Good day, ladies and gentlemen, and welcome to your First Quarter 2012 XPO Logistics, Inc. Earnings Conference Call hosted by Brad Jacobs, Chief Executive Officer. My name is Chris, and I will be your coordinator today. [Operator Instructions] Before the call begins, let me read a statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which, by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release or made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements. During this call, the company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the company News and Key Facts section on the company's website, www.xpologistics.com. I will now turn the call over to Mr. Brad Jacobs. Please go ahead.

Thank you, operator. Good morning, everybody, and welcome to our first quarter conference call. With me today are John Hardig, our CFO; and Scott Malat, our SVP, Strategic Planning. And we have progress to share with you today, progress on acquisitions, cold-starts and organic growth, all 3 ways we intend to create shareholder value. Let's start with acquisitions. As you saw last night, we purchased Continental Freight Services, a $22 million truck broker headquartered in Columbia, South Carolina. It also has satellite offices in Texas, Florida and both of the Carolinas. It's well-established in the industry. It's been in business for 32 years. It has strong customer relationships, especially with manufacturers and distributors in the Southeast. The main reason we bought Continental Freight is because we can significantly scale it up, so it's a good strategic fit for us. There's 3 things we'll do to increase the revenues and profits at Continental. One is to aggressively expand the company's sales force. Second is to increase efficiency as we migrate them to our technology platform. And third is to give the sales force access to greater capacity. They'll continue to use the carrier base they've been using, but now they also have access to the capacity at our Charlotte operations center. Bottom line, the sales force should be able to book more freight, and they're excited about that. As for other potential transactions, we continue to have discussions with a large number of targets. The companies we're looking at are primarily truck brokers, and they're all highly scalable. Scalability is the main characteristic we look for. Apart from acquisitions, we're gaining traction in our cold-start program, too. We opened our third truck brokerage cold-start in Dallas just last week, ahead of schedule. Doug George is our branch President there, and he…

Thanks, Brad. I'll start by giving you some color to the performance of our 3 business units. Our total consolidated revenue increased 7% to $45 million. In our expedited segment, revenue grew 8% year-over-year. We had an increase in air charter revenue related to a project completed in the first quarter, and 2 of our target sectors, international and temperature control, had combined growth of 24%. These gains were offset by lower demand from our automotive and logistics customers. Gross margin percentage declined primarily due to the change in mix, and SG&A was flat year-over-year. In our freight forwarding segment, revenue was down 2%. Our revenue from domestic shipments declined, although we had strong growth and lower margin, international shipments booked through our Miami and Tampa branches. We opened 3 new locations in the quarter, which increased our SG&A expense by $169,000. As Brad mentioned, freight brokerage did very well. Revenue was up 33% through a combination of volume growth at our South Bend office and our cold-start in Phoenix. South Bend had strong flow-through, with first quarter profitability more than double what it was last year. Our cold-start program for truck brokers increased SG&A expense by about $400,000 in the quarter, in line with our plan. On the corporate side, expenses increased to $5.8 million. Our loss per diluted share after preferred dividends was $0.36 compared to earnings of $0.13 a year ago. Our liquidity remains very strong. During the quarter, we used $2.8 million in cash from operations, invested $836,000 in fixed assets and made a $450,000 payment to wrap up an earn-out on a prior acquisition. We received a $137 million of net proceeds from our common stock offering in March and paid off our revolving credit facility. We closed the quarter with $204 million in cash and no debt. Now I'm going to hand it over to Scott for an update on our strategy, and then we'll go to Q&A. Scott?

All right. Thanks, John. I'll review our 3-part strategy and how it ties to the financial picture. So first, on cold-starts. Our performance in Phoenix has been encouraging. We're attracting strong talent to run our new offices. As Brad mentioned, we're on track to open 5 cold-starts by year-end. We continue to expect cold-starts to account for tens of millions of dollars in run rate revenues by the end of the year. Second, on acquisitions. Continental is an example of the type of acquisition we're looking for. Once we close these types of deals, the plan is to rapidly add salespeople, increasing SG&A to drive growth longer-term. We're encouraged by the number of companies we're talking with. Given our healthy backlog of acquisition candidates, we're comfortable with our target of approximately $250 million in run rate revenues from acquisitions by year-end. Third, we're making core investments in the business. We're ramping up our operations center in Charlotte, focusing on expanding our relationships with quality carriers and adding the backbone to be able to support a much larger organization. We expect to have approximately 100 hires in Charlotte by year-end, including the 27 people we've hired so far. We're building up our capabilities and recruiting and training with new leaders in these areas, and we're adding IT resources. After launching the first phase of our IT platform in March, the IT plan is focused in 2 areas: first, customizing the application and giving real-time access to metrics, which will help our salespeople do their jobs more efficiently; and second, building new and innovative ways of interfacing with customers and carriers and finding more efficient ways to match freight with trucks. In addition, we just launched the new website that has more functionality for shippers and carriers. These investments in carrier relationships, training, recruiting and technology, they're critical to our success in scaling up both the cold-starts and the acquisitions. Along with deal-related costs, we continue to expect our corporate SG&A to increase as we move through the year. Lastly, on the existing operations by division. In freight brokerage, we expect strong growth to continue at our South Bend, Indiana branch as we're adding sales and support people. In expedited transportation, we expect continued growth in our strategic areas of cross-border Mexico and temperature-controlled. This should help us offset what's been a relatively slow expedite market in general. In freight forwarding, the market there is soft, and we've not yet seen a change. But we're adding new offices and going after new business to offset the headwinds. Adding up our existing business, cold-starts and acquisitions, we continue to target revenues, exiting 2012 to be on a run rate of approximately $500 million. With that, we'll ask the operator to open the floor for questions.

[Operator Instructions] Our first question today is from the line of Justin Yagerman from Deutsche Bank.

It's Rob Salmon on for Justin. It sounded like you guys are really highlighting a very solid acquisition pipeline. Could you give us a little bit more details about the typical size and the range of these opportunities, what your timing expectation are, as well as the general split of the acquisition opportunities across business offerings?

Okay. 3 questions in there. Let's start with the size. So we have discussions going on with literally over a couple hundred targets. And they're prioritized by actionability, by evaluation, by desirability, by strategic sense and so forth. If you take the top 50-or-so ranked ones that we're most interested in, the vast majority, over 40 of them are between $20 million and $150 million in gross revenues. But there are a handful that are bigger than that and smaller than that, some substantially bigger than that, some substantially smaller than that. But the most thick part of the bell curve is the net $20 million to $150 million sweet spot. So that's in terms of size. In terms of business mix, if you look the, again, at the top 50, about 45 of them are truck brokers, and the remaining 5 or so are expedite freight forwarding intermodal. So again, the majority of them, the vast majority of them are truck brokers, but there are some others. And the third part of your question, Rob, I think, was in terms of timing. Timing is not as easy to answer as the first 2 because in M&A is very unpredictable, and these deals, like all deals, have lives of their own. Deals get hot and then suddenly they die and then they reincarnate. And the guy who told you, "Let me return your call" suddenly calls and says, "Here's the deal, if you can close it in 2 weeks." And it's very unpredictable. But I would say that given the backlog that we've got and given the number of people that we're talking to, we're still comfortable with the target of buying another $250 million of revenue by year-end. Where that will lump out between now and the year-end, that's harder to say.

That's helpful. When I look at the Continental Freight acquisition that you guys announced yesterday evening, it looks like you got a fair price on the acquisition. We're assuming kind of around 4x EBITDA or potentially lower if their margins are a little bit higher than what we're expecting. Could you talk about your pricing expectations, if you're kind of at the lower end of that $20 million to $150 million of gross revenue expectation, as well as where it could kind of fall out in the higher end?

I think that's right. I think there's a scale, and it's really directly correlated to size. So companies that have $1 million or less of EBITDA to buy those 4x EBITDAs is really not outrageous. I mean, that's something that's reasonable. To buy companies that are higher than that but still in the single digits millions of EBITDA, you're going to pay a few turns more. When you get above $10 million in EBITDA, then you're going to get in the high single-digit multiple. So it's really a range from as low as $4 million to as high as, let's say, $10 million based on size, based on size, based on profitability. [Indiscernible]

Fair enough. When I'm thinking about the acquisition markets -- and I know it's obviously a key part of the growth strategy where you guys see roughly half of the gross revenue run rate coming from that by year-end. If we enter a market where the equity markets get even more turbulent, does that change your growth strategy with regard to the acquisitions and size preference?

I don't think so. I think we're running the business based on 2 scenarios. One is that, what you just outlined, capital markets die at some point, and the $200-some-odd million of cash we have and whatever debt capacity we can add to the company is all we're going to have forever. And we need to then take that capital and deploy it in the most efficient and intelligent way to generate the greatest returns over time, partly on cold-starts, partly on acquisitions. And then the other way we're looking at it is, well, maybe the capital markets will continue to be open, and maybe there will be cycles of opening and closing. And after we've deployed our capital and proven our business plan a little bit more, maybe we'll get a better valuation, and it might make sense to raise more equity at a higher price or in conjunction with an attractive, accretive acquisition. So either way, the business plan to your point about what we'll do between now and the end of the year is to open up a total of 5 cold-starts by the end of the year, and we're 3 out of 5 done already on that, and to buy another $250 million or so of revenue through acquisitions. And regardless of our view in the longer term, that's our plan. And whether or not -- to your point about whether we would buy smaller ones or larger ones, it's hard to predict. We might buy a smaller number of larger ones or a larger number of smaller ones. There's a certain level of randomness to that.

Our next question today is from the line of Kevin Sterling from BB&T Capital Markets.

Brad, I'm sticking with the acquisition story. Since Continental is your first acquisition, what made it an attractive candidate?

Scalability. So here's a company that's doing about $22 million in revenue, been around for a long time, 32 years, rock solid company, great relationships with a number of stellar manufacturers and distributors, old line companies, most in the Southeast, constrained by carrier capacity. And here we are with, guess what, carrier capacity. And we're developing that in Charlotte. And our whole secret sauce here is to have an operations center in Charlotte, which, by the end of this year, will have roughly 100 bodies there. And hopefully, a couple of years, it will have hundreds of bodies there, the majority of whom will be dialing for diesel, the majority of whom will be getting capacity. And the purpose of that is to see the acquisitions with additional capacity and to see the cold-starts with capacity. So with respect to Continental, this is the perfect match strategically because here's a company with great shipper relationships, great customer base. And they keep the carrier relations that they've got right now, and they add on to that the carrier capacity that we've got in Charlotte. So effectively, it doubles the capacity overnight, and it can service their customers much better. So they're excited about that, we're excited about that. And we'd like to grow Continental from a $22 million company to a $50 million or $75 million company over the next few years, without putting in a whole lot more capital. So from our return on capital point of view, assuming we execute well, this could be a real home run.

Well, great, makes sense. And it sounds like this is a -- it's a good model for future acquisitions. Did culture play a big role in the Continental deal as well?

We like the people, we like the people a lot. And that does play a role. When we do acquisitions, when we look at acquisitions, to the extent we have chemistry, to the extent we get along with them, to the extent we like them and there's mutual respect, that tends to correlate with it being a good deal after the acquisition. And at Continental, we do like the people, and we do like the culture.

Great. And Brad, as you look at acquisitions, are you seeing competition from strategic buyers or private equity or maybe a combination of both?

Or none of the above. There's very little competition for the smaller-sized deals. I haven't seen any private equity for any of these deals that we're looking at on a smaller level. Once in a blue moon, we are coming up against one of the other strategic buyers, but there's less than the number of fingers on my hand of strategic buyers that are out there looking at these smaller deals. And there's hundreds and hundreds and hundreds of targets.

Okay. Great. And Brad, you touched a little bit on what you're doing in Charlotte. Is the goal here to kind of build out this back-office platform with 100-or-so people and then kind of layer on the growth and really get the leverage there? But as you're become a multi-billion dollar company, will you have to continue to grow this back-office or is there some inherent leverage as you kind of get scaled with the back-office? How should we think about your back-office growth going forward?

There'll be some leverage to it, but that's not really a big feature to it. As we grow the cold-starts, as we grow the acquisitions, we will grow Charlotte. And Charlotte will be 100 by year-end, but it won't be 100 by the following year or the next year. It's going to keep growing as we have more freight. Now, we -- our opinion, our belief is that over the next 5 years, the likely scenario is that capacity is going to be much tighter. And as the economy comes back over time, there'll be more freight. So if you ask, the truck is going to win. So from our point of view, focusing on developing carrier capacity is really, really central to our strategy.

Okay. And that leads me to another question. You talk a lot about acquisition and cold-start growth, but how is it -- it sounds like you really want to focus on growing your carrier base. Are you having some success there and lining up new carriers to come into the XPO network?

Yes, very much so. So we hired a really great guy, Lou Amo, who's an industry veteran managing carriers for Union Pacific, for GE, for SABIC, for others. And we've hired now about 30 people in Charlotte, and about 2/3 of them are Lou's people just dialing for diesel all day long, getting capacity. And Phoenix, for example, which is now on many millions of dollars of revenue run rate, would not have been able to get up, ramped up that fast, were it not for the other half of the equation, which is Lou Amo's group in Charlotte getting capacity. So Phoenix is customer-facing, sales-generating and handing off the load to our IT system to Charlotte, and it's working very, very well. That's a big, big part of the equation, and it's successful to date.

Well, great. What's your sweet spot for signing up carriers. Is it guys with 100 trucks or maybe 100 to 250? Is there a sweet spot that you're targeting?

So far, it's actually been the smaller ones. It's been ones that are 25 to 100 trucks, by and large. But we're not limited to that. It's just the way the chips have been falling so far.

Okay. And Brad, you talked about your Bounce South Bend office, I think, doubling revenue in a year. What's the key that made South Bend so successful? And is this a roadmap for future organic growth?

Well, a couple of things. I think one is adding salespeople, training them and compensating them correctly. And that's the formula for success in almost any business, which is -- particularly in this one. At the same time, I don't want to beat our chest too much on the success we're having at Bounce because it's pretty hard not to have success when you're so small. I mean, this is a cold-start that started 3.5 years ago, and now it's up to roughly $30 million of revenue. When you're tiny like that, you can grow like a weed. It's just the law of small numbers, the advantage of being tiny, which was part -- it was part of the thinking, which went into our strategy of, that's interesting. When we look at the industry, there's not a whole lot of companies that are billion-dollar-plus companies, but there's a whole bunch of companies that are in the tens of millions of revenue. So we said, "Okay, let's not fight City Hall. Let's go with the flow." For whatever reason, that's easier to create a branch that's doing tens of millions of revenue than hundreds of billion dollars of revenue. And let's do many of them, and let's find real talented people who have been there and done that before at a previous employer and empower them, and empower them with technology, empower them with carrier capacity, empower them with HR and compensation programs. And so far, it's working.

Right. Great. And last question here, just kind of a general industry question. I heard this week about the U.S. auto manufacturers are not going to go into their typical summer shutdown. Could this have a positive impact on your business given your auto exposure this summer?

Well, that cuts both ways. That will be good for the truck brokerage part of the business. There will be more freight. If it's just steady, steady and there's no supply disruption and there's no jerks and jolts, that's not the best environment for us in the expedite part of the business because expedite wants disruptions in supply chains, it wants things to go wrong, so to speak, in the external environment. So that cuts both ways.

Our next question today is from the line of Scott Schneeberger from Oppenheimer.

Could you guys speak to what your policy is going to be with regard to earn-outs, the use of them, just how prominent? And what types of acquisitions would you consider to them for and not?

Earn-outs are sometimes appropriate, sometimes not appropriate. When we can avoid earn-outs, we'll try to avoid them because sometimes you get into fights about them later about, "Oh, if you only had done this, you would have or wouldn't have made earn-outs and so forth." But we've come up with a formula that seems to work pretty well with many of the people we're talking to, which is basing it on gross profit minus payroll. That kind of aligns our interest to grow the margin as much possible but not do it in a way that has a lot of costs associated that's not contributing to revenue directly. So I think we've got a way to skin that cat that will make it black and whitish and decrease the chances of dispute going down the line, which is very important to us. The way -- the times that we use earn-outs are when we just can't bridge the gap in terms of where a seller sees value and where we see value. And we're just looking at it differently and just have a different set of economics and can't get there, and then it created a way to solve that as to put an earn-out in there. The other time we'll put an earn-out in there is there's some deals that we're looking at where, in part, we're buying it for the existing operations, but in larger part, we're buying it for the person, for the entrepreneur that's got a big business plan that they feel is better to do it with us, together as a team, with our capital, with our technology, with our back-office, with our carrier capacity, with our credit collection, so forth. And they go out and build the business up. And they have very ambitious plans, and we have several people like this to build one or more locations up a lot. And in that case, it makes a whole lot of sense to incentivize them to succeed at that. And it's a win-win situation where we'd love to pay in that big earn-out because the only way we're paying that is if they are delivering the bacon.

Great. And then you touched on this a bit, but with regard to cold-starts, it looks like Phoenix has had a really great start. Could you kind of steer us through what is typical to see in an early cold-start? I don't imagine we would expect that from everyone. But what are the key metrics and ways that we should be tracing them along the way?

Yes, it's Scott. So everything is going very well in Phoenix, and I think Rob Martin and his team have gotten off to just a great start. Like you said, they're ahead of our schedule. I wouldn't expect this for every cold-start. We still are staying with our $5 million to $10 million in revenue run rate by the end of the first year kind of number. I would say that when you look at Phoenix, they didn't have access to Charlotte up and fully running during a lot of the quarter. They -- Charlotte really ramped up from only a few people covering loads to now around 17 or 18 people covering loads, and they're doing a much more efficient, strong job at getting trucks efficiently. So I think that when you look at Dallas and Ann Arbor, which is still in very, very nascent stages, they'll get help from Charlotte more than Phoenix will, but we're going to stay with our thinking of $5 million to $10 million in the first year.

Great. And just a follow-up on that. What's sort of timing for the final 2 cold-starts? I realized that they'll happen when they'll happen, but are you trying to pull those as forward as possible or might they be fourth quarter?

It all depends on finding the right people. So the key to these cold-starts is not where they are or anything other than finding the right person for the job. Someone who has ramped up a cold-start or an office or branch from 0 to 50 million, 0 to 100 million, 0 to 150 million before has the right kind of experience that can do it again. We think we found very experienced people in the 3 we have started so far. We'll continue to work through, and we're being very selective in finding only the best people. And if we find more than that, then we'll go with more than that. And if it opens in second, third or fourth quarter as we go through the year, it's hard to tell.

Our next question today is from the line of David Campbell from Thompson, Davis & Company.

I just have 2 questions. One is for John. You mentioned the expedited business in the first quarter helped by the air charter project that was completed in the quarter. Does that mean that some of those revenues were nonrecurring? What -- could you describe a little bit more about that?

Yes, David. We had a big uptick in air charter in the first quarter of this year. We do a little bit of air charter business every quarter. It's typically a smaller piece of our business. But the big uptick we had this year was nonrecurring. It was an automotive-related project, and it was related to a particular order for a big OEM. And we had to move a lot of freight quickly, and we jumped in and did it for them. And so that is not going to recur as we go through the rest of the year.

Right. So we would expect some moderate less growth in the second quarter than you had in the first?

It all depends if it's replaced by other business. I mean, that's the nature of expedited. It's lumpy, it's unpredictable. So it makes it fun, too. We're like ambulance service, not -- every morning, we come in, and we don't know what's going to happen. And when customers do come in with emergencies, we're there to respond, and we hope to have capacity just where they need it and when they want it. So it's hard to predict exactly what it's going to do quarter-by-quarter.

Right. And Scott, you mentioned the SG&A, corporate SG&A, continuing to increase as the year goes on. You were talking about increasing from the base amount or increasing from the first quarter, including the $1 million of nonrecurring expenses?

It will increase from the level it was this quarter as we go to the year and as we scale up Charlotte and add more infrastructure. So it should -- I think if we look at the SG&A in general, I think on the base level, you're in the low 20s kind of range. But then as we work on deals and as we go through due diligence and closing costs and all different pieces of acquisitions, that adds up onto that line. So that could push it higher, and that's what's hard to predict. We do expense our accounting charges, we do due diligence, we do expense legal fees, so that can push it up into the mid-20s kind of range.

Yes. So it's really a combination of revenue growth and startup costs that make it hard to predict those startup costs.

Our next question is from the line of Todd Fowler from KeyBanc Capital Markets.

Brad, can you talk a little bit about the brokerage gross margins and specifically, the comment in the release about the strategy in Phoenix and some low margin sales to get some business in? Is that a top-down strategy? Is that something that's made at the branch office? And what's the thought there with looking at margins as you continue to ramp the cold-starts going forward?

Right, right. I think with cold-starts, it's realistic to expect that when they first started out in the first few months, their margin is going to be lower than it will as they go along because they got to break the ice, they got to get on the board, they've got to start doing business with shippers. And you're not going to get that business by coming in real high on price. Having said that, the strategy is not to keep at that margin low for a long period of time. Let's start going -- doing business, and then let's raise the margin through normal market level.

And how do you think about it? And what makes somebody a strategic customer, is it size, is it density, is it somebody in a specific market? How do you think about who you're looking for to basically attract business to or attract business from, I should say?

It's really potential for future business. So that could be a large shipper or a small shipper. It's what kind of share of wallet do we think we can get. And that can be retail, that can be manufacturing, that can be industrial, that can be commercial. We're pretty agnostic with respect to that. Our bias is more towards spot than contractual at this point in time, but it's really the size of the business that we can get that makes it strategic.

Okay. And then just so I understand the model, the selling is all done at the branch office, but the capacity sourcing is all going to be done out of Charlotte. I guess the first part, I mean, is that the correct way to think about it? And then the second part is, how does the compensation work? Is the compensation for the branch people just based off of sales or is it based off of gross margins? And how does that work, capacities being sourced out of Charlotte and sales are being done out of a different location?

Right. The first part of your question about where is capacity being sourced out of, what you said is partly right and partly needs to be adjusted. When we do an acquisition like at Continental, they've been accessing freight and they've been covering those loads for 32 years. So they obviously have both sides of the puzzle. They can get freight, they can get capacity. When we buy Continental, for example, we're not saying, "Stop talking of your capacity, stop covering the loads, and we'll just do them in Charlotte." We're saying, "In addition to what you've been doing, you often now have all this new capacity available to you through Charlotte." So it's both. It's not like the acquisitions are only going to do selling and all the capacity should be covered in Charlotte. To the extent they want to utilize Charlotte, to the extent they find Charlotte more competitive and more compelling and more responsive and more price-sensitive, then naturally, they'll use Charlotte. But to the extent that they can source capacity on their own to their historical relationships better, God bless them, let's keep doing that. There's no reason to stop that. With respect to the cold-start, a little bit different. With cold-starts, the idea there is to really have high-testosterone, customer-facing, revenue-generating sales offices that are dialing for dollars all day long, dialing for freight, and to divide the labor up between carrier sales -- between customer sales and carrier sales. So here, you have in the cold-starts customer-facing people, shipper-facing people, handing and then being connected in a virtual way right to our internal load boards or IT. With Charlotte, it's covering the loads. So we found so far, it's working very,very well. And the key to this is technology. And one of the things…

Good. That's actually very helpful. And then just the last one I had is, thinking about the model and you've got the revenue target. And I guess, first, I just to make sure I understand. I mean, you're talking about a revenue run rate by the fourth quarter. So fourth quarter should be somewhere and take it to a $500 million annualized range, $100 million, $125 million or something like that. And then the second part of that would be, how do you think about becoming EBITDA positive? I mean, if you get to that run rate, are you generating significant EBITDA? Or is there still some time when you actually become EBITDA positive in addition to where the end of the year run rate is?

It's Scott. On the run rate revenues, yes, somewhere in that range. We're thinking about a December ending kind of run rate of $500 million, so fourth quarter comes in a little under that $125 million. That makes some sense in those ranges. The second part of your question was on profitability and EBITDA. It's hard to tell. We're not going to give out EBITDA guidance or profitability guidance yet because we don't know the companies, which companies we're going to purchase and acquire, and that will really depend on that and the makeup of that. I would say that as we look out along the year and along into '13, we're doing our jobs right, and we're investing in the acquisitions. And we're adding SG&A and adding headcount to those acquisitions as we buy them to really ramp up growth in the outer years. And if we're opening up more cold-starts and we're doing a good job on that, then really, part of the plan is to be negative on EBITDA for a good amount of quarters.

Todd, we're not managing the company nor is our business plan for the next several quarters of earnings. It's -- because it's an ironic business model. We're doing our job as Scott was just saying well, the numbers could be "worse" than otherwise. In other words, if we do more cold-starts, which take money in our EBITDA loss when they first start up, well then -- well, I'll aggregate now a big of a loss. But we want to do that because longer-term, multi-years, that's going to pay big dividends. And with the acquisitions, acquisitions should be accretive in the first year, but for the onetime charges that the accounting rules require, we have to write off right after you buy them, the legal and the accounting and the due diligence costs, right away. But for those, they should be accretive.

[Operator Instructions] Our next question is from the line of Robert Hoffman from Princeton OP Partners.

I know it's probably going to be hard to characterize something with a pipeline of 100 or 400 or however you said it. But is there any way of what is the driver for people to sell, especially in the Continental type of -- the smaller category? Is it a guy who's 64 and wants to get out of the business, so price is everything. Is it a guy, I guess it could be a girl, who realizes that he is technologically behind? And so the question is, does he invest in it himself but he doesn't know anything about that? Or does he sell out to you guys? Is it somebody who has a paternal instinct about his employees and wants to make sure they have an opportunity to grow? And then finally, is it the fact that your cold-starts have been successful? Can you use that as a strategic weapon? Basically going to Joe in Boise and saying, "Well, Joe, we can either buy it from you or we can steal your guys and do a cold-start." Any way of characterizing how people are thinking?

Yes. Several good questions in your larger question. First of all, the last thing, we don't do that. That's not our game to go to somebody and say, "Sell to us or we'll steal all your employees." That's just not our DNA. But in terms of the motivations for sellers, a lot of it depends on age. So in the case of Continental, Wes and Davis, 2 great guys built up a business over several decades, 65 and 67 years old, and God bless them, it's time to retire and take some chips off the table and smell the roses. So that's a good and fine motivation for anybody. There's other companies that we're looking at that the sellers, and yes, some of them are women, are -- and by the way, some of the better ones are women, interestingly, in this industry. Some of those sellers are younger, in their 30s and 40s, and their goal is to not sell out and cash out and hit the beach. But their goal is to team up with us, get access to our capital, get access to our IT. By the way, sometimes they will contribute to our IT. They'll add great things, little customizations, little things they've come up with that are improvements that we haven't thought of, but to put best practices together with us and get access to our capacity in Charlotte and grow the business. Because from their perspective, it's a funny thing about the way the truck brokerage business works, is the faster you grow it, the more working capital you need because you have to pay the truckers pretty quickly and you don't get paid by the shippers for a month or so after that. So if you stay steady-state, you always have a month or so of working capital tied up in the business, but if you're growing it, that need becomes bigger and bigger. And that was more easily financeable before, 2008, 2009. It's still sort of financeable for many people, but it's not as financeable. And even when it is, from a free cash flow basis, from the seller's point of view, if he's going to grow his business, he's not going to take -- he or she are not going to take a lot of cash out of the business while they're growing it. So they're going to be paper rich, growing a company that's got increasing revenue, increasing profits, but they're not going to be able to spend their financial statements buying cars and houses and planes and whatever they want to buy. So it makes some sense to offload that negative aspect of the financing feature to us, who are more than happy to finance something that's going to grow very dramatically over several years. Do that more or less answer all your questions?

Yes, I didn't mean that you would steal their customer -- steal their employees as much as you could do a cold-start in their city, and that would be competitive for them. So yes, that did. But it also brings up a follow-up question on the working capital. Is it -- you guys have a -- can you quantify the advantage that you have? I mean, obviously, you can borrow at institutional rates, and these guys are borrowing at retail, maybe, depending on their size. Is there quantifiable that you guys can bring the costs of that bar down by a couple of 100 basis points?

Well, yes. First of all, we have that -- we can get access to capital, period. There are some brokers that we run across that their -- the moneys in our banks aren't going -- that's not on their business plan anymore to lend to these smaller companies. And when the bank lines are available, they are at significantly higher rates than what we, as a public company, and a larger company can borrow at. By the way, another thing I want to comment on in the comment you just made was, very interestingly, sometimes you'll go to a city and you meet with 2 or 3 truck brokers in the same day and find out that their customer base is -- barely overlaps, and their carrier base barely overlaps as well. And that's because this is a real national business, and with the telephones and technology, your customer base isn't restricted to the city that you're in. So even if we did have a cold-start in the same city, it's conceivable that you wouldn't be stepping on each other's toes. I mean, you look at the larger established -- the companies that are much larger than us, let's say, for instance C.H. Robinson, where they have many, many branches in the major Metropolitan areas in the same places, and they seem to be doing very well.

Our next question is from the line of Justin Yagerman from Deutsche Bank.

Circling back to the capacity discussion, could you give us a sense of how much incremental capacity of the Continental acquisition added to your network, even if you're just kind of talking in percentages of terms? And if we think about kind of bringing those additional carriers on your database, how long are you expecting that process generally to take as we look out?

Let's start with the last part, that's the easier part. In any acquisition, and including Continental, speed is of the essence. You want to get the integration done as urgently as possible. It's best for everybody involved. So Mario is down there, he would say -- he might be going tomorrow, I forget, and going to start the integration on the IT part. And the migration onto the same database starts immediately. It's not an afterthought, that's how you avoid problems, that's how you can be more effective and more productive, and we're on the same page. In terms of the amount of the capacity that we're adding, well, it's about a $22 million company. That's about the amount of capacity they got. In Charlotte, our amount of capacity grows literally every day. I mean, we, at the moment, have almost a couple of dozen people and that's their job is to call carriers all day, stock them out, check them out and sign them up. Those are, say, who passed the right standards. And that's going to continue to happen in larger percentages every month as we hire more people in Charlotte.

Okay. That's fair, Brad. If I'm looking at kind of the freight brokerage, just annualizing out kind of Q1 revenue, it looks like that's about a $32 million top line. I realize, because of seasonality, that's actually understating the true gross revenue of the business, and obviously, you guys are aggressively adding cold-starts and growing same-store sales as well. But if I'm kind of looking at a $22 million acquisition, relative to that, is it fair to think that your capacity could have expanded by 50% as a result of the acquisition?

That's something in that magnitude, and although it's 50% of a small number, I don't want to jump up and down about it too much. Over time, the amount of capacity that we're going to have is going to be vastly larger than what we have now.

We have no further questions at this time.

Everyone, thank you very much for participating in the conference call. We look forward to seeing you at the conferences that we'll be presenting at in May and talking to you on the next quarterly conference call. Have a great day. Thanks.

Thank you very much. Okay. So ladies and gentlemen, that does now conclude your conference call for today. And you may now disconnect your lines. Have a great day. Thank you very much for joining.