As shipping sector deflates, Arrive Logistics gets comfortable with new phase
Austin Business Journal
1 September 2023
2023 has been a real test for Arrive Logistics Inc. But CEO Matt Pyatt said it’s still managing passing marks and that the work employees are doing now will prepare the Austin-based transportation company to ace 2024 and beyond.
The company reported 2022 revenue of $2.35 billion, which was more than any other local privately owned business tracked by Austin Business Journal.
But revenue is on track to end 2023 down about 10%, Pyatt said. That’s because even though the number of loads it handles per day is up about 10% from last year, revenue per load is down about 20% because of falling shipping rates.
The Arrive CEO still feels like he's in a strong position — he said that increasing market share now will pay off down the line when those cyclical rates rebound. Arrive makes money as a freight broker, arranging transportation for companies that need to move goods. It has grown mightily in recent years, with $1.6 billion in revenue in 2021 and nearly $811 million in 2020.
After a pandemic spike, shipping rates have declined globally to 2019 levels, impacting the entire freight sector. C.H. Robinson Worldwide Inc. (Nasdaq: CHRW) reported in July that revenue in the first half of 2023 was down 34% year-over-year to $9 billion.
"People aren't spending as much, durable good spending is coming down," Pyatt said. Yet, he argued Arrive has "outperformed the market really significantly."
Arrive now has more than 1,700 employees, with 1,000-plus in Austin — its headquarters in MetCenter, near the airport, spans 115,200 square feet across two large warehouses. In one, brokers work in long rows of at stations decked out with triple monitors, while the parking lot outsize is almost entirely full.
The company has hired about 700 people this year, mainly in sales as it seeks revenue producing additions. Pyatt noted that 80% of Arrive's employees have joined since 2019 and many have never experienced this kind of freight disruption.
"You have what happens when the rates are going up, and what happens when rates are going down/stable. It's a completely different job, nine to five," he said.
Education was already an emphasis at Arrive and it's what will make the difference in 2024 between shrinking or staying flat and returning to rapid growth, Pyatt said. New hires spend six to nine months in training — the HQ has classrooms where new employees sit at replica work stations and listen in on real broker calls. Arrive has launched a mentorship program that connects all new hires with one of roughly 200 signed-up mentors.
As a CEO who's perhaps hired more than anyone else in Austin in the past year, Pyatt has developed a good idea of what it takes to be successful at Arrive: good time management, determination and the ability to handle rejection.
Arrive has about 6,000 customers, Pyatt said, with more than 1,000 added this year alone. They range from small goods producers to enterprise giants. Revenue is weighted toward these larger clients that can ship dozens or hundreds of truckloads a month. About 80% of revenue comes from about 275 customers, Pyatt said, although no customer accounts for more than 2.4% of revenue. Clients include the likes of Home Depot Inc. and Domino's Pizza Inc., which this year both named Arrive their carrier of the year.
Arrive won’t be ready for an initial public offering in the next three years, Pyatt said. After that, who knows? The company, which raised more than $300 million in 2021 from New York City-based private equity firm ATL Partners, may look for another large, strategic investor.
"We'll do something where we recapitalize our board and the people that want to roll forward and take this to the next step, they can do it, and then we'll bring in another big investor that is really going to prepare the business for that next stage of growth, which is really going from $3 billion to $10 billion," Pyatt said.
He said, in the freight industry, $5 billion in annual revenue is the lowest threshold to consider going public. Ideally, he'd like to see Arrive be closer to $10 billion before entertaining the move. Pyatt noted that about 30% of the company is owned by employees.
"We've just kind of gotten started. We're nine years in and really a lot of this growth has happened over the last four or five years. We look forward and say, how are we going to go from 1,000 employees in Austin to 5,000 employees in Austin, as a company going from 2,300, 2,400 to 10,000 employees? The good thing is, we've got the recipe to do it, we've just got to continue to have a long view on it and not be reactionary in the market."