With Roadrunner Transport recently completing a restructuring of its ownership, the LTL carrier now has its sights set on a bigger stage: getting back to being traded on an exchange where the world will know how it’s doing every 90 days.
In an interview with FreightWaves, Chris Jamroz, the company’s CEO and chairman and a significant holder of equity in Roadrunner (OTC: RRTS), also said he sees the company staying in its LTL niche, as a carrier of freight between key metro areas rather than seeking the sort of massive distribution network of hundreds of warehouses found at other large LTL carriers.
The late-November deal saw Prospero Staff Capital buy out all but a small share of Roadrunner equity from Elliott Investment Management, which had owned about 90% of the company since a 2019 transaction.
Prospero is a Jamroz investment vehicle that teamed with investor Ted Kellner to buy out Elliott Management, which Jamroz said had “made money on this investment. It’s probably taken a little bit longer than they had anticipated at the beginning. But it was a good investment. They’re happy and they’re moving on.”
What remains as ownership is a small stake still owned by Elliott (Jamroz would not disclose the number but it appears to be about 2%), about an 8% float of publicly traded shares in the hands of investors. The stock is traded on the so-called over-the-counter “pink sheets.”
That limited float provides a daily volume of about 21,500 shares, per Barchart. The stock also is up about 100% in the last month given the kick it got from the announcement of the new ownership. It closed Friday at $2.08 per share.
Setting a new course for public equity markets
Jamroz said he does not intend for that structure to remain in place.
When Jamroz came aboard as executive chairman in 2019, his plan was to bring about a turnaround that, if successful, “would come and lift the stock again, and that’s today,” he said.
Jamroz was unsparing in describing the company he walked into in 2019. It had been battered by an accounting scandal that led to indictments in 2018. According to Jamroz, he did not invest in Roadrunner when he joined. Rather, he followed the strategy he had taken at other companies where he led a turnaround by taking an equity stake of 20% to 30%
Jamroz said Roadrunner chose to delist from the New York Stock Exchange because “sometimes in a severe trauma, you have put patients under a drug-induced coma because they wouldn’t survive with what needs to be done. That was the same with Roadrunner.”
“It looked terrible,” Jamroz said of Roadrunner when he joined. “It looked like it had every sign of looking like I would have my first bankruptcy on my stellar resume. And everybody was telling me, Chris, you have this King Midas reputation. Why would you want to risk it?”
“We’ve changed every single function in this business,” Jamroz said of Roadrunner. He described the history as “37 failed acquisitions, 37 CFOs, 37 accounting systems. A dumpster fire. People ask me what was broken and what I fixed. I always tell them it is easier to say what wasn’t broken.”
‘Such a mess’
Jamroz said his usual strategy is to come into a company as executive chairman. “But this was such a mess that I had to replace every single manager, and I effectively ended up being CEO,” he said.
By staying on the pink sheets, Jamroz said he could keep Roadrunner in the public domain, but without the 90-day check-ins required of a public company on an exchange like the New York Stock Exchange or NASDAQ.
As a company on the pink sheets, Roadrunner has a limited amount of financial information it needs to disclose.
One of those numbers is revenue, which Jamroz said is about $450 million annually.
Roadrunner will be EBIT positive this year, he said. And compared to other companies slogging their way through the continued freight recession, “Roadrunner in 2024 will probably have one of its best years in the last decade.”
Sticking with its LTL model
As the company moves forward, Jamroz said the current business model of metro-to-metro LTL service will stay in place.
It’s an approach that avoids a hub-and-spoke system where a parcel might get transported on more than one truck on its way from point A to point B. Even when the freight moves in a “beautifully perfectly oiled machine, and it moves very very well, you have those reloading moments,” Jamroz said, when efficiency can be lost.
The Roadrunner model, Jamroz said, “is effectively a straight line.”
Jamroz joked that an increase in moves runs into the reality of LTL, which he said “stands for less than likely to go perfect.” “We are the expedited version of what the super national or super regional guys would do,” he said.
It’s a model that Jamroz said “offers incredible scalability.” He mentioned the growth of the Laredo port and noted that Roadrunner had recently opened its first warehouse facilities in that border city in partnership with a second company. But he added that the company is looking for a more permanent operation in Laredo.
Roadrunner is pursuing an asset-light strategy, Jamroz said, with particular emphasis on minimizing the number of company drivers and tractors.
Most of the independent owner-operators pulling freight for Roadrunner are operating in teams, “because to get speed and direct routes, you need to have team drivers,” Jamroz said.
As far as equipment, Jamroz said he is “not a huge fan of owning rolling stock and things that depreciate.” He put the fleet of vehicles now working for Roadrunner at approximately 1,000.
Ready for M&A
Roadrunner does expect to grow through mergers and acquisitions, Jamroz said. The freight recession, Jamroz said, means that “a lot of players are weakened. Their cash positions have been depleted. “And ‘m not trying to be predatory or opportunistic, but there are a lot of folks who just don’t seem to have as much fun in trucking as they used to.”
Since the news of the restructured ownership in November, Jamroz said, Roadrunner has been talking to “four or five targets” about possible acquisition.
The small volume of Roadrunner shares traded at its current stock price translates to a market capitalization of about $80 million, which Jamroz dismissed as unrealistic.
“It would be cost prohibitive to replicate this business,” he said, a task that might take a decade.
But that also presents his key challenge. “It is my job to take this business on the road and show the power of the financial turnaround, and then the investors can make their own decisions.”
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