Covenant Transport Group (NASDAQ: CVTI) plans to become a $1.5 billion revenue company – up from $885 million in 2018 – largely on the back of explosive growth in its revamped brokerage division, Covenant Transport Solutions. That was the message delivered on April 3 by Covenant chairman and chief executive officer David Parker at the ribbon-cutting ceremony at Covenant Solutions’ new office in the trendy Manufacturer’s Row neighborhood in Chattanooga, Tennessee.
The new brokerage office is across town from Covenant’s headquarters, a separation in both geographic distance and style. It is located on the sprawling top floor of a remodeled factory, complete with huge windows, exposed brick, arcade games and a ping-pong table. There are about 50 freight brokers covering loads on the floor now, but they’re only using about one-third of the available space. Headcount should double by the end of the year, Covenant executives said, and along with Landair’s logistics business will eventually account for fully half, or $750 million, of CVTI’s gross revenue.
Employees and guests munched on brisket, pork and chicken sliders, grits and potato salad from Edley’s, the restaurant downstairs, before a series of talks by Covenant executives and Chattanooga Mayor Andy Berke.
“This is a milestone for Covenant Solutions,” said Paul Newbourne, executive vice president and chief operating officer at Covenant Transport Solutions. “In 2016 David Parker and Joey Hogan made a strategic decision to invest in the business. Since then we’ve grown 65 percent to over $100 million last year, and we have a great vision for this year and for growth after that.”
Newbourne gestured toward the office space and the neighborhood outside.
“To accomplish that growth we need good people,” Newbourne said. “Chattanooga is a great place to employ people; younger folks today love the downtown lifestyle and being closer to the city. The building has a lot of personality and is in a great location on the Northshore, which is growing by leaps and bounds. Employees ride bikes and walk to work – we’re really excited to be here.”
Parker spoke next and reflected on the 34-year history of Covenant Transport. “We’ve had bumpy times and gotten through everything,” Parker said. “Through God’s blessings and working our bottoms off, we’ve got a great company.”
Parker recounted several years of sitting through board meetings being harangued by Bob Bosworth, a Covenant board member, who asked why Covenant’s logistics operation wasn’t performing as well as Chattanooga-based freight brokerage Access America, which was eventually acquired by Coyote Logistics.
“I said ‘I’m tired of listening to Bob Bosworth and I don’t care who we have to hire and how many we have to hire – I pray to the Lord we can make some money – but get me some people in here!’” Parker remembered.
“Let Landair run the logistics and the third-party logistics side, and let Solutions become a pure brokerage. We want to give you guys the exact tools you guys need to have to be successful. We just want to explode this business,” Parker said.
Mayor Berke spoke about the importance of the transportation and logistics industry to Chattanooga.
“This is a great space and you all are going to love it,” Berke said. “We want to grow our businesses in Chattanooga by capitalizing on our strengths. What’s our strength here? Logistics. So if we want to develop economically, we start with our successes. And the money matters. What makes a city tick? To a large degree it’s people making more money. These logistics jobs are great middle-class jobs.”
“This beautiful city we live in is the prettiest places on God’s green earth,” Berke concluded. “We have more restaurants, music and entertainment options. We’re glad to hear people are living close by. If we do this right, we can attract the talent we need to grow those next jobs.”
After the ceremony, FreightWaves spoke to Newbourne about the growth plans for Covenant Solutions. The brokerage is deep in talks with several technology companies – project44 for track and trace, Ambition to gamify competition between brokers, and Parade, an artificial intelligence platform for engaging with carriers – to make sure that Covenant Solutions is a leading brokerage in the city. A transportation management system upgrade is in the works and Solutions is also exploring new customer relationship management solutions.
Newbourne explicitly stated that Covenant Solutions was diversifying its customer base away from the asset side of Covenant Transport as a counter-cycle hedge, so that in the event of a recession or a freight downturn, the brokerage would be largely unaffected.