Cost Cutting, Lower Rates Keep Brokers Profitable

Gross margins and revenues were down for freight brokers in the third quarter of 2019, but cost reductions allowed brokers to stay profitable, according to a report from DAT Solutions.

Gross margins were down to 16.1% for freight brokers in the third quarter, down from 16.8% in the second quarter, but they were up compared to the 15% margins of a year ago. Margins remained healthy due to lower spot market rates, which lowered the cost of transportation for brokers.

Operating profit was at 32% of net revenue, beating Q2 results by 7%, but was down 18% compared to the record highs experienced during Q3 of 2018. Cost reductions supported the bottom line, according to DAT, due to brokers cutting labor and non-labor expenses.

The quarterly average load count has remained mostly steady in 2019, with load counts decreasing by just 1% compared to the second quarter. As with most of these metrics, load counts peaked in Q3 2018 at 7% higher than Q3 2019.

Overall, brokers averaged $77 of profit per load, only 2% down from the previous quarter, but 14% below the highs of Q3 2018. Revenue per load averaged $1,511 in the most recent quarter.

DAT’s benchmark data is drawn from the TMS systems of nearly 100 freight brokers and 3PLs with average 2018 revenue of $13.8 million, a 16% increase compared to 2017. Prior year results, as well as the current report, have been re-stated as of the first quarter of 2019, to exclude outliers.