The Chicago private equity firm buying Lytx Inc. wants its new acquisition to stay the course.
Lytx has grown at 35 percent per year supplying electronics and services that monitor truck and bus driver performance, with the promise of improving driver safety and saving carriers money.
There will be few changes, said Phil Canfield, managing partner of Chicago-based GTCR, whose $550 million, all-cash purchase of the company is expected to close soon. “It’s a great business,” Canfield said.
CEO Brandon Nixon will keep his job and Lytx will stay in San Diego, where it plans to expand its space.
Lytx’s business model of recurring revenue through subscriptions is “powerful,” Canfield said.
“We’ve got resources to help him grow, especially through acquisition,” he added, referring to Nixon, who has a minor ownership stake.
The deal was first announced Feb. 18.
Start Your Startup
Lytx started life in 1998 as DriveCam; its product and its associated program still bear that name.
The DriveCam system constantly records the activity in a truck cab with two cameras: one on the driver and one on the road. If its sensors detect an anomaly such as a swerve or hard braking, it will save the video from several seconds before the incident to several seconds after. It will then send that video clip wirelessly to a cell tower, which forwards it to an analyst at Lytx. The analyst will look over the incident and provide a report to the trucking company or bus operator, which can bring the incident to the employee’s attention.
The dual cameras — one on the road and one on the driver — beat other vendors’ single-camera solutions, Nixon said, because the second camera often puts the incident in its proper context.
The system identifies entrenched driver habits — such as speeding and texting — and helps managers correct them, Nixon said, adding that the system has the potential to save lives.
For every major collision, Nixon said, there are probably 200 incidents of risky behavior that produce no damage. Flagging such incidents and eliminating risky behavior cuts down on the number of accidents, he said.
The DriveCam system promises fleet operators a 50 percent to 80 percent drop in collision costs and claims, Nixon said.
In a statement, GTCR said it prefers to invest in companies with hard-to-replicate data and highly valuable workflow applications. Nixon described Lytx’s patent portfolio as “strong.”
The business is not just about video. Lytx will consult with companies on how to coach their drivers — an aspect that customer Richard Stocking says he likes. Stocking is president and COO of Swift Transportation, which bills itself as America’s largest full truckload carrier.
Lytx’s leadership is “actively engaged in our success with this,” Stocking said in a recent interview. Swift, which has $4 billion in annual revenue, is working to put the system into 18,000 truck cabs by the end of 2016.
Lytx has 66 percent of its market, according to the research firm Frost & Sullivan — roughly four times that of its nearest competitor at 14 percent.
White Space Opportunities
The acquisition shows GTCR’s enthusiasm for “market-leading companies with substantial white space opportunities,” said Mark Anderson, managing director at GTCR, in a statement. A white space opportunity simply means a market that has not yet been addressed.
Lytx has experienced a compound annual growth rate of 35 percent, Nixon said. Its 2015 revenue was $130 million, up from $97 million in 2014.
The business had 365 new customers come on board in 2015, Nixon said — one per day.
Lytx has 300 employees in a 75,000-square-foot building at the foot of Towne Center Drive. Conference rooms at Lytx are named after iconic streets in literature, pop culture and real life. Total employment is 400.
Lytx has taken the 50,000-square-foot building next door for future expansion. The company plans to occupy it next year.
The business introduced the Lytx name in 2013; before then, it was DriveCam.
Nixon arrived at DriveCam in 2008, shortly after selling his previous company, Enerdyne Technologies, to ViaSat Inc. (Nasdaq: VSAT). He said he envied how ViaSat CEO Mark Dankberg and his partners were able to grow their Carlsbad-based technology company, and wanted to do that with his next venture.
He seems to be doing that.
In the last 18 months, Nixon said, the commercial transportation world has recognized that video is an effective means of assuring the safety of the fleet.
Nixon, who likes to run during his off hours, reaches for a running metaphor: it seems that headwinds have turned into tailwinds.
CEO: Brandon Nixon
Revenue: $130 million in 2015;
$97 million in 2014
No. of local employees: 300
Investors: GTCR is buying a majority stake; Nixon and management also have stakes
Headquarters: University Towne Center
Year founded: 1998
Company description: Provider of technology and consulting services for fleet operators