FWRD - Earnings call transcript Q4 2020

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Operator

Thank you for joining Forward Air Corporation's Fourth Quarter 2020 Earnings Release Conference Call.

Before we begin, I'd like to point out that both the press release and webcast presentation for this call are accessible on the Investor Relations section of Forward Air's website at www.forwardaircorp.com. With us this morning are CEO, Tom Schmitt; and CFO, Mike Morris. By now, you should have received a press release announcing our fourth quarter 2020 results, which was furnished to the SEC on Form 8-K and on the wire yesterday after market closed. Please be aware that during this conference call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others about the effects of our business efforts on each of our businesses; the future plan of our Pool business; steps to expand our operations organically and inorganically; the company's outlook for first quarter and fiscal year of 2021, including expectations for revenues, tonnage, net income per diluted share, free cash flows and operating margins; the expected impact of growth and strategic initiatives; and those other forward-looking statements identified in the presentation. on and based current are statements current our information expectations. These

from risks they and factors materially in are such, and forward-looking results results statements. the subject differ operations As actual to other discussed cause that to the may

risks information Commission information, company CEO as refer undertakes Exchange to factors, additional events to The the no to press call with For any webcast update and And result I'll Securities or future this presentation call. obligation filings relating Air. the please these new concerning and now and forward-looking statements, otherwise. our release a over of and whether to of to turn the Tom earnings Forward Schmitt,

Tom Schmitt

us. I to first Grace that's heartfelt partners. first customers with and a want and morning things business other you, drivers, you our of teammates, good of with to you and all thank all go Thank call to on the

celebrated In still invasive differently made year of the from an certain a cyber-attack You you this customer commitments. our our back all bit of we that fact all actual very little holidays business all normal. kept and a from brought

XXXX. for customers So going making Forward and ramp a into thank clean for and side-by-side entry you that for team

are I we time keeping Before briefly talked those made I that around this ramp, call October, how back. entry commitments, we more just into go XXXX Last in on and freight. essential were six about density commitments

six, execution accretive in took service five new our number permanent number levels tight business a pause organic and a of LTL temporary actions, no medical of ones; very XX% December was holiday and in closed was in with fact period. in number supplies; was precision In pricing record we our M&A; expansion;

double-digit that this double-digit time double-double; me ramp take journey make growth observations me very, you with into rate XXXX take towards margins. entry confident our very and annual our and share five for Let that commitments and

a The strong is off-ramp. first observation

a need of XXXX a on-ramp XXXX. have strong to strong you off-ramp into you For off

look They at we fourth into the our clean that's first were of are quarter an clean. XX beat. were of you And weeks quarter performance XXXX. type If operational operations taking that fourth the

have XX.X% say business in is shipments XXXX. that January year-over-year there's We January; core things tonnage up rate momentum. a oftentimes daily every Christmas, year; we and general very Three, increase. showed in three up LTL XX.X% very, LTL our a had Secondly, early increase. very strong rate we certain are I Easter over strong.

off. been different it invest have I in those organic our increase keep customer seen, the to business. days I LTL year all rate talked GRI, I customers. have us just mentioned. might we be and our an the customers. There's of X% a across We on be when Christmas in it's commitments, continues a more I year always February truckload about get in to strongest customer containers It bit investing exemptions. New last did points our strong and more year, which like you six continued a makes will rate this around see making Monday looks lines drivers' Four, volumes, our to LTL onto Mile new a increase the X, in on working we are left Year a very service organically this February provide just as is rate units adding look beyond exceptions six Now for tear. to waiting LTL business our you ever Final and added before, and Also, of terminals like and beyond continue we observation mentioned doing new on port, the allows ago that first access and you period going safety current We're This capture XXX,XXX XX intermodal I've this and but that even around means Also, year momentum year. minimum predictable L.A. have extremely Chinese our which other mentioned it port. more outside then momentum. in look those had and just to earlier. in And to we LTL And period a And sure the versus we than footprint. well. right, core

Inorganic into on precision saw in ramp more strong a quite intermodal tuck-in service great last access of volumes entry the a also team signed while. geographies release the that more the going a our and is to for, giving company, Midwest. the the a strong the in to five team. I exact to Proficient in is tight So graduation. known that's will sometimes a We great observation DNA want which want is inorganic going execution. what and addition be us terms Number means for they're they're have our volumes another we you on to XXXX share or be to first-class as strong

business. night. And is investing we doing being more. have graduate whose to other to did closed now customers our they've who heavier. We into done show that the actually Pool be when the fit our found I'm super the It customers so which team sale expect is that that do best was distribution owner and that fit narrative. just And the our be and going the we have does an going only Ten the had our business portfolio. windows. As our last commitment must service what Pool very asset continue that handling is we with I to It's and always if main will Oaks. made the tight here will will and close business in retail team owner, exactly verticals. right Pool we're Pool we're what far, Pool did the confident business. they're into across lightness be And getting that to this perfect. we sitting actually not time fully our sale What of

say map, sure here. the and be to for I up thing, very the sharp I XXXX value. turn as thing, our main going Grace, bit. maximum clear shareholder time We I precision laser it will maximum to beyond I little team main double-double wanted before it road mix make operator, of a execution And keeping we personally, a an said, the Forward for over want we're back entire to to exchange there's Finally,

do go the open So to straight we're that to And going and with lines. let's that Grace, Q&A.

Operator

[Operator Bruce Chan with open first Please question from is floor The and Instructions] go you. is our Thank now for And Stifel. ahead. comments. questions

Bruce Chan

there sale Tom, I motivations doing were in diversification businesses when appreciate Pool versus it Carriers to But same kind great start what now some and already of back you off to the growth think take strategies want morning, with and is back acquisition the those of you're But really Mike, good can you Final and with acquisitions that anything know Tom think apply maybe It's what Final the growth TQI, learned you think the back when asset-heavy the lessons and that see USA other you I differences in format wasn't those some the Pool. of to Mile when I you tenure, the was I there. but to your that the of during nature here. of business kind Final TQI, to Mile? of think outlook now it I some addressed as with the and And your know for for and or with of a Mile? of is now to business. Pool.

Tom Schmitt

Yeah.

Bruce, have with morning, I first good us. and of you think all, good to

growth itself Gartner to it's actually for at grow says it's come. Final the many I high years you think business. fundamentally, a if in look to high-single-digits Mile, by going

growth. are in We that participating

sauce you we're retailer. floor have us they're revenue side Bruce, with scratched. have We best the enhance we're order for that Mile, some retailers. certain not working going that that also, very we're Final that world-class think, that I you to will with to a maintain be on where do And fridge customer make and the when the capture a kitchen of And that. with relationship And special premium going paying

then Mile, picking -- As local they they we long On a co-route. LTL do light oftentimes Final sometimes that pallets. you dropping buildings. few up as of get which our team off out day, and installation installation operationally, synergies and crew might we use the Oftentimes a can LTL the same see or

you at premium those I got a where you and the once types an the with basis. revenue level locally, ongoing you've So, LTL operational see like, on I say business sauce, a synergies see secret margins capture of once that

of synergies Truckload road back. Truckload, over with LTL recruited the that's services, about special LTL the what's same two out for that's drive drive Final business. One sometimes business. being a and the way, sets an by Mile our So fleet,

So also. lots of there synergies

like for a our actually a or single On believe a cross-sell back-office the services. towards customer business some it's to be And year, capital. returns odds of terms Intermodal SG&A; we that strong and -- Intermodal trade above second leg, Intermodal the blunt the the in cost actually very Intermodal, side, return also double-double. between way our of brings shareholders synergies other where odds to sharing I some and the every team of about some I

micro-porter entire lightness profile when in successfully industry, a market But got be that's the the pressure, fully sauce, There's So, profile terms that's secret growing just what supplier upside. the Pool in retail about brick-and-mortar at. still and focused that our kind best the have asset terms double-digit those fits do they narrative, I it. owner business, I we a of we and pressure, the future something believe you risk/reward analysis of Bruce, in territory but on not the good are talked fit the an things financially. look you of of old-school have to share for business. And did with do untapped the will customer portfolio in of

Bruce Chan

clear, synergies you Truckload that keeping Are business. there linehaul can just integrated, great. to business side. That's outside improve color. pull and the to right-size there the finding on And of and networks? Okay, levers That's getting good linehaul the the you are be integration that other very then, of you're

Tom Schmitt

Yeah.

locally; the and Truckload a as is you to beautiful business over mostly Freight LTL, as said and Final and be more the said, road. between, I Mile more LTL, very Bruce, clear, and just Expedited wonderful Bruce, So interplay

LTL, from each the and TL the on side side, lot. a On benefit recruiting selling other and

the also are into more brokerage tremendous margin potential. more getting asset-light space, We another hugely and Truckload with space

Bruce Chan

on here Okay, mission kind pricing. at or great. I least you've just it up really one to the kind to mission Forward last since it, of at queue. part you turn And your move Tom, Air, before started one made then, back the of of notch your

expect to pricing. like said and Air been for a able But exact to great. And expect Christmas product You that's even certainly be GRIs, premium or you Forward Easter. more might extract

of as as new more there? So that the tools opportunity of kind some more there you wrap TCG, technology you're even about is implementing up you get with aggressive to think

Tom Schmitt

use that a do getting Nike's -- can legally terms is without my I going going hope, be on to in hand, being is I without pricing this race To finish excellent line. and slapped to a be,

have So Bruce better mentioned the -- gotten tools. we much you at

We in the also team. space hiring experts getting expertise on significant LTL great by are our class

tools and the we're better. getting so, and between better the And people,

And sure last we airport-to-airport premium pricing make special take we very got Where door-to-door you invest drivers If area. take segments, over does segments. much handling? different congested? it we Then looked an at that more the extra to customer customer into sophisticated. in get geographies Which also need we to year are specific LTL,

haul it's a to sure we're from Atlanta make of equally whether or competitively matter a it's Seattle Now, move across actually move the Washington. pricing we're to into whether getting all that no heavy length country short

the discipline, of McKinsey close very, make about type we're was pricing horsepower perfect the upside. parcel I we're the actually to before pricing. in railroads, need to back some Pricing fortunate my We're to then upside days must sure that But going learned untapped core FedEx better So we that I very absolute in as tap have disciplines sure days that the terrific there's we up. side dynamic keep getting we to perfect. or I said, and make and that and my going ongoing of on ramping the is going one to even consistent of with be of and better. being to

Bruce Chan

I’ll back you Great. Okay. queue. in Thank for the hop time.

Tom Schmitt

and conference week. thanks, Hey, Bruce, for thanks the this

Operator

we'll Thank line you. go of Atkins Stephens to And next go Incorporated. ahead. Please with Jack the

Wade Schaller

Tom Mike. and Good morning,

morning. this Jack for question. our on taking Schaller Thanks Wade got for You've

Tom Schmitt

Wade. upgrade, an That's what I call

Wade Schaller

I him that. won't tell

existing On impact are be underserved of many this markets? terminals How mentioned do are year? density in the markets? at LTL network, to additions I new believe those those bolster least what of those additions How many you you the six of And year. this expect to or

Tom Schmitt

Yeah. is a to part. large This exercise a of math business Precision math what A Execution do in a you is lot our exercise.

agency to Southern minutes We're I do significant – greenfield LTL we Ontario what to own co-locations – the a year, our operation is California locations. So Wade we're introduce talked is the already It's of up it's here so well. very we're which in doing answer going going conversions. terrifically ago. Mile combination way, into going about doing had portion some Inland of few And be a a some last volume. just specifically to to Empire, Like and Final

going X new XX of a think to or it's be those. you if locations combination year, of this So

It's Now, exercise. math to a how do we them? also get

first in locations have customer Forward presence. there's base, current no we origin following especially Air us the is our telling The thing where freight

look Secondly, have. some and look the access you large-class we – number that you LTL certainly freight you people twice right. X.X There's if have sometimes left in cases cases learn players, from of some right some times of in they the points and left when to

have data. LTL freight class Third, we do access to

US we Canada. the So the across flows and know across

also then we those then present we less we So shortfalls once okay. you where possibility trade frankly of demands against customer flows against are say, should current than And or you be. know see

are a Mile with Final the own our network. co-location ones around location. The easiest look Let's

We Mile some LTL where of we that terminal. have don't cities – have XXX almost locations in Final an them

add, already much easy the with. an how that's space there. utilize volume can actually So because basically you, you that's start conversions Agency we tell

that to So points Fontana current co-location The with ones and But demand Inland in data the last three those easy a agencies conversions; a bit harder. to that's our And again, of the Mile; a of and ease those agency it's ones year from another things: easy the exercise. Final those initial one. are co-locations Empire freight customer greenfield. is greenfield base between combination like with implementation fairly question and accessible our your Mile Final back do Wade terminals, between math going thirdly to it's be answer are

Wade Schaller

scale that dig doing guess, I to on Intermodal Okay. switch Intermodal Proficient piece of business. the if on very Great. the that? more you've or That's helpful. sorts I been you to drayage over last derive could, value from and and Could intermodal I to speak network want gears broadly, the and importance year you strategic of in the the of a work national benefits what

Tom Schmitt

Yeah.

part business. for is multiregional regional Intermodal a the and So most a

nationally customers more Some do to of present. our be ask us

decision-making So national you the where the presence of bit truly and have Wade a more some that of national helps. is

for more the something, drayage and about very When a is business us box. transit where and a does love for bit intermodal bigger that, precision And For means but instance present similar Forward call be It fundamentally, fit something ratios. that's is lowest handling are much you in the Northwest we and certainly means looking fastest what than towards DNA to the would that's what sensitive talk a Forward best execution times. I damage mean? that DNA. for very It

once But in for Then more are they this for four. initially product. may in exact of selling being the gets XX, be on Once up another And about the every ocean, port, rail intermodal lost the all over get you in a extra that slack think into supply it ultimately two when typically you going used not we're adjectives. season to six the hauling. and days, you oops, XX, about DCs head, took days need And longer it versus more those to they the and think than products, because that lost premium XX is these understand, goods railcar, is particular chain the up. wait sit end you the day day Those drayage, may days time. few days. Now, actually came stores, that to

drayage service, actually for to a that above premium of an a that are to being that precision our bigger in is that's that going I what that capital said. and is that's which something tremendously ROIC for service those odds back deliver at business are double-double premium than adjectives required and frankly that. job way The cost particular exact permanent So, DNA execution high our are customers paying where a where fits intermodal box,

Wade Schaller

Awesome. That’s it much. so from me. Thanks

Tom Schmitt

Okay. Thanks Wade.

Operator

Thank you.

go the Group go of Please ahead. to Scott Research. we'll Next, with Wolfe line

Scott Group

Hey, thanks. Good morning.

Tom Schmitt

Scott. morning, Good

Scott Group

on want the margins business. expedited I ask the about to

ago. I you're that mix should can you XX%. here, guess years terms And how in at do LTL be of and saying out where of margins margins can year means you think business has there's a for what that, think X% to there and the you're been I about XX you've lot a from So mix XX, closer in XX%. the to changed changes go help business? got know, last maybe these someone I saying, non-LTL us margins, And guess, the go? what is within possible it

Tom Schmitt

I summarized think Scott, quite well. you Yes. it

tag going me here team with Let Mike to then, and ask I'm me. start to

you margins an two gotten our actually Airport-to-Airport we Total when XX TAM, business exclusively Addressable that not years last to. like when The types ago, Airport-to-Airport go has over back of was decades, So, of XX, you're had bigger. smaller business, Market the to referring the the

lanes They actually there's Airport-to-Airport they up And did that customers quite showing core built own the visibly Some thing. were of dense. in then space. a started competitors smart actually also our out where their

spaces, because, core with it you margins we that still described. for the we LTL, question remain execution customers for where and that's always business double-digit shooting will correct, us. and specifically, market types augmenting believe, asking We're where Mike believe are to, your stretching wonderful should are mid-double-digit margins us I precision are of or and possible. confirm percentage to a answer a also that door-to-door where the XX muscle into you of frankly was trained our go that's or that either we very where be To a should So

better in probably capture market, about $X criteria getting stretches to strong into of damage faster and LTL we're billion, Airport-to-Airport handling, I've value for LTL stretching the XX% type been lowest add? than plus those finds, premium transit anything those that I expands we a the sensitive times, that. creation want least have before; actually belief billion of those we're program And fits our at because, value that territory. better to So that there's us more and you $XX that XX% and beyond that, on margin, are about. talked That that get should keeps talking ratios. ones, in grow-forward margin Airport-to-Airport beyond with Mike, That's

Mike Morris

on which some Final ended it that hit Matt Freight getting business. mean career to then past. in a unpack really I No. XX.X-type with north get X-plus -- X% XX to COVID. the a whole to been done of we back to be critical I XXXX margin as feel rough the it. percent has range, needs and Obviously, XX%, where I rough is it's getting Expedited Mile you just the to looking -- the hitting XXXX is as X% margin percent But been. mean, LTL and XX% to double-double Truckload XX% And My We like, can Yes. we've range. was math to margin. XX% cyber. in that think, XX% a the margin Scott here in with of

of yet, math, were look be excuses just and the X% you FSA Expedited to you the in the steady-state in if can the a add stay safe second of margin like if fourth and certainly doing quarter. insurance operations back other that accrual try the not marry of have lot does you quarter explaining, to to fourth cyber where do, impacts more of add we but earn-out at get impact were kind there can work making If and that if to. the to Not the you have whole then some for which Freight's effect just you would a together thing And it seem up Intermodal that we with is for double. something some

Scott Group

now. I like it's That's it's thing think Okay. on stay because like think just I'd helpful. to the I -- this important right

where is so where -- mentioned go? you So Final -- said today? today? you X%, want where that And LTL think X% mile is if where Truckload can you X%, today? that that get is to that is or do -- you that to

Mike Morris

as direction, -- there final closer you SEC where out direction. I the But already disclose segment, we margins a trending just in historically if LTL you on Because sense offer getting of order not and numbers I'm I to we general we've been the one don't individuals. these back general break giving in transparency. on mile that the probably there if Truckload described that can on of

Scott Group

historical Okay. back at? to on we're a we've XX% just do But mix is be you for that it and the why business that now. I get got the there LTL why final XX%? the XX% And side, the in can't not more you XX% shift mile Truckload reason then can talking understand to think used or LTL LTL -- about

Mike Morris

Yes.

we to clear need to of where next that's be the get get to level. to, to kind Just

So to percent next I'm take get Freight trying to step to Expedited to will. what well least I do kind Well a doesn't then of just there. we the XX-ish need it to to stop you once That margin do But we're platform have standing at if XX%? of here. we communicate on terms got the summit it that you mean in get to

Tom Schmitt

we're what the level talked for. Scott. add just is a so milestone as next a takes me about. Double-double That's not Mike -- is destination. that, let And shooting to It it

as an a as work very define haul. of line it execution interim precision, longer be by double-double door-to-door a step. takes If lot -- that's longer But clear you customer to stretches by XX, segment

that XX% margins $XXX by when a the not it math and all business, going the that's work. and If we we do you million it we to Airport-to-Airport say is six was multiply like do

the then to have are type have and us. for the capture creating Airport-to-Airport that still size value of we has always has same profile premium core the So that the will stretch and of that we business

clearly, Freight the aspiring XX% for to again So company for not Expedited is but we're destination. towards. and -- overall a you're is heading that's Scott, where what a final And milestone

Scott Group

Okay. one. Great. And just my then last

pricing of or to So the What seen another on cost side, that's you purchase where or PT margin to the certainly side, sort is there side? over time. the do driver going about -- on the pressure biggest is going on help. you've transportation -- margin is What is if anything the are expansion there of differently

Tom Schmitt

are the two those questions So end. at

other drivers So are a though do. Scott and I big expansion. margin well yes, as PT as you one this know is there on

be stats. years, Kyle about purchase So People talked of our small just XXXX clear several with just spike last Officer the very Chief transportation which Mitchin with to exception the the over yesterday I up, a was

or driver Over in the in What that? mean day, years, either we make single we -- Because actually low that several the helps professional last we I engage predictable them. -- is short wait territory our by every We their retention. tremendously manage a driver times for home great our which and home appreciation when short day. driver were we is call. traction they in single-digit And times Why like wait teens. this make priorities distance like for dispatch like low

the single-digit California. things the this that We for we're transportation. of our to to of I congestion in before, to with for day exception We driver and X,XXX sure of years them next them. of California and mentioned get We're a meet drivers -- the the who have regularly. We need difficulty make most concerns. meeting made We Every ago. and we the represent same is Board time, with thousands matter all The did the towards their fully still representative Southern listen in next there's survey with getting purchase couple the over steps With big like that. drivers week. managing day. appreciation territory California compensated But at we of we is them And Driver overall, are XX that a independent contractors.

is So, that -- to making to And expansion that our in -- territory good very reality we has there. people are team team a talked job this the about. be path tremendous become The this PT the has margin safety we our on done and professional a for is a drivers. has a for tremendous first-class operations to from done home a to single-digit

Scott Group

Okay. the for you Thank appreciate I time it. guys.

Tom Schmitt

Yeah. Thank you, Scott.

Operator

we'll next, James. Tyler Raymond And ahead. Brown go the line to of you. Thank Please with go

Tyler Brown

guys. morning Good Hey.

Tom Schmitt

Tyler. morning, Good

Tyler Brown

It so like the I Hey, Scott. feel agree with does are here. margins key

managing So give -- and little bridge to detail that one more things. Two when mentioned that I are to other probably there, when a Then drivers try build Can we through PT. bridge? you we try you -- robust But the to just want pricing. really to be mid-teens going clear. the some build so another year of

Mike Morris

Yeah.

you popup. going if where to numerically think are look I the costs

some decision-making $X.X more and of has around So related million When and Operating front-end, the whatnot. history I incidents. having it's at to things informing, a in the recruiting, coaching, had not we in pressure technology data-driven safely been utilities SIR, margin our like and Self-Insured because Retention. safety, joined,

it think able lower to type was the decision. I insurance to of that's to be buy. to prior not $XX It's buy would love our million That's we now. insurance We And market. used that. the right

the at terms when in that of or fleet because is terms they find efficiency. big the we we've it's We by our that's not and Truckload one. Tom retain And Truckload that We became we're that of and recruitment are they Truckload of to of drivers, in lots The us Truckload. currently. flexibility grew recruit delivery, COVID. best in and able but Yeah, them of some right, we out in delivery. are pickup outside a and role P&L. give not the that Final one it has operating described. P&L, for that non-GAAP Mile, opportunity avoiding helps Mile an like markets that pickup on and example, able been ways able component. an And we've fleet, along And an of miles, the offers and responsibility. the in degrees integrations grew of, gives anything, -- so saw us, not The gave of by That's retention, only There's cost that. that about We us that lever on kind with drivers important number. in Final using LTL insurer's our important these talking a That core kind were playing and growing them. fleet the Brokerage XX our of don't LTL, didn't LTL and to nonetheless, we elsewhere freedom were may have PT. and line-haul points give we the been Truckload. both, component are have LTL number But That fleet. hits loads LTL And Also back. The an rapidly. -- co-mingling to

how which of more this report are the that's to as fixed lower some for world. And is cost between, business is that the unit costs we it the two why the in of run. we terminal spread because other we things did, As modes. terminal you're happening operationally, helps are segment have able That being These cohabitation, both. the

the cost other should treating modes. are but LTL, combination, greater to integrated inure given benefits of operating an the We this the of model as this, and these variable

Tom Schmitt

Tyler let just me And add.

Tyler Brown

Yeah.

Tom Schmitt

this for are Ruble that of the the knows always most a going contract the in creating And stepping a you back efficiencies. mentioned previous And got program customers. We they're so our very locally. that ran and also after help about this global the mentioned, and to added up a right something the moment. there on safety, have -- it's or importance by Operations how financial to consequences. purchase sure obviously, my -- and first thing goal Final actually, finish these up the Operations but that is that background and fastest-growing slice buildings our of the talked only the transportation profitable we team got And We I've Chris large ones to operations do. across has I big our inside co-mingling. It LTL a on the world. be then a seasoned capture efficiency ended and does that of line. race It COO first the performance go the not the which of you and employer. making we some most because side we Personally without making that team. pricing. But Mile lever unit the is is road. very, value the that we're enhancement we cannot for the at Mike, job, important in co-routing overstate to in you a is to efficiency also you human, and logistics

do obviously we to race also that have line. So lever finish pull as without a a

operations So efficiencies. pricing I -- two then in to transportation first but and and you and add too safety just would mentioned the addition purchase

Tyler Brown

you then about talked integration. And Okay.

integrated? adequately Towne is So

Mike Morris

Towne the isn't there mean, anymore. I Yeah.

Tyler Brown

that No, I got does completed? fully know. feel like But it

Mike Morris

Sure.

Tyler Brown

Okay.

Mike Morris

Air. it's Yeah, It's for been while. I Forward a mean, Air Forward

Tom Schmitt

as And some a came versus I of Final would the Final know, mean, Mile no would even is business. these historically example Final are today. even locations. Mile. locations, few one locations actually It's with one our example -- one Tyler best as of part Mile Towne Towne which but Final business actually -- No very other think people the the much locations Mile of

Tyler Brown

Okay.

in want That's Okay. expansion you're Columbus. And I about know helpful. cohabiting. do to then the an talk doing I

you're estate? that you -- does And existing back door about pressure I let's do curious have cause you think shipments pressure or -- end you perspective. million latent feel way, the capacity adding much you do You're But Expedited four of ring-fencing network mean, the year, the Airport-to-Airport co-locating on how door-constrained? if then dock a another that in you're trend real door the I facilities. Maybe does terminal, business? the a in traditional the Airport-to-Airport the existing said as LTL am the say more over particularly from

Mike Morris

capacity last make kind particular between on where Well is together. conscious done to cohabitation sufficient join the eyes in there a where modes is the wide territory, they two one, decision the of the open, can

the around essentially Mile stand until goal maybe there that an you you same take terminal we're LTL the PUD as is In for over for gets million Final and ZIPs the it of of Savannah up Mile year and is type to our we'll some really an you perhaps. business all is like if mean pick And Maybe LTL umbrella. agent the dozen-or-so into that pressure If Savannah a I kick actually Mile though to we Savannah. go example. revenue. get an own think terminal Final use a selling lucky it out agent on agent point able to create some then so the freight in Final for they you're as even in us up $X evolution, can can

Chicago terms asset-light that of to have can estate-constrained in with Like are tend grow. office of logistics go cohabitation. There we real driven intensity. parks, to medium, down and operating where the model a going up and room there places was around in so set you intensity an go ability Northeast market, dial the a of a intensity Atlanta. how up in to be kind and lot a those just kind no-brainer. the degree Fontana Southern to we're depending tight e-commerce pressure But the and offers and lease are California we of much some terminal. So But we There go go max areas general heavy by in in it's of light, in and your situation. sign is on a in

do enough the the you have itself. Sometimes terminal parking it's It's not for drivers. much like so

some softer Sometimes stuff. it's

because things already sorry back. nice is some And the us had the we're terminal that -- will of we that do that Columbus probably we're things expansion capacity, zone CMH at One wouldn't we capacity that is doing skipping. if for do normally

we -- as you've there. again, investment been and so make And probably that

We're investment, capacity yard. That efficiencies significant XX% recall linehaul hub, the expand we're network. more times, this terminal. the load flow blend ability better in most bring through It's transit flowing grow You the fleets. on because this getting its should linehaul, the factor, the going costs, to better we're to with lower our better central a lot of freight

that other its back receiving that receive we to to terminals historic like historic to ease -- recent XX% number, pressure inbound that that that might ought need bring be don't As inbound that in some type anymore.

So there's ways to example. a to work Fontana is and pressure. network within modulate adjust the good

lot and way. It's controlled stage the Fontana a of PUD the lets in congested bring hit PUD can growing. is of California efficiency. in more dock growing PUD while in on Southern operational flow kind the way, a Staging the action. a organically.

that at of the revenue equation part to your exist through the as can pressure So that suggests. flows ops might equation question get

Tyler Brown

Okay.

I've a couple got Okay. more.

am your lot quickly it pre-COVID, the I -- lines XXXX book a at if holistic of a an above-average how carry And high-service you looked control. if book things there does freight the But margin Just that though cruise looked of it are obviously concerts? call out at much in vertical curious was conferences of extremely you sense, profile?

Tom Schmitt

retailer you a an and mean, Taylor than Imagine, your halfway answer the take Swift you're doing yes. if the question if is first, extreme margins setting probably I to up So, better do. job we salt gets delivering a competently you Tyler latter concert example,

is May in to year. sleep answer was So it of to went point it our question LTL. numbers in The in our does. profitable and last your mathematical XX% That's your margins business temporarily XX% to most to essence. about

grow my that at gentleman lead because, forward Buschmeir together where company, employer Stefan with Our who similar we again, a codes previous other find, program me program SIC we keep did [ph] and his verticals. expand a other have a

program before out. broke COVID a we So that's had

something So we called foresee couldn't COVID.

essential we up freight. accelerating closes in supplies the medical mentioned example, up you what's December. fact dialing makes XX% and spell couldn't our and for In I I of it. prepared But were today called

a you to Forward those cruise So the types some shows. from lines back just year will events. two events in or we freight bring now are forward because Air Tyler time be help a that over business now, we mentioned company essential you company, fast the will better when a of customers this have trade unit those what way And they getting customers does from same that those just also conferences by cases

we So bring customer the keep strong that relationships, we back.

in stronger more XX a Air forward additional was, were COVID we're It program much expand a getting around to grow a find, anyway was spaces. now And in ago, we more was have multi-legged -- a huge a place tragedies Forward premium of keep legs. I'm and will not accelerator it trivializing human years freight of it. had did and the what one-trick we great within that You and pony where bit

that to path going of XXXX less in So I are company. be a us we're stool where a for make that faster, but love have it bit wish even would we I kind that painful all I to love of heading. creating multi-legged been as

Tyler Brown

Yes.

on earn-outs. here Okay. can quickly on we And and but my Great. last then of this kind one Mike one the maybe go here

there? the earn-out? do Are OpEx line? over? are we in you accruals it done think additional Was So any much And other the how was

Mike Morris

Are talking you the about Final Mile earn-outs?

Tyler Brown

Sorry, Final Yes. Mile. Correct.

Mike Morris

of because in amount the accrual. fluctuations kind it in was $X.X the operations. in note the period, of that inside other end I'll Yes. It pre-COVID the the not actually million. earn-out current was is That below the business, this of was had The the of -- that. is of expedited freight. was quarter release But It inside of we an accrual one an prior things relative of to of

But like period-over-period it's can't the $X.X So higher. contractually. is And any out actually April it over. is go maxed and swing million. settles it It in

Tyler Brown

is then a earn-out, to get to earn-out? the called you have that there? Okay. marker that it – the hit you Do onetime – so on what's like what it's And multiyear or do earn-out? And Pool a earn-out, is

Mike Morris

more when we'll is is mark at it But a It's provide morning. is a K its in XX:XX about that the the determined. closed disclosure – and earn-out transaction, in lot a this one-year which

GAAP per to So of long exists, would the ops. still would rules as ours one disc it of though its with thing, mean is earn-out disc through would I'll that anymore. at earn-out that thing any an the fluctuations is the open a we ops, not the to Because business have the even keep as go continue bottom mention P&L way is

which So the of is way little to disc have earn-out. we're change at any in value the the just bottom going this number, ops

back-office also perspective. get Oaks We Ten TSA up a from to have six-month help a stood

Tyler Brown

Very your guys. generous Thank time. you right, of All Okay.

Tom Schmitt

forward Hey, Tyler, in look a to weeks. couple your conference of

Operator

Todd to next Please KeyBanc Thank line Capital ahead. go of go with the Fowler you. And we'll Markets.

Todd Fowler

Hey, great. good and morning. Thanks

Tyler of within the flat just to think maybe Scott handle. and impacting think one around questions that that think I TVs I the historically a profile. lot standpoint. the of screen And of were the is vein much last one some pretty history that right easy How business from was margin of business on you And the mix lesson do the a a with Airport-to-Airport business kind margins?

As items the you've shifted Airport-to-Airport? to more network, much has profile moving had of the impact e-commerce bulky-sized that and how are some of margin on in through that the

Tom Schmitt

great and Todd question. morning, Good Yeah.

a kind of I as thought – – this thing minutes So to before, plan. like or smart do one partners we drivers so action XX be good of we said afford cannot to have and

by like six – margins do times say e-commerce multiply okay as and they took work. the six just almost to or you and Airport-to-Airport that's not like extent you If going just early some e-commerce the pre in much and business to them

because that So the of some mentioned of Airport-to-Airport the the you segment just has dominated e-commerce some codes. obviously – SIC in

challenges. revenue-per-shipment have So seen we

value. weight of But looking going – be in going challenge, the sea profile that XX%. we need up Execution best providing. back to business. about down; certainly Airport-to-Airport seen be to always after Precision to going for of the best like team it what and slice – that that Airport-to-Airport talked we of stretches. LTL because ago premium get margins those core a Mike But minutes the have where is is margin surgical are that the is that impacted to and that fair beyond easier. those extremely everything that to and the the at capture go love, probably to there's again freight. weight profitable and looking doing need the – just LTL you being are doing and we do That we And has e-commerce will profiles big not door-to-door referring that what our then available again XX% this the We are all doing that few get generate surgical of our the all a fits at And to profiles in tremendously again is us at again that's we challenges. your to that's just is the requirements that is be the have actually the extremely domination we we're profiles a harder yes All has that then and it, work doing. being business But be is and gotten something types

Todd Fowler

and Yeah. makes No a that that's Got lot sense it. helpful of context there.

couple a Just on of quick follow-ups few things. a

of And or – the not catch-up strength speak about Tom, comments how seeing First New January? in of big you that continue? a expect you seeing the that some January you to made with tonnage, that you're Year. within from some December, wall then, some around, to is maybe the Chinese can do the

conviction XQ that's tonnage expectations bit how that to can the So your you a the that talk and -- little in for strength your persist? behind about drivers going in and

Tom Schmitt

the Todd, tonnage January tonnage. January Yes. is

move freight December I -- doesn't move of have it XX, is don't you if you'll of type on think, it January our -- on the luxury X.

see more or equally So, it the that then, really perhaps point second is And January continuing. momentum tonnage. and we important,

slowing I freight XXXX. think, Todd, between environment the like in almost somehow it seems

COVID, boom go of spring down. XXXX into slowed you a XXXX back, was second slowed XXXX. remember Then go down, year, If of XXXX half you really

economy right XXXX And of January, XXXX. feels seeing bunch in And the a believe time. very is second a XXXX got February It's and you economy very COVID, slowing down freight that half between short what now, We're the amount XXXX. like, even pent-up of of the Somehow, it recession and me like of almost of more in in like whole more. out A that. the unleashed contracted demand makes it times. seems boom we're

Todd Fowler

it. Got

through is for you've additional to continues of your kind you going able for that last then cyber guidance, is or incurred the an be you're in forward? attack the be once that's quarter And XQ? that you've expectation year, Mike, one. first expense, cost my that additional that move something that maybe behind And Okay. with and to going that put the got the your amount just IT around to

Mike Morris

that investments feathers and -- forward, because, of into from up, We're event whatnot, we the -- some is more and that, But that. those road calling IT perspective. to this cyber. on latter. IT to enhancing related make continue it that focused that to We're out up are IT are and to the Obviously, relates running closing only the as No, event. just postmortem related an but those that wraps Yes. and it's map that those beneath just it on going out

Tom Schmitt

Forensics and endpoint that that QX. is endpoint have clearly an in

Todd Fowler

Okay. just in rate. some It's everything It's you not higher additional December? run costs a to related that incurred

Mike Morris

Yes.

Todd Fowler

Okay for guys. Thanks much the so time this morning.

Tom Schmitt

you, Thank Todd.

Operator

further That that you. concludes at Thank Investor Relations will website Call. on available questions XXXX webcast this Air's section I remember Please queue. call. have Earnings the Fourth Forward be no Forward in Quarter after of shortly www.forwardaircorp.com Air's this

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Forward Air (FWRD) 12 Feb 212020 Q4 Earnings call transcript