Q4 2019 Earnings Call
[laughter].
[music].
Thank you for joining forward Air Corporation's fourth quarter of 2019 earnings release.
Conference before we begin I'd like to point out that both the press release and the webcast presentation for this call are accessible on the Investor Relations section forward airs website at Www forward Air Corp Dot com.
With us this morning, our CEO, Tom Smith, and CFO, Mike Morris I know you should've received the.
Yes, releasing and helping our fourth quarter of 2018 results, which was furnished to the FCC on form 8-K on the wire yesterday after market close.
Please be aware that duration during this conference call, we'll be making forward looking statements within the media.
Private Securities Litigation Reform Act of 1995.
Putting statements among others.
Guarding the Companys outlook for the first quarter fiscal year of 2020, the expected impact growth and strategic initiative.
The expected impact of organizational restructuring you expected impact at the FSC westie at Olin store acquisitions, and those forward looking statements identified and.
The presentation.
These statements are based on current information at our current expectations as such they are subject to risks and other factors that may cause actual operation and results to differ materially from the results discussed in the forward looking statements.
For additional information concerning these risks and factors please refer to.
Our filings with the Securities and Exchange Commission and the press release and webcast presentation relating to this earnings call.
A company undertakes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise and now I'll turn the call over to Tom Smith CEO of forward Air.
Thank you Charleston, and good morning to all of you on the call.
We are in a tough stretch on a very robust and clear journey.
We've seen both a choppy environment and also we have made very conscious move.
In the fourth quarter and throughout the year Onboarding new.
Basis, as we were just approaching peak also integrating three acquisitions, so with those moves Andy environment. Together. The result for the full year is a 708, 7% growth 8% margin not quite the the medium term double double yet.
But precision execution I'm pretty confident I'm actually very confident we are working toward getting there, though and we will not confuse efforts with results.
What gives me confidence well, let me look back 2019 wasn't library first full year with my forward Air teammates we.
We did set up a clear strategy.
Which we unveiled on the Investor Day in New York in June.
It's bigger than the box and the matters think forward.
We wanted to make sure that'd be drive to strategy, both organically and also inorganically, where they were very very clear precise commercial and operational lineup.
And our precision to.
Fusion processes in everything we do behind it.
Resulting in that medium term double double destination with double digit revenue growth in double digit margins.
Then what we did throughout the year well executing the heck out of our strategy.
Again, it klee with us three acquisitions.
In our growth businesses.
Truly first class companies in my eyes, and most importantly, the eyes of our customers.
One acquisition in intermodal away steam Baltimore, Great team I got to see and two acquisitions in final mile Apis eight logistics and Landstar many of the teammates there I've met also.
In final mile. We went from eight markets to over 80 markets in 2019 with a business that now as a run rate of $200 million.
So if you remember I did say several times that.
Nowhere, it's written that you shall not do more than two acquisitions a year. So we are accelerating.
And organically.
Organically, we also show growth strong double digit growth in pool, our solutions business.
We also profit year over year improved and in fact, we could have driven that.
Number higher and be made very very conscious decision to onboard new business open.
New locations as we were approaching peak in pool, which did hurt a lot in the short term and it setting us up very very well for the long term.
We are stretching well we have to same high expectations in that business as we have in all other businesses. We also showed strong organic growth in five allow after the.
Acquisition of essay.
And.
Our go forward initiative within our core LTL business is starting to bear fruit showing incremental business in new verticals.
Notably Threepl in addition to our core airport to airport cost or was which will always be.
Remarketing important core to us.
And then finally, we did line up for maximum synergy and that's happening most visibly with the creation of our expedited freight segment.
Over the road truckload and LTL are collaborating much more tightly commercially and operationally we are selling truckload out.
Out LTL, yeah on the back call all the other way round.
And locally we also starting to drive synergies between the LTL pickup and delivery piece and the five allow routing so the way the whole product the way be route product between those two they'll be very very much in sync.
It is key for us in that expedited freight business to nail those synergies with rigor as that's exactly what drives the potential of a double digit margin in that new segment.
As I said, we are in the top stretch of a very very clear and robust journey.
And that clarity off that game plan and.
Cigarettes position execution gifts, we tons of confidence that we are in fact on a very very robust journey towards our double double so having said this.
I'm going to turn it over to our CFO, Mike Morris to paint out that colorful picture a bit more especially also with a double click on our new.
New segment expedited freight Mike Thanks, Tom before we go to Q an area, we'd like to comment on our new reporting segment called expedited freight.
During our third quarter earnings call on October 25th we mentioned that we were exploring a deeper synergy between our LTL and truckload operations.
Which Tom described in his opening remarks.
No as the quarter progressed, we continue this analysis and concluded that it makes the most sense to run LTL and truckload as one combined fleet.
The best implement this decision, we put new sales and operational leadership in place and effectively merged to these business units.
The strategy will help drive organic growth build line haul density and lower purchased transportation costs within our LTL network.
It will also complement our plan to further integrate final mile into our LTL operations, which will enhance pickup and delivery and terminal density.
Overall the continued.
The integrations of both truckload and final mile will help lower unit cost LTL, where we have the greatest opportunity for operating leverage.
As a result of these changes we have decided to report these operations as one segment. Since this is how we are running the business.
To help to.
Annual statement user we have provided to enhanced disclosures for expedited freight.
First we are showing greater revenue detail. Since this is now a billion dollar segment following the acquisition of Landstar.
Second we are providing a new metric called network gross.
Yeah.
The truckload and final mile integrations will improve LTL operating leverage over time, but will also create a different gross margins and operating margin profile for this new segment.
Network gross margin intends to preserve visibility into our core.
LTL operating leverage by showing the leverage we are getting on purchase transportation, which as an asset light provider is our biggest leverage opportunity.
As you can see on page five of our earnings release, our LTL operations generated this leverage in the fourth quarter and improved network.
Gross margin by 110 basis points.
The reduction in the expedited freight segment gross margin and in our consolidated gross margin was driven by the acquisition of Fs say, which is not in the prior period.
Finally, the historical information, we customarily provide on our Investor relations.
Site has been modified to reflect this new segment reporting and will be maintained in this manner going forward with that Justin let's open the line for QNX.
Certainly thank you. So we can gentlemen, before is now open for question and comments for US you can press one followed by zero to place yourself in Q and if you happen to be.
And your speaker phone this morning and may be helpful. The lift the handset before pressing those number keys, we do ask that you ask as many questions as you'd like today, but the queue up only once during the question answer portion once and again, if you'd like to place yourself in Q.
One followed by zero no.
And it looks like our first question comes from all end of top dollar of Keybanc capital markets. Your line is open.
Great. Thanks, and good morning, Thanks for taking the question.
Tom I guess, maybe just to start when you think about the expectation for double digit revenue growth in double digit profit growth.
Obviously as you mentioned in the prepared remarks kind of in a soft patch.
Now do you think that that's something that is attainable as you move through the back half of the year or is that get pushed out more into 2021, just trying to think about a timing of how long you kind of see this softness persisting and when you think you can kind of get back to or started approaching what you've laid out is kind of the interim targets Yep Todd good morning to you.
Couple of things one is just a clarification when we talked about the double double in.
New York It is double digit.
Annual growth and its double digit margins. So that's what we're referring to we also we always talked about the medium term I think right now is actually a perfect time.
To kind of illustrate why we call it the medium term.
It's hard to predict whether it's the the freight market whether its disruptions like the one we are experiencing right now is in the economy as a global actually economy, not just the U.S. economy with the kroner virus, it's hard to predict.
Take that kind of how fast.
Precision execution will translate into the results that we know we're going to be having.
Because you could have tailwind or headwind right now we have a headwind coming our way so hard for me to we look into into that Crystal balls and talk to say, it's going to be second half of 20.
20, or it's going to be 2021, what I am very very confident in if I look at the quality of the organic growth when I look at the quality of the businesses that we are acquiring in our growth segments final mile and intermodal drayage.
Precision execution with the way we are.
Looking at what we do is happening that I know so and this is where I can just say I'm confident based on the track record that we're starting to establish that.
Those actions will result in what we believe is possible thats, what we articulated on Investor day, the timing is really hard to.
Calibrate.
Because again headwinds and tailwinds and even the source of those.
And I can both both guest probably pod equally well.
Okay, Yes, I know that makes sense and thats helpful context, and thinking about kind of the near term and then gives you said the medium terms I appreciate that.
Maybe for Mike what the new segments.
We've had some good historical information or historical data on the margin profiles for the individual pieces that are now kind of rolled up into expedited freight but.
As you think about that segment in the reporting for that segment going forward and some of the new mix that's in there what's kind.
Realistic for all our assumption for that business, maybe not so much here in the short term how do you think about the margin profile of all the pieces that now that you combine those together, what's what's the right allar for expedited freight.
Well I think if you if you think about the second double in double double.
You know and this is reflecting back on and what we set a bit during IR day.
You know deepened side, we would be striving for.
The LTL operations too.
Moving in the direction.
For the 85 a.
Our.
When you lay in truckload.
When you lay in final mile.
Including final mile acquisitions, because this is going to be I think Tom called it godfather part two.
CST trade re done in the final mile space.
That will probably put that.
That pressure that to the zone of 10%.
And then we'll just have to see.
How much operational goodness, we can generate from the integrations that might less data.
Similar to the CST the intermodal segment.
We've talked about historically.
In side, you have a margin profile, that's greater than 10%, but.
But when you layer on acquisitions acquisitions.
They tend to be dilutive until they are integrated but when you do another acquisition other acquisition for growth.
Kind of push that margin.
The 10% range.
I would think short that's the long answer to your question. The short answer is 10% or a 90 LR.
Okay, no that all of that makes sense that's helpful and.
And then I guess, maybe just for a couple of.
Shorter term questions, if I've got kind of the comparisons right.
Revenue per hundred weight, we still positive in the fourth quarter, but.
It's a difficult comp can you talk a little bit about what you're seeing in the yield environment and.
Is that really where you're seeing kind of most of the pressure I know that Tony just remain challenge how much could just kind of talk about expectations for for pricing what you.
On the fourth quarter, and then as you get into the first part of 20 on that could be helpful.
Why don't I go first just on time on some of the math and then if you just want to talk about the philosophy.
Todd actually what's what's starting to happen I think you had given mace and some council on.
To be very clear about which is.
As we grow organically and Threepl and pursue.
Your denser shipments in more industrial type markets will necessarily have lower yields on that because the market yield is going to appreciate.
The density.
We have had a lot of growth in threepl organically a lot of initial success.
And that is having an effect on our yield so our system yield ex fuel was up 1.3%.
Door to door was actually up call it two two and.
A half.
But the growth and Im sorry Airport to airport was up two two and a half but the growth in door to door from a mix perspective.
Got pushed it back down to the numbers you see on the release. So it's it's and then that's kind of the math that's going on the core airport to airport.
<unk> was higher.
Theres no real actions to reduce price just a bit of a mix shift as we grow organically in door to door in what for the past quarter was relatively soft.
In an airport to airport environment.
So just up Todd Pepsi.
A little bit more.
Color around the philosophy.
For pricing I've been extremely vocal about.
Great companies are very disciplined 20 comes the pricing so are we.
Now having said that.
We have bought and this is well positioned execution comes in we've gotten much.
More intelligent about what's good business for us and our customers and what's not so when customers that we work with very closely including the domestic forward as who has been our core for a long long time.
Identify with them or for that matter, our growth segments VPLS lanes and volumes that are good for.
For them.
We are lowering damages high on time fastest lines.
Yes.
Telling them you can earn more discount with more volume because thats good volume for you and for US. So we are extremely interested disciplines. We also extremely surgical so you.
Can earn more actually spent more as a customer with us but it is for specific business that we know to be goodness for them and for us.
That's great color.
And.
I'm not used to having people listening to my advice so.
Thanks.
That was.
Just my last one.
Wondering now ill turn it over but on the first quarter guidance, obviously, you're getting the revenue lift from the acquisition.
It doesn't feel like a lot of flow through can you maybe walk through a little bit of kind of the cost.
Specific cost pressures.
In one Q either that wouldn't be recurring the kind of depressed the earnings are kind of how youre thinking about.
About cost in the first quarter that might be.
I might start to balance out as you move through the year and then I'll turn it over thanks sure. So.
Typically in the first quarter, we are lapping the FSC acquisition, which closed in April of last year.
And we have nearly a full quarter of landstar because it closed in mid January of this year.
So the revenue growth is being driven by.
Positive growth in final mile.
We're doing a good job in.
Integrating.
Fs say and starting to integrate with Landstar.
But we took an opportunity to grab some additional organic growth over the course of last year with Fs say.
Our kind of more hard core integration is going to kick in this year, but we've got.
You know transaction closing and some.
Call at general distraction around the Landstar acquisition. So we're not anticipating a lot of drop rate off of this final mile revenue growth, but we're very excited.
That is less than the span of a year. We went from a 40 million run rate to a 200 plus.
Plus million run rate player in final mile.
We are anticipating some pressure in the freight markets frankly, we overestimated.
Peak last quarter.
And we're being a little more cautious in terms of our outlook. It does feel like Theres more.
Our headwinds and Tailwinds.
Particularly in the overall truckload market in the intermodal market.
So that pressure, we expect is going to continue to the earlier comment I wish I had a crystal ball everyone's kind of pointing to the second half whenever it occurs we're going to.
Pretty well positioned with the actions we've taken the grow the portfolio.
Todd if you looked at it and this is again were being surgical and.
Again, I use the term position execution consciously allowed.
Help we do know fairly well, but need.
I have an acquisition whether it was FSC in early 2019 always teen summer or now landstar.
In the first few months the initial revenue benefits do get eaten up and sometimes even more by the integration costs. So that is something thats, Mike as you said that we're going to be.
Experiencing in a good way in the for the first quarter I mean to short term payments for long term gains. So that we don't see that a lot into first quarter and then we did.
In the pool business had on a lot of new business as we were approaching peak that suppress the profitability in the.
Third quarter against a typical fourth quarter full pool and now you see the typical softness in the first quarter. So.
Again this is when I go back to my remarks at the opening of the call. We are executing exactly what we set up to do but that strategy to structure organic inorganic you.
Right and I have a little bit of a compounding effect of Onboarding new business in pooling fourth quarter integrating our latest have acquisition in final mile and then some of.
The headwinds that Mike that you talked about and Thats in totality, adding up to us being somewhat.
Whenever you will recall it.
Less than inspiring or so in terms of our guidance for the first quarter, but we just wanted to be realistic because we do know surgically will the effect. So the actions that we are taking into very short term.
Okay. Thanks, so much for the time and time will get use that triple double still yet so thanks a lot.
Okay.
You can help me with that going back. Thank you.
Okay.
Next in queue at the line of Jack Atkins Stephens. Your line is open.
Hi.
Jack.
Hey, guys. So.
Let me start here with Mike is your way to kind of thinking about what.
Did you kind of consolidate the the all the moving pieces together, what's the kind of the current run rate.
Margin is within your expedited transportation business, I mean, I'm kind of coming up with about 10% currently.
Pro forma for the acquisition I'm, just trying to get a feel for what the current base is when you combine.
LTL and and adjust for these recent last mile acquisitions can you help us with that.
Yes, sure I just want to make sure I understand the question.
So are you, saying if you.
Appear.
Or into core LTL, what's that doing is that the question no no no. I mean my question is you are now reporting one expedited segment right and you've got yes, and they're just we only have one quarter of historical.
Yes, a couple of large acquisition, so what I'm trying to understand is what is the current.
Sort of.
Margin run rate on the business that you kind of have on a go forward basis for expedited transportation.
Is it about a 10% margin is in less than that because your goals and so I'm just trying to understand like where are we now unlike how much upside is there over the long term as we try to move to 10.
Yes, I think.
Well it will follow.
That will follow up because LTL still the big part of that margin it'll probably largely follow.
The seasonality of the LTL margin that you've seen historically just knocked down a couple of points for the introduction of.
Large amount of truckload and final mile revenue.
It's kind of a near term comment and then as the integrations kick in.
Now it will lifted up.
So obviously you are in peak here.
And so 10% feels pretty good you might see some softness over the next couple of quarters.
Finally, and then you start to walk your way back up.
[music].
If that gives you some additional clarity.
Let me ask it this way what is.
Wired revenue from from Landstar that you're expecting to get out of that transaction.
What we've said.
Ed.
In our in our announcement as we expect Lindlaw landstar to run at about a 90 million dollar run rate okay.
And it has some seasonality to it as well this is a softer quarter for the final mile on that kind of builds.
During the course of the year, Okay, Gotcha that that health, we get there. So let me kind of ask.
Similar question when do you think about the integration of.
But LTL and expedited LTL can you help us think about the big synergy benefit there I know theres opportunities on the purchase transportation.
Side, but is there are there any sort of opportunities just in terms of back office synergies Salesforce synergies.
And how long will take from for those are really be realizes that immediate or would you expect to take about 12 months.
I think we're already so let me let me take it in pieces.
I think we're already seeing benefits on the truckload side.
Going to start operationally Jack that Theres not a lot of back office here our back office is largely centralized.
In our shared service center in Tennessee.
But.
On the truckload.
Side, the benefits became very obvious very quickly.
Where you have.
<unk> increased revenue opportunities like Tom described that are driving better line haul density lower cost per mile.
Better usage of assets like.
Trailers.
Better recruitment lower year recruitment costs, you're just recruiting to one fleet better retention.
As you offer more diversity.
To the driver in terms of of.
What there what routes, they're running larger overall fleet.
The LTL Salesforce, just again, the truckload salesforce pretty big lift.
And what I really like about the way that our team is doing it.
Jack do you remember when Conway.
Cfive.
Sure and the freight business.
Kind of Didnt treat the truckload business to nicely.
After that acquisition.
The opposite is happening here, we are pursuing truckload revenue revenue opportunities with the same vigor were pursuing LTL revenue opportunities and there is an operational drive to it where we are creating.
Leading lanes, we couldn't run before because both sides were afraid of coming back empty and those lanes are being opened up and thats, creating these these revenue synergies that I think are going to be very powerful wall day simultaneously lower the cost per mile.
The integration a truck load is clearly the agenda.
The most fruit sooner final mile is going to take a little more time.
Yes.
How there is largely a dedicated model, but we're starting to push into integrated applications and as we've talked about in prior calls. We're also able to offer the driver a synergy with respect to.
Doing pickup and delivery for LTL freight.
Pickup and delivery and the install with respect to final mile freight that helps us recruit that helps us get the best in the market and Thats kind of the secret sauce of being good at this that'll take a little longer and will also probably slowed down as we continue acquisitions in that space.
But I can tell you Tom Chris others on the leadership team like literally have objectives on their scorecards for how much integration we've achieved.
So we really think it's it's going to come together truckload sooner final mile. Little later Domini, yes, just briefly on the scorecards. So.
And this gives it a little bit more flavor Jack behind the timing so.
The number of lanes that we co operate between LTL moves one way NTL moves the other way in the last six months have gone fivex, So thats significant cotwo.
I think going on today already so thats, a car and benefit that that's ramping up.
When you goal kind of behind.
So if the at the corporate processes to support the business recruiting as my guess you mentioned is also realtime happening so we recruiting for one.
With one team for one fleet is just.
Obviously, we had one fleet now serves two segments truckload and LTL, so operations already up recruiting already.
Coordinated and integrated that's happening and in terms of selling but the implementation of Salesforce dot com as our CRM, we actually also have increased opportunities.
To do more enterprise sale and systemically support that so you need essence, Dave I guess, you said 10 ex the Salesforce that actually is looking for tea leaves. So all thats happening right now and then on the final mile piece, yes.
It's in all of our.
Support leadership.
Team Mboe was to get some of that integration both from a terminal building and then from a routing perspective between pickup and delivery LTL and find them out.
Happening Sunbury now network. This year. So this is not a long term multiple years out it's going to be.
Happening some are non network. This year. In addition to what we have I think we're in three markets today, we're already starting to do that in addition to that.
So that all makes a lot of sense I think I think the integration of TL and the LTL, they're just huge opportunity there so very happy to see that happening.
I guess just a couple of other quick.
Keeping questions.
Is there way to kind of quantify the integration expenses that are baked into the first quarter guidance and can you give us some sort of sense for how January tonnage has been trending.
Yes, I would it I wouldn't think of the integration expense Theres, some closing costs for the transaction and things of that.
Nature I would think of the integration drag as more of a distraction if you will.
As the two companies come together and that's that Theres. Some effective that on profit there aren't a lot of like serious integration expenses were going to.
Slow.
Wholly stitch together a platform over the next couple of quarters between forward air at FSC and Landstar.
I would characterize it as just more of two companies coming together.
Maybe being a little more focused on that.
Then there is some type of big check we after right.
First quarter tonnage per day has been down.
Roughly 3.5%.
Okay Gotcha.
That's helpful. And then last question I'll turn it over would be on on insurance expenses. This took a step up.
Yes pretty meaningfully.
Did you guys have any unusual sort of.
Items in the fourth quarter.
Could you kind of comment on that and then could you also talk about how you're expecting your insurance rates to trend.
In 2020.
Sure so in the fourth quarter.
There is inflation in the insurance and claims line.
Let me give you the big pieces.
The biggest piece frankly is just premiums that we have to pay to outside providers. We have done a significant increase in our self insured retention as you know.
Going from a million to seven and a half million.
But even with that we need coverage above that level and that coverage is up.
40, plus percent year on year, that's a function of the.
Troubled insurance markets that.
All of the transports are dealing with.
The next bucket is in the claims side and I'll break that into one is we did have a couple of 100000 dollar type incidents in the fourth quarter.
But the other is there some optics related to FX say fs staying within.
Not in the prior period its revenue wasn't nor was it is claims and so when you put them in the current period you bring in their usual claims expense and thats, creating some optics of inflation as well.
With respect to the first quarter I mean, this you know.
No.
Better than I do this is a problem for trucking companies and we are expecting.
Continued inflation from carriers regarding the premiums on on the towers that we have above Rs IR.
And with the growth in the business, we are predicting some headwinds.
As we bring on self insurance reserves Landstar similar effect as it comes in it's not in the prior period and so that'll show up in our first quarter results. So soon so is that ill call. It 12 ish million dollars a quarter or is that kind of right ballpark to kind of think about obviously there. So thanks again can impact that.
Got around quarter to quarter, but does that sort of the new kind of run rate quarterly going forward to think about.
[music].
Yes that that feels there maybe ironwood with landstar, even or just I just want to make sure. We've got that calibrated correctly in our model I think I think thats a fair starting point.
We are doing.
Thanks, a lot in terms of our safety initiatives in terms of our operational initiatives.
It is slower quarter, so we would.
Back to have less claims expense.
But thats a fair starting point and we just don't see any relief.
Coming in the markets, where we do have to buy coverage.
Above our MSR.
Okay.
Jack the one thing let me just add one piece here because that's obviously a reality that we and everybody in the industry is.
Coping with the need to manage with but the one thing I do want to emphasize.
We're not.
Audience sitting in movies.
Theaters seeds watching a movie playout, keeping our fingers crossed and hobby, hoping guys happy ending we're directors look our own movie. So when we see these things happening on the insurance cost that's when they need to kick in synergies that we just talked about between TLD LTL between the pickup and delivery LTL in final mile. So that'd be.
Actually take.
Take these hits and compensate them elsewhere, why the last year and they're very very challenging 2019.
If you take the reserve that we had to take if you take some of the excess labor costs in the fourth quarter, because we added on additional.
Locations and business in peak.
If you look at these things and we still Cayman EBIT wise close to 2018, so we need to make up at least things to have real.
Day hurt.
And then that's where you operationally commercially at look for synergies and make them a reality, so that'd be actually compensate for those.
So that's I want to emphasize we are not the victim here, we are actually the direct or probably will be.
Okay that makes sense guys. Thanks again for the time.
Thanks Jack.
Next in queue, we as a line of Ben Hartford Baird. Your line is open.
Hey, good morning, guys.
Wanting Ben.
Tom just from a high level.
I think we understand what's going on.
In terms of.
Volumes in January prevented that number Mike, but but the lead into the start of Chinese or lunar new year in January sounded like it was a little soft.
To begin with from from a couple of broader Airfreight perspective, and then obviously, we're in the heart of.
Of the lunar new year shut down at the moment and then we've got this drove over situation. That's that's developing so from a from a broader macro maybe a specific airfreight perspective could Tom could you provide a little bit of context about.
What's going on from a.
Core legacy kind of airport to airport volume.
Perspective, having any sort of commentary that you could provide about how quickly.
The factory output can come back up at this point in time, because it sounds like that's obviously been kicked out Sony perspective, there will be helpful.
Yes, Ben.
Couple of quick things one thing I mean.
So our chief commercial officer module and I would just literally just talked before this call.
The things that you now both leading in the papers there obviously Rio I mean, there's.
A lot of the airlines that.
Stopped operating flights between China, and now not only mainland China also Hong Kong in.
Most cases then.
North America.
And that's.
Starting this week more so than perhaps January that's noticeable so I would expect some of the traditional traffic.
Thats coming we airfreight.
We see a slowdown as we sit in that space.
Speak I would expect something similar happening on the ocean side, because obviously, it's just a time delay by the same impact over next several weeks.
So let's open issue in January very real SBC attendance at tier.
And then to last piece is the one that I just.
Could have some form of confidence in.
Kind of.
People working extremely hard figuring things out, including I mean, this is the first and foremost obviously obligation making sure that everything is possibly being done to help people get better and healthy as quickly as possible. So whether they are talking.
In weeks and months is hard to say the one thing from a positive perspective, Ben and that's also an opportunity we need to look at is.
As and when we graduate past this.
Virus.
There will be opportunities that we need to tackle I'd be need to take advantage of of.
Catch up because obviously as.
Slowing down or even halt of airfreight slowing down Ravenhall dove Ocean vessel shipments.
At some point there will be catch up now when you talk about who should be going after opportunities for catch up.
People like us who are.
R&D.
Fast expedited business so.
Full today.
May take weeks, perhaps even hopefully not most but this is where I hope that.
Concerted effort so all the different.
Agencies industries mentioned all start kicking in.
And then it's up to us to work with our customers.
Very very closely to look for ways to catch up to best possible way.
And I guess in that vein as you're thinking about.
Yes, potentially volumes coming back into the network at some point in time from an exposure perspective.
How do you.
How do you think the network sits today.
Service point of view and when you talk a little bit about the initiatives that you've got underway with regard to owner operator recruitment.
A bit of a wrinkle toward the end of the year with every five it sounds like it's it's obviously stayed at the moment, but you've got the that overhang you've got the insurance issue that I think as.
Pretty straightforward, but just from protecting the network and making sure that service continues to improve in your position before that can you talk a little bit about some preparation there.
Hey, Ben it's like one I'll give you a data point, then I'll turn it over to Tom.
The owner operator fleet isn't how.
Ending condition.
The network is operating very very well.
Put that in perspective, and then I'll turn it over to Tom.
Broker power so the outside miles of fewer.
Last quarter was 8.2%.
Of miles.
Versus 25.9% in the prior period, so a very significant improvement.
In the quality of the fleet.
And I think we're pretty well ready to handle Ted expedited demand, but.
Okay.
Yes and.
He knows when you have your.
Sure.
I see soon.
You are independent contractors that actually know to work with us.
And you have them predominantly and less purchase transportation. It obviously does have a double whammy positively it's actually lowers our cost.
And secondly, and most importantly.
It's people who know.
Know how to operate on our behalf and our customers that shows in service. We just had two of our larger conferences.
Leak or two ago.
Air cargo conference and SCM.
Many many of our.
Domestic forwards international forwarders airline customers Threepl.
Now this is probably adding don't leave but once you have 20 or 30 observation points from your largest customers all pointing to the same.
Message.
That message being we.
We love to service that we're getting from you on our scorecards you're on time shows at record levels.
That's telling me that what you might just talked about in terms of these being high sees that know how to work on our behalf.
Customers and the resulting service they are in sync.
Okay.
Helpful.
Yes, some of the.
Clinical data on the LTL Thats helpful.
If I look closely at this with pounds per day.
Down year over year shipments down greater but weight per shipment up.
You'll probably pressured on that to me that's kind of weight per shipment.
Being up as a little bit of hotel in terms of progress on.
The expansion of the Tam. So can you can you talk maybe Tom about some of the.
Rental sales you talked about the integration of the Salesforce, but sales efforts some opportunities during the year as you move through the year and how we should.
Corporate this data as as indicative of direction in terms of the efforts to expand that broader threepl customer set through the year.
Hey, Ben.
Just real quick so just to give you a little more clarity in the folks on the call. Our Threepl daily tonnage was up like over 100% wafer shipment was up 15%.
Daily shipments were up 16% tremendous amount of progress being made in this initiative yeah and in this instance.
And northern or so I do want to emphasize very very clearly the traditional airport to airport business. The core customers that we have with predominantly domestic forwarders, we are going above and beyond to be on their support team and frankly almost on their pursuit team as they are going.
For more business so.
Putting more tools and that will create that that's not that's not going away that's in.
A core we need to keep and to now getting Ben to your point.
Got tremendous strides do you have you talked about threepl and how they would be a logical.
So for us, especially as we focus on fast planes, especially as we focus on record low damage ratios and make sure we get that type of business through Threepl and Thats whats happening more and more our fastest growing customer segment is threepl, our fastest growing customer is a threepl customer so what we.
You talked about a year year and a half ago is happening.
Good and last one in terms of.
The planning timeframe of GR I have you.
Thoughts on that.
2020.
Yes.
It.
The same as all base, which is.
This year and last year at next year, there will be Christmas in eastern and achieve right.
And they all happened to roughly beyond the same.
Schedule. So we're doing the same thing we want to provide maximum predictability for ourselves and most importantly for our customers whether they can plan and budget. So the GRC.
Yes.
Slightly different by mode.
But there they are if they're not contract specific on a per customer basis. They tend to being the first half of the year slightly deferring weeks or in some case sea legs.
We are going to get into the same cadence every single year. So that we can plan together with our customers and.
Going back to the previous points, we made.
With Jack and Todd.
Because we increasingly understand was good business for our customers and for US there are ways that you can kind of.
Safe boys, who spend more so geoeye applies at the same time customers and we can surgically.
Work on.
Volume discounts as we go into supporting them with business Thats, good for them and for us.
But the timing so same as last year.
Between February and May and all business units.
Okay Thats helpful. Thank you guys appreciate the time thanks.
With no further questions here in Q that does conclude forwarders fourth quarter of 2019 earnings conference call.
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