Q3 2020 Forward Air Corp Earnings Call
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[noise]. Thank you for joining forward Air Corporation's third 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.
The investor relation selection.
Forward Air's website.
Www Dot forward Air Corp.
Uh huh.
With this morning.
We have a CEO, Tom Shredder and see Apple Mike Morris.
By now you should have received the press release announcing our third quarter 2020 result.
Which was furnished to the FCC on form 8-K.
And on the wire yesterday after the market close.
Please be aware that during this conference call.
Be making forward looking statements within the meaning of the private Securities Litigation Reform Act of 90.
Including statements among others about the effects of our business efforts and response to cope at 19.
Including the impacts on each of our businesses that future plan for our pool business.
Steps to bolster our liquidity.
Steps to expand our operations organically and Inorganically.
The company's outlook for the fourth quarter and fiscal year of 2020.
Including expectations for revenue.
On edge and free cash flows.
The expected impact of growth and strategic initiatives.
And those other forward looking statements identified in the presentation.
These statements are based on current information and our current expectation.
As such they are subject to risks and other factors that may cause actual operations and results to differ materially from the results discussed in the forward looking statement.
For additional information concerning these risks and factors please.
Please refer to our filings with the Securities and Exchange Commission.
And the press release and webcast presentation relating to this earnings call.
The 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 conference over to Tom Schmidt CEO of forward Air.
Thank you, Tony and happy Halloween weekend to all of you on the call.
Sorry to disappoint upfront this call, it's actually not about scary, it's about precision execution of commitments, we make commitments, we kept specifically I'm going to address six commitments. We made on this very call three months ago on the Q2 earnings call and how we kept those coming from.
Games, and how we're going to take them forward.
With me number one was if you remember we talked about bringing density you back bring our people back bring volumes back to what we call. The zero plus same as last year or more and we did no.
No flagship LTL business, we were there in July.
Factual I was 1.7% tonnage wise ahead of July last year August 4.5% September 4.6%.
For Q3 overall, 3.6% up over tonnage from previous year final mile. So very very strong growth as well same park truckload, especially in the asset light brokerage business.
You know modal we see a recovery coming also so zero plus.
Same all better volumes than last year are happening that's out on the way to our first stop when we talk about double digit annual.
Annual revenue growth.
Our second commitment.
We will not wait to bring all those high speed high sensitive handling businesses that temporarily went to sleep in March.
We will not wait for that to happen whether cruise lines trade shows concerts conferences airlines.
That'd be bringing buyers back next to you all the year. After we know we will and we will bring them back strongly in great partnership, but you're not going to wait for that info.
In fact, rather than waiting we are focusing on another leg of the stool and make this business more multi pronged stronger more essential freight more medical supplies, we dialed up those that's I'd see coach as we commented on the call three months ago and in Q, If we already essential freight was up eight.
And year over year.
Our third commitment was to do a one two punch, yes volumes back first but complemented very closely by what we called a march for margins, meaning taking pricing actions. So that we can make the investments into our drivers and into the service commitments that we have and that we keep towards if at all.
Our customers, so Q twos year old plus volumes was top aldi density restored now in Q2, we March from margin specifically in LTL in September and October alone, we did implement a California surcharge of 5% the high class Upcharge, a class fuel surcharge more to come.
Occasion, a low class upcharge removal of Nord, Walt volume discounts and a $3 surcharge for lightweight shipments less than 300 pounds. It.
Additional class actions to come and in truckload select rate increases also in intermodal drayage, we're going to have a fourth quarter G. III coming so overall long term I am committed to one two punch kept and the impact started showing now Q3.
If you take the example of expedited freight which is our combined LTL TL and final mile business in Q2, expedited freight had a 5% margin.
On July 7.1 August 7.7.
In September 10% margin for expedited freight that sounds a bit like this second gobbling double double double digit margins, which is also our medium term commitment the same way as average double digit annual revenue growth is a medium term commitment.
We expect that with these.
Measures being implemented in Q3, we will have a full impact of those measures in Q4.
Permitting done before was we are keeping organic expansion going if you remember last call you talked about Savannah, where we opened a brand new LTL terminal you backing on our presence in final mile. We talked about on the call about our investment into the Columbus helped our biggest top and.
And in Q3, we kept going we opened LTL facilities in Columbia, Missouri in Roanoke, Virginia also benefiting from our final mile presence in those markets and Thats big ones coming within the next few weeks Alan.
Allentown, Pennsylvania conversion from an agent to our own facility and then the big one in Ontario, California, Greenfield location about to open up all happening within the next few weeks far from done more coming next year.
Commitment number five we said there's no pause in M&A this year.
We.
If you remember at the very beginning of the year, we had a lean store close in our.
Final mile business, a significant step up for that business unit and just this quarter Q3, we had a close and follow them all as well the CW in Johnson City wonderful unit, joining us great teammates.
And to value logistics in Memphis, Tennessee, a very very important intermodal drayage market.
That we wanted to make sure we have a stronger presence in.
And then commitment number six we also made very shortly in everything we do front office back office, but certainly in operations precision execution is happening we have record service levels right now and I'm proud to say, we actually delivering goes record service levels with drivers who knows.
Yes, well I'll independent contractors are outside miles even in this tight market. If you exclude Los Angeles, a heavily congested area outside miles are still in the single digit area. It's our drivers that we know very well delivering those types of record service levels.
So we kept our commitments we made last quarter.
NBC ongoing ramp up of benefits going into the fourth quarter from having kept those commitments.
Want to thank you all of our teammates I want to thank all of our independent contractors all of our business partners for truly making each other better it shows Andrew far from done.
For the final commitment beyond the six I mentioned, we also have a strong commitment to robustness may come some liquidity and cash flow I'm going to ask my teammates our CFO, Mike Morris to address commitment number seven strong liquidity. Thanks.
Thanks, Tom.
Before I give a few quick updates let me provide some additional clarity on the earnings release, we issued last night.
First the six cents charge, we called out was recorded in other operations and did not impact expedited freight or intermodal segment results.
Second our fourth quarter 2020 guidance relates to continuing operations only.
And finally, our EPS guidance range of 71 to 75 cents compares to 79 cents in the fourth quarter of 2019 on a continuing operations basis.
We will be sure to provide this measure of clarity in our earnings releases going forward.
Since we are only guiding to continuing operations, let me provide a brief outlook for pool.
As physical retail continues to recover Paul will return to profitability during the fourth quarter of 2020.
We expect to pools fourth quarter revenue will be between 45 and $50 million.
And Paul pools fourth quarter operating income.
It will be between one and $2 million.
Before we go to Q in a let me close with an update on liquidity and capital allocation.
This year is certainly tested the cash flow capabilities of our asset light business model although.
Although we greatly expanded our liquidity in response to Cove in 19, we were able to remain free cash flow positive throughout the year by actively managing our operations, while continuing to make key investments. So we could emerge a stronger competitor.
And if trouble does resurface, we believe we have ample liquidity to support our business and capital needs.
So as we signaled on our last earnings call, we began to relax our excess cash position during the third quarter.
We said, we would reduce debt and we repaid $20 million on our credit line, bringing our gross leverage down to one turn of EBITDA.
We said, we would resume share repurchases and we bought back $30 million of stock during the quarter.
We also said we would remain committed to our dividend and were pleased to announce a 16.7% increase to our quarterly dividend from 18 cents to 21 cents per share.
Our dividend is an important component of our capital allocation philosophy and between dividends and share repurchases. We have returned over $350 million to shareholders over the past five years.
That Tony let's open the line for Q and a please.
Thank you the floor is now open for questions and comments.
If you wish to ask a question or comment today.
Please press one then zero on your telephone keypad.
You may withdraw your question at any time by repeating the one zero command.
Once again, if you have.
A question you May press, one then zero at this time.
Our first question comes from the line of Todd Fowler with Keybanc. Please go ahead.
Great Thanks, and good morning, Tom.
Tom I'm going to try and refrain from making any Halloween Jekyll and Hyde comments about the second quarter to third quarter, but it's a nice improvement.
Okay.
Hey, I guess just the start time can you talk a little bit more about the pricing actions that you're taking right now.
From what I heard in your prepared remarks, it sounds like that those are surcharges that were put in place I wasn't clear if those were going to be all the way through the.
The fourth quarter, if that was something that was temporary into October and then like I don't know if you have an October tonnage number but I'm curious if those are having any impact on a little bit of trade off between volume growth in yield.
Let me up Todd I'm going to start on both and then Mike can correct me on the second one.
On the first first one yes.
There really are two things and they are complementary there are very specific.
Surcharges that address unique times. So for instance, if there is a congestion out of the west coast as we all know lots of traffic coming into a long beach.
We like everybody else.
Our going above and beyond to make sure we keep to commitments to our customers that means in some cases.
Getting.
A truck and the driver.
Almost no matter, what it cost because with the commitment to our customers come first does it cost to that we do not expect that Todd to be added to happen Mike.
An ongoing sustained basis for ever so thats, a temporary surcharge thats a time limit to it some of these temporary surcharges have a time limit till the end of this year. That's an example of that Thats eight more weeks now if for some reason unexpectedly this type of temporary spike goes on we have to same commitment.
To our customers, we need to make the same investments in securing transportation and we will.
And then that that may be the extension a lot of the other measures is us becoming frankly as a company more disciplined and better getting compensated fairly and fully for the service that we provide in Dallas revenue leakage in the past when we are making very certain.
The step up in revenue capture.
Scott share our new CTO has a ton of experienced pun intended in that space.
We have a pricing.
Departments that we actually 45.
We brought in people with with significant Threepl the experience with significant LTL pricing experience. So you see that hold machine.
Surgical precision execution in pricings being stepped up so roughly speaking talk two thirds of what I mentioned.
Our ASP.
US becoming better on a permanent pricing perspective, one third of what I mentioned is temporary to address peaks that we expect to last four weeks in a couple of cases, perhaps a couple of months, but.
But not forever.
On the second point is very very briefly.
I think we've gotten this sweet spot very very very right.
The October volumes and Mike you can actually get as specific as you want to get men can get.
I like the October volumes, the same will act as a timber volumes I, just like the pricing will be better.
Yes, Todd the so far quarter to date, you know 30 days into October.
Daily tonnage and LTL is up around 6%.
It is a fair question, though I think some of the pricing actions, we'll take might drive a bit of that tonnage out of the network.
As we go through the balance of the quarter, but it really gets to how tight the chocolate market remains.
And how robust consumer demand is and Thats one of the more challenging things that we're trying to address in our outlook for the fourth quarter is the uncertainty that's created by the Covance situation, there or perhaps better put the volatility around these potential future scenarios, but 6% so far.
We'll see how the balance of the quarter goes.
Okay great.
Oh Thats really helpful. I appreciate the detail there.
I guess, Tom to the mix of freight that you've gotten a network I mean, obviously the team has done a great job of.
Backfilling some of the dormant freight that's out there you can you speak a little bit to the characteristics of this for eight I mean is this something that you would have in your in your network you have consistently going forward or some of this kind of a temporary still until some of your core customer your core end markets come back.
Tom maybe I'll go first and you can chime in.
So Todd the stuff that is really kind of driving the bus right now is organic growth and the new verticals, we've been talking about for a long time for quarters.
We're making a lot of headway in.
Paul on the industrial side of the LTL market.
Growing and Threepl growing through other avenues.
Beyond our legacy.
Continue to serve the legacy very well.
That is still in a bit of a recovery mode coming out of the covance situation the growth that we're bringing in from a.
From an end market perspective is where we want to be for a while.
Some of the stuff that came in early on when we are building tonnage was perhaps.
A little light or going a little too far.
Or needed to be recalibrated, but once we stood up density than we pivot to being more selective and thats kind of what took place in the back half of the quarter, but regardless, what I'm, saying is regardless of whether a piece of freight stays or goes it's in the markets, where we want to be for a while.
And.
And.
That capability of steering the way Mike you just talked about.
We really stood up as a company over the last 12 to 18 months and we're not done standing you there will be more precisely.
We know by S&P.
He code kind.
Kind of which industries heavy.
Heavy ecommerce worldwide ecommerce.
So one category of medical supplies, that's heavier than another category. We know each FSC codes tend to have which types of qualities and then from a sales call.
Call perspective, and customer call tracking perspective, we dialed up those types of industries. So there is it's not coincidental that heavy commerce on medical supplies make up more of our total mix today than it did a year ago is the consequence of us dialing up those less IC codes.
Okay, Yes that makes sense and I guess, when we look at the yields to it speaks to the fact that you're getting compensated the right way for the freight that you've gotten a network. So I'll ask one more then I'll turn it over but as we think about kind of the mix within expedited freight at this point between final mile Truckload do you have a view.
Are you on where the all are for that that.
Segment should be kind of on a normalized basis, not really thinking about guidance for 21, but just when we think about the mix and kind of the growth rates, you know where should the normalized margin for that segment shake out at.
Hey, that's the that's the second double.
[laughter] right.
Right I mean, it's it's a it's a straight forward.
Two segments and we need.
Both at a double double and get the whole thing too and double that.
That's that's where we're driving.
You have you have a lot of inorganic growth in final mile as we lap the Landstar acquisition. So one more quarter of that and then we will have lapped that.
But we are seeing good organic growth in final mile.
We that is a strong contributor to the overall margin.
Truckload is making a lot of progress towards.
Getting to call it a.
Five to six ish percent type margin and then inside the old LTL, we need that humming along in mid teens right in order to kind of make all that work together, that's what we said in IR day.
That remains.
Got it Okay, Hey, guys. Thanks for the time have a really good weekend.
Thanks, Todd Yes, thanks, Tom.
Thank you next we go to the line of Jack Atkins with Stephens. Please go ahead.
Hi, Good morning, Thank you for taking my question.
Jack.
So I wanted to go to this announcement I guess it was in late September about the service that the LTL service that you guys are rolling out in <unk>, and Missouri and Virginia.
You know it.
I guess, what it from what it seems like you guys correct me if I'm wrong you are utilizing.
Final mile facilities, just sort of expand the.
Reach of your LTL network, you know is there sort of a target over the next call. It 12 months of additional markets that you are.
We are looking to to expand into across the country and.
Maybe I guess more broadly how many how many places are markets do you have a final mile location, but not an existing.
Expedited LTL facility.
Okay. So.
To summarize hard checks good.
I'd like a series of free questions anyone.
All right I can break it out.
Thats fine ill, let me, let me try and probably will hit them. All so up on that on the first one of the like the decision to open up new terminals again is it's not exactly.
Sacked signs, but it's close to a science. So we do know the origins and destinations of freight flows we do know what our customer base actually is asking us to do more I mean, so this is a.
Working with the best in terms of both the best data, but also the best customers, Mike, which origins and destinations should we be serving that'd be in October you might now that's hike harvests of NR for instance, popped up and dose trade flows as you know check out publicly available data so between the data and our customers speaking and thats listening debts.
Thats, a fairly obvious kind of line up of locations and then there's a certain level of easy if we have an agent already in those locations. It's a fairly simple exercise as we dial up is the volumes to then switching over from H. into our own location also when you have a final mile presence. It also is somewhat.
Easier we.
We have 80 plus final mile locations right now and we have 93 LTL terminals I think actually now now 95, we've got it at the analyst latest too.
There's still quite a few in those into low teens locations, where we have a final mile precedence and not an LTL. So we can actually piggyback a bit more that's something a pure play LTL all final mile company cannot do as efficiently as we can.
Well 20 quarters also we have no problem when we see the demand from our current customer base plus trade flows for potential future customers, indicating that a another location if even greenfield is a good. One then we put a flat down there thats whats going to happen in Ontario, California, that's greenfield and its allocation that.
Our current customer base and future customers want us to be and Thats, where were going to be so I expect us in the combination of conversion from agent piggybacking on a few more panama locations as well as some more greenfields.
What you see us do this year with a handful or so of LTL terminal openings.
You should expect that to last on into next year Mike.
Yes, what I would add to that is actually a couple of situations or final mile launched out of LTL.
Two markets.
Got to make it sound Jack like some overly complicated rubik's cube.
But we do have a very clear.
Kind of healthy dialogue.
As a leadership team and with the operations and sales.
Around.
Which which of these approaches make sense, where is it let's sell some LTL dips out of a final mile terminal and they can handle the pilot is it hey, let's launch final mile out of an LTL terminals. Because there is an award that we're bidding for their sometimes both are so big They act.
Really cohabitate same terminal we split the rent.
Is there an organic growth opportunities should we flip and agent it sounds complicated, but theres really only six type of.
Flavors here and then we have a very active dialogue throughout the course of the quarter and the year from a planning perspective as to which flavor can we use what's the most logical next step sure.
So it it's a nice degree of freedom that we have and one of the things that I think is important to consider in this is the people that run the operations in this respect they're all LTL people buying their origin of their career so the final mile.
People that we've acquired worked with LTL people, who were also find a mile people from our from our kind of legacy workforce. If you will so we've got a really good blend where a final mile person can think LTL as an LTL person can think final mile in terms of this high level planning I know, it's very different.
Freight on the ground.
But when you look at Tech, Chris and Tim and Scott and kind of the whole team.
They really got experience in both and that really helps decide which flavors going to fit where in the in the country. Okay that thats, great thats exciting to the year, maybe maybe a couple other quick quick questions.
I guess, when we think about it.
And Tom you referenced it in your prepared comments, but.
The outside mile.
Which.
Historically at this point in the cycle, we've seen that go up as owner operators have left the network.
To operate in the spot market.
Are you seeing that at all show up so far this cycle and.
You know I guess, how are you thinking about the percentage of outside miles as we sort of move forward over the next couple of quarters here.
Jack let me take that one.
So this has been an interesting evolution over the past couple of months the truckload market began to tighten.
And the speed at which it began to tighten was was aggressive and I think perhaps that's a characteristic of our cyclical swings in this industry going forward. It seems to turn and it seems to turn pretty fast.
We were ready.
No we didn't move as quickly as we should perhaps last time and so we've been preparing for this as a team.
If you exclude California, and I'm going to come back to California, but if you exclude California.
Broker power was around 7.5% of miles in the third quarter.
That's pretty good it compares to about three and a half in the prior quarter, but three and a half is almost a bit on natural given the normal imbalance in the network. So a 5% to 10% type of outside miles is operating pretty well.
And that is the case, 7.5% network wide, except California.
If you bring in the California effect, that's seven and a half goes up to 14 and a half.
And with all the inbound freight coming into California coming into the port of L.A.
There's just an intense amount of congestion that we saw happening we respond to but also that led to our first.
Pricing action, which was a calendar increase to our California, California outbound surcharge, so that we could get compensated and get the kind of power that we need to get to to give our customers. The service. We promised. So this one is really unique one node and the network is drive and how.
Half of the half of the outside miles.
Outside of California, right now we're in the zone that that we'd like to be in.
And let me just add to the first part.
Very briefly you said, we were prepared I mean, I do want to say between.
Chris rubles operations team call mentions recruiting team Matt.
Casey safety team, what we did.
Consciously over last two years to maximize the odds that four drivers solos and teams forward Air remains the most desirable professional home has been nothing short of outstanding whether it's got driver boards, where we listen to them, we prioritize their needs.
Good for home times short lines when they call this batch.
Having a driver App, which we just launching now where they can run their business out of an app. That's literally 21st century very advanced date.
Weeks, where they can run their own business the same way anyone else in the progressive state would run their own business, we've done a lot to make it very very attractive.
For people, who choose to become their home our classes ride in our classrooms are full and retention rates are still phenomenal. So.
I do want to give a big.
Now to our operations recording safety teams to really really work with our drivers who are the best in the industry, but also make this a very hard place for them to leave I mean, there's lots of incentives out there for them to leave I mean, we all read the same articles and we all see this is the same reality.
Some of the largest companies on earth, putting tremendous incentives out, but we do have.
Operating system here that makes is a very attractive plays into that less than double digits outside California is.
A result of a lot of very focused.
Offered and not coincidental okay. No. That's good that's helpful. Maybe just a quick follow up on that point.
Mike from earlier, I mean, do you feel like that to the degree that you have some.
Higher in the percentage of outside miles, you're going to be able to get the rates that you need.
At the same time from from your customers. So that it's not going to be the type of margin erosion.
Issue that we've seen in prior cycles. It sounds like you are pretty confident that thats. The case, well, yes, I mean, but its interrelated right where you are.
Need more rate. So you can recruit and retain the power. So you can provide the service that are just as the rate I mean, that's.
Thats the ecosystem here, so we have to be able to recruit and retain the driver. So that we can probably give it the.
Service level that we promised and Jack Jack I think I mentioned that on last call.
Now, it's been I guess seven or eight months.
Middle of March.
Thank you to all of us.
Never talk more with customers that have been glass eight months in my career.
And these are very very supportive collaborative conversations, but they also straight talk organizations, we keep our service commitments to our customers and we expect to get compensated fully and the second part is equally non negotiable as the first part.
Okay that all makes sense. Thanks, thanks for the time guys. Thanks Jay.
Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please go ahead.
Hi, This is Derek on for Scott. Thanks for taking my question.
Good morning.
It's been a few quarters. Thank you.
LTL NPL combining to create the expedited freight segment.
Clearly there have been a lot of challenges out of your control over that period, but can you provide an update on sort of what operationally, it's been accomplishing that time and whats still to go.
Sure.
And out of your control is a good phrase because we've been focused intensely on what we can control. We can control is the strategy.
On the ground from an ops perspective.
To bring these things together, so think of truckload and LTL as one fleet.
And the real benefit of there is on the line haul and the efficiencies that we get on the line haul but also.
There is a retention element in that we offer other opportunities for revenue to our drivers if a line haul run isn't available and that really made a big difference during the cobot crisis.
Many of those owner operators, perhaps would have gone out of business frankly, and we were able to find truckload moves again, we don't run Pops in our network. We're a 53 floater LTL. So these are truckload line hauls and that really fits together well.
So we made a lot of progress in terms of thinking of this as one fleet and then growing outside opportunities.
Hey through truckload or through our growing brokerage operation in truckload.
The other.
The other main integration point has been.
On the in the terminal and in the pickup and delivery with respect to final mile again from an asset perspective. This is a straight truck with a lift gate.
And that is the type of asset that can deliver palettes. It can deliver dishwashers. So we do have I think it's up to nine commingled Pud markets.
Where the pickup and delivery for final mile can support line haul I mean support LTL.
And the timing of the freight flows between these two modes marries up nicely in our LTL business, we tend to get busy.
Busy on a Friday, we line haul over the weekend and Monday, and Tuesday are busy Pud days.
In final mile Wednesday through Friday tend to be the busy pud days that lets us level load revenue for the owner operators that provide our final mile service. It gets gives us a recruiting angle that we can give them more opportunities.
To maintain their revenue and have predictability around their cash flows and we actually use that almost competitively in these markets to help really drive outstanding levels of customer service and final mile and in LTL.
We with some of the announcements.
Like Savannah, and the others that we talked about earlier you have the early stages of Comingling on the dock.
And that's an example of a synergy that happens from.
From a dollar perspective, we almost have a very very cheap.
Call option on a market if LTL or final mile says, hey, I want to get in there.
They can work together at a piece rate basis internally and sell into those zipsor bid on that market for the big box retailer freight and the goal in though is is that they get big enough that they got to get kicked out and get their own building, but it's a great way to get started and I think thats. Another example of the synergy that that we've.
Really been able to extract that expedited freight and then just.
To perhaps put it this way.
To recap and summarize Michael just talked about.
US calling this an expedited freight segment.
He is not a reporting exercise it say operational synergy articulation and.
Activities, so over the road between TL and LTL, Chris Ruble pointed out early on that the backhaul. So that may be TL and LTL was the outcome.
Move was like Fivex Technetics early on when we put that segment together.
And Mike you just talked also to the local synergies, which clearly with the LTL and final mile terminal openings routing from one building using the same.
Drivers in some cases on a light installation day to do pick up for LTL. So again, there's a lot of underlying activity that drove this one segment.
So this is not a reporting exercise this is actually an operational synergy reality.
Got it.
Okay.
And then I guess turning to the intermodal segment grade volumes were down 12% in the quarter, what do you think driving that.
Look at Us and volume.
And the transpacific.
Very strong rail intermodal volume.
Pretty good.
I think you're seeing a pretty significant decline there.
Yes, my strong expectation into for last few weeks would actually confirmed that is that this is primarily a time delay issue.
And that depends on whether you deal with forwarders over shippers directly and depends on how much stuff forward stocking by customer and by industry you still had.
Deplete your inventory first and then the replenish in some cases.
So literally when you.
So I would expect what you just described to show up.
But what do you typically have is is that there's a four to six week delay just based on the ocean move itself and then making its way from the coast oftentimes the west coast over to the Midwest and East Coast. So there is a travel kind of a component that takes days in some cases weeks.
And then on top of that especially with the uncertainty that Mike you talked about a lot of our customers had forward stocking of inventories that they depleted first so if you take the whatever you call. It four to six weeks of depleting inventory then you add the the ocean vessel move time, Andy over the country time that.
Ken as up to a two month or even three months time delay between what you described and what do you see that's real and what shows up in intermodal drayage on our rail yard on the east coast or in Chicago. So, but we are we have been seeing the consequences of that pickup in the most recent weeks so when I talk to.
About zero plus like having the same volume as we hit had a year ago intermodal just started having zero plus weeks and how would you describe what we had in the quarter was not that yet but it is now.
That's helpful. Thanks for taking my questions.
Thank you. Thank you.
Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Please go ahead.
Hey, good morning, guys.
Good morning, Tyler Hey.
Hey, Tom So I really appreciate the comments on diversifying the freight base I think you mentioned that those essential FSC codes were up 8%, but I'm just broadly curious just what is what is the mix of that essential freight in the book today.
So you got to come around its Mike you got to come around to a definition of essential.
Yeah.
The the bulk of it is call it consumer and medical.
The type of ESI see codes.
That's the need of it.
Okay, but is it is it a quarter of the book or as you defined it as as as essential yes around a quarter of the book.
Yes look as you know, especially as a wholesaler, it's really hard for us to know what's inside that box and less it's obvious.
What's inside the box right right right and so we're doing our best with some of the good Intel we've stood up from an IP perspective to get a little more clarity here, but thats, our best estimate okay.
Okay, and then if I come back to freight characteristics a little bit. So one thing I noticed was the weight per shipment was up sequentially, it's still flattish year over year.
But as you have more success in that traditional LTL market should we really be thinking about weight per shipment rising into 21, 22 and is that really a strong KPI of your success there.
Yeah, I would I would say yes.
One of the things I mean, when you look at our door to door business and we could talk about the.
The quarter or step back on the whole year.
On a door to door basis, we're pushing on 800 pounds 700, 5800 pounds type stuff.
And that's the type of weights that we really want to grow in to capture the density benefits in the network.
But the legacy business, which is which.
Hit pretty hard by Cove, It and had some absolute declines in volume has had some decline in weight.
As they have grown.
E Commerce space more broadly kind of as part of the effect to covance. So.
You have as you have.
Medium term progress on the objectives for door to door, but that is still a smaller percentage of the overall shipments in the network and so the impacts on airport to airport have been suppressing the weight math, but inside the door to door.
Which speaks to class based shipments threepl another door to door applications.
Yes, we are pushing 700 5800 pound type freight okay.
Okay. Okay. That's helpful. And then maybe quickly I know you have some larger investments cued up with Columbus, but how do we think about 21 capex at a broad stroke is it 30 40 million Bucks or is it more than that we don't think it's actually going to be all that big of a blip.
And we're still finishing off our planning here now, but one of the things that's been happening in our capex over the years I've worked here past four years is there has been a bit of a rotation.
So we had some heavy capex when I joined which was really churning through the town fleet and getting the average age of our trailers.
Down to where we wanted them as that abated, we've had some heavier and we filled it in.
With some heavier capex on I T. As we had to catch up on some technical issues, there and build a platform for for our beyond our double double approach.
So as that starts to slow will feather in the CNH, It's a big investment its going to take a couple of years.
So we'll be able to spread that over the course of the 21 and into 22.
So it shouldnt have a material blip outside of the normal standard fluctuations of our of our nominal capex.
Okay. Yes, that's helpful. And then maybe my last one so Tom maybe what is the longer term vision intermodal. So I think at this point you've completed something like 11 intermodal transactions, you've probably paid low to mid single digits multiples of EBITDA for them, so very attractive and accretive uses of capital.
It feels like you've got a very well oiled integration program, you've got a great platform to work from so should we still be thinking about a couple of tuck ins a year do you think you could go faster are there some bigger maybe central states or Atlantic trucking type opportunities out there, but just some some big picture thoughts on intermodal so.
Ill.
Tyler to out to you last kind of question or set of questions. The answer is yes, yes and yes.
So yes, weve this whole tuck in model of like buying too that fit our model and our grading sheet from the operating system compatibility.
To kind of two geographic distribution extremely well, we will keep doing that so you should be expecting us doing what exactly what we did last few years, where on average never to talk into the year.
We also secondly, and this is this is why it's an and not an or.
We are challenging ourselves how can we actually increase the amount of deals that we look at at any given point in time and how can we speed up.
The process. So our leadership team there, Michael Haines, Choleric, and Theyve done a tremendous job kind of just getting more people on the forward team into the process of that and shortening the process itself.
We still we will be pushing too can you actually get more brains arms and legs looking at more opportunities. So that you can actually get more deals.
So there's something about yes tuck ins, we will continue doing yes, we will look for ways to get more guidance at the same time.
And then the last one to be very very clear.
I've been challenging the team and the team has lived up to challenge we are looking at larger ones too.
Not gigantic lawns, and frankly always within the discipline off the current model. So a larger one still has to a grade out positively on the exact same criteria that we have.
But in over the last couple of years.
We had more than one that we were very close to and we won't confuse efforts with resolve.
That was in the three digit revenue.
Category and as long as to fulfill the same disciplined criteria, we'd love to do that so.
We have strong growth expectations into that segment.
It's also a very very good interplay between that.
Trucking industry and in the world dredging industry.
You could even see ourselves kind of thinking about can be augmenting the more branch by adding a brokerage leg to that where in some cases actually we use.
Outside providers to do that so this is an important part and Mike you mentioned before this is our second Rockstar segment I'd like to find a way where we keep the tuck ins going we have more of them going and be of larger deals going also that fulfill the same disciplined criteria.
What about geography is going back to the question about Trans Pacific I mean, the I guess the problem is you are not really on the west coast is that something that you categorically want to stay away from or.
Would you look out west.
We are so sorry.
Thats an incomplete answer.
No. We yes, we are looking at the west we have several opportunities in the pipeline Pacific Northwest.
Good for everybody when we talk West coast thinks about the L.A. in California, and long Beach first the West coast is fairly long.
There's several opportunities in our pipeline and we'd love to have a footprint that includes a presence on the west coast.
Okay. All right. Thanks, guys appreciate it.
Thanks Tyler.
Thank you and our last question in line comes from Bruce Chan with Stifel. Please go ahead.
Hey, Good morning, Tom Mike I appreciate the time morning.
Good morning.
Just.
Another M&A question here at the risk of beating a dead horse you all obviously havent been shy about driving growth through final mile and intermodal but.
But is there anything philosophically that would prevent you from looking at M&A in LTL or does it just really come down to the opportunity.
So again.
This is something about where.
We you and I use sometimes labels, our imperatives to kind of characterize the type of leadership imperatives that we as a company live we did remove ceilings or I mean by that is in the past we looked at this model over the last five six years to either be intermodal drayage or being final mile. Those two still.
Did worked wonderfully we keep doing those but we are looking left and right. We are looking left right from a vertical integration perspective, we could go further upstream into supply chain.
From a moat perspective, there is nothing wrong about drugs truckload brokerage and from even from a geographical perspective, there's a lot of opportunities in our pipeline right now north of the border. So.
So the answer is though we are.
Keeping the current success model going and we're very open minded augmenting it by looking left and right.
Okay, Great that's really helpful and then.
And just.
Another question here, it's been a while since we've talked about the legacy TQ I business, but as we kind of think through a potential vaccine scenario, what's the set up there for that pharma life Sciences business and how are you all positioning.
So clearly I mean like like.
Probably every transportation company, whether its surface transportation.
Our forwarding.
We are talking to our customers we are in.
Direct negotiations in some cases about how where we can help.
So we are part of those supply chains, our domestic and international forwarders are part of those supply chains and we are working with them on it then same is to actually with airlines also so a lot of our customer base international forums domestic forward as airlines and in some cases asked directly with some of our customers.
This is.
Right into the conversation, we had 10 20 minutes ago more essential more medical supplies and these things don't has happened to us we have to earn them by working with our business partners, which is what we're doing so we should we should be expecting to be part of that.
Okay, great well I appreciate the time thank you.
Thank you thanks Bruce.
Now that concludes forward airs third quarter 2020 earnings conference call.
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