Q3 2021 Forward Air Corp Earnings Call
Yeah.
Thank you for joining forward air corporations third quarter 2021 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 for me.
Have you W. W. Dot forward Air Corp, Dot com.
With us this morning are C E O.
Tom Schmitt and CFO, Rebecca Gar break.
By now you should have received a press release announcing our third quarter 2021 results, which was furnished to the FCC on form 8-K and on the wire yesterday after the market close.
Please be aware that certain statements in the company's earnings press release.
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That are not historical facts.
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Checked expect may will would could or should and the negative of these terms or other comparable terminology. This conference call in the company's earnings press release contain forward looking statements, which include but are not limited to statements related to future operations.
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Undertakes 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 Schmitt CEO of forward Air.
Thank you David and also and most importantly, a big thank you to all of my forward, our teammates and our independent contractors, who made our record third quarter possible.
A record quarter that actually culminated in a record month for our company for the month of September.
And let me just take a moment to go inside our businesses for the quarter and give you a little bit of a sense.
Intermodal one of our two segments had a very very consistent three months period, producing the expected what we call double double a double digit margin and a double digit growth rate, they're very consistently producing those types of numbers and I'm very proud of our team there.
That made me go into our other segment expedited freight two of the three lines of business final mile. In truckload also were very consistent throughout the three months period now.
Now the third basis inside extra afraid our L. T. L business was a different story in a very good way.
We executed a transition throughout that quarter and I mentioned on our last earnings call in July what that transition would be about where we are working on be it work very closely with our <unk> customers, eliminating inefficient freight inefficient meeting loose oversize non pell.
<unk>.
From our system to.
To ensure one thing and one thing only that our network is unclothed and delivers the speedy no damage on time service our customers expect.
July and August inside that quarter were a bit of a handoff of the baton from that inefficient freight, which we dialed down and out too.
To dialing up more dense high value freight.
Baton Handoff was superb it also frankly caused us coming on the revenue side slightly below guidance.
In September the whole thing came beautifully together inefficient trade gone.
Hence our high value freight dialed up.
Resulting in a September 2021 over a September 2020 in our <unk> line of business, where the weight per shipment was up by about 30%.
Our revenue per shipment year over year September was up by about 50%.
And in <unk> operating margin for that line of business for the month of September of 17, 5%, we're getting there.
So let me put where we are with the third quarter and was September into context, Let's go back a couple of years on our Investor Day in New York Trane, 19th we announced a double double in the medium term.
We were prepared to go for a double digit margin company and a double digit revenue growth on an ongoing basis, we had a grow forward program to go after more high value freight.
Now that it's been luck.
Means preparedness meets opportunity.
We were actually prepared to dial up higher value freight.
He didn't know that last year the opportunity that actually came ringing was called Covid.
Now all we did with all the events business temporarily gone we used outgrow forward program to dial up high value freight faster just doing good things faster.
So again like as when preparedness meets opportunity. We were prepared we just didn't know what opportunity it would cost us to run even faster.
So we dialed up high value dense freight at record speed and.
And that resulted in a first set of double double months in April and June of this year, so less than two years after our double double announcement in New York.
It resulted in a full quarter of double double in the second quarter of this year again, a double double in this quarter, which was talking about here in Q3.
And then obviously, having dialed up our high value freight at record speed.
Allowed us to go ahead with that exact cleansing that'd be just talked about of our lower value inefficient freight out and higher value freight in that got us to a record quarter and two the September that'd be just briefly discussed.
So where do we go from here.
October continues to be very very strong in fact again for the <unk> line of business. The first two weeks of October were the highest end of third highest tonnage week in the history of our company with revenue about 35% over the same two weeks last year.
We expect that strength to continue putting us into a position for another record quarter.
We expect Q, sorry, Q4 to come in at an adjusted EPS of $1 27.
For our full year EPS of $4 32.
We also expect looking forward to next year 2020, we won't do just double double months or double double quarters, 2020, clearly will be a double double year for our company.
That takes us to a one year further out to 2023 to give you a sense. There we are targeting revenue for 2023 between 2 billion and 2.600 billion and EPS between $6 30.
And $6 70, and that's comparing to the 432 that we expect for this year.
Now, let me talk briefly about that revenue range from two to two six.
I just talked about the high end of that range will.
It will be achieved only if we step up significantly with more focus on brokerage, making sure we have controlled access to high quality outside miles when do we have to flex up in support of our customers.
The lower end of that range is when we keep growing organically the way we have a small tuck in acquisitions the way we have.
It's still going to be significant organic growth on the LTE outside for instance, including a handful or so of terminals that we are going to rollout next year.
Secondary terminals that are of significant size in primary markets. So organic growth will happen, that's getting us to the lower end of that range. If we do more aggressive M&A specifically also.
Enhancing brokerage organically or inorganically to secure the access to our driver pool that we need to support our growth that's what would get us to the higher end of that revenue range, we still feel very very comfortable with our range of EPS between <unk> 30, and <unk> 70 for 2023.
So stepping back before I turn it over back to David If you think of the last two earnings calls in April we talked about hitting the stride.
In July we talked about running.
I can say today, we're actually at a point, where it's stretched time.
So with that David ill give it back to you and you can open up the lines for Q&A.
Thank you the floor is now open for questions and comments if you wish to ask a question. Please press one zero in your phone.
Pressing womens zero would indicate that you wish to ask a question.
One moment for our first question.
Our first question will come from the line of Todd Fowler with Keybanc capital markets. Please go ahead.
Hey, good morning, guys attack on for Todd.
Tom I appreciate the detail you gave on the 2023 target. So it sounds like the high ends a bit more in organic.
But just looking at the EPS range at 680 to 670 is that.
Also an inorganic number at the high end or is that organic for both because.
When I put in the high end for the EPS I'm coming to a margin that's more in line with where you guys are at so just some additional color on the 'twenty three targets would be helpful. Thanks.
Yeah, Let me start and then I'll ask Rebecca.
To add to that.
So we feel very very strong on the organic side.
We're going to continue expanding our margins so whatever we saw in Q3 and whatever we saw specifically in the month of September I used inside the expedited freight segment, the <unk> margin as a comparison point.
<unk> seeing improvement there.
<unk> always said even back to last year's call for us as a company to have a comfortable double double.
LTM inside expedited freight has to be in the mid teens or better. So that's what we expect for 2023 to be in the mid teens or better.
Let me just leave it there and Rebecca if you can perhaps add on to that sure.
Just adding a little more to what Tom said, so if we kind of back up a little bit and just talk to our revenue mix.
In the inorganic space that Tom talked about so I just wanted to add.
<unk> got for you in terms of where are we.
We think right. So if we think back to 2014, we've done 12 intermodal acquisitions that have been true.
Tuck in acquisitions, we've gotten attractive multiples and they've certainly been accretive to our business. So we believe that those tuck ins certainly will help us in terms of growing our margins as we head into 2023 then.
And then if we take a look at our final mile acquisitions in 2019 and 2020, it's certainly indicated that we are capable of extending beyond that as tuck in acquisitions.
We believe as we look through our research day or evening.
Inorganic growth can continue to extend and stretch us more.
On those tuck ins, we believe that our corporate development team is comprised of highly skilled professionals that have a proven track record. So we plan to use our capital in a way that will focus on achieving a high return on our investment.
And then if we look at our organic credit.
As previously mentioned about focusing on specific FSIC codes like our automotive industrials and healthcare.
We can capture the high value of that higher quality freight.
As we look to our organic credit we will certainly focus on capitalizing.
Capitalizing on the growth levers for our LTM business, which has a higher incremental margin business.
Then with that strengthened our LCL business will help to support our solid operating margins from our final mile truckload and intermodal lines of business.
And then as we Holistically think about it we have not made any radical shifts in our tax rates. When we came to our EPS range and we didn't change any of our significant less.
<unk> ratios.
Have thought about these 2023 targets and we believe the targets are reasonable.
And we think that based on our strategy that we can achieve that.
Okay I appreciate all the color there and then I guess just more of like a near term question.
Zach.
That did we lose you.
Pardon me just a moment.
Hey, David This is Tom can you still hear me Claire.
Yes, Sir I can and pardon me just a moment I believe he may have his line may have accidentally dropped.
I apologize.
They are welcome to compress one zero again to rejoin we're going to go on to the line of Jack Atkins.
Thank you Eric Okay, Great, Hey, Tom Hey, Rebecca good good morning, and congrats on a great quarter.
Thank you Jack so I apologize if I missed it I've been kind of hopping between calls this morning, but I guess I would just love to maybe dig in a bit on some of the longer term.
Targets that you laid out with that.
2023 outlook.
If I understand it correctly the revenue range has acquired <unk>.
Revenue in there, but the bottom line ranges.
More organic.
I guess can you can you maybe help us think through some of the bigger pieces that are going to be moving you there from a from a core business perspective.
I think it's really encouraging that youre talking about earnings growth into 2023.
But would just like if you could maybe kind of expanded a bit on on the on the <unk>.
Strategy to drive that core earnings base higher in 2023, Okay. Thank you Jack and other than kind of broad strokes about hopefully I think that will give you a pretty good sense sellout again, you won't you pointed out correctly that revenue range is pretty broad.
Between 2 billion and $2 six.
The only difference on the revenues and that's a significant difference it's like a half billion dollar differences, if we do things beyond the execution of the current business model, which is high organic growth.
Implemented with tuck in style acquisition, so if we did.
Brokerage like Super high organic and or an acquisition of a brokerage just to make very certain we are both our ROIC frankly, and we also have access to a quality drivers at all times. So that we can flex up our <unk> volumes the way we would need to.
They might do on a brokerage or acquisition or we might just organically and Scott shower has tremendous experience in growing brokerage businesses organically.
That's the difference between the $2 billion and $2 six.
Brokerage enhanced one way or another and it's also.
But we did have good chain P Hall on the <unk> side, if we actually wanted to know in addition to building out significant sized terminals, which we will do over the next year. If you. In addition to that want to do a bigger <unk> acquisition. That's considered there the quality of the revenue is tremendous inside kind of the low end of.
That two to two $6 billion range. So that's kind of $2 billion 2.1, and that would assume from what maybe ending up this year of $1 six or so that we have high organic growth that is high quality organic growth and this is where I said.
I fully expect us with a high value of freight that we have right now that we're going to continue moving up the <unk> margins into the mid teens and perhaps even slightly above the mid point of the teams over the next couple of years, what we did in Q3 in September specifically to me is the clean start.
<unk> point for every at right now.
<unk> of the freight even in a looser environment allows us to actually price in a very disciplined way.
When you do a relatively kind of low value low density e-commerce products. If the market gets softer I think it's going to be harder to maintain pricing discipline. When you do high value dense freight and Rebecca mentioned some of the industries like medical equipment, Hi Tech.
Industrial parts spare parts for those types of higher value moves I like our odds tremendously of having the same pricing discipline or better in the next two years that we had in the last two years. So that hopefully gives you a bit of a flavor of where that two to $2 six comes from and <unk>.
Kris and quality of what's inside the lower end of that range organically.
No it absolutely does and thank you for that Tom.
I guess, maybe shifting gears, a little bit and I'd like to talk a bit about your vision for your LDL network as you look out over the next several years.
I think historically, the expedite LCL business that Ford Arris operated has been.
Heavily reliant on <unk>.
Principal customer base there.
With some airlines and some.
Some of the integrators as customers as well.
As you look out into the future Tom is that still.
The way you think the business should be structured or do you think that also there is a role for.
Directly with the <unk>.
The the actual shepherd the beneficial cargo owner would make sense over time as well.
So the first thing I should say and this is Jack not to question asking directly.
I do want to give you a little bit of a broader sense in our other lines of business. So inside of expedited freight take final mile.
Even truckload or suddenly taken intermodal in those lines of business, we have a tremendous amount of experience today already working directly with <unk> with people, who actually make staff our ship stuff directly.
<unk> has been a bit different in that way the vast majority of what we do is through third parties domestic forwarders International Forwarders Airlines three pls.
Going forward this will be an and not an or so we are building out selling directly to <unk> to commercial shippers. We also are working very closely with our.
It kind of.
Forward or three PL partners.
They tend to go after medium sized large complex shippers and there is a vast space available to us in the small medium sized business arena, where we actually complement what we do with our middle men type customers versus stepping on their toes. So this could be an engine and all.
And by the way those two.
Domestic forwarders international Forwarders, they will always be super important to us and now, especially that are afraid is high value freight for them.
We're going to continue working with them on that because they frankly wanted to type of service, we provide the reliability the speed to know propensity to damages for those types of moves.
They are going to continue using ours, and we're going to do everything possible to be by far the most compelling partner for them that makes them win at.
At the same time, there's ample space ample space selling more to <unk> directly in the SMB space, where we are complementary to what I just said about the.
Forwarder customers.
I like our ability to grow on both fronts tremendously and frankly do it in a very very complementary partner based way.
Okay. That's that's exciting to hear it really opens up a pretty significant portion of the market to you as well you know I guess maybe.
Again, staying along the lines of the book.
Thinking about the longer term nature of the <unk> business, but how are you thinking about that.
The ideal asset intensity of that business over time as you as you look to sort of grow your network add more terminals does it makes sense to remain <unk>.
Principally.
Our non asset based business, what do you think about the.
The trucks that that sort of move the freight around your network or do you think about maybe having more company controlled company owned.
Equipment makes sense over time as you as you add capacity to your network.
Yes to me that this whole game is about access to high quality resources.
So when I talked before enhancing our focus on brokerage I think about it this way so in a soft economy, we have a very small bites, but superbly qualified staple of employee drivers. We always did have that we always will have that we have our core roster of independent contractors, who frankly have been tremendous.
With us for decades.
Now what we've seen in the last year.
There are cases, there will be cases, where our customers are calling on us and they really want to rely on us as they move their freight and they're asking us to flex beyond those two sources of power.
Enhanced focus on brokerage means finding access to quality power that allows us to flex up in those situations. That's what we're going to be doing that does not mean, Jack that we should be buying a whole bunch of trucks.
It just means that we should have quality access to high quality drivers and brokerage allows us to do that organically or inorganically depending on.
What gets us to have better.
The same with terminals.
The vast majority of our terminals are on long term leases, we do own a few and as we build out a.
Strong kind of second terminals in primary cities in primary locations, we will do whatever it takes and if that in some cases means actually owning a piece of property. We can do that we are very much in the asset light spectrum.
Leasing some and buying one or two will not get us out of that asset light spectrum remember Columbus, we do we are doing a significant expansion. This is actually a terminal that'd be one so that is our own capital that we're putting in there.
To me.
Go forward picture is high organic growth with access to quality resources in some cases it might require a capital again think of Columbus and it may be that one or two of our terminals that were going to be expanding into requires that in most cases.
It's ensuring access and does not require a buying something. Good example is the brokerage business that allows us to flex up and down in a high quality way Okay alright.
That's helpful. And then one last question for me and I'll turn it over but.
As you think about doing more with these b C o's versus you know.
Three pls or freight forwarders, obviously those are going to remain a very key customer base for you.
How do you think about the the final mile attachment and might not thinking about BTC final mile, but b to B final mile taking that cargo to your customers and location versus having them coming to your facility to pick it up.
Where does that attachment rate today I think that's the way we've long time ago talked about it is that final mile attachment where is that today in <unk>.
Where do you think that goes over time, and we need to make investments in that and that that local cartage network to make that happen.
So first of all I mean, if you look at the way, we actually got Jack and you know us as well.
Well as I do the way, we typically tend to talk about it. This is our airport to airport was is door to door right.
<unk> has gotten from a take 20 years ago, even like 12 years ago, where it was a 100% of airport to airport business got into roughly 50 50.
And my expectation is as long as we keep doing more premium freight from anywhere to anywhere that attachment rate is most likely to go up.
Okay. Okay that makes sense. Thanks for the time, Tom appreciate it thank you Jack.
Our next question will come from the line of Scott Group with Wolfe Research. Please go ahead.
Hey, Thanks, good morning, guys.
Lots of them lots of mix changes in the quarter, maybe can you just help us with the monthly cadence of tonnage and shipments throughout third quarter and if you have some thoughts on October.
Sure Scott I can I can tell you so for the quarter, our daily tonnage was up.
8% year over year.
<unk> of July it was seven 5% in August it was seven 7% in September it was nine 1% as we look.
Quarter to date in October our year over year daily tonnage was up 13, 1%. So we are certainly seeing.
And an increase in that daily tonnage.
And as Tom mentioned earlier.
Earlier in the call we've seen some record tonnage coming in October.
Okay.
I'm curious do you have the same thing from a shipment basis and what I'm trying to understand also is with with this mix shift in shipments down but tonnage up do you feel like you have excess capacity in the network or not.
Yes actually that's.
What do you actually pointing towards is exactly what we intended to achieve so.
Roughly speaking tonnage wise are in a.
Small to medium growth space.
We just talked about 13% up October year over year.
On the shipment basis as you pointed out were down.
So these are much frothy or heavier more dense higher value shipments that we're actually delivering for our customers and that's exactly what we want to do at the same time with shipments being fewer our floors look so much cleaner and then when you walk into one of those terminals to you will actually look MTR they have more space.
So what that allows us to do is as we grow and again I said organically, we're going to grow significantly double digits in LDL 12, 14, 16%. Your every year in revenue.
This gives us actually room to stretch into them. We would have been if we had not adjusted the mix.
We did over last several months.
We would have been run out of space in some of our core terminals and this would have been screwed up the exact customer base with the accept high value freight that we actually want to move where the on time performance, including damages would have would have gone up on time performance would have gone down.
There is a significant a significant upside on capacity that the cleansing of the afraid that we did allows us to do we still believe.
The way, we intend to grow that those <unk>.
<unk> terminals in primary cities a handful of them open next year will be something that we will be putting in place that need to be putting in place at the same time across our network. It almost feels like we have 15% to 20% more capacity last point to that Scott.
Immediate project Eli and.
In collaboration with Oliver Wyman.
We actually guesstimate it like how much additional capacity the cleansing of the freight gives us.
And again, 20% is not outside the realm of possibility here. So we've in essence create a 20% more capacity without changing any brick and mortar component.
Okay helpful.
Can you talk Tom about underlying pricing trends and expectations going forward.
Hi.
So.
We have a pricing discipline and I think today.
Perhaps going back over the last couple of years.
Great teams to have ambition, Mark Katie Fox and a group of now nine people that used to be three people two years ago.
With tools that they should be using and are using in a very very surgical way.
And as pricing actually in a way that makes sense for us and our customers longer lanes differently from shorter lanes because of team driver demand versus solar demand certain destination is very different.
We added a very aggressive price increase.
Earlier this year.
Which we needed to take to make sure we invest in the drivers in technology and safety that our customers expect of us.
And did we actually always make the moves for them and not patent.
We're going to do the same thing again next year.
Feel very bullish about the price increase.
In February it's going to be necessary, but it's also going to be what actually puts us in a position to be the best possible provider for our customers to.
To take our acceptance rate next year will be similar to what we had this year, but thats. The beauty Scott is again as I mentioned, a few minutes ago with a high value freight.
The equipment that goes to a hospital.
When we do this the best possible way and we are the most compelling provider with the fastest service and hitting the tight window and make sure that it's actually not damaged we can ensure that pricing discipline much better than if you move to a whole bunch of frogs.
Okay, and then just last thing where are we from a events projects business today versus where we were and what have you assumed.
In terms of the 'twenty three guidance in terms of how much that comes back.
Yeah, Great point, so I am not sure about Q, Scott, but the last couple of weeks I've been to our conference actually wants to use South Carolina International Trade Conference.
Which in 46 years of its existence had highest in person attendance last weekend.
So that was promising.
I also went to my first couple of contracts in the last few weeks.
Having said all of that if you look at the overall stats and im not trying to realize that.
We planned our Q4 pretty much with a very very sporadic at best event space business Theres No cruise line moves built in there.
Do believe that in 2022, a good fraction of that will come back.
Percentage wise, it's kind of hard to express.
2022 it's like 60, 70% of what it was before Covid.
That may be realistic and everything else on top I think gives us upside against our what will be our plan. So we are planning very conservatively and expect to probably beat those estimates.
But we do want we do not want our business success to be dependent on kind of Colgate disappearance rates.
Okay. Thank you guys I appreciate it okay. Thank you Scott.
And we would like to invite the phone line of Todd Fowler to join US again in the Q&A by pressing one zero.
We are going to move on to Bruce Chan. Please go ahead.
Hey, good morning, Tom and Rebecca and thanks for the question here.
Talk about the B to C final mile a little bit.
When you think about the motivations behind their great cleansing. It makes a lot of sense right higher value denser easier to handle but that also seems a little bit at odds with what we would traditionally think of as final mile delivery rate.
Actually when you start to think about integrating those facilities into the network. So we haven't heard a lot about final mile. This quarter, maybe you could offer some comments around the strategy. There is it unchanged or are we going to see a little bit let's focus on that segment are you still pursuing M&A growth as aggressively there youre going to be more focused on other acquisition and business lines like broker.
<unk>.
Yeah, I mean, so first of all I mean final mile has been a tremendous part of expedited freight.
I can't Overemphasize Bruce.
When you look at the last two years, how much kind of local collaboration between our final mile business <unk> business has helped US final mile actually helped US launch <unk> service in some secondary markets for us because final amount already was there in the <unk> was not there Savannah is a good example.
And then also we talked about this before we do route together in some cases.
Also in some cases hold.
Inventory in each other's facilities, so there's quite a bit of goodness, where final mile by itself is a very very good high growth business for us it actually helps us with our EPS tremendously and at the same time makes us frankly to the <unk> business a bit more successfully in those situations I just mentioned.
We are focused perspective, Bruce I did mentioned before we have in essence.
Four primary <unk>.
Focus areas on the inorganic side two of them you are very familiar with over the last two or three years. We built these platforms in final mile and intermodal and then put tuck ins on top of it.
Very very helpful to us when we talk about the EPS more than 20% of that he comes from our intermodal segment.
So we will keep doing these tuck ins, both the intermodal space and final mile space, having said that I think.
Goes back to the earlier part of this conversation for us getting more access to more drivers in a high quality way is becoming tremendously important so and that will guide us more towards doing more of what we started with with JMP Hall, considering <unk> acquisitions. This will also guide us.
Not doing much more in the brokerage space and again, having a lead over Scotch arrows that actually has tremendous experience in that space will help us whether we move organically inorganically or both.
This is one of those where what we have done and what got US here the tuck ins and memorial in final mile are tremendously important what will get US. There. We will also have additional focus on what I, just mentioned more <unk> organic and inorganic as well as more focus in brokerage which could be <unk>.
And our inorganic so theres a bit of a shift to other areas are becoming more important.
Okay, Great that's super helpful and then.
Maybe just a follow up question on the driver comment where are you in terms of the ICU versus brokerage fleet, where did that mix shake out this quarter and how is it trending.
Yeah.
We certainly as we saw as we closed our freight as Tom mentioned earlier.
Our use of outside power ebbs and flows depending on.
The tonnage that's coming through and so.
As our shipments or tonnage.
With a little bit lower in the months.
With July and August we use less power and then as we ended the quarter in September we used a little more power. So.
We are trending.
<unk>.
As to probably where we were although it's lower year over year.
From the outside is power standpoint.
Got it so as we think about a number for <unk>.
Next quarter is it likely to be in that sort of sub 10% range.
It's certainly not going to be sub 10%, it's going to be somewhere between 10, and 20 and again.
The way boost to be very clear the way. We're looking at this is there's nothing wrong about outside power, there's everything wrong about outside power power that is not the quality and not the cost effectiveness that we expect hence the enhanced focus on that could.
Becoming more pressure in the brokerage space that you will see us play out.
We do believe that we.
We will always have flex situations, where the staple of employee drivers and IC roster.
We shouldn't have them kind of on our roster indefinitely chest for the highest peak week off peak months, we will have to access that first source of power outside miles. The only thing we want to make very very certain we doing it in a high quality and high end kind of controlled access way. So that's about brokerage comes in I D.
Have a problem with that number being between 10 and 20% as long as it is it is cost effective and the same quality that you would be getting from our Ics and employee drivers.
That's great. Thanks, a lot of things that could occur.
Thank you Bruce.
Our next question will come from the line of Tyler Brown with Raymond James. Please go ahead.
Hey, good morning.
Good morning, Tyler Hey, Tom I joined about 25 minutes late so if you addressed any of these questions. Please just tell me to read the transcript, but from a modeling perspective, where did you guys exit the quarter in terms of weight per shipment was it higher than the 814, I mean, I assume that mixed shift didn't occur day, one of the quarter.
That makes shifted what's actually come.
Throughout the quarter.
Becker is actually making sure that I don't screw this up too much but we have seen those numbers going up month by month, we had instances in weeks, where that number started with a nine towards the end of the quarter. So that number keeps going up do you have any more specific yes, that's exactly right.
As Tom mentioned, it certainly we could see it progressively getting better.
Better so on average that's where we landed.
Within the eight hundreds and so yes to answer your question in September was better than the average given the fact that it was a split we saw this slow progress coming from and I would say necessarily slow, but the progress coming from the month of July August and then culminating to.
September.
Okay, and then you mentioned that pricing is strong, but just to be clear. So your revenue per hundredweight X fuel I think rose sequentially.
By being significantly heavier that would've depressed yields at least revenue per hundredweight right.
Not sure can you repeat the question again, just what was the did the mix would the would the heavier weighted shipments.
Reduced or depressed your revenue per hundred weight.
I think it certainly puts pressure on our on our yields yes, it certainly does but.
Theres also benefit from having you know heavier denser freight in the network.
Sure.
Certainly we did see some pressure on that but.
Yes, we did actually see the benefit does that heavier denser freight coming in right revenue per shipment was up huge okay I get that.
Okay, and then you you guided to call. It $4 30, just round numbers for 'twenty. One you gave 23 guidance of $6 50 at the midpoint, but can you kind of bridge those two incremental dollars just what were the key or what are the key drivers. There does that assume the events business comes back are you assuming a rollover in the truckload spot market.
Do you have a buyback in there I'm just trying to understand what the buckets are and what is idiosyncratic versus maybe just market driven.
Yeah, I think at this point, we certainly.
We are willing to share some of our strategies as we get there.
At this point, we talked a little bit about you know the mix earlier in the call on the mix between organic and inorganic growth.
So certainly focusing.
On both of those as we think about it shifting in our.
Where we land on the organic and inorganic kind of based on where the freight cycle is at that point in time as we get there.
I think as we think ahead in terms of our operating margins.
We are certainly focusing on something that's better than a demo.
It's driven by our <unk> line of business.
We plan to capitalize on those growth levers.
Since that is a higher incremental margin business and that L. T O.
Strength of that operating margin is supported by our final mile truckload and intermodal.
Lines of business as Tom mentioned earlier, we do plan to scale, our brokerage business, we believe that that will help us to provide some synergies.
And then as we think ahead.
Below the line of operating margins.
Not expecting any radical changes in the tax rate, we certainly believe that there are forthcoming tax rate changes coming.
Don't believe the day, we didn't model in any significant changes in our leverage ratios.
So that's as much information as today as we are willing to provide in that in terms of that bridge.
Between where we are today and where we plan to be in 2023.
The only thing that I would.
To add to that and Thats.
<unk>.
In big strokes.
The single biggest part.
It's going to be growth.
Of.
Revenue in <unk> and the quality of the revenue margin in <unk>. That's the single biggest driver of that was $2.
Okay. So.
So it seems like the revenue quality is improving.
Improving quickly so how do we think about cadence.
Is it get a dollar in 'twenty, two and $1 23 or is this more earlier or is it back end weighted.
Should Ah Theres nothing wrong about thinking about $435 36 50.
Okay. Okay. That's helpful. And then obviously you guys have been generous with the guidance, but your free cash flow has converted over net income I think for the past five years, it's I'm sure it's deal amortization, but you've got this asset light model Columbus is sunsetting.
I would assume that there is some leverage on the Capex line. So is it reasonable to assume that the free cash flow outlook.
It could be maybe even better than earnings or is it just too soon.
A little bit too soon the one thing I will mention just to clarify on the Columbus did we complete phase one this year, but we do enter into a phase two next year. So you will continue to see some of that capex for that Columbus phase two into next year as we kind of think ahead.
Hey.
And but you will.
But not 23.
No by 'twenty, three we will not we will be done with our Columbus expansion that's right. Okay. Okay.
Yes, but but overall the free cash flow profile here could be very strong.
Could be yes, that's what we're at.
That's right I think directionally headed in the right place.
Okay perfect. Thank you guys.
Okay. Thanks Tyler.
Ladies and gentlemen that concludes forward Air's third quarter 2021 earnings Conference call. Please remember that this webcast will be available on the Investor Relations section of <unk>.
Forward Air's website at <unk>.
Www Dot forward Air Corp, Dot com.
That will be shortly after this call. Thank you you may now disconnect.
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