Q4 2022 Forward Air Corp Earnings Call

Speaker 2: By now you should have received the press release announcing our fourth quarter 2022 results, which was furnished to the SEC on Form 8K and on the wire yesterday after the market close.

Speaker 3: Please be aware that certain statements in the company's earnings press release announcement and on this conference call are forward-looking statements within the meaning of the private security's litigation reform act of 1995, including statements which are based on expectations, intentions, and projections regarding the company's future performance.

Speaker 4: anticipated events or trends in other matters that are not historical facts, including statements regarding our expected first quarter, 2023, and fiscal year 2023.

Speaker 5: are on our subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements. For additional information concerning these risk factors, please refer to our filings with the Securities and Exchange Commission.

Speaker 6: in 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. During the call, there may also be discussion of financial metrics that do not conform to U.S. generally accepted accounting principles.

Speaker 7: or GAM. Definitions and reconcilations of these non-GAM measures to their most directly comparable GAM measures are included in the press release issued, which is available in the Investors tab of our website. And now I'll turn the call over to Comments, CEO of Foridere.

Speaker 8: Thank you, Brad, and good morning to all of you on the call. First things first, a big thank you to all of our teammates, our independent contractor drivers and our business partners. You did keep our commitment to the best service in the industry for the most intact damage-reel TL shipments.

Speaker 9: And I thank you for that. You also delivered a recordier in all of our lines of business, top line, bottom line with EPS here, you know, via growth by almost 70%. So that's top of the class in our space.

Speaker 10: Now, still we did not finish the year the way we expected and we need to address that.

Speaker 11: In contrast to many of our peers we had guided to Q4 to be sequentially better than Q3. And our peak planning efforts with our customers actually supported that guidance. We always pull our top 25 customers or even more going into the fourth quarter and we felt good about the guidance that we gave.

Speaker 12: Well, turn out we have no monopoly to wisdom and not even in concert with our customers as we plan together.

Speaker 13: We had modeled that the forward 23 actions that we control would more than make up for the shortfall in demand, the overall sluggishness in the economy, and also for fuel coming down.

Speaker 14: Where we ended up though was with the LTL TANGE going down by 13% in the fourth quarter, way more than the single-digit decline we and frankly we together with our customers had expected.

Speaker 15: December was the worst month and January was equally sluggish. We're talking 15-16% down.

Speaker 16: Now, the most recent weeks were a bit more promising. The most recent week that has a complete week we showed at minus 10%.

Speaker 17: still Q1 will be tough and also I want to say despite the Q1 being tough our story and our drive towards high value freight still holds

Speaker 18: We are keeping all of our LTL customers.

Speaker 19: We're actually adding customers by adding direct shippers. We have more than 200 right now. And that's in the space, small, medium-sized businesses where they don't do not use forwarders.

Speaker 20: Even in Q4, the number of LTL shipments held stable, we were down by 0.4%.

Speaker 21: So it's pretty much the same as last year. The freight mix, as we showed in the release, is getting better and better. Evidence for that is also that on a per-piece basis, the late increased 12% year over year.

Speaker 22: And we looked at four high value verticals, and they used to be 18% of our rate mix a year ago, and now that 29% of our rate mix.

Speaker 23: Trade shows in the last quarter of Q4 went up by 50% compared to the last quarter of 2021.

Speaker 24: And finally, what's also important, we get paid for that high-ovalu freight. Our revenue per 100 rate is up 13% Q4 over a year Q4. And so a lot of the journey that we're on works out exactly the way we had intended. That.

Speaker 25: The challenge that we have right now that caused the year to end is a quarter that was less than what we expected, significantly less than what we expected is our shipments that we still have, have way fewer pieces than they used to have and that they will have.

Speaker 26: 20 to 25% fewer pieces.

Speaker 27: We expect that sometime in Q2 inventory starts normalizing and shipment sizes should be normalizing too.

Speaker 28: At the end of the day, we do not rely on that to happen. We do have our FOV-23 initiatives in place. We have half of them that are focused on growth. We talked about them many times before. Anything from selling more direct to events coming back. We also have initiatives that are focused on cost containment.

Speaker 29: And we call that forward game shape. And for instance, including Dimmie and Rewaying, which is a huge initiative, as well as cost reductions in travel, reduction in force, we're down by more than 100 people in the last two months alone.

Speaker 30: and we also have a hiring freeze in place. So, also part of game shape is for instance, making sure that we use our independent contractor roster as much as possible and we have minimum outside miles.

Speaker 31: We just updated our Forward 23, Forward Force growth and Forward GameShape initiatives for impact.

Speaker 32: At this point, we still believe that we can target to a 2023 that's ahead of 2022 in EPS.

That's what the collective initiatives are telling us. We show about a 90 cents EPS headwind from sluggish economy. We show a 60 cents headwind from fuel coming down. But the initiatives collectively in our minds will make up for that.

Also, please bear in mind we did buy a beautiful company called Land Air Express. That's helping us also with 18 cents EPS impact that we expect out of that. That's a creative to our model. And as you also know if the economy keeps being slightly longer, we tend to have...

beautiful tucking acquisitions, both in intermodal drainage as well as in LTL, that would be on top of those initiatives that we are targeting. So at this point, we still believe that with forward 23 initiatives in place and updated for the economic slowdown and for the fuel going down.

as well as the Land Air Express addition to our team, as well as potential additional acquisitions, we can still target a EPS 2023 ahead of 2022.

And by the way, I'd rather shoot to do that and have initiatives in place with first class team members driving them and getting very very close than targeting 10 or 20 percent down and starting that with that as an Ingoing proposition in our models we can get to an EPS in 2023 that actually is on top of

on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. And if you're using a speaker phone, please pick up the handset before pressing those numbers. Once again, if you have a question, you may press 1 and then 0 at this time. And one moment please for our first question.

And we're going to jack at Ken's with Steamence. Please go ahead.

Hey, this is a grandson for Jack. Good morning, Tom and Rebecca. Thanks for taking my question.

Morning, Grant. Morning, so just kind of curious on the big reversal and weight for shipment and you can with the volatility we've seen there over the last couple years, you kind of how are you thinking about that going forwards?

Yes, so this is the combination that we just talked about, right? So the weight for Q4 shows down by 13%.

That in itself is not a good metric. It's also not something that we like to see. Then you kind of unpeel the audience and say, what's happening here? Because our freight mix is getting better and better. And again, the weight per piece inside the shipment, most shipments have more than, or many shipments have more than one piece.

The number of pieces inside the shipment over the last several months went down by more than 20% because people still order two SKUs but the third SKU is still in the warehouse so they don't order that as part of the shipment.

And so despite the fact that our weight per piece is going up, that the number of shipments is holding steady, the fact that we have more than 20% fewer pieces in a given shipment means the weight per shipment is going down. I know this is a lot of kind of math pieces coming together, but in essence,

The quality of the freight is there, the number of shipments is there, what's inside the shipment currently is actually high quality, it's just less of what it was and less of what it will be. And we're not relying on the economy coming back quickly, we are pulling all of these cost actions forward game shape, and we're also pulling all of the growth actions.

and again collectively between the Land Air Express acquisition and our organic growth initiatives which has opened a terminal in Midway, third terminal in Chicago. We got five new dots on the map with Land Air Express. Between the GameShape initiatives and Forward Force growth initiatives.

We do believe we have a good shot of 2020 being a head of 2020 despite an economic head between that we just updated and despite the fact that we expect fuel to come down and normalize in 2020.

So weight-per-shipment down by itself is not something we would like to see, but we need to understand what drives it. The quality of the phrase is exactly what we wanted to be.

Gotcha, that definitely makes sense. And just to follow on, you talk about growing earnings next year in 20, or this year in 2023. Could you maybe just kind of try and quantify how that could break down quarterly, you know, you kind of expect a more positive inflection in the second half of the year.

So just kind of any colleague you could offer around your how the EPS breaks down by quarter maybe would be helpful.

Yeah, and we did guide for the first quarter and that is continuing this lagishness that we saw in Q4. So, but let me just give a little bit of color commentary. So you saw the 132 that we guided to for Q1. Obviously if you multiplied it by 4, that doesn't get you to pass $7, which we still target.

And again, we came in adjusted at 718 for 2022. And again, between our initiatives that we control, between getting 18 cents CPS for Lander Express, and between the potential of wildcard acquisitions, which we tend to have highly accretive talking acquisitions.

we think we can still beat the 718. But it is more and more ramping up. As an example, Land Air Express is joining us. We're working with them very closely to make sure that the quality of the freight in a cleansed operating environment gets to standards that we expect.

at Forward Air and the Land Air Express team is wonderful to work with. They'll get us there. But this is a journey that's ramping up quarter by quarter by quarter. Most of the initiatives that we talked about whether it's selling more direct, whether it's bringing events back, doing more in and out of Canada and Mexico.

or on the game-shape side getting dimming and re-waying, eclipin in all of our terminals, all of that is ramping up throughout the year. So while it looks precipitate, thought lazy to say, okay, it's gonna be back and loaded or it's gonna be second half loaded, fact is all of these growth and...

and GameShape initiatives are taking steam and are ramping up throughout the year. So you would see a bit more of an impact in Q3 and Q4, and you see more impact in Q2 than Q1. So yes, it is ramping, the first quarter being the most muted one.

And this is frankly driven by the fact that we expect continuous growth by each one of those initiatives and therefore you do see a ramping effect.

Great, thanks Tom.

Thank you.

And next we can go to Tyler Brown with

Hey, good morning guys.

Tyler, good morning.

Hey Tom, so thanks so much for the color on the guide, but I just want to kind of make sure I've got it so you have maybe a dollar 50 and bad guys from the economy and fuel and then I'm rounding but maybe called 20 cents from land there and then maybe another few cents from Chickasaw but can you kind of bridge that other dollar to a dollar 20 and savings that you think you can

So we finished the year with 718, not quite the 750 that we shot for because of what happens deeper and faster in Q4 than what we had expected.

So then we say we want to have more than 718 in 2023 And then you have a dollar and fifty coming against us from the get-go And that's the 90 cents or so from the sluggish economy and the 60 cents from fuel prices coming down

So now how do we get to a positive kind of 160 or 170 to make up for that 150? You mentioned the 20 cents and the 18 is the one that we have in our model for land air express. So that still leaves us to have to get at least $1.30 from the other initiatives. They break down roughly.

50-50 between the forward, what we call forward force growth initiatives. I'm going to get a bit more specific in a moment. And the forward game shape initiatives, which are more about efficiency and effectiveness, including cost, containment and cost management. The biggest items on the growth side.

would be doing more high value freight with some of our core domestic forwarder, airlines 3PL international forwarder customers. That gives us about 17 cents. Selling more direct to small, medium-sized businesses that do not use our core customer forwarders gives us about 7 cents.

You have more coming back on the trade shows and you have more Canada and Mexico so this is kind of stretching in existing areas because we are doing Canada and Mexico today and trade shows obviously. That's another eight cents. We do have a lot of brokerage ramp up with our new leader in brokerage under Nancy Brian Faux.

That gets us backhaul efficiencies, both from a cost perspective and an empty mouse perspective. That's about 12 cents. We're growing our final mile. Integrated customers. Integrated means it's more efficient for us to operate them in a co-mingled system. That's about four cents. We have an individual drive to grow more with BCOs versus in the...

basis where we expect an 18 cents, sorry a 37 cents delta between what we had last year and this year. Remember we had last year's high load quarters where we were in the low to mid 20s of outside broken miles. We're in 3 to 4 percent territory today.

and we expect the entire year to remain in single digits. Tremendously well managed by Tim Osborne, by Justin Lindsay, Chris Rubles, team members. So that's the big single biggest block on the cost management side or on the game shape side. We do expect dimming and re-weighing benefits and other technology enhancement benefits.

be done there yet. And then we have surgical pricing efforts where we continue becoming more and more of a machine in pricing for the quality of the service where it's relevant to the customer. That surgical pricing gets us another 14 cents.

If you do the math between those, and again, we're more than willing to open up and be very transparent because these are real growth and real cost management and game shaping initiatives that collectively add up.

to the 93 cents economic slowdown and the 61 cents reduction on the fuel side, add up to that and slightly more. And again, so even if we fall a bit short, we still have the possibility of another tucking acquisition or two. So when you're saying we're targeting a year that's actually up from last year.

This is based on initiatives by our leaders with their teams that add up on the globe side and on the game-shaped side. And if the economic headwind is steeper and longer, we do have additional opportunities with again Land Air Express already on board. You mentioned Chickasaw. We also have the

We typically always have a couple of talking acquisitions that we don't know at the beginning of the year which ones will come through but they always come through.

Sounds to me like you will prepare for that question. So I was extremely helpful. Real quickly on fuel, what is the estimate in there on the 60 cents? Is it call it 452 or lower?

So, I'm doing this top of my head, Tyler, and I'll get it close enough to write Stefan Brischenmayer who runs our pricing, he would know the exact number. So what we do there is, and I'll tell you the correct numbers, so what we do there is we look at one of the best sources for forecasting, that's the Energy Institute in Washington.

They have for this year and they've been by month by the way, so we have it by month too in our forecast. We don't try to outsmart people who do this for a living full time. So we took on average for this year something around 423, 424. That number was, I believe, in 2022 more like 489.

So in rough terms, that's a 490s to 420s, step down by about 70 cents.

Once we actually get that through our math exercise, and we also have some employee drivers where the math works slightly differently, but this gets translated into, at this point in the model, a 61 cent headwind comparing 2022 to 2023. So it's a 490 to 420-ish step down.

Yes, okay, that is extremely helpful.

kind of going back to the waist for shipment. So I think you're around 130 pounds ish

Do you think that that's going to be a low mark? Do you think it can build from here? Maybe can you talk about where your current weight per shipment is? I think that would be helpful. Just longer term when we think about the model, where do you think...

You kind of pan out in terms of weight. Is this a is 800 pounds more like a Stasis kind of weight or could it be higher than that or should it be lower than that? Just kind of any broad thoughts there Yeah, my senses is kind of so the numbers that you have and it's just go to dark correct that is where we are

I would though on a belief that the 730 is kind of the low mark. Again, this goes back to way fewer pieces. Way fewer pieces than we saw six months ago and that we will see again at some point. And if it doesn't come as early as we want to, then we need to pull a few extra levers including a couple more talking acquisitions. But uh...

We probably will never get into the 1200, 1500 pound range because this is where you deal with bulk commodities, where you deal with big shipments that are more in the retail and consumer goods sector.

we tend to be more specialized. I mean, remember this is what used to be air freight being grounded in many, many cases. So there's a difference between what a world-class company like an Old Dominion or a SIA in the class freight space halts and moves and what we move. Remember also in some cases for the more sensitive but smaller high value shipments.

some of these best companies in the LTL space are our customers. But 800 sounds like a good space. Perhaps even 85900 we were there when shipments were fuller. So I think that's possible.

Okay, and just my last one on land air. So it sounds like it is expected to be accretive here in year one I'm calculating maybe six to seven million in e-bid

Yeah, so when you think about 24, I feel like there's more to this story, longer term, from an accretion perspective, can you just talk about maybe what you would expect over the next few years out of land air and maybe what's in the benefits world from this deal. Thanks.

I mean, so roughly speaking, the number you use, the 6-7 million for this year, is absolutely correct. What we're doing is we have a company that is now part of us that has some of the same DNA. They did airport to airport line haul extremely well. They were a formidable competitor. Now they're part of us.

Now we are in a compact way together with them doing our growth forward story very very quickly. What took us two to three years we're going to try to do here within a year or so, which means upgrade the freight to more high value freight.

operating in what we call a cleansed operating environment, which means all palletized, making sure we're pricing accordingly for the high value freight, and then also tapping into a larger customer base.

A lot of that, including synergies, where in some cases we have duplicates in terms of buildings, we can consolidate some of them. We do get, as I pointed out, we have five new origins and destinations in our network based on Lander Express.

they call Boise to Peacars Springfield and Abelene, Texas. So you probably see a ramp up of these energies throughout Q1, 2, 3, 4, and some of it will probably spill over into next year. So if you look at this up...

Land Air Express, we said we think we're going to retain between $74 and $94 million of the revenue. So just make that for argument's sake $85. And do assume that from a game-shaped perspective that forward air and land air standards will be very...

similar in a year. So take a 15% margin to be conservative. Then you talk certainly more about a 13 million or so run rate impact from that acquisition versus perhaps half of that this year.

Right, right. Okay, perfect. Thank you so much for your time.

Thank you, Tyler.

And next we can go to Todd Fowler with Keybank Capital Markets. Please go ahead.

Hey, great. Thanks. Good morning, Tom. Hi, Rebecca. Morning, Todd. Good morning, Tom. So maybe a similar thought on what you're just talking about with Tyler on the fuel side. The 90 cent headwind that you have coming from the economy. Can you break that down a little bit as far as how you get to the 90 cent headwind?

how much of that's tonnage, what would be an assumption on the OR side for the environment that you're thinking about maybe on the expedited freight side? Just some thoughts on the 90 cent headwind.

Yes, what we did do was we modeled this again with some macroeconomic assumptions. Some of the reports, frankly, that you and some of your analyst colleagues put out are helping us with kind of validating and kicking the virus in some of those assumptions.

So we finished a year with 13% down year over year in Tunnage per day. So we took some of that, and we started actually even with a higher number down, 15 to 16% for the first couple of months.

And then we looked at that number getting somewhat better throughout the rest of the year. But we took a very, very steep double digit year over year tonnage decline as the base case. And then we built those forward force initiatives, the land area express acquisition, and some of those.

impact of effective kind of running of our system, including cost management or dimming and reweighing on top of that. But so it's a double digit year over year decline in the LTL tonnage that makes up the base assumption.

And then we also had a couple of margin points that we...

that we kind of took down and what the thinking there was in a very very soft environment we may have to work with our customers in some specific cases about competing and winning business that may be a bit more in the soft kind of profitability area.

we are still going to be extremely pricing disciplined. We had a GRI, we put this in place for every single customer. So the pricing discipline is going to be there, but it's a combination of double digit starting with 15-16 and then alleviating getting a little bit smaller throughout the year tonnage per day reduction.

coupled with a couple of percent margin points that we took off. Once you run this to our model, it ends up being the number that I quoted, which was 93 cents EPS impact.

Got it. I'd say other than relying on our reports or some of my peers maybe those are all prudent assumptions time so I don't know what I'm assuming. Right, I guess we gotta be careful there.

I don't know how granular you want to get on this question, but when I look at the X-rated freight OR in the fourth quarter, despite the falloff and tonnage, there's only 30 bases points are so higher than the fourth quarter of 21, at least what I've got in my model. What's a realistic assumption for 23 in this environment? Then you can you hold the OR?

Flatish on a full-year basis. Do you see it moved back by on our basis points? You've got a lot of levers on the cost side. Just maybe any thoughts on the X-Prid O-Rs? We moved through 23.

Yeah, so it's probably a flatish. But let me just explain this one more time too, because I think we had this conversation and I think the logic holds, but you guys challenge us on that. So if you remember, we said we expect, inside X-Tradict, we create the 800-pound gorilla's, the main show, the LTL business.

The other businesses are in their own right, obviously profitable, and they need to be above certain ROIC and margin thresholds, but they also need to make the main show better with backhauls, with co-locating, co-routing, and so on. But we did say going into 2022, we expect 150 to 200...

Basis point margin expansion in 2022 and in 2023. If you look at 2022, you've probably got about twice that. We were more like 390 or so basis points that we added margin on the LTL side. And some of that is temporarily inflated by fuel.

So, safe arguments say we get 3.5% or 4% percentage points LTL margin expansion in 2022. We as a team do not take credit for the 150 or so that come from fuel being temporarily at very high levels.

Same is true the other way around. Now fuel is walking down. So if the margin remains flat, it still means the quality of the freight, the quality of the business, the way we operate, our terminals, the way we demand re-way, all the initiatives that are part of forward trade free.

Still get us 150 to 200 basis points margin expansion in 2023. However, if you look at a piece of paper, it might show flat because fuel is going to be the headwind in this case. We want to get pound for pound as a company better and we don't take extra credit for fuel, but we also don't want to take fuel as the...

determined and when we look flat but de facto make the business better. So it's almost like put fuel assigned. Sometimes it's a bit of a tailwind, sometimes it's a bit of a headwind. The test is, is this business getting better by 150 to 200 basis points in its own right and it did in 2022 and he expect the same based on these initiatives in 2023.

Yeah, okay, Tom, those are all really fair comments and I appreciate that, but the thoughts are on kind of how fuel helped 22 and you guys being prudent about what you can control and what you can. So I'll turn it over. I'm sure you've got some other people in the queue, but I appreciate the thoughts this weren't.

Thank you, and we'll keep using your analysis. All right. Thanks, Tom. All right.

And next we can go to Scott Fowler with Wolf Research. Please go ahead.

Hey guys, thanks. Good morning. Can you just really quickly go through the monthly tonnage?

4Q and start of 1Q.

Sure, Scott. So in October , our tonnage was down 11%, and in November , our tonnage was down 12%, and in December , it was down 15. And in January through the end of January , we're seeing about a 16% decline year every year.

Sure, Scott. So in October our tonnage was down 11%, in November our tonnage was down 12%, and in December it was down 15%. And in January , through the end of January , we're seeing about a 16% decline year over year.

Any chance you have the the the monthlies for Q1 a year ago? I do not actually I'm sorry Scott. We can we can get those later. Okay.

When I think about the fuel headwind that you guys talked about

Is there any of that in Q1 or is that really all starting in Q2? I just want to I mean it feels like maybe Q2 is the biggest of that fuel headwind so that could be the biggest Year-over-year earnings decline is that fair as I think about the quarterly cadence Tom?

Yes, Scott, that's right. I mean, if you remember, right, I think June was like the peak of all of the fuel that came in. It was up over like 5, you know, 560, I think, at that point in time. So, it was, I think Q2 is when we'll see those, you know, fuel headwinds. I think in Q1 we'll see a bit of a tailwind. So, I think you're right in your thinking.

We used 5.9% this year. It became effective on Monday, always the first Monday in February . And last year the number was 7.9. The one thing that we should say up front is, and I'm going to make two comments here, the first comment is we always look at the numbers. We always look at the numbers. We always look at the numbers. We always look at the numbers. We always look at the numbers.

pricing as an overall picture. Part of that big picture is actually fuel search arch and we always look at left and right what do others in our space do as they service their customers and then we make adjustments. So late fall as Godly did make an adjustment in the fuel search arch table.

That's worth about two percentage points. So we looked at that and then we looked at the GRI, kind of as a package that we want to make sure we keep our customers and us in a space where it works for both of us. So there's a bit of an end proposition here between the FUO Zerge Adjustment in November and the 5.9 that gets us into similar territory.

and we have more than 200 agreements in place where in some cases if there's real growth that's substantiated and we track this on a monthly basis that customers can kind of save more as they do more with us meaning there's a mitigation where if someone goes with us in key lanes that are good for them

where we gave some of it back for earned growth makes sense. And we have those kind of, we call them value exchanges in place. We had them in place last year and this year. So you should expect 200 customers plus that actually have commitments to go with us because it's good for them and good for us. And you should expect a 70% or so take rate.

perhaps even more than that of the GRI. Both of these numbers are fairly common and somewhat consistent with what we saw last year.

And then can I just clarify one real quick thing? So with the 60-cent fuel headwind, is that including the benefit of changing the surcharge tables or is that separate?

So that would be, let me just do this real time, this is kind of a net number. So we look at it, came down and then we just looked at what it was last year. So if we adjusted in safe arguments, they can talk about it and we got two or three.

months with a higher fuel surcharge number, then the 61 would step down, would include that step down from that higher number.

So it's including the benefit of the new search charge tables. Meaning if you didn't change the search charge tables that had been would have been bigger, is that what you're saying?

No, if he hadn't changed the surcharge table, the headwind would be smaller because the actual fuel surcharge collected was bigger last year because of that adjustment, so the step down in space is bigger now.

So it may have been, but that difference by the way it is from math perspective is a few cents. So this would be going from 56 to 61.

Well, I thought you raised the search charge tables. Never mind. We did.

We did. We collected more fuel, search arch because of it.

Okay, I understand. Okay.

Thank you guys, appreciate the time. Okay, thank you.

Next we'll go to basketball majors with Susquehana. Please go ahead.

Tom, not to go back to mix again, but I think it was really illustrative when last spring you shared that investor deck where you kind of...

let us visualize what the terminals used to look like before some of the changes you made and what they look like now and I think you know maybe some of the investor concern around mix and the shipment weights getting a little smaller is that we're going back you know a little bit in the way of Where we were before so can you help us understand?

If we were to walk before today, what does one of your LTL terminals look like?

Just visualize the shrinkage and the shipment size and why it's not a step back and all the hard work that you've done in this very strong environment over the last two years. Thank you.

Yeah, thanks, Mask and for asking. By the way, for those of us who you that look at our investor relation side in our deck, we just talked about over the last several days, that visual of what our unclenched terminals look like before the cleanse or what they look like all palatized today, we probably have to take that picture back in because I think it is a big part.

If you look at a big shipment that had last year seven or eight high-value treadmills in there, now it has four treadmills in there. We do like high-end consumer goods. They are good freight.

But there's just the shipment looks smaller. So when you take a visit into any one of our terminals, you will like what you see from a cleanliness perspective. You just would like to see a few more of those boxes. Or you would like to see some of these boxes to be bigger.

Understood and thanks for walking through that.

Maybe to cap it off, we've spent a lot of time on the LTL business today for understandable reasons. Can you?

Walk us through some of the assumptions you're making for the intermodal segment on an organic basis pre-M&A. So how you are modeling that to trend versus seasonality and maybe even a little structural reminder of your customer exposures between

The larger asset using IMCs versus the smaller pure asset light or non-asset IMCs and ports in the shipping companies. Thank you.

Yeah, so Bascom on the In-A-Mole drayage side, what you'll see is, you'll see, there's two customer segments. And so roughly speaking, it's not exactly half, half, it's probably 60, 40. 60% of our customer base in the mole drayage are shippers that make or ship the goods that we...

move on their behalf. The other 40% or so are intermediaries that have the end customer as their customer.

We like both of these customers a lot and we work with them extremely well. We have found that when we get to work with some of the shippers directly, this is really, really good business for them and good for us. So we have a growth initiative in place. I mentioned it when I ran through some of the forward force initiatives before to grow.

over proportionately with some of those they're called PCO customers, customers are actually making ship things directly. So you'll see some of that good PCO growth as some of the organic growth. Also our sales force has been much, much more focused on organic growth in the model. So yes, we grow by those talking...

organically growing we are, as I just said, specifically BCO business. What is happening though is we do expect some of the accessories, specifically for storage fees, detention fees, to come down to normalize. Remember last year we had the preponderance of the year oversized.

storage fee, a social revenues and detention fee revenues because we were helping our customers as things were coming on shore, mostly on the west coast ports, but also on some of these coast ports, we helped them holding those goods until they could get moved.

And we use our facilities in many cases for that. So that is something that will be expected to normalize. So when you look at year-of-year growth on the inner model business, you will see a step down in percentage. That is mostly because of the assessorial normalizing.

And from an operating income perspective, in your plan does expedited freight or the intermodal segment feel more pressure for the full year? Thank you.

Expertise, Fred does. Difficult on each one of the three participants in that segment. The tonnage slowdown felt in LTL. Final mile appliance business is probably not intrinsically growing as much as it did. And a truckload brokerage sees the same slowdown that LTL sees. Now having said this,

becoming the most compelling provider. But if you look at those two segments, the X-ray and freight segment, I think is experiencing, and this is, I'm not taking any credit away from Intermodal, but is experiencing a bit more of a headwind.

compelling provider. But if you look at those two segments, the X-ray and freight segment, I think is experiencing, and this is, I'm not taking any credit away from Intermole, but is experiencing a bit more of a headwind. Thank you for the time.

Okay, thanks, Bascom. And speakers, currently we have no further questions in queue.

Well, perfect. I just want to say thank you to all of you for listening and participating. I'm more than willing to follow up on any of the models. We feel very, very good about what our team is driving on the growth side, but also on the efficiency and effectiveness side.

And again, the target is for this year to end up better than last year. In our minds, the initiatives can get us there even with the moderated, or with the headwinds becoming less moderated. And again, we have an acquisition in a model that's already a creative jigsaw. _____ _____ _____

That's coming on top of the model and I do expect us to have a pretty good shot at an additional couple of attacking acquisitions. So we feel good about how we're going to finish up 2023 as potentially another record year. So thank you.

Thank you, that does conclude forward airs 4th quarter, 2022 earnings conference call.

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