Arcbest Corporation · NASDAQ:ARCB
Arcbest — Q4 2020 Earnings Presentation
59 slides from Arcbest's earnings presentation, Feb 2, 2021
Slide 1: 4Q'20 Investor Presentation
4Q’20 INVESTOR PRESENTATION
Slide 2: Forward-looking statements
Certain statements and information in this presentation may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “intend,” “may,” “plan,” “predi
Slide 3: COVID-19 Pandemic: Cost Cutting Steps Taken By ArcBest
COVID-19 PANDEMIC Cost Cutting Steps Taken By ArcBest In 2Q’20, the COVID-19 pandemic negatively impacted demand for our services. Since late 2Q’20, shipment and tonnage levels have improved. ArcBest entered this uncertain Beginning in April 2020, we: environment in a solid financial position that w
Slide 4: COVID-19 Pandemic
COVID-19 PANDEMIC In 2Q’20, the COVID-19 pandemic negatively impacted demand for our services. Since late 2Q’20, shipment and tonnage levels have improved. In 3Q’20: In 4Q’20: • The 15% reductions in salaries and • Growth of tonnage and shipment board member fees were restored. levels over previous
Slide 5: Pension Relief Act
PENSION RELIEF ACT Butch Lewis Emergency Pension Plan Relief Act of 2021 • On February 11, 2020, the Ways and Means Committee approved the Butch Lewis Emergency Pension Plan Relief Act of 2021 as part of the proposed COVID stimulus package. • Multiemployer pension plans that would be eligible for th
Slide 6: A Transformed Company, A Differentiated Business Model, The Future
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 6
Slide 7: Profile of an Industry Leader
PROFILE OF AN INDUSTRY LEADER ≈240 95+ #1 Asset-Based North Years of transportation Safety award American service centers and logistics experience winner in the industry 25,000+ 40,000+ >98% Owned and operated Approved contract Coverage of assets carriers United States 7
Slide 8: ArcBest Today: Broad Suite of Logistics Solutions and Services
ARCBEST TODAY: BROAD SUITE OF LOGISTICS SOLUTIONS AND SERVICES TRUCKLOAD TIME CRITICAL & EXPEDITE PREMIUM LOGISTICS INTERNATIONAL SHIPPING RETAIL LOGISTICS LTL FREIGHT SUPPLY CHAIN OPTIMIZATION TRADE SHOW SHIPPING MANAGED TRANSPORTATION PRODUCT LAUNCH WAREHOUSING & DISTRIBUTION
Slide 9: Execution Is Well-Underway to Transition the Company
EXECUTION IS WELL-UNDERWAY TO TRANSITION THE COMPANY FROM AN LTL TO AN INNOVATIVE TRUCKING COMPANY LOGISTICS COMPANY 32% of revenue from logistics versus 7% in 2012 Four key acquisitions since 2012 Innovative asset-based space-based pricing Realignment and enhanced market approach under the ArcBest
Slide 10: Our Strategy Is Delivering Solid Results
STRATEGY IN ACTION OUR STRATEGY IS DELIVERING SOLID RESULTS ArcBest Revenues ($B) ArcBest Operating Income ($M) +7% +147% $3.1 $3.0 $2.9 $2.8 $153 $2.7 $121 $109 $70 $49 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 *Operating Income adjusted for certain unusual items. See Reconciliations of GAA
Slide 11: Operating Ratio Improvement
97.9% 96.9% FREIGHT RECESSION 94.5% 94.2% 93.3% 2016 2017 2018 2019 2020 FREIGHT RECESSION and 370 bps COVID-19 IMPACTS IMPROVEMENT Compared to the previous freight recession *Operating Ratio adjusted for certain unusual items. See Reconciliations of GAAP to non-GAAP Financial Measures in the Additi
Slide 12: A Transformed Company, A Differentiated Business Model, The Future
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 12
Slide 13: Leveraging a Differentiated Business Model
LEVERAGING A DIFFERENTIATED BUSINESS MODEL 13
Slide 14: A Values-Driven Culture
ArcBest CREATIVITY More Than Logistics AT THE CENTER OF OUR COMPANY: INTEGRITY A VALUES-DRIVEN CULTURE COLLABORATION GROWTH EXCELLENCE WELLNESS
Slide 15: Environmental, Social and Corporate Governance (ESG)
ENVIRONMENTAL, ▪ ArcBest strives to be a responsible corporate citizen — investing in the overall well-being of our employees, being mindful of our environmental impact, supporting our communities and acting with SOCIAL integrity in all aspects of our business. ▪ Beginning in 2019, we increased the
Slide 16: Positioned in Large Markets
POSITIONED IN LARGE MARKETS BUSINESS MODEL#1 Less-Than- Expedite Domestic TARGET LARGE ATTRACTIVE MARKETS Truckload Shipping Transportation Management $41B $5B $87B Premium International Warehousing Logistics & Distribution $20B $62B $40B Moving Final Mile Maintenance Services & Repair $17B $13B $43
Slide 17: Large Cross-Sell Opportunity
LARGE CROSS-SELL OPPORTUNITY PERCENT OF CUSTOMERS INDICATING A NEED OF 78% MORE THAN ONE BUSINESS MODEL#2 DEEPEN CUSTOMER RELATIONSHIPS LOGISTICS SERVICE OFFERED BY ARCBEST AN INCREASE TO 40% ADDS ~$30M REVENUE PERCENT OF CUSTOMERS USING ARCBEST FOR 38% OPPORTUNITY MORE THAN ONE LOGISTICS SERVICE 17
Slide 18: Deepening Customer Relationships
DEEPENING CUSTOMER BUSINESS MODEL#2 RELATIONSHIPS DEEPEN CUSTOMER RELATIONSHIPS ✓ Higher customer retention rates ✓ Higher profitability Recommend Profitability ✓ customer business Advise & Cross-Sell Greater share of Loyalty Service Satisfaction ✓ referrals Increased customer New Customers ✓ growth
Slide 19: Cross-Sell Opportunity
CROSS-SELL OPPORTUNITY BUSINESS MODEL#2 DEEPEN CUSTOMER RELATIONSHIPS LOYAL CUSTOMER SPEND ON >$3.5B ASSET-LIGHT SERVICES 2019 SURVEY RESULTS WE HAVE IDENTIFIED “IDEAL” CUSTOMERS = LOYAL AND NOT PRICE SENSITIVE 19
Slide 20: Cross-Sell Case Study
CROSS-SELL CASE STUDY DEMONSTRATES SUCCESS OF OUR APPROACH SITUATION RESULTS/BENEFITS BUSINESS MODEL#2 DEEPEN CUSTOMER RELATIONSHIPS CLIENT INCREASED MONTHLY REVENUES High-end home appliance manufacturer, revenues >$15B $1.8M/mo 4X CLIENT NEEDS Serve retailers: reduce damages, ensure $430K/mo on-tim
Slide 21: Cross-Sell Case Study: Customer Comment
CROSS-SELL CASE STUDY DEMONSTRATES SUCCESS OF OUR APPROACH SITUATION RESULTS/BENEFITS BUSINESS MODEL#2 DEEPEN CUSTOMER RELATIONSHIPS “WORKING WITH ARCBEST HAS CLIENT INCREASED MONTHLY REVENUES BEEN A WONDERFUL EXPERIENCE” High-end home appliance manufacturer, revenues >$15B $1.8M/mo 4X CLIENT NEEDS
Slide 22: Investments in Innovation
INVESTMENTS IN INNOVATION CUSTOMER EXPERIENCE ARCBEST CAPACITY BUSINESS MODEL#3 DEVELOP INNOVATIVE • Customer engagement • Serving shippers and • Digital connectivity to SOLUTIONS focus capacity providers in the capacity sources - Voice of the customer channels they desire - Customer analytics + • S
Slide 23: Investments in Innovation: Pilot Test Program at ABF Freight
INVESTMENTS IN INNOVATION PILOT TEST PROGRAM AT ABF FREIGHT POTENTIAL BENEFITS Patented handling equipment, BUSINESS MODEL#3 DEVELOP INNOVATIVE software and a patented process SOLUTIONS to load and unload trailers • Improved transit performance • Reduced cargo claims • Reduced injuries Full freight
Slide 24: Integrated Logistics Provider
INTEGRATED LOGISTICS PROVIDER FULL SUPPLY CHAIN SOLUTIONS International shipping from 1 warehouse to port BUSINESS MODEL#3 DEVELOP INNOVATIVE 2 Managed transportation options for vendor consolidation at port SOLUTIONS 3 Multiple transportation options from port to warehouses TL, LTL, and Expedite op
Slide 25: Winning Customer Proposition
WINNING CUSTOMER PROPOSITION ArcBest Solves my logistics and Is a trusted provider Makes it easy transportation challenges and partner to do business Customer visibility Unmatched Digital and access to vital assured capacity channels BUSINESS MODEL#4 W INNING CUSTOMER information options & tools PRO
Slide 26: Customer Experience Improvement
CUSTOMER EXPERIENCE IMPROVEMENT +14% +11% +10% +177% BUSINESS MODEL#4 W INNING CUSTOMER PROPOSITION Solves my logistics Is a trusted provider Makes it easy Net Promoter and transportation and partner to do business Score challenges 2020 versus 2017 26
Slide 27: Balanced Capital Allocation
BALANCED CAPITAL ALLOCATION GROWTH AND OPERATING INITIATIVES • Capital investments consistent with service initiatives and strategy • Invest in operational efficiencies and innovation • Selective tuck-in and strategic acquisitions SOLID FINANCIAL POSITION (1) BALANCED • Cash Balance: $369M ($85M Net
Slide 28: A Transformed Company, A Differentiated Business Model, The Future
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 28
Slide 29: Continuing to Execute Three Point Strategy
CONTINUING TO EXECUTE THREE POINT STRATEGY A MULTI-YEAR PROFIT IMPROVEMENT PLAN 3 2 Optimize Cost Structure More Balanced Advance adoption of 1 Business Mix innovative technologies Accelerate Expand Revenue asset-light growth Opportunities Continue to grow Deepen customer asset-based business relati
Slide 30: Clear Long-Term Financial Goals
CLEAR LONG-TERM FINANCIAL GOALS Low 90s 50% Expanded Asset-Based Of Revenues From Earnings Asset-Light Business Operating Ratio (currently 32% of $3B) Multiple 30
Slide 31: Current Initiatives & Priorities
• Effectively serve customers while insuring the financial strength of ArcBest in response to COVID-19 • Deepen customer relationships – increase the number of customers using multiple ArcBest services • Advance supply chain conversations addressing significant customer challenges/costs with our log
Slide 32: Current Low Valuation Set to Improve
P/E December 2020 CURRENT LOW (BASED ON FY2021 CONSENSUS ESTIMATES) VALUATION 18.4X SET TO Peer Average IMPROVE AS STRATEGY 10.5X EXECUTION ADVANCES LOGISTICS PEERS INCLUDE • Landstar • C.H. Robinson • J.B. Hunt • Echo • Hub Group • Schneider Source: FactSet 32
Slide 33: Why ArcBest Will Continue to Outperform
IN SUMMARY WHY ARCBEST WILL CONTINUE TO OUTPERFORM Strong financial profile Winning customer proposition Develop innovative solutions Deepen customer relationships Target large attractive markets 33
Slide 34: Additional Information
More Than Logistics ADDITIONAL INFORMATION
Slide 35: ArcBest Consolidated
ARCBEST CONSOLIDATED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 12/31/20 12/31/19 % Change 12/31/20 12/31/19 % Change Revenue $ 816.4 $ 717.4 13.8% $ 2,940.2 $ 2,988.3 (2.2%) Operating Income (1) 37.5 20.2 120.8 109.0 Net Income
Slide 36: ArcBest Consolidated
ARCBEST CONSOLIDATED Three Months Three Months Twelve Months Twelve Months Ended Ended Ended Ended Millions ($000,000) 12/31/2020 12/31/2019 12/31/2020 12/31/2019 Operating Income Amounts on a GAAP basis $ 30.3 $ (11.2) $ 98.3 $ 63.8 Innovative technology costs, pre-tax (1) 7.2 4.6 22.6 15.7 Asset i
Slide 37: Notes to Non-GAAP Financial Tables
ARCBEST CONSOLIDATED NOTES TO NON-GAAP FINANCIAL TABLES The following footnotes apply to the non-GAAP financial tables in the previous slide. 1) Represents costs associated with the freight handling pilot test program at ABF Freight. 2) Noncash impairment charge recognized in fourth quarter 2019 rel
Slide 38: Consolidated Cash Flow
ARCBEST CONSOLIDATED In Millions Consolidated Cash Flow 2020 Cash and Short-term Investments, beginning of period $ 318 Net Income 71 Depreciation and amortization (a) 118 Net change in other assets and liabilities (b) 17 Cash from operations $ 206 Purchase of property, plant and equipment, net (92)
Slide 39: Asset-Based
ASSET-BASED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 12/31/20 12/31/19 % Change 12/31/20 12/31/19 % Change Revenue $ 554.4 $ 513.3 8.0% $ 2,092.0 $ 2,144.7 (3.0%) Operating Income* 34.9 25.4 121.3 118.8 Operating Ratio* 93.7% 9
Slide 40: Asset-Light
ASSET-LIGHT Three MonthsThree Months Twelve Months Twelve Months Ended Ended Ended Ended Millions ($000,000) 12/31/20 12/31/19 % Change 12/31/20 12/31/19 % Change ArcBest Revenue $ 245.6 $ 184.3 33.3% $ 779.1 $ 738.4 5.5% Operating Income* 4.9 - 9.6 6.3 FleetNet Revenue $ 55.6 $ 52.8 5.3% $ 205.0 $
Slide 41: Net Capital Expenditures vs. Operating Cash
NET CAPITAL EXPENDITURES VS. OPERATING CASH 300 250 $255 200 $206 Millions $170 150 $152 $152 $147 $144 $146 $143 $146 $134 100 $112 $101 $94 $92 $85 $86 $77 $69 50 $42 $26 $24 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net Capex Cash Provided by Operations Note: Capital expenditures a
Slide 42: 2021 Net Capital Expenditures (estimated)
2021 NET CAPITAL EXPENDITURES (estimated) $200 $180 $160 $140 $150 - $160 $120 Millions $115 - $120 $100 $100 $80 $60 $40 $20 $4 $0 Revenue Equipment Total Net Capital Depreciation and Intangible Asset Expenditures Amortization Amortization • Total Net Capital Expenditures, including financed equipm
Slide 43: Asset-Based Billed Revenue per Hundredweight
ASSET-BASED BILLED REVENUE PER HUNDREDWEIGHT (INCLUDING FSC) $38.00 August 2017 implementation $36.00 of space-based pricing $34.00 $32.00 $30.00 $28.00 $26.00 Decrease reflects lower fuel $24.00 surcharge and freight mix changes related to the addition $22.00 of transactional shipments $20.00 Reven
Slide 44: Additional Information: Yield Metrics
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment 4Q’20 Year-over-Year Yield Metrics • Billed Rev/Cwt on LTL-rated freight, excluding fuel surcharges, decreased by a percentage in
Slide 45: Additional Information: Monthly Business Trends
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. Asset-Based Segment 4Q’20 and January 2021 Year-over-Year Monthly Total Daily Business Trends 1) Statistics for the full month of January 2021 have not been finalized. 2) There were 20 work
Slide 46: Additional Information: January 2021 Business Update
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment January 2021 Business Update Statistics for January 2021 have not been finalized. Preliminary Asset-Based financial metrics and b
Slide 47: Additional Information: 1Q'21 Other Items
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment 1Q’21 Other Items • 63 Working Days compared to 64 working days in 1Q’20 • In January 2021, ABF Freight sold an unutilized proper
Slide 48: Additional Information: Asset-Light Trends
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. Asset-Light ArcBest Operating Segment [Excluding FleetNet] 4Q’20 and January 2021 Year-over-Year Monthly Total Daily Business Trends Statistics for January 2021 have not been finalized. Pre
Slide 49: Additional Information: Consolidated Projections
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS ArcBest Consolidated 1Q’21 – Projected • Loss in the “Other and eliminations” segment (non-GAAP basis): $6 million vs. $5 million in 1Q’20 • Interest
Slide 50: Additional Information: FY'20 Capital Expenditures
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS ArcBest Consolidated Capital Expenditures FY’20 – Actual • Total Net Capital Expenditures, including financed equipment: $92 million • Includes reven
Slide 51: Additional Information: FY'21 Capital Expenditures
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. SUMMARY OPERATING AND FINANCIAL IMPACTS ArcBest Consolidated Capital Expenditures FY’21 – Projected • Total Net Capital Expenditures, including financed equipment: $150 million to $160 mill
Slide 52: Additional Information: Union Profit-Sharing Bonus
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. ADDITIONAL DETAILED INFORMATION Asset-Based Segment Annual Union Profit-Sharing Bonus • As provided in ABF Freight’s current Teamster labor contract, for the full years of 2019 through 2022
Slide 53: Additional Information: Tax Rate
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated Tax Rate • ArcBest’s fourth quarter 2020 effective GAAP tax rate was 20.8%. • The “Effective Tax Rate Reconciliation” table of ArcBest’s
Slide 54: Additional Information: Other and Eliminations
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated “Other and eliminations” within Operating Income on the Operating Segment Data and Operating Ratios statement • The “Other and eliminati
Slide 55: Additional Information: Other, net
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 2/2/21. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated “Other, net” line within Other Income (Costs) on the Consolidated Statements of Operations • Subsequent to the settlement of ArcBest’s n
Slide 56: Reconciliations of GAAP to Non-GAAP Financial Measures
ARCBEST CONSOLIDATED (Unaudited) RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES 2016 2017 2018 2019 2020 ($ millions) ArcBest Corporation - Consolidated Operating Income Amounts on a GAAP basis (1) $ 34.1 $ 61.3 $ 109.1 $ 63.8 $ 98.3 Restructuring charges, pre-tax (2) 10.3 3.0 1.7 - - Transa
Slide 57: Reconciliations: Consolidated Adjusted EBITDAR
ARCBEST CONSOLIDATED (Unaudited) RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES 2020 ArcBest Corporation - Consolidated ($ millions) Consolidated Adjusted EBITDAR Net Income $ 71.1 Interest and other related financing costs 11.7 Income tax provision 21.4 Depreciation and amortization 118.4 A
Slide 58: Asset-Based Reconciliations
ASSET-BASED (Unaudited) RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES 2016 2017 2018 2019 2020 ($ millions) ArcBest Corporation – Asset-Based Segment Operating Income Amounts on a GAAP basis (1) $ 37.4 98.0% $ 57.9 97.1% $ 103.9 95.2% $ 102.1 95.2% $ 98.9 95.3% Restructuring charges, pre-ta
Slide 59: Investor Presentation 4Q'20
4Q’20 INVESTOR PRESENTATION