Forward Air Corporation · NASDAQ:FWRD
Forward Air — Investor Day (June 2019)
79 slides from Forward Air's investor day presentation, Jun 25, 2019
Slide 1: Investor Relations Day June 25, 2019 | NYC
Investor Relations Day June 25, 2019 | NYC
Slide 2: Forward Looking Statements Disclosure
Forward Looking Statements Disclosure Today’s presentation and discussion will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “intends,” “estimates,” or similar expressions are intended to identif
Slide 3: Agenda & Things to Know
Agenda & Things to Know Beyond 2019 8:30 – 9:00 THINGS TO KNOW Investor Day Guides are on each table with maps, Wi-Fi details and additional information Business Unit Reviews 9:00 – 10:15 Restrooms are located outside the Foyer in the Reception on your right Please mute cell phones and electronic de
Slide 4: Legend
Legend 3PL Third Party Logistics Company FINAL MILE B2C Heavy Bulky Delivery & Installation A2A Airport-to-Airport FWRD Forward Air B2B Business-to-Business GSA General Sales Agent B2C Business-to-Consumer LTL Less-than-Truckload BCO Beneficial Cargo Owner PUD Pickup and Delivery CFS Container Freig
Slide 5: Keeping Your Business Moving Forward
Keeping Your Business Moving Forward a u a
Slide 6: History
History Origins: Expedited Ground Alternative to Airline Linehaul 1981 – Landair Services “Time definite Truckload services for the air cargo industry” Asset-based Truckload 1990 – Forward Air Operations “Scheduled LTL services to air freight forwarders, air cargo carriers & airlines” of Landair Ser
Slide 7: Grounding Air Freight
Grounding Air Freight Simple Concept: Grounding an Airline Freight Move Benefits Cheaper On Time Less Carbon Emissions 7
Slide 8: Precision Execution
Precision Execution 38 Years of A2A Experience Trained Our Precision Execution “Muscle” Expedited Services Scheduled Network Tight Time Windows A2A Premium Handling Precision Execution Asset Light 8
Slide 9: Muscle Development
Muscle Development Training, Developing and Building Customer Trust in Our Precision Execution “The 10,000 hours rule says that if you look Trained our precision execution muscle for over 30 years at any kind of cognitively complex field, doing what we do best over a million times from playing chess
Slide 10: Forward Air Portfolio
Forward Air Portfolio Stretching this Muscle to Other Modes LTL Pickup & Delivery Final Mile Intermodal Drayage A2A Expedited Truckload Precision Execution Pool Distribution 10
Slide 11: Freight Move Examples: Airport to Airport
Freight Move Examples Origins: Airport to Airport Freight Linehaul (“Middle Mile”) LTL A2A TERMINAL TERMINAL 11
Slide 12: LTL Footprint
LTL Footprint . ral, QC, Ce I Se % ° ——-— ? @% Pp s 9 @° @ 9 ee9 M ee g g %e 9 @9 , , swe ° % 9 % & "9% 96%% 9 9 9 9 ok ee a 9 9 gy 9 @” 9 °° S 12
Slide 13: Freight Move Examples: Pickup and Delivery
Freight Move Examples Stretching to Pickup and Delivery for Door-to-Door Moves LTL A2A TERMINAL TERMINAL LTL B2B D2D DC TERMINAL DC LTL B2C D2D DC TERMINAL HOME 13
Slide 14: LTL Footprint with Pickup and Delivery
LTL Footprint with Pickup and Delivery 14
Slide 15: Freight Move Examples: Final Mile
Freight Move Examples Stretching to Final Mile LTL A2A TERMINAL TERMINAL LTL B2B D2D DC TERMINAL DC LTL B2C D2D DC TERMINAL HOME Final Mile TERMINAL HOME 15
Slide 16: Final Mile Footprint
Final Mile Footprint ¢ 9 9 ° SPF. ° cS) e aw My @ _; we GY %9 2 ° We oo) g 6 gy e 9 3° = 16
Slide 17: Freight Move Examples: Premium Intermodal Drayage
Freight Move Examples Stretching to Premium Intermodal Drayage LTL A2A TERMINAL TERMINAL LTL B2B D2D DC TERMINAL DC LTL B2C D2D DC TERMINAL HOME Final Mile TERMINAL HOME Intermodal RAILHEAD / PORT DC 17
Slide 18: Intermodal Footprint
Intermodal Footprint = 18
Slide 19: Freight Move Examples: Expedited Truckload
Freight Move Examples Stretching to Expedited Truckload LTL A2A TERMINAL TERMINAL LTL B2B D2D DC TERMINAL DC LTL B2C D2D DC TERMINAL HOME Final Mile TERMINAL HOME Intermodal RAILHEAD / PORT DC Expedited TL DC / AIRPORT DC 19
Slide 20: TLS Footprint
TLS Footprint = 20
Slide 21: Freight Move Examples: Pool Distribution
Freight Move Examples Stretching to Pool Distribution LTL A2A TERMINAL TERMINAL LTL B2B D2D DC TERMINAL DC LTL B2C D2D DC TERMINAL HOME Final Mile TERMINAL HOME Intermodal RAILHEAD / PORT DC Expedited TL DC / AIRPORT DC Pool Distribution DC TERMINAL RETAIL OUTLET 21
Slide 22: Pool Distribution Footprint
Pool Distribution Footprint 22
Slide 23: New Forward Air
New Forward Air When it is bigger than a box and it really matters, “Think Forward” 23
Slide 24: Forward Air Footprint
Forward Air Footprint OQ we § ® 9 9 ee iS) LTL 8 io) LTL with PUD S @ Final Mile v ® @ Intermodal @ TLS @ POOL @ 5 24
Slide 25: Mega Trends
Mega Trends Supply Chain Trends Increasingly Demand Precision Execution E-Commerce Final Mile Precision Omni Growth Execution Channel Regional Supply Chain 25
Slide 26: Strategy
Strategy Leveraging our Precision Execution Capabilities to Drive Profitable Growth LTL Network Growth Intermodal and Final Mile Expansion Grow PUD volumes Grow through acquisition . Class-based shipments Expand via greenfield opportunities . Legacy Complete Grow with other Intermediaries . Internat
Slide 27: Addressable Market
Addressable Market Significant Opportunity for Future Growth Source: Studies performed by Tompkins International and SJ Consulting LTM Business Unit Revenue TAM TAM Comments $M at 3/31/19 $M Expedited LTL 756 5,500 $1,500 traditional A2A + $4,000 3PL Intermodal 207 7,100 Midwest + SE region Truckloa
Slide 28: Operating Model
Operating Model Driven By Teams that Focus on What They Do Best Growth Management Compete Sales Pricing Business Development Collectively Marketing Customer Service Expedited LTL Intermodal Truckload Pool Focused LTL Operations Operations Operations Operations Factories Final Mile Operations Shared
Slide 29: Management Team
Management Team Seasoned Leadership Team Tom Schmitt As of September 1, 2018 Chairman, President and CEO Previous: Schenker AG, Purolator, FedEx Matt Casey 1 year with Forward Air SVP, Safety Previous: Forest City Technologies, Panther Premium Logistics Michael Hance 12 years with Forward Air Chief
Slide 30: Social Responsibility
Social Responsibility SAFETY SUSTAINABILITY COMMUNITY/SOCIAL Applying innovation and Implementing new practices and Donating time, materials and enhanced safety practices to technologies to incorporate financial resources to support drive safer operating sustainability objectives in our the communit
Slide 31: Expedited LTL
Expedited LTL
Slide 32: LTL: Revenue Overview
LTL: Revenue Overview 2018 Revenue by Customer Type Services Overview 16.0% Expedited regional, inter- regional and national LTL Domestic Forwarder - 58.0% 8.4% services, including pickup and delivery International Forwarder - 16.0% Final mile 6.6% 3PL - 8.4% Consolidation / deconsolidation Airline
Slide 33: LTL: Operations Overview
LTL: Operations Overview 2018 OPERATIONS Terminals 92 PUD Zip Codes 92% Tractors ~1,350 Trailers ~4,200 Employees ~2,700 Owner-Operators ~900 Daily Lbs. 10M Daily Lanes Served ~8,200 Daily Shipments ~16,400 Lbs. per Shipment 614 Warehouse Space (sq. ft.) 3.4M 33
Slide 34: LTL: Growth Strategy
LTL: Growth Strategy Evolving from a Middle Mile to a Door-to-Door Carrier Grow Pickup and Delivery volumes Increase network density . Class-based shipments . Increased weight per shipment . Legacy Complete . Final Mile integration Grow with freight intermediaries Expand terminal footprint . Domesti
Slide 35: LTL: Final Mile
LTL: Final Mile Entered market with 2015 Towne acquisition . Small final mile operation, serving 4 markets and generating $13M in annualized revenue Grew organically to 8 markets generating $39M in revenue in 2018 Operated at LTL-like margins Significantly expanded footprint with FSA Logistix acquis
Slide 36: LTL: Financial Overview
LTL: Financial Overview Revenue 1 EBIT 1 (CAGR = 11%) (CAGR = 5%) 800 120 700 100 600 80 500 GAAP) GAAP) - 400 - 60 300 $M $M (non $M $M (non 40 200 20 100 - - 3 3,4 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2018 Results 2 2 2 Revenue EBIT EBIT Margin EBITDA EBITDA Margin $747.6 M
Slide 37: Intermodal
Intermodal
Slide 38: Intermodal: Revenue Overview
Intermodal: Revenue Overview 2018 Revenue by Customer Type Services Overview 25.0% BCO (Retailer) - 41.2% 15.8% Premium intermodal drayage Steamship Line - 25.0% Linehaul and local LTL services 3PL - 15.8% CFS warehousing services . Devanning International Forwarder - 12.2% 12.2% . Unit load device
Slide 39: Intermodal: Operations Overview
Intermodal: Operations Overview 2018 OPERATIONS Terminals 22 Tractors ~220 Trailers ~175 Chassis ~370 Employees ~670 Owner-Operators ~725 Daily Shipments ~1,200 CFS Space (sq. ft.) 184k Yards 25 39
Slide 40: Intermodal: Growth Strategy
Intermodal: Growth Strategy Footprint Expansion Driven by M&A Grow through acquisitions Grow with BCOs . Small regional providers . Top 500 importers – Midwest . “Partnership-based” buying strategy (not just rate-driven) – South . Potential for expansion within network – Southeast – Mid Atlantic Enh
Slide 41: Intermodal: Original Footprint
Intermodal: Original Footprint 41
Slide 42: Intermodal: Current Footprint
Intermodal: Current Footprint 42
Slide 43: Intermodal: Financial Overview
Intermodal: Financial Overview Revenue 1 EBIT 1 (CAGR = 24%) (CAGR = 34%) 225 25 200 175 20 150 15 125 100 (GAAP) 10 $M $M (GAAP) 75 $M 50 5 25 - - 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2018 Results 2 2 Revenue EBIT EBIT Margin EBITDA EBITDA Margin $201.0 M $23.3 M 11.6% $29.6 M 14.7% 43
Slide 44: Truckload
Truckload
Slide 45: Truckload: Revenue Overview
Truckload: Revenue Overview Services Overview Time-definite truckload services 2018 Revenue by Customer Type . Long haul, regional & local 17.0% 20.9% D2D dedicated service LTL Carrier - 37.8% 10.3% LTL brokerage services Airline - 20.9% Wide range of equipment BCO (Retailer) - 17.0% . Rollerbed For
Slide 46: Truckload: Operations Overview
Truckload: Operations Overview 2018 OPERATIONS Tractors ~300 Trailers: Dry Van ~1,100 Trailers: Reefer ~50 Employees ~200 Owner-Operators ~225 Broker Carriers ~5,150 Weekly Loads ~1,900 46
Slide 47: Truckload: Growth Strategy
Truckload: Growth Strategy Room for Secular Growth Capitalize on growing demand for time- Support Forward Air LTL operations definite Truckload services . Offer flexible capacity for LTL linehaul . Large market potential Enhance IT & Business Intelligence Grow diversified service offerings tools . B
Slide 48: Truckload: Financial Overview
Truckload: Financial Overview Revenue 1 EBIT 1 (CAGR = 10%) (CAGR = -13%) 225 14 200 12 175 10 150 ) 8 125 GAAP) - (GAAP 100 6 $M $M 75 $M $M (non 4 50 25 2 - - 5 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2018 Results 2 Revenue EBIT EBIT Margin EBITDA 2 EBITDA Margin $192.6 M $5.1
Slide 49: Pool Distribution
Pool Distribution
Slide 50: Pool: Revenue Overview
Pool: Revenue Overview Services Overview High frequency handling and distribution of time- sensitive freight for shippers who have regular 2018 Revenue by Customer Type replenishment needs (e.g. Retailers) . Allows customers to “pool” their shipments for delivery to common locations (e.g., retail 26
Slide 51: Pool: Solutions Overview
Pool: Solutions Overview 6 Separate LTL or Parcel Shipments Weekly Delivery to Stores Parcel Service P Center / Hub LTL Terminal Store 1 T LTL Terminal T T T T LTL Terminal Store 2 T T LTL Terminal Store 3 P P Parcel Store 4 Origin DC P P Parcel Store 5 P P Parcel Store 6 51
Slide 52: Pool: Solutions Overview (Daily Delivery)
Pool: Solutions Overview Daily Delivery to Stores Store 1 Store 2 Single TL Shipment Store 3 TL Store 4 Origin DC Pool Facility Store 5 Store 6 52
Slide 53: Pool: Operations Overview
Pool: Operations Overview 2018 OPERATIONS Terminals / Locations 36 Power Units ~700 Trailers ~650 Employees ~1,450 Owner-Operators ~350 Daily Deliveries ~3,500 Daily Carton Sorts ~600k Warehouse Space (sq. ft.) 1.7M 53
Slide 54: Pool: Growth Strategy
Pool: Growth Strategy Expanding Through New Verticals Grow non-retail verticals Improved Sales & Marketing . Industrial . Brand o HVAC, electronics, energy, packaging o Enhancements and improved focus o Customers include dealers, resellers, large commercial users . Pipeline development o Using D&B,
Slide 55: Pool: Financial Overview
Pool: Financial Overview Revenue 1 EBIT 1 (CAGR = 11%) (CAGR = 23%) 225 7 200 6 175 5 150 125 4 100 3 $M $M (GAAP) 75 $M (GAAP) 2 50 25 1 - - 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2018 Results 2 2 Revenue EBIT EBIT Margin EBITDA EBITDA Margin $194.1 M $5.9 M 3.0% $12.8 M 6.6% 5
Slide 56: Break
Break
Slide 57: Corporate
Corporate
Slide 58: Strengthening Our Foundation for Growth
58 ~ $5 M Investment In 2019 driven pricing analysis to drive profitable growth profitable drive to analysis pricing driven - operator recruiting operator - Expanding our mission beyond our legacy our beyond mission our Expanding Enhancing safety mindset safety Enhancing visibility & customer system
Slide 59: Growth Management
Growth Management Developing Profitable Growth Programs FIND KEEP EXPAND Initiatives that aim for the right Initiatives that keep good business, Initiatives that allow us to grow with Customers, Geographies, get rid of bad business and win our existing business Industries and Channels back good lost
Slide 60: People
People Making Forward Air an Outstanding Professional Home Attract Develop ENGAGEMENT Assess Reward 60
Slide 61: Safety
Safety Goal to be World Class Safety Program Overview 58% Reduction in Department of Transportation Reported Injury Accidents Core Belief: Delivering excellence from 2017 to 2018 begins with safety Mission: Keep our people and the 26% Reduction in year-over- public safe with world-class, results- ye
Slide 62: Information Technology
Information Technology Investing for Future Growth OFFICE TERMINAL ROAD Business Intelligences Operating Systems Safety . Revenue Management . New (Final Mile) . Cameras . Customer Profitability . Enhanced (All) . Speed Monitoring Rating Engines Process Automation . Collision Avoidance Customer Serv
Slide 63: Financial Overview
Financial Overview
Slide 64: 2018 Results
2018 Results Record Year Across Every Major Financial Metric ($M except per share) 2017 2018 % Change Revenue 1,169.3 1,320.9 13.0% Operating Income 108.8 122.0 12.1% Net Income 87.3 92.1 5.5% EPS $2.89 $3.12 8.0% 2 EBITDA 149.9 164.2 9.5% 2 Free Cash Flow 67.6 117.3 73.5% 64
Slide 65: 2018 Revenue Mix
2018 Revenue Mix Increasingly Diversified Customer Mix 11.5% 7.1% Domestic Forwarder - 33.2% 23.2% BCO (Retailer) - 23.2% 6.7% International Forwarder - 11.5% 3PL - 7.1% 5.4% Airline - 6.7% 3.8% LTL Carrier - 5.4% Steamship Line - 3.8% 3.0% Final Mile - 3.0% 1.4% Pharma & Broker - 1.4% 4.7% Backhaul
Slide 66: 1Q19 Results
1Q19 Results Record First Quarter Across Every Major Financial Metric ($M except per share) 1Q18 1Q19 % Change Revenue 302.6 321.5 6.2% Operating Income 24.2 24.7 2.1% Net Income 17.7 18.4 4.0% EPS $0.60 $0.64 6.7% 2 EBITDA 34.9 35.5 1.7% Free Cash Flow 2 35.2 37.8 7.4% 66
Slide 67: Summary Financials
Summary Financials Double Digit Growth Rates This Decade 1 Revenue 1 EBIT (CAGR = 13%) (CAGR = 11%) 1,400 125 1,200 100 1,000 GAAP) GAAP) 75 800 - - 600 50 400 $M $M (non $M $M (non 200 25 - - 3 3,4 5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 1,2 EBITD
Slide 68: Cash Flow
Cash Flow Strong Free Cash Flow and Conversion 125 160% High cash flow business 140% model 100 . Operating leverage without 120% capital expenditure intensity 100% 75 5-year average free cash 80% flow conversion of 102% GAAP) - 50 60% . Swings driven primarily by working capital from Conversion ($M
Slide 69: Capital Returned to Shareholders
Capital Returned to Shareholders Commitment to Return Capital to Shareholders Shareholder Returns Dividends Share Repurchase 90 80 70 60 50 $M 40 30 20 10 - 2014 2015 2016 2017 2018 69
Slide 70: Capital Allocation
Capital Allocation Disciplined Capital Allocation to Support Growth and Deliver Shareholder Returns Past 5 ($M) Outlook Years Expect annual net capital expenditures to remain consistent Capital Expenditures 188 (adjusted for inflation) Expect dividends to rise with increased earnings; Dividends 82 p
Slide 71: Medium Term
Medium Term Maintain Double Digit Revenue Growth with Double Digit Margins Past 5 Years Medium Term Revenue Growth Nominal GDP + 10 percentage points Nominal GDP + 8 to 12 percentage points Last Year Medium Term EBIT Margin 9.2% ~10% ROIC 15.9% 20%+ 71
Slide 72: Q&A
Q&A
Slide 73: Closing Remarks
Closing Remarks C’
Slide 74: Key Takeaways
Key Takeaways When It Matters, “Think Forward” Precision Execution Company National Footprint With Room To Grow Operating Model: Supports Growth and Operational Excellence Significant Untapped Upside Our Goal: Double Digit Growth at Double Digit Margins When It’s Bigger Than a Box and It Really Matt
Slide 75: Forward Air THINK FORWARD
Forward Air THINK FORWARD 75
Slide 76: Appendix
Appendix
Slide 77: Appendix: Footnotes
Appendix: Footnotes 1 Impact of ASC 606 (Revenue from Contracts with Customers) estimated for 2010-2013 2 See GAAP to Non-GAAP reconciliation of this non-GAAP metric in the Appendix here-in 3 Adjusted to exclude $0.6 million of revenue related to the Towne integration (non-GAAP) 4 Adjusted to exclud
Slide 78: GAAP vs Non-GAAP Reconciliation
GAAP vs Non-GAAP Reconciliation $ in millions, shares in 000s GAAP Revenue Reconciliation Q1 2019 Q1 2018 2018 2017 2016 2015 2014 2013 2012 2011 2010 Segment EBITDA GAAP Revenue 321.5 302.6 1,320.9 1,169.3 1,030.2 987.9 824.7 672.2 603.9 557.4 494.0 Reconciliation Towne Integration - - - - - 0.6 -
Slide 79: Thank You For Your Time
Thank You For Your Time Investor Relations Contact: Mike Morris, CFO & Treasurer mmorris@forwardair.com (404) 362-8933