ArcBest Corporation · NASDAQ:ARCB
ArcBest — Q4 2018 Earnings Presentation
51 slides from ArcBest's earnings presentation, January 2019
Slide 1: 4Q'18 Investor Presentation
4Q’18 INVESTOR PRESENTATION
Slide 2: Forward Looking Statements
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,” “i
Slide 3: The ArcBest Story: A Transformed Company. Performance Accelerating.
THE ARCBEST STORY A TRANSFORMED COMPANY. PERFORMANCE ACCELERATING. A transformed company A differentiated business model The future: performance accelerating 3
Slide 4: Profile of an Industry Leader
PROFILE OF AN INDUSTRY LEADER Asset-Based service Years of transportation Safety award winner Coverage of centers across North and logistics experience in Industry U.S. America >240 >95 #1 >98% Owned and operated Approved contract Strong balance 2018 financial assets carriers sheet results >27,000 >
Slide 5: Broad Suite of Logistic Solutions and Services
A R C B E S T TO D AY BROAD SUITE OF LOGISTIC SOLUTIONS AND SERVICES TRUCKLOAD PREMIUM LTL FREIGHT MANAGED TIME CRITICAL PRODUCT LOGISTICS TRANSPORTATION & EXPEDITE LAUNCH A one-stop shop for dry van, Door-to-door reliability and Less-than-truckload services Best-in-industry freight Guaranteed servi
Slide 6: Execution Is Well-Underway to Transform the Company
EXECUTION IS WELL-UNDERWAY TO TRANSFORM THE COMPANY To: An innovative logistics company • 31% of revenue from logistics versus 7% in 2012 From: An LTL trucking company • Four key acquisitions since 2012 • Innovative asset-based space- based pricing • Realignment and enhanced market approach under Ar
Slide 7: Our Strategy Is Delivering Impressive Results
S T R AT E G Y I N A C T I O N OUR STRATEGY IS DELIVERING IMPRESSIVE RESULTS ArcBest Revenues Operating Income ($B) ($M) 7% CAGR $3.1 >3X $147 Increase $2.7 $2.8 $64 $43 2016 2017 2018 2016 2017 2018 Up 15% from 2016 Up 240% from 2016 Momentum is building 7 *Operating Income adjusted for certain unu
Slide 8: 2018 Highlights Improvement in Asset-Based Operating Ratio
S T R AT E G Y I N A C T I O N 2018 HIGHLIGHTS IMPROVEMENT IN ASSET-BASED OPERATING RATIO* 97.1% 93.5% 360 bps improvement One of the best improvements in the industry 2017 2018 8 *Operating Ratio adjusted for certain unusual items. See Reconciliations of GAAP to non-GAAP Financial Measures in the A
Slide 9: The ArcBest Story: A Differentiated Business Model
THE ARCBEST STORY A TRANSFORMED COMPANY. PERFORMANCE ACCELERATING. A transformed company A differentiated business model The future: performance accelerating 9
Slide 10: Leveraging a Differentiated Business Model
LEVERAGING A DIFFERENTIATED BUSINESS MODEL 1. Target large attractive 2. Deepen customer markets relationships VALUES-DRIVEN CULTURE 5. Strong financial profile 3. Develop innovative solutions 4. Winning customer proposition 10
Slide 11: At the Center of Our Company: A Values Driven Culture
AT THE CENTER OF OUR COMPANY: A VALUES DRIVEN CULTURE COLLABORATION GROWTH We work We grow our together people and our business INTEGRITY EXCELLENCE We do the We exceed right thing expectations CREATIVITY WELLNESS We create We embrace solutions total health 11
Slide 12: Positioned in Large Markets
OUR BUSINESS MODEL #1 POSITIONED IN LARGE MARKETS Less-Than- Expedite Domestic Truckload Shipping Transportation Management $41B $5B $72B Premium International Warehousing & Logistics Distribution $20B $54B $40B Moving Services Final Mile Maintenance & Repair $17B $13B $43B ArcBest® Opportunity: ~$3
Slide 13: Deepen Customer Relationships: Large Cross-Sell Opportunity
OUR BUSINESS MODEL #2 DEEPEN CUSTOMER RELATIONSHIPS: LARGE CROSS-SELL OPPORTUNITY Percent of customers indicating a need of Percent of customers using ArcBest for MORE THAN ONE MORE THAN ONE logistics service offered by ArcBest logistics service 75% Opportunity 37% An increase to 40% adds ~$30M reve
Slide 14: Laser Focus on Deepening Customer Relationships
OUR BUSINESS MODEL #2 LASER FOCUS ON DEEPENING CUSTOMER RELATIONSHIPS Our Focus Advantages Higher customer retention rates Recommend Higher profitability Profitability Advise & Cross-Sell Greater share of customer business Increased customer referrals Loyalty Satisfaction New Service Custome
Slide 15: Almost $3B Cross-Sell Opportunity
OUR BUSINESS MODEL #2 ALMOST $3B CROSS-SELL OPPORTUNITY Revenue Opportunity from ArcBest Revenue Opportunity from ArcBest TOTAL ASSET-BASED EXPEDITE CROSS-SELL Customers Customers OPPORTUNITY $1.7B $1.2B $2.9B We have identified “Ideal” customers = loyal and not price sensitive 15
Slide 16: Cross-Sell Case Study Demonstrates Success of Our Approach
OUR BUSINESS MODEL #2 CROSS-SELL CASE STUDY DEMONSTRATES SUCCESS OF OUR APPROACH Situation Results/Benefits Increased Monthly Revenues Client: $1.8M/mo • High-end home appliance manufacturer, revenues >$15 billion 4X Client Needs: • Serve retailers: reduce damages, ensure $430K/mo on-time final mile
Slide 17: Cross-Sell Case Study Demonstrates Success of Our Approach
OUR BUSINESS MODEL #2 CROSS-SELL CASE STUDY DEMONSTRATES SUCCESS OF OUR APPROACH Situation Results/Benefits Increased Monthly Revenues Client: $1.8M/mo • High-end home appliance manufacturer, revenues >$15 billion 4X Client Needs: “Working with ArcBest has been a wonderful • Serve retailers: reduce
Slide 18: Investments in Innovation
OUR BUSINESS MODEL #3 INVESTMENTS IN INNOVATION CUSTOMER ARCBEST CAPACITY EXPERIENCE • Customer engagement focus • Serving shippers and capacity • Digital connectivity to − Voice of the customer providers in the channels they capacity sources − Customer analytics desire • Algorithmic matching of • O
Slide 19: Integrated Logistics Provider
OUR BUSINESS MODEL #3 INTEGRATED LOGISTICS PROVIDER Full Supply Chain Solutions 1 International shipping from warehouse to port 2 Managed transportation options for vendor consolidation at port 3 Multiple transportation options from port to warehouses 4 TL, LTL, and Expedite options from warehouse t
Slide 20: Winning Customer Proposition
OUR BUSINESS MODEL #4 WINNING CUSTOMER PROPOSITION ArcBest… Solves my logistics Is a trusted Makes it and transportation provider easy to challenges and partner do business Customer visibility Unmatched Digital and access to vital assured capacity Channels & information options Tools Broad logistics
Slide 21: Customer Experience Improvement
OUR BUSINESS MODEL #4 CUSTOMER EXPERIENCE IMPROVEMENT +13% +11% +8% +103% Solves my logistics Is a trusted provider Makes it easy Net Promoter and transportation and partner to do business Score challenges December 2018 versus December 2017 21
Slide 22: Improved Free Cash Flow Business Model
OUR BUSINESS MODEL #5 IMPROVED FREE CASH FLOW BUSINESS MODEL $M $250 Cash Flow from Operations $200 Growing Free Cash Flow $150 Dividends $100 $50 Capex $0 2016 2017 2018 22
Slide 23: Balanced Capital Allocation
OUR BUSINESS MODEL #5 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 BALANCED SOLID FINANCIAL POSITION CAPITAL STRAT
Slide 24: The ArcBest Story: The Future: Performance Accelerating
THE ARCBEST STORY A TRANSFORMED COMPANY. PERFORMANCE ACCELERATING. A transformed company A differentiated business model The future: performance accelerating 24
Slide 25: Continuing to Execute Three Point Strategy
GOING FORWARD CONTINUING TO EXECUTE THREE POINT STRATEGY – A MULTI-YEAR PROFIT IMPROVEMENT PLAN 3 2 Optimize Cost Structure • Accelerate adaptation of More Balanced 1 innovative technologies Business Mix • Continue to grow asset-light Expand Revenue Opportunities • Deepen customer relationships • Se
Slide 26: Space-Based Pricing Improved Margins
SPACE-BASED PRICING IMPROVED MARGINS; RESETS THE FOUNDATION FOR CUSTOMER PRICING DISCUSSIONS Asset-Based Total Tons Per Day Growth LTL Operating Ratio* % 2.8% 101.8% Launched August 1, 1.6% 2017 y/y: 0.1% 97.2% - 270 Launched bps August 1, 95.6% 95.4% 96.1% (0.7%) 2017 (0.9%) 93.3% 92.6% 91.4% (3.0%
Slide 27: Clear Long-Term Financial Goals
CLEAR LONG-TERM FINANCIAL GOALS Low 90s 50% Expanded of Revenues from Asset-Based Asset-Light business Earnings Multiple Operating Ratio (currently 31% of $3B) 27
Slide 28: 2019 Initiatives
2019 INITIATIVES • Deepen customer relationships – customers use multiple services • Build on success of our CMC (space-based) pricing initiative • Enhance and expand carrier relationships Priorities • Improve customer experience and Net Promoter Score • Further develop and integrate technology and
Slide 29: Current Low Valuation – Set to Improve
CURRENT LOW VALUATION – SET TO IMPROVE AS STRATEGY EXECUTION ADVANCES P/E December 2018 (Based on FY2019 consensus estimates) Peer Average 13.4X 8.8X Logistics Peers Include • Landstar • C.H. Robinson • J.B. Hunt • Echo • Hub Group • Schneider Source: FactSet 29
Slide 30: 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 30
Slide 31: Additional Information
More Than Logistics ADDITIONAL INFORMATION
Slide 32: ArcBest Consolidated
ARCBEST CONSOLIDATED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 12/31/18 12/31/17 % Change 12/31/18 12/31/17 % Change Revenue $ 774.3 $ 710.7 8.9% $ 3,093.8 $ 2,826.5 9.5% Operating Income (1) 38.1 19.0 146.7 64.2 Net Income (1)
Slide 33: ArcBest Consolidated
Three Months Three Months Twelve Months Twelve Months ARCBEST CONSOLIDATED Ended Ended Ended Ended Millions ($000,000) 12/31/18 12/31/17 12/31/18 12/31/17 Operating Income Amounts on a GAAP basis $ 37.2 $ 18.7 $ 109.1 $ 61.3 Multiemployer pension fund withdrawal liability charge, pre-tax (1) - - 37.
Slide 34: ArcBest Consolidated Cash Flow
ARCBEST CONSOLIDATED Trailing Twelve Month – December 31, 2018 In Millions TTM Consolidated Cash Flow 12/31/18 Cash and Short-term Investments, beginning of period $ 177 Net Income 67 Depreciation and amortization (a) 109 Pension settlement expense and amortization of actuarial losses on benefit pla
Slide 35: Asset-Based
ASSET-BASED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 12/31/18 12/31/17 % Change 12/31/18 12/31/17 % Change Revenue $ 548.9 $ 497.0 10.4% $ 2,175.6 $ 1,993.3 8.9% Operating Income 36.9 19.7 141.8 58.2 Operating Ratio 93.3% 96.1%
Slide 36: Asset-Light
ASSET-LIGHT Three MonthsThree Months Twelve Months Twelve Months Ended Ended Ended Ended Millions ($000,000) 12/31/18 12/31/17 % Change 12/31/18 12/31/17 % Change ArcBest Revenue $ 193.8 $ 182.1 6.4% $ 781.1 $ 706.7 10.5% Oper. Inc. 7.1 4.7 22.1 20.2 FleetNet Revenue $ 50.1 $ 40.0 25.3% $ 195.1 $ 15
Slide 37: Net Capital Expenditures vs. Operating Cash
NET CAPITAL EXPENDITURES VS. OPERATING CASH 300 250 $255 200 Millions 150 $152 $152 $143 $144 $146 $143 $146 $134 100 $112 $105 $101 $94 $86 $85 $86 $77 $69 50 $42 $44 $42 $26 $24 $12 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Capex Cash Provided by Operations Note: Capital ex
Slide 38: 2019 Net Capital Expenditures (estimated)
2019 NET CAPITAL EXPENDITURES (estimated) $200 $180 $160 $170 - $180 $140 $120 Millions $100 $110 - $115 $80 $90 $80 $60 $40 $20 $0 Revenue Equipment (1) Real Estate and Other (2) Total Net Capital Depreciation and (3) Expenditures Amortization 1. Revenue equipment purchases of $90 million primarily
Slide 39: Asset-Based Billed Revenue per Hundredweight
ASSET-BASED BILLED REVENUE PER HUNDREDWEIGHT (INCLUDING FSC) $38.00 $36.00 $34.00 $32.00 $30.00 $28.00 $26.00 $24.00 $22.00 $20.00 Revenue per Hundredweight, Including Fuel Surcharge 39
Slide 40: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Interest Expense ● Interest expense, net of interest income, was $1.4 million in 4Q’18 and $5.6 million in full year 2018. ArcBest expects 1Q’19 net interest e
Slide 41: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Other, net ● The “Other, net” line of ArcBest’s income statement, primarily includes the costs associated with nonunion pension and postretirement plans and ch
Slide 42: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Other and Eliminations ● The loss reported in the “Other and eliminations” line was $7.2 million in 4Q’18 compared to a loss of $6.3 million in 4Q’17. ● In 201
Slide 43: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Capital Expenditures ● In 2018, total net capital expenditures, including equipment financed, equaled $134 million which was below previous expectations reflec
Slide 44: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Asset-Based Segment ● Excluding fuel surcharge, the increase in fourth quarter billed Rev/Cwt on Asset-Based, LTL-rated freight was in the mid-single digits. A
Slide 45: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Technology Initiatives ● As previously disclosed, technology investments have been made in ArcBest Technologies in a variety of areas to improve our customer e
Slide 46: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. Annual Union Profit-Sharing Bonus ● As provided in ABF Freight’s current Teamster labor contract, for the full years of 2019 through 2022, ABF Freight’s Teamst
Slide 47: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. January 2019 Business Update – Asset-Based Segment Statistics for January 2019 have not been finalized. Preliminary Asset-Based financial metrics and business
Slide 48: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. ● In recent years, the historical average sequential change in ArcBest’s Asset-Based operating ratio in the first quarter, versus the fourth quarter, has been
Slide 49: Additional Information Provided on January 30, 2019
ADDITIONAL INFORMATION PROVIDED ON JANUARY 30, 2019 The following information was included in an exhibit of an ArcBest 8-K filed on 1/30/19. January 2019 Business Update – ArcBest Asset-Light Segment (Excluding FleetNet) ● Statistics for January 2019 have not been finalized. For the ArcBest Asset-Li
Slide 50: ArcBest Consolidated
ARCBEST CONSOLIDATED (Unaudited) RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES 2010 2011 2012 2013 2014 2015 2016 2017 2018(5) ($ millions) ArcBest Corporation - Consolidated Operating Income Amounts on a GAAP basis $ (54.5) $ 9.8 $ (14.6) $ 19.1 $ 69.2 $ 75.5 $ 29.0 $ 53.5 $ 109.1 Restruct
Slide 51: 4Q'18 Investor Presentation
4Q’18 INVESTOR PRESENTATION