Arcbest Corporation · NASDAQ:ARCB
Arcbest — Investor Presentation (November 2020)
56 slides from Arcbest's investor presentation, November 2020
Slide 1: 3Q'20 Investor Presentation
3Q’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: ArcBest Provides Solutions To Our Customers' Challenges
COVID-19 PANDEMIC ArcBest Provides Solutions To Our Customers’ Challenges The initial impact of the ArcBest positively responded by serving coronavirus pandemic was these logistics needs: swift, and its ultimate impact • COVID-19 test kits moving to testing locations is still unknown • Hand sanitize
Slide 4: 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: In 3Q’20: environment in a solid financial posit
Slide 5: A Transformed Company
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 5
Slide 6: 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 27,000+ 35,000+ >98% Owned and operated Approved contract Coverage of assets carriers United States 6
Slide 7: 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 8: 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 9: Our Strategy Is Delivering Solid Results
STRATEGY IN ACTION OUR STRATEGY IS DELIVERING SOLID RESULTS ArcBest Revenues ($B) ArcBest Operating Income ($M) +4% +112% $3.1 $3.0 $2.8 $2.8 $153 $2.7 $109 $104 $70 $49 2016 2017 2018 2019 3Q'20 2016 2017 2018 2019 3Q'20 TTM TTM *Operating Income adjusted for certain unusual items. See Reconciliati
Slide 10: Operating Ratio Improvement
97.9% 96.9% FREIGHT RECESSION 94.5% 94.5% 93.3% 2016 2017 2018 2019 3Q'20 TTM FREIGHT RECESSION and 340 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 A
Slide 11: A Differentiated Business Model
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 11
Slide 12: Leveraging a Differentiated Business Model
LEVERAGING A DIFFERENTIATED BUSINESS MODEL 12
Slide 13: ArcBest: More Than Logistics
ArcBest CREATIVITY More Than Logistics AT THE CENTER OF OUR COMPANY: INTEGRITY A VALUES-DRIVEN CULTURE COLLABORATION GROWTH EXCELLENCE WELLNESS
Slide 14: 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 15: 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 15
Slide 16: 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 17: 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 17
Slide 18: 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 19: Cross-Sell Case Study
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 20: 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 21: 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 22: 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 23: 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 24: Customer Experience Improvement
CUSTOMER EXPERIENCE IMPROVEMENT +11% +9% +7% +168% 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 3Q’20 versus 3Q’17 24
Slide 25: 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: $351M ($59M Net
Slide 26: The Future: Performance Accelerating
A Transformed Company A Differentiated Business Model The Future: Performance Accelerating 26
Slide 27: 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 28: 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 28
Slide 29: 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 30: Current Low Valuation Set to Improve
P/E September 2020 CURRENT LOW (BASED ON FY2020 CONSENSUS ESTIMATES) VALUATION 24.1X SET TO Peer Average IMPROVE AS STRATEGY 10.2X EXECUTION ADVANCES LOGISTICS PEERS INCLUDE • Landstar • C.H. Robinson • J.B. Hunt • Echo • Hub Group • Schneider Source: FactSet 30
Slide 31: 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 31
Slide 32: Additional Information
More Than Logistics ADDITIONAL INFORMATION
Slide 33: ArcBest Consolidated
ARCBEST CONSOLIDATED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 9/30/20 9/30/19 % Change 12/31/19 12/31/18 % Change Revenue $ 795.0 $ 787.6 0.2% $ 2,988.3 $ 3,093.8 (3.2%) Operating Income (1) 45.8 38.1 109.0 152.6 Net Income (1)
Slide 34: ArcBest Consolidated
Three Months Three Months Twelve Months Twelve Months ARCBEST CONSOLIDATED Ended Ended Ended Ended Millions ($000,000) 9/30/2020 9/30/2019 12/31/2019 12/31/2018 Operating Income Amounts on a GAAP basis $ 39.8 $ 31.2 $ 63.8 $ 109.1 Asset impairment, pre-tax (1) - - 26.5 - Innovative technology costs,
Slide 35: 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) Noncash impairment charge recognized in fourth quarter 2019 relates to a portion of the goodwill, customer relationship intangible assets, and revenue equi
Slide 36: Consolidated Cash Flow
ARCBEST CONSOLIDATED In Millions TTM Consolidated Cash Flow 9/30/20 Cash and Short-term Investments, beginning of period $ 308 Net Income 41 Depreciation and amortization (a) 117 Pension settlement expense and amortization of actuarial losses on benefit plans and share-based compensation 10 Net chan
Slide 37: Asset-Based
ASSET-BASED Three Months Three Months Twelve Months Twelve Months Ended Ended Per Day Ended Ended Per Day Millions ($000,000) 9/30/20 9/30/19 % Change 12/31/19 12/31/18 % Change Revenue $ 561.9 $ 565.6 (1.4%) $ 2,144.7 $ 2,175.6 (1.2%) Operating Income* 42.8 38.5 118.8 145.6 Operating Ratio* 92.4% 9
Slide 38: Asset-Light
ASSET-LIGHT Three MonthsThree Months Twelve Months Twelve Months Ended Ended Ended Ended Millions ($000,000) 9/30/20 9/30/19 % Change 12/31/19 12/31/18 % Change ArcBest Revenue $ 217.3 $ 199.7 8.8% $ 738.4 $ 781.1 (5.5%) Operating Income* 4.8 2.5 6.4 22.1 FleetNet Revenue $ 50.5 $ 54.0 (6.5%) $ 211.
Slide 39: Net Capital Expenditures vs. Operating Cash
NET CAPITAL EXPENDITURES VS. OPERATING CASH 300 250 $255 200 Millions $170 150 $152 $152 $147 $144 $146 $143 $146 $134 100 $112 $101 $94 $85 $86 $77 $69 50 $42 $26 $24 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net Capex Cash Provided by Operations Note: Capital expenditures are presented n
Slide 40: 2020 Net Capital Expenditures (estimated)
2020 NET CAPITAL EXPENDITURES (estimated) $200 $180 $160 $140 $120 Millions $100 $110 $90 - $95 $80 $60 $64 $40 $20 $4 $0 Revenue Equipment Total Net Capital Depreciation and Intangible Asset Expenditures Amortization Amortization As previously announced, our recent actions to preserve cash and lowe
Slide 41: 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 42: Additional Information: Yield Metrics
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment 3Q’20 Year-over-Year Yield Metrics • Billed Rev/Cwt on LTL-rated freight, excluding fuel surcharges: decreased by a percentage i
Slide 43: Additional Information: Monthly Business Trends
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. Asset-Based Segment 3Q’20 and October 2020 Year-over-Year Monthly Total Daily Business Trends 3Q’20 and October 2020 Sequential Monthly Total Daily Business Trends * Statistics for the ful
Slide 44: Additional Information: October 2020 Business Update
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment October 2020 Business Update Statistics for October 2020 have not been finalized. Preliminary Asset-Based financial metrics and
Slide 45: Additional Information: 4Q'20 Other Items
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. SUMMARY OPERATING AND FINANCIAL IMPACTS Asset-Based Segment 4Q’20 Other Items • 61.5 Working Days, the same as in 4Q’19 • Projected Innovative Technology Costs in our Asset-Based business
Slide 46: Additional Information: Asset-Light Trends
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. Asset-Light ArcBest Operating Segment [Excluding FleetNet] 3Q’20 and October 2020 Year-over-Year Monthly Total Daily Business Trends Financial metrics and business trends for October 2020,
Slide 47: Additional Information: Consolidated Projections
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. SUMMARY OPERATING AND FINANCIAL IMPACTS ArcBest Consolidated 4Q’20 – Projected • Loss in the “Other and eliminations” segment (non-GAAP basis): $3 million vs. $6 million in 4Q’19 • Interes
Slide 48: Additional Information: Capital Expenditures
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. SUMMARY OPERATING AND FINANCIAL IMPACTS ArcBest Consolidated Capital Expenditures FY’20 – Projected • Total Net Capital Expenditures, including financed equipment: $90 million to $95 milli
Slide 49: Additional Information: Union Profit-Sharing Bonus
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. ADDITIONAL DETAILED INFORMATION Asset-Based Segment Annual Union Profit-Sharing Bonus • As provided in ABF Freight’s current Teamster labor contract, for the full years of 2019 through 202
Slide 50: Additional Information: Tax Rate
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated Tax Rate • ArcBest’s third quarter 2020 and 2019 effective GAAP tax rates were 24.9% and 30.3%, respectively. . • ArcBest currently exp
Slide 51: Additional Information: Other and Eliminations
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated “Other and eliminations” within Operating Income on the Operating Segment Data and Operating Ratios statement • The “Other and eliminat
Slide 52: Additional Information: Other, net
ADDITIONAL INFORMATION The following information was included in an exhibit of an ArcBest 8-K filed on 11/3/20. ADDITIONAL DETAILED INFORMATION ArcBest Consolidated “Other, net” line within Other Income (Costs) on the Consolidated Statements of Operations • Subsequent to the September 30, 2019 subst
Slide 53: Reconciliations of GAAP to Non-GAAP: Consolidated
ARCBEST CONSOLIDATED (Unaudited) 3Q’20 RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES 2016 2017 2018 2019 TTM ($ millions) ArcBest Corporation - Consolidated Operating Income Amounts on a GAAP basis (1) $ 34.1 $ 61.3 $ 109.1 $ 63.8 $ 56.8 Restructuring charges, pre-tax (2) 10.3 3.0 1.7 - - T
Slide 54: Reconciliations: Consolidated Adjusted EBITDAR
ARCBEST CONSOLIDATED (Unaudited) 3Q’20 RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES TTM ($ millions) ArcBest Corporation - Consolidated Consolidated Adjusted EBITDAR Net Income $ 41.6 Interest and other related financing costs 12.1 Income tax provision 8.6 Depreciation and amortization 117
Slide 55: Reconciliations: Asset-Based
ASSET-BASED (Unaudited) RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL 3Q’20 MEASURES 2016 2017 2018 2019 TTM ($ 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% $ 91.5 95.5% Restructuring charges, p
Slide 56: Investor Presentation 3Q'20
3Q’20 INVESTOR PRESENTATION