Okay, sir. Good morning. Thanks for braving the rain and being with us here live in New York for our Investor Day. Really appreciate your attendance today. Also to the people that are listening on the webcast live or at a future replay of the webcast, thank you for your time in our meeting today.
Let me start with some presentations. Up here on the dais are the main presenters for today's meeting. So I'll start here. Tom Schmidt, our Chairman, President and CEO Matt Jewell, our Chief Commercial Officer Chris Ruble, our Chief Operating Officer and my name is Mike Morris. I'm the Chief Financial Officer.
Back in this part of the room, we've got other members of the leadership team who are going to share a slide or 2. So let me make those introductions. If you could stand up when I call Jay Tomasello, our Chief Information Officer Kyle Mitchen, our Chief People Officer and Michael Hans, our Chief Legal Officer. So you got the whole C suite here with us today. A few other members of the Forward Air management team are here.
So let me make those introductions. Tim Osborne, Senior Vice President of Operations, overseeing LTL and Final Mile Katie Bishop, Project Manager, works with Tom and is our point person on ESG initiatives. And I think Brandon, if you're over here, Brandon Hammer, who works with us in Investor Relations. We do have a few members of our Board of Directors here today. They're here of their own accord.
They're not being compensated for their time today. So I wanted to let you know they were here. They are not presenters in today's meeting. If there's any Q and A that comes up with respect to the Board, Tom can handle that as the Chairman of the Board. But the Board is an important part of our team and this is a shareholder meeting after all.
So we thought it made sense if the members of the Board could and Katie, if you could bring the mic over, could just briefly stand up, introduce themselves. And then when we get to Craig, I'll take it back.
I'm Mike Lynch. I'm Chairman of the Audit Committee. I've been on the Board for, let's say, 13, 14 years.
Bob Campbell, I've also been on the Board actually the same time as Mike and I've at different times shared the Audit Committee, Comp Committee and then Lead Director.
Good morning, John Langley, and I want to say welcome to everyone. I've served as the Comp Committee Chair recently, and thank you.
Good morning. Anna Micarella and I serve in the Audit Committee and Corporate Governance and Nominating Committee.
And I'm Craig Carlock. I'm Chairman of the Compensation Committee and the Lead Independent Director.
All right. Thank you. Let's you all have books in front of you. Screens are hard to read, little numbers. We can follow along in the books as well.
Let's go to the second slide. A quick comment on our forward looking statements. I would like to note that a number of statements made today will be forward looking statements that relate to future events or performance. These statements reflect our current expectations and we do not undertake to update or revise these forward looking statements even if experience or future changes make it clear that any projected results expressed or implied in these or other statements will not be realized. Please be cautioned that these statements involve risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from the forward looking statements.
We refer you to the disclosure on Page 2 of the written presentation relating to forward looking statements. Okay. If we go to the next slide, a quick overview of our agenda today. When I'm done with the opening remarks, we'll turn it over to Tom for a section called Beyond 2019. Then we'll go through a series of business unit reviews of our reporting segments.
If you have a question that you really want to ask during the review, raise your hand and we'll get you a mic. But please be aware that we left a decent amount of time at the end for Q and A. We'll take a break. The break is going to last exactly 15 minutes and then we're going to get started. If you're not in the room, don't take it personal.
We're just trying to stay on time. Then we'll give an overview of corporate support and we'll have some other members of the team come up and be a part of that presentation. I'll cover a quick financial summary, off to Q and A and then some closing remarks by Tom and we're going to end sharply at noon. Few other items, you've got an insert in your book that has some information in it, got the Wi Fi passwords in front of you. If you do need to break out, take a call, whatever, if you go out this door and you make a right and a right, the Tribeca room is a large room that we have available.
There's a big round conference room table in there if you need to sit down and do anything. From a safety perspective, there are safety personnel on staff. If there's a fire or other emergency, we will be informed, communicated to, informed what to do. If there's an emergency in this room, 48 on a hotel phone or 911 will bring personnel here right away. With that, why don't we turn it over to Tom for beyond 2019.
Thank you, Mike. Can everybody hear me okay? Perfect. So from my side, first of all, thank you for making the time that you probably didn't think you had. And our goal is perhaps twofold.
1 is make it worth your while. So when you leave here today, hopefully, and you will be the judge of that, this will be worth your time. And the second and perhaps more substantial goal is we want to make sure that all of us start sharing and understanding what that remarkable company Forward Air actually is, why we are, where we are and where we're taking this place together. If you start and I'm actually like roaming around the problem a little bit is that the moment I come downstairs in this way, then I'm going to be hidden from all of you over there. So we'll figure this out together.
But if you start with the history, at first glance, this looks kind of a regular good profitable growth story. So we started in 1981. Then when you go through the timeline, you see what you oftentimes see in small, fast growth companies. There's spin offs. There's obviously a remarkable event that takes us here today.
If you go to 1993, the IPO, in fact, actually last year we celebrated 25 years on the stock exchange. And this afternoon, we actually have the honor and frankly the pleasure of closing the trading day at NASDAQ. And then afterwards, a lot of organic growth, if you go down to the second half of this page, coupled with inorganic growth. So fairly kind of good typical sustainable success story of 38 years to date. And at face value, it just looks like a typical small place kind of blooming and starting to grow.
Now once you actually unpeel the onion, in my mind, there's something noteworthy and something remarkable that happened here. When you go back to our beginnings, somebody and these were my predecessors, so hard for me to take any credit for it. I just got fortunate to become part of the story. My predecessor had a great, very compelling, simple idea. They actually looked at the airlines and their schedules across the U.
S. And they basically took them down and wrote them down and said for the long distances, probably not, but anything that's 1,000 miles, 1500 miles or less, we can probably copy those schedules and pull that air freight off of those bellies where they make it into those bellies if there's space, if not, next day perhaps. Take the schedules and take them to the ground And then actually with the same or frankly higher reliability move those goods on the ground at much lower cost And at the time probably somewhat fortunately also becoming an early carbon emission reduction hero because you can do that actually at a much lower carbon emission on the ground than you would do it in the air. So this is like many of the great success stories in American business history and global business history, a very, very basic idea. To some extent, you could say UPS actually with a parcel or a letter did something similar when they actually invented UPS 2nd day air, UPS 3 day select.
And they said, hey, if it's short distances, that thing does not have to hit a plane. All we're committing to is we're going to nail the time slot. And they are and we are. But again, if you think about it, a very, very simple, powerful, compelling idea, pulling that airfreight down, doing it on the ground more reliably, much lower cost, and again, an early carbon emission reduction hero. Now what happened since then, for the 1st couple of decades actually exclusively moving those terminal to terminal close to an origin and destination airport airfreight on the ground.
That muscle of that precision execution of hitting those exact schedules reliably every time for higher value goods. This is not dark food or salt or coal. This is stuff that typically would have moved via air. Higher value goods, if you look at this, tight timelines, hitting it every single time and making sure that precision execution for 2 decades, every single day, thousands and thousands of moves, we really, really, really got 1st class at it. Then if you take the last 10, 15 years, after 20 years of training that muscle of hitting those tight time windows from airport to airport, we thought it actually is time to stretch that muscle a little bit.
We actually now have confidence we can do something with it. If you go back and at the top here of this chart, where it says train, you actually see something which goes back and reminded me of Malcolm Gladwell book, Outliers. Who has read this book actually here? That's quite a few of us, okay. If you think about the basic thesis and it's a bit populist or so popular or so, but it fundamentally makes sense.
When some people say, well, I'm just not talented enough, I'm just not good enough, well, possibly. However, if you look at world class people in any space, including forward air and hitting those tight time windows, they tend to have a few things in common. They actually nailed for 10000 hours or more, in our case, for 2 decades or more, that precision execution. Melton Wetzel actually took the Berlin like violin classes of a decade or 15 years ago and actually looked at some of these teachers and some of those students. And a few years later, what became of them?
And there was a direct linear strong correlation, the ones that actually put that 10000 hours of practice in or more, nailed it, became world class. Again, what we did is for 20 years, all we did was grounding that air freight and nailing the precision execution. It's bigger than a box. It worked. And then 10, 15 years ago, we said we can actually do more with that.
We feel very comfortable with that trained muscle. Let's stretch it a little bit. Now where do you stretch it first? Well, you stretch it first on your home turf. You don't have to pick something up at an airport.
You don't have to drop it off at an airport. We can and we did for 2 decades. You can also pick it up a bit earlier or drop it off a bit later. Think about my former employer, D. V.
Schenker. If they are contracting with a high-tech company like Dell, getting laptops, the new releases into the U. S, well, if all we did is once it hits the 1st airport, pick it up from there and take it to a secondary airport, they still have to get it to a DC somewhere. The Dell DC outside Chicago, New York, Los Angeles, any major city or secondary city for that matter. Well, the last thing they want to do is sitting somewhere in Austin, Texas or Round Rock and contract with Tom Strutking for that move from that destination airport to a DC.
So we stretched a little bit internally. We can actually also get into that DC. And that was the first thing we did. And then since then, as you'll see in a minute, we stretched a bit further. We got to a point where our customers, some of the most demanding challenging companies on this earth are telling us with their own KPIs, you actually in that core and also in your stretches, you forward air actually the best at what you do.
You hit those tight time windows more precisely than anyone else does. Their KPIs, they're telling us, not we are not us telling them. And we are building a, what I call a community of trust, where they know to rely on us the same way they would rely for that golden package for UPS or a absolutely positive year overnight with my former employer FedEx. So you take what we ended up doing over the last 10, 15 years and what started, if you look at the left hand side airport to airport and training that muscle of hitting and nailing that world class for 2 decades, we took it places. The top right hand side, the first stretch is a near stretch.
It's the pickup and delivery of that same airport to airport move. The other stretches, Final Mile, most recently enhanced by the FSA acquisition, intermodal drayage, expedited truckload, pool distribution, same principal supply. Remember what we said before, tight time windows, premium handling, precision execution, if it's bigger than a box, applying to all of those. Now if you look at the dimension and the scope of training that muscle, stretching that muscle and taking it different places, let's just do a little bit of a visualization of what happened in those 38 years and where we are today and power of what we have today. So as we said, it started with a terminal to terminal move that grounded airfreight.
Today, 38 years later, more than 90 terminals. Most major and second tier cities, that's not a judgment call, it's just the size of the places. We have a U. S.-wide coverage and my wife's Canadian, so I should be pointing out. We also have coverage up there in Toronto and Montreal and through an agent also in Vancouver.
So a long way from that beginning of that first grounded move. Then we also, as we were adding the pickup and delivery pieces from a DC, sometimes even to a home already, Now we have those same number of terminals for the most part with the ability also to pick up before the origin airport or a delivery after the destination airport. If you look at this chart, all the red dots from the previous chart, for the most part started converting into blue dots because we can do pickup and delivery before origin airport and past destination airport too. Then you go further. As you saw a few months ago, when we tripled our presence in the business to consumer final mile space, same principle.
That refrigerator, that washer dryer unit that comes to your home on a Wednesday morning between 8 and 10 am, very tight time window, bigger than a box, premium handling, same principle, trained muscle, stretched muscle. We put that in place and by now quite a presence. Most of the U. S. Covered with that B2C stretched DNA also.
Intermodal drayage, well, the first thought would be like premium handling, intermodal grades. Well, you go back, right, so where does this stuff come from? It goes primarily not exclusively, but it goes primarily to retailers. It comes oftentimes from Asia. How does it get here?
14 days, if you're lucky, on the ocean to Long Beach. 5 days, if you're lucky, on a railroad car to Chicago, Dallas, Atlanta. And then it sits somewhere in a rail yard. Those sweaters on those containers, they have probably a selling window of 20 business days, 4 weeks. By the time it's in that rail yard, they really, really, really want this in the DC and on the shelves.
Every single day, it takes another day in addition to the 15 days on the ocean and 5 days on that railroad car takes away 5% of their selling window. So intermodal drayage, absolutely. Once we get it, it has to hit that DC super reliably because every day lost is another 5% of the selling window gone. Today, quite a presence. Eastern half of the United States bless you Eastern half of the United States quite effectively covered.
Truckload. Some of our most demanding challenging tight time window customers actually need aggregation. They sometimes actually need not only a pallet load, they need something bigger than the box, but actually it consolidates into truckload. International Airlines, some of the premium package providers where they just have to have that entire truckload with the same precision at that terminal or that hub of layers. Here, we are picking some select major places to actually do that extra truckload for them.
And finally, somewhat similar story to Intermodal drayage, actually the 2 businesses actually are complementary in many, many ways. Retailers also, malls, same thing. Those sweaters have to be there in that 2 hour time window before the day opens in that mall shipping and delivery not after 8 am in some cases. And we have to get there with the same precision execution and we are across the U. S.
In most major and second tier places. If you add this whole picture up from a humble beginnings with a brilliant, simple, powerful, compelling idea 38 years ago to today's reality, this all adds up to a simple statement. It's bigger than a box and it really matters to you, think forward. When it's bigger than a box, if it's a box FedEx, UPS got it covered, it's bigger than a box and it really matters, not coal, no salt, nothing against dog food. I had a dog for a long time, but it really matters to you, think forward.
And if you look at this across the U. S. And a few outposts in Canada. So but that gives you an idea of the geographic scope of the power of what we put in place for it being bigger than a box and mattering a lot. Now to take us from where we are today a little bit forward, thinking forward.
What's happening around us with e commerce, omni channel is actually providing us going forward even further tailwind. A lot of the trends going on, precision execution, you've got to have it tomorrow, are actually helping us. Those business models that have been evolving rapidly over the last 10, 15 years are actually playing in our favor. Here's some that are listed. I know some of us, I think, have been looking at these trends for a long, long time, including some of our Board members.
So again, we are getting tailwind from what's going on around us because what we are very, very, very good at and what we trained for a long time is becoming more and more relevant. So we are taking advantage of that. In our LTL network, whether it's adding those pickup and delivery points, remember, the red dots turning blue for the most part, there's a few more that can turn blue. Today, 30% of our LTL moves have a pickup or delivery component or both. That number keeps growing.
We also having started with domestic forwarders as our customer base, they will always remain super important to us and we'll be doing everything possible to make them successful. And we also are adding other verticals, international forwarders, people like my former employer, Dibyshenko, 3PLs. And in fact, this year with a tougher economic environment, those are our growth segments. We've actually been growing those areas where we wanted to add to the domestic forwarder base, international forwarders, VPLs. And again, there's no 10th or 11th commandment anywhere written in a Bible or any other document that says you shall not have a terminal outside an airport.
We can actually also think about connecting lanes where the origin or destination may be a terminal that's not adjacent to a major or second tier airport. So a lot of untapped upside for the LTL network picking up delivering different geographies, different verticals and again also terminal footprint lots of upside still. On the organic and inorganic growth side, if you go to the top right hand side of this page, and we are currently now on Page 26, both Greenfield and through acquisition, we have a tremendous growth opportunity in something that we got really, really good at in intermodal, which actually is adding to our opportunities by selecting very smartly, integrating quickly, standing up the performance to our platform. We've been doing this for intermodal, and we're starting to do that also now for B2C. Our last mile FSA was the single biggest leap that we made in that space.
Truckload and pool, we're going to talk about this some more, but we're going to talk about the segments. There's also significant upside where we can actually get more automated, more of an electronic marketplace in TL and we also in pool can take that same excellence that we actually honed in retail into other verticals. And this year we actually took it already to the hospitality vertical as well as to the industrial parts vertical. So significant upside in the LTL space as well as in our other segments. To put some math behind that upside, I'm not going to take you through every single one of those formulas, but in essence what you have here is the list of all of our business units, starting with our core expedited LTL, intermodal truckload pool.
And then at the bottom, you have basically our current revenue in that space. This year, we are shooting for 1,400,000,000 dollars as a company in revenue, as you can see at the bottom of that column. What the column right next to it is the exciting one. That is actually in our mind the TAM, the total addressable market that is actually right for the taking for us. Now, for those of you who are math inclined, you can do the math yourself, 14, 15 divided by 26,400.
For those of us who are less math inclined, there's a bit of a 8 on the right hand side at the bottom. We only own today about 5% of what we should be owning and could be owning of our total addressable market of that precision execution hitting those tight time windows better than anyone else does as our customers are telling us. 5% is what we have. The rest is wide open untapped upside. Now the way we go to work and the way we actually nail every single day those expectations that our customers have and the way we go to work going after untapped upside, we did a bit of sharpening, fine tuning of our structure.
Fundamentally, the single most noticeable thing that we did was aligning the 2 core pieces, the going for profitable growth, which is what we call growth management at the top of this page, and the execution every single day, tens of thousands of times of doing the correct moves with the correct time windows. What we did do over the last few months is we put those places all into one common core of responsibility. In the past, without dragging through all the details, sales and marketing was done inside each of the business units. May have been done in world class, but certainly there's a benefit of consistency of attracting business, stretching customers, profitably growing them, retaining them, making sure you amplify what you do with them. All of that is done better if you compete collectively actually and where you draw on the same practices in a very commercial sales and marketing efforts into one area of a Chief Commercial Officer.
So we did put all of the commercial sales and marketing efforts into one area of a Chief Commercial Officer, pulling it out of the factories into a world class commercial setup, which also increases no pressure, Chris increases the pressure also on the operations. If there was any possibility of an explanation or an excuse in the past that, oh, we also have to do this in customer service and marketing and branding, whatever else for LTL and TL here and whatever, there's no more excuse. The only thing that the Chief Operating Officer and the thousands of people that actually are in service. They don't have to be fellow marketeers. They the service.
They don't have to be fellow marketeers in their spare time. They don't have to moonlight their salespeople. All they have to do is nail the operational execution. So we compete collectively, drawing on best practices commercially, and we actually execute operationally in focused factories with one set of principles also. When I say we, Mike, you introduced some of the core team members.
I'm looking at this list here. We have every single one of our senior team here. And during the break, obviously, we can at least start getting to know each other if we don't know each other yet. Also all of us will be speaking to their respective areas. This is the team.
So without tooting their horn, which I would be proud to do, I was very, very fortunate to join a team that actually is 1st class, both from an attitude perspective and also the way they go about doing things. We have a most recent addition, Jay just joined us Monday last week as our CIO, which completes the team that we're going to go forward with. And again, you get to know all of us here a bit better this morning. One final point on the team, if you look at the right hand side, we're not making this stuff up from scratch. There's quite a bit of experience in this room and on this team from Forward Air growing and stretching inside that team complemented in a nice way with also external experience from other places that actually have been at this for quite a while.
The final and most important point is so we know why we are, we want to nail what matters most and it's bigger than a box things precisely for our customers so that they can focus on what they need to focus on. We got it covered as far as their transportation is concerned. We know how we go about things in airport to airport first and then stretching into other areas. The single most important thing though is not just doing the right things. The single most important thing is to do it safely and to do those things the right way.
And so Mike, you introduced Katie before. So we actually have point person also pulling together some of our social responsibility initiatives. And perhaps Katie, you can just say a sentence or 2 about what you're doing here.
Yes. Thank you, Tom. As you mentioned, we're focused on doing the right things the right way. And one of the ways that we're starting that is by upping our game in this area. We started by bucketing our focuses into 3 different categories, into safety, sustainability and community and social.
And we already have a few things underway in each of these initiatives, one of them being recently rejoined, Truckers Against Trafficking. And moving forward, we are going to, improve the quality of our disclosures and begin publishing data more robustly on these initiatives as this is an important part of Forward Air who we want to be beyond 2019.
Thank you, Katie. So again, this is important to all of our businesses doing the right things in a world class level and as KDSI just mentioned also doing it more formally in a way that actually we feel very, very good about also how we go about doing things. So with that, I'm going to turn it back over to you, Mike.
All right. Thank you. Good job, Tom. We're right on schedule. Before we start, I was remiss as my eyes scanned the room, I forgot to introduce Christina Bottomley, our Chief Accounting Officer and Controller and Chuck Smith, our VP Finance, overseeing Financial Planning Analysis.
Sorry, as I just swept over, my bad. We're going to move to the business unit reviews section. We're going to start with expedited LTL. Turn it over to Matt and then the 4 of us will take turns with the slides.
Great. So we're going to follow a cadence as we do this. Each segment we cover, I'll go through the services overview and then we'll look at kind of the revenue pie, how that's divided up. And then I'll turn it over to Chris to talk about the operations and then back over to Tom to talk about the go forward strategy within each segment. So starting with expedited LTL, on the left and this will be the same kind of slide each time we talk about a segment.
On the left, we've got the services overview, which talks about the general services we provide and LTL, with the focus on if you look at what Tom talked about, which was this airport to airport thing that was if you follow this company for a while, it was founded on a kitchen table in Greenville by Scott Niswonger and executed to a tee by Bruce, Tim, Chris and others and a bunch of folks that are probably listening. That evolved into not just an airport to airport niche business, but it evolved as Tom said into basically a full service LTL provider, 92 locations with final mile and pickup and delivery capabilities. That's a nice evolution. What that pickup and delivery transformation brought us was the ability to tap into 3PLs and international freight forwarders and other intermediaries. So it kind of got us out of just domestic freight forwarders and airlines and into other business segments.
If you look at the revenue pie on the right,
if you you don't have to
go back too far and the revenue pie was pretty uncomplicated. It would show 90% domestic freight forwarders, 10% international and domestic airlines. So we've gotten away from that in a good way. We've diversified our revenue base among a number of different customers now. But I do want to emphasize that the domestic freight forwarder still remains the largest revenue generator within the LTL business and will continue to be an extremely important part of our business going forward.
But as Tom mentioned, as we've kind of grown out the PUND that continues to grow each year and it continues to allow our international freight forwarders and 3PLs to grow with us. So a lot of I think a lot of potential here within the legacy LTL business. And I think as this pie, if we look at this again next year, it's going to look even different and more diverse than it is this year, especially with the final mile offering that we've just buoyed up. It started essentially when we got town, we got a little piece of Final Mile in 2015. And then with this FSA acquisition, we've really gone into it in a big way.
And we think that's a capability that both our domestic freight forwarders can sell, our international freight forwarders can sell and our 3PLs can sell. So to us, it's yet another way to diversify the pie of revenue for Forward Air and for LTL. And with that, I'll turn it over to Chris to talk about the operations.
Okay. Thanks, Matt. I'll speak real quickly on the overview of the LTL, which is our core business. We run a hub and spoke network with 92 terminals, of which 72 are company owned and operated. We have 14 hubs, one being our nationwide hub in Columbus, Ohio and then we have 13 regional hubs as well as 20 agents across the United States for coast to coast coverage.
From a line haul perspective, what makes that important is it allows us to optimize how we move our shipments throughout the system and service our 8,200 daily lanes, so that we can either do direct point to point or we can consolidate through a hub and improve our load efficiency. This footprint at all of our major locations and our capacity mix of nearly 40% teams in our over the road fleet really differentiates our service value as it allows us to have late cutoff times at Origins, latest in the LTL world and also early recoveries at destination throughout our network. If I look at the pickup and delivery side of it that Tom mentioned, how we stretch that execution muscle from our middle mile or just the airport to airport to a pickup and delivery function. We did that in 2,006, introduced that, it was called Complete. And we have grown since to 92% of the U.
S. Contiguous zip codes that we service in pickup and delivery. Even though you see those blue dots, frankly, every terminal that we represent today, every terminal in that map has P and D capability and we provide that service. So there is a door to door service. The blue indicators are where we actually operate our independent contractors or company drivers.
But we do have agents in the other locations that provide that service. So it covers 92% of the U. S. Zip codes. We also entered the final mile space as Matt spoke to earlier when we bought Towne, started with 4 locations.
Now we have 60. We organically grew that in the 4 years prior to the FSA acquisition from the 4 to 9 locations from 13,000,000 to 39,000,000 and now it's well over 100,000,000 in the final mile space. Really excited about that area as that will be a future growth vehicle for us. And we can cross utilize those final mile trucks in our pickup and delivery segment. So there's some real synergy between the 2.
Let me talk real quickly about our people because I think that's what really differentiates us. We have a experienced long tenured team of 2,700 employees in the field and our management team, as well as 900 owner operators providing service between all of our terminals in the U. S. And Canada. And then finally, our technology, we have integrated dock and P and D operations that work seamlessly together so that we can have a smooth transition from warehouse to the final mile to the pickup and delivery, also keeping connected with our customers at all times through API and EDI.
Am I on? Yes, no? Yes. Okay. No, just a little bit of a side story before I take it over.
So this company, as you can see from that footprint, obviously we are getting bigger national footprint. The one thing as you mentioned, Chris, people, and the importance of closeness to customers. This company will always find a way to have a small team feel inside and also vis a vis customers. Small example, yesterday, as we were making our way here, a customer who needed some equipment for a music event that night. He had trusted us with that shipment, reaches out to me in all sorts of different ways.
In this particular way, via LinkedIn. Got lucky that I do feel like we are staying connected with our team and also our customers. I looked at it right away and say, oops, that should not happen. This guy needs to have a concert tonight. So he needs to get that bigger than a box where it's supposed to be.
It took a very quick connection with Chris and with Tim Osborne back here and then his West Coast team got on it, made sure that actually we got this there and the guy thanked us a few hours later for having his equipment at his concert, which was that night. So that's one of those like remember that sweater that can't get there next day, well, that concert equipment had to get there that night. But the important thing is, yes, as we are building up to become a more national company, we'll always keep that small team field direct connection internally and most importantly also with our customers. Chris, were you done or? Yes.
Go ahead. Okay. Sorry. Then to reemphasize 2 points, how this operational execution adds up to something that we will leverage into significant growth. We talked about on this Page 34.
Now, Matt, you mentioned some of the stretching, pickup and delivery more on top of the critical domestic forwarders, which will always be a core of ours getting into additional segments. We talked about the final mile. So these things obviously provide that stretching space for us by length of haul, by industry verticals, by the type of application. The one thing I do want to point out on that page is the bottom of the right hand side, where it says enhanced IT and Business Intelligence Tools. You can obviously and for those of us here who are in the finance world, in one way or another, we all are, you can grow all sorts of things.
And if you gave me the mandate grow our company by 25% over next year, we can. It would be stupid though if we did it a wrong way. We have very, very tough high expectations, double digit top line growth and double digit margins as a company. And we are getting much, much, much more surgical. That's also part of that commercial effort becoming extremely consistent, much, much, much more surgical to make sure we understand fully the profitability of the business and we actually make sure we charge correctly for what we are being owed and what we should become sales for and we capture that.
So in that effort of LTL growth, same vertical, additional verticals, more line of length of haul, B2C in addition to business to business, we are becoming extremely surgically intelligent about what business to attract, keep and grow. Certainly, I think the efforts also with UJ onboard will help push that to the next level. As one example of that, if you look at the final mile piece, because that's one where frankly we got quite a few questions over the last few months like, can you really make money in this very, very tough B2C space? Well, you look at the bullet point in the middle of this page where it says somewhat innocently powerfully operated at LTL like margins. Again, this is where we need to continue being extremely surgical, understanding what we actually leveraging, as Chris, as you said, our LTL network, how we can actually make the type of returns that we are striving for across all of the spaces that we operate in, including as we see here in the business to consumer space where we can actually operate and are operating at LTL margins.
So with that talking about margins in the finance world, back to you, Mike.
As you've heard in the opening comments, as you've heard in the specific dialogue around the LTL reporting segment, The LTL network is evolving its capability set, growing out a greater pickup and delivery capability, growing out a greater final mile capability while continuing to serve the core domestic forwarder both through those advanced capabilities and in the legacy airport to airport line haul. These enhanced capabilities have helped us over the past couple of years to maintain this double digit growth rate in revenue that we're striving towards as we've grown with the international freight forwarder, as we've grown with 3PLs and then Final Mile, these capabilities open up a greater addressable market as Tom talked about in his opening remarks, which is a really important component of our medium term growth strategy and has been for the past couple of years. This network works wonderfully. It's operated wonderfully with great people. It can do more.
If we put more capabilities in this network, it can do more, it can serve more, it can grow from a top line perspective. So that's been extremely important. It's helped fuel our revenue growth in the past couple of years. And as we talk about the future, it's a key role in our revenue growth in the future. As you make these shifts, as you first figure out how to do it and as you stand it up in a nascent sense, say, you mentioned complete, Chris, on the pickup and delivery with an agent model.
And then as you evolve that into an owner operator base model and then as you grow that throughout your network and as you seek more density, that's going to have an effect on margin and our EBIT growth has not kept pace with our revenue growth for the past couple of years as we've pivoted this network into these new capabilities. We do believe though as we continue to execute on this strategy and we continue to address a broader market and we continue to grow density in these new capabilities, we will be on a path to have the growth rates in profit reaccelerate and for our margins to get back to historic levels. We've got some forward looking stuff at the end of the presentation, which I can double click on a little bit. But I wanted to provide a little bit of color about why the CAGR in EBIT has not kept pace in the past couple of years with the CAGR in revenue. Another factor that's going on along with that pivot and along with the introduction of these new capabilities, I think has been a trend in the shipment characteristics that are going through our network as we continue to serve the domestic border and as the domestic border continues to grow in e commerce markets.
And across that backdrop over that time frame, we have seen kind of a steady declination in the weight per shipment and a steady decline in the length of haul. As you see a regionalization of supply chain and in e commerce, the unwinding of this hub spoke, more DCs around populated areas, lighter weight per shipment, more shorter runs in the mix. There's still some long runs in the mix, but more shorter runs in the mix. That backdrop puts pressure on margin. We do believe that as we stand up these capabilities, we can benefit from that tailwind, but also get into other markets, more industrial type freight, heavier denser freight, length of haul.
So I just wanted to bring that comment in addition to the pivot that I described. We are seeing a secular trend in the type of freight from the legacy Air X line haul. Okay. That covers LTL. Why don't we shift to intermodal?
I'll turn it back to Matt.
Tom alluded to this earlier, but when we sat in a room, I think Chris was there with me, 2,005, 2,006 ish and we were white boarding. We've got this incredible airport to airport thing. What else can we go into? And we were listing things we could possibly go into. And the person who was moderating this discussion, wrote drayage on the white board and it was literally like a scene from Animal House when they showed flounder on the screen and people started throwing stuff at the screen.
It was a visceral reaction from everybody. No one thought anything about this being a good thing to go into drayage. But lo and behold, if you fast forward 13, 14 years later, it's the fastest growing Forward Air segment. It's the 2nd largest segment by revenue. It's the 2nd largest segment by EBIT contribution and has the 2nd best operating margin profile of any of the segments.
And we did that by in 2014 buying a company called Central States or CST out of Chicago, which essentially served the Midwest railheads. And since then, with this incredibly professional management team who brought this kind of level of professionalism we didn't think was possible in drayage, partly because we didn't know a lot about drayage. We have performed and actually closed 8 roll up deals since then, adding both service areas as well as customers as well as management talent. And I'm happy to say that last week we signed our 9th and acquired a company, which is going to close hopefully within the next 30 days. The assets of the company called OST, a Baltimore based drayage company, approximately $35,000,000 in annual revenue, dollars 3,500,000 in adjusted EBITDA.
They have 4 locations, the best of which to us is Baltimore because we did not have a Baltimore location in our drayage group. And when we were at the TPM conference recently, Tom was there with us. Every time we sat down with our customers, whether they be freight forwarders or BCOs or steamship line folks, they said you need to be in Baltimore. So this is a great linchpin to the expansion of the drayage product. If you look at sort of the
We just announced an acquisition.
We just announced an acquisition. So 169 trucks, 107 of which are independent contractors, so about 63% independent contractors. It gets us additional trucks and people and talent in Savannah and Charleston and Norfolk and gives us this great Baltimore location. So very excited about that. So we're going to continue and Tom will talk about this a little bit.
We're going to continue to do this roll up. It has worked well over the last 5 years and we think this is really the path forward. And essentially what we do is we buy and then we upgrade. We try to what we call CSTIs, the company with the best practices. And there's a different motivation when you're privately held versus when you're publicly held.
We try to apply the learnings that we've had over each one of these deals to make them better. If you look at the revenue by customer type, you'll notice on there 41.2 percent is BCO, which is retailer. That is a specific focus of our CST Intermodal Drayage Group because we find that with the Intermodal Drage BCO customer, they're stickier. Why are they stickier? Because for them, service matters.
It's not a transaction. It's a partnership. They will follow us to new locations. Actually, they'll suggest new locations. We had a lot of people saying go get Baltimore, so we can give you more freight.
And if you look at this chart, you see a lot of the steamship line business as well as some 3PL and some international freight force. Some of those actually are also BCO customers where that particular provider who we call the bill to is actually we're a nominated carrier for the BCO. So they may be using a freight forwarder or they may be using a steam ship line, but the steam ship line or freight forwarder is told use CST. So that is a particular focus for us, the BCO retailer customer. We continue to try to grow that out and very excited about the prospects of this group.
It's been a fun ride for the last 5 years and we think they've got a lot more growth ahead. And with that, I will turn it over to Chris.
All right. Thanks, Matt. Sure. I just recently got this Tom, as Tom calls it factory. And prior to that Matt had it for 5 years and started it off in fantastic fashion.
So I'm going to try not to screw it up. The good news is the 3 keys in intermodal is first, you better be at the right rail yards and the right ports. And sometimes it's more important not to be at specific ports and rails. When we started 5 years ago, 7 facilities in the Midwest with CST, they were at the right railhead, where they could get in, get out quickly, do double turns, very, very productive. 2nd part of that is you have to have world class operators.
And not just world class operators, but operators that have steamship line experience and more importantly has relationships with the BCOs because as Matt mentioned that's the real key to growth because they appreciate the partnership and they'll expand with you to other ports and other rails as you grow out your network. And then the third part of being really successful is you have to have the right mix of capacity available to manage the ebbs and flows in the rails and the ports and we have that with our CST team. The good news with CST is world class operators that have relationships in the new ports that we've expanded to with the 7 that we started as we have acquired, as Matt said, multiple companies and expanded our footprint. That world class leadership team has remained intact and has instilled that same culture in all of the additions that we've added throughout the last 5 years. So I'm excited about that.
So in the 3rd part on the power, we recruit all that locally. We've not had much of an issue keeping that stabilized and we mix it with 50% or about 70% independent contractors and 30% company drivers. So we've got the right footprint, we've got the right people and we've got the right capacity to ensure success in this area and I'm excited about it. Tom?
Thank you. So let me just make a couple of quick points on growing this remarkable space that we just went into 5 years ago after discussions and the white boarding session that happened more than a decade ago. So most of what's on this chart actually, I think we talked about, but I want to kind of make one point come alive. So 5 years ago, February 2014, after whiteboarding and thinking, we actually did. We're not a philosophy club, we're actually business, so we're actually in the business of doing things.
And we bought CST, as Matt, as you mentioned, in February of 2014, so a good 5 years ago. Since then until yesterday, 8 tuck in acquisitions. And the way this process works is really beautiful. So we got this company CST and then to your point, we integrate, in this case, it was the platform, it was the base and then we enhanced their performance in that precision execution DNA type way that we learned over the last 3 plus decades. And after we got the platform CST, we started looking for similarities.
What made this actually a double digit margin business for us. And we actually put on a grading sheet the 12 criteria that makes intermodal drayage for us a remarkably profitable business. And if you and I came up with those criteria from scratch right now, we probably would guess most of them asset light, certain perspectives about employee relationships, geographic focus areas. So we actually came up with a grading sheet and then we went through 100, literally 100 of potential businesses. Our customers told us some of them.
We looked at many of them and then we actually graded them. And if we saw the same possibilities that we saw with CST initially, that's when we got extremely active. And we actually widened over the last few months, we widened our pipeline of actually looking at more of them at the same time. So this is not a few people getting lucky 8 more times. This is actually about us being extremely systemic and I mentioned the word surgical before about how we look for common patterns 8 more times in addition to the platform business and yesterday the 9th time.
Couple of points to make here. I have a very, very strong belief that we can keep doing what we've been doing here with those tuck in acquisitions, fulfilling those same potential profitability criteria as the platform did. And we also can look for opportunities that fit those same criteria that are a bit bigger. They do exist and they're in our purview right now to analyze. The one thing we're going to be extremely rigid about and rigorous about is we're going to keep the same profitability and rating criteria no matter what the size is.
But we can do more tuck ins and we can also look for some that are big or fulfilling their same criteria. When we put these charts together of the initial footprint from 5 years ago and then as we just looked at with Chris and Matt walking us through the footprint today, we took a bit of a bet that precision execution would happen between putting this chart together and sitting here today because as you can see here, we did put Baltimore on this map here. So that was a bit of a bet we took. And fortunately, between 3 days ago or so when the presentation was put together or finalized, And yesterday when we actually did come with an agreement with OST that Baltimore spot has a rightful place on this map. So with that, let's talk a bit more about the economics, Mike.
Thanks. We did take a bet. We FedExed the books last week. So thank you, Matt, for making all the dots correct. The Intermodal Financials, very solid revenue and EBIT growth to roll up strategy that we've discussed and then the top grading and the bringing of the acquired targets up to the platform margin.
But I think that explains the very aggressive growth rate in revenue and EBIT. The one thing I would point out in Intermodal, we talk about this a lot with respect to the margin profile in Intermodal. Platform margin runs at call it a 10% to 12%. But then you've got layers of acquisitions on top and if it was a newer acquisition that's being top graded up to the platform margin or maybe a later acquisition or if it's a bigger one like Atlantic was in the spring of 2017, you're going to have mathematically dilutive effects on what you see in a quarterly earnings release. And we'll talk more about marginality going forward.
But because M and A is going to play such a big role in this strategy, we're acquiring assets that trade at about half our multiple that operate at about half of our margin. A lot of value creation at closing, a lot of value creation as we bring them on the platform. If you look at this business in a given quarter based upon how that evolves, you might see something less than the platform margin and go what's happening. It's M and A for the most part causing that distortion, if you will, of what's inside at the platform level. Probably going to see that in final mile at LTL as well.
I think the FSA trade is going to feel like the CST trade where we build a platform, we have a large fragmented space where we can roll up smaller players at attractive multiples or we can look to upsize the acquisitions if conditions permit. But very aggressive growth in Intermodal from a revenue and an EBIT perspective. Okay, we're doing well. Let's move to truckload. And Matt, I'll hand it back.
All right. If you've been around Forward Air for a while, you'd know that truckload, the genesis of truckload was something called EUV, which means exclusive use vehicle. And it was something we provided to the airlines as kind of a complementary service to our LTL service. Essentially, it's if the airline wanted to buy a whole truckload and they just want their product on that trailer, they would buy an EUV unit. Back when you look at this kind of truckload, it was even broken out, I'd say it was like $5,000,000 to $7,000,000 kind of in the early 2000s.
Today, it's approaching $200,000,000 and it's the truckload when you break it out is the 40th largest truckload carrier in the country. It's come from very humble beginnings. And the reason why is because the type of service they provide, it's a precision like service. You can see here, time definite truckload services. We also do door to door, a dedicated service, LTL brokerage services, and we have a wide range of equipment, which is listed there on the slide.
What that allows you to do, it allows you to do a lot of different things and do them well, but all of them require very high service levels and oftentimes require teams. For the truckload market, it's huge. Dollars 200,000,000 of that TAM for the truckload market, it's huge. Dollars 200,000,000 of that TAM is very small. And that's the same with all the groups we've looked at so far.
Our penetration of the potential addressable market for each of these segments is very small. So the potential upside is large. When you look to the right and you look at kind of the revenue by customer type, LTL carrier 37.8%, Essentially, what's going on there is we provide substitute line haul for some of the larger LTL carriers. You know all the names that are out there, but we provide that service for them. Airline is continuing to be there.
That was there at the beginning, continues to be there today, 21%. BCO, so we do some dedicated things for some of the BCOs. Some of that is actually linked in or connected to some solutions customers that we have and have had for a long time. Forwarder, 10.3%, that's something we feel like actually should grow. This is something that within the International Freight Forward as well as the Domestic Freight Forward, this is a product that we should be selling a lot of.
There's a lot of need for it, a lot of demand for it and we need to grow it. Backhaul is just obviously something we're going to try to do. For instance, if you haul air out of Florida, If you can get a load out of Florida, it's a great thing. It makes that headhaul so much more profitable. So we have a focus on getting those types of backhauls, which balance the turns.
And in pharma, 5.2%, that's essentially a lot of that's refrigerated. It is high value. It is temperature sensitive. Again, precision, precision, precision in terms of how do we execute on our truckload services. And with that very quick recap of truckload, I will turn it over to Chris So cover the 3 or 4 dots on the map.
Yes, thanks. If you look at those 5 dots, about 90 8% of them are in Columbus, Ohio, where we run that truckload operation for the entire map there. As Matt said, the genesis of our truckload division was handling the time definite needs of our LTL customers, primarily airlines, our forwarders and some retail customers. Today, we have 300 tractors in our expedited truckload fleet with 225 of those are owner operators pulling our 1100 trailers, reefers and roller bed equipment. As Matt said, utilizing that same time definite muscle and executing on that, we're a good fit for other LTL carriers that you all know, where time definite is an important part of the equation.
We're really focusing more on growing our brokerage operation for both the ad hoc and the dedicated space. We have 5,000 broker relationships, carrier relationships and you'll see us really put a focus on growing that area because today with 300 trucks that's not a real big fleet. But with our broker capability, we have found that that's an area that we can grow pretty quickly. So the focus will be there over the next months years. And then the other piece is now that I have all 4 of the units too from a synergy standpoint, there are some real fits where truckload and LTL can flex capacity, where it helps us, where it reduces backhauls in the LTL or balances lanes, it can be a real benefit to both and vice versa.
We have 900 trucks in the LTL fleet that can help on the truckload side. So you'll see us exploit that more than we have. The last year we've quadrupled our coverage of truckload covering LTL loads at a much lower cost, which helps us on the profitability side. So moving forward, I'm excited about the synergy that the truckload brings us. Their growth is will continue and as I said, we'll focus on the brokerage side there.
Tom, that's it on
operations. Thank you.
Briefly, three points on the growth. First one, that's reemphasizing, Matt, your point about high value truckload moves. You see on that middle part of that left hand side of that page, hotshot refrigerated. Again, like with everything we do, if you back to that initial airport to airport type of freight, these are higher value goods with extremely sensitive needs. And we can do more of those.
The total addressable market, as Matt, as you said, is tremendous. The second point I want to make is around the complementarity, Chris, that you talked about. Truckload in that highly time sensitive expedited way for us is a purpose on its own right and it also is a great tag team partner with LTL. If you go back to late last year, where, for instance, driver shortage and covering loads was a huge issue and a near impossibility or near possibility, whatever way you want to put it look at it, it was hard. We really started tag teaming a lot between the truckload driver force and the LTL driver force.
So there's a bit of complementarity where we can actually help each other out in a significant way when it matters most, which is what thinking forward is all about. The 3rd piece that I do want to mention, yes, it's its own segment in its own right and for the right reasons. And secondly, it also is very, very complementary with LTL, which is a key thing. The third thing is, it truly fits our criteria of being asset light. It's a brokerage business for the most part.
You saw those 5,000 plus carriers that we actually use. There's an opportunity for us to become even more agile and nimble by automating some of the processes. We talk about digital apps that we're going to be using much more. So this is a very, very kind of nimble, agile, asset light business that in its own right has a purpose that fits our criteria and helps our LTL segment significantly. So this is untapped upside the way we like it.
And with that, Mike.
Thanks, Tom.
So just briefly on the financials, you heard Matt talk about a lot of demand for expedited full truckload applications in the market, good double digit revenue growth over the past 5 years, Bit of an EBIT challenge the past couple of years, 2016 TQI, we had a hiccup. We took a non GAAP here, but we took a goodwill impairment with respect to that acquisition in 2016. And then as capacity really tightened in the back half of '17 and into 'eighteen, the truckload group stuck by their customer relationships and their contractual relationships, played the long game with their core customers and work the rates back up to more profitable levels. We talked about that in a couple of conference calls. As well as you heard pivoting that model to more of a brokered model, we've made some progress through 2018.
We expect to continue to make progress. And as you heard in the earlier remarks, truckload does have a very good strategic fit in the portfolio, particularly with LTL, if it can help LTL generate operating leverage when capacity is not available in the LTL fleet. And also that brokerage concept that Tom talks about has the potential to open up a lot of addressable markets. So expect to continue making improvement on truckloads EBIT profile, but a tremendous amount of demand in the marketplace. For the service, and there is some DAW in this model, the EBITDA margin profile is much stronger than what we've put up recently on EBIT.
Okay. This is the last of our 4 reporting segments. We'll do pool distribution. All
right. So pool or pooled as some people like to call it, Satish, is let me cover this real quick. There's been a lot of confusion about what pool is. And I've sat in a lot of investor potential investor meetings where people like, do you ship pools? Do you ship pool products?
Do you ship whole chemicals because it's solutions, which tends to mean a chemical? So perhaps we weren't very prescient in thinking about our name. But pool distribution simply and there's a nice little description here, but I'll make that first bullet a little shorter, which is it's B2B final mile to the retailer. You want to kind of drill down on that a little bit more, it's high frequency inventory replenishment. And essentially, if you think about what's the alternative, the alternative is parcel.
And when we looked at USA Carriers and basically the beginning of 2007 before we acquired them, the owner Jerry Bebuck and Robert Fawcett both said the same thing, which was this is an elegant solution to for retail, especially retailers who have to have this replenishment on a regular basis, whether it be daily, 2 times, 3 times, maybe 4 times a week, instead of getting parcel, parcel, parcel, parcel, parcel, they get a truckload coming into a Ford Air facility and then with basically for a number of stores. And then we take that truckload and we break it down into store sized either pallets or shrink wrapped delivery. So all those different would be parcels are in packages, which we then deliver to the store. Well, why it's important to have kind of precision around that is because you're dealing with a store manager who among other jobs has to be upfront dealing with their folks that are on the floor, cashing people out, etcetera. So the precision in getting and hitting these tight time windows is really important because that store manager needs to be back there at 8 am to receive the packages, to replenish the shelves to make sure the product is moving because as we all know, retail specialty product is perishable much like fruit and everything else.
You can't get it on the shelves, you can't sell it. So when we launched into Forward Air Solutions back in 2007, we bought 2 other customers to roll them up into the service offering. And what we've seen over the course of recent years is there's been a tremendous consolidation within this market. A lot of folks who are in this market have exited the market. What that's done is that's afforded us the ability to actually go in and take rate increases and things like that, that frankly when we first bought it wasn't possible.
So this business and you kind of see this play out, the business is looking better and better in terms of our ability to get relief on our rates in order to basically take rate increases, our ability to dictate more delivery times with our customers and frankly our ability to run and operate this business a little better. If you look at the revenue by customer type, this is not a very exciting slide because it just shows you've got a dedicated retailer, you've got an integrated retailer. Well, a dedicated retailer is essentially a big box store and they're going to want more packages delivered to them, 150 to 350 usually palletized. If you're looking at the 73.5%, which is integrated retail, that's more like a small mall store. We go to the back of the store, it's sort of one of the alleys and you do a delivery.
And that's generally a smaller like 50 to 100 cartons of delivery. Now what's not on this chart, which I think is extremely exciting for this particular group is the new verticals. And why the new verticals are exciting is because specialty retailers, if anybody looks at this business, is worried about the health of the specialty retailers, and the growth of the specialty retailers. So the new verticals are such things as hospitality. Well, it's like anything that needs that regular replenishment of product.
That's where you can actually thrive with this model of pool distribution. Hospitality like hotels and restaurants, if you look at healthcare, they also need regular replenishment of product. If you look at equipment industrials, that's also an area where we're starting to get traction. This is the 2018 numbers. It's not the 2019 numbers, but we're making inroads and actually providing these services outside of the specialty retail space.
The other nice thing about that is the seasonality goes out of this model. If you can get enough of this non retail specialty retail business, the seasonality goes out of it. And frankly, the price points and the ability to charge more, there's a more value proposition to the folks that are outside of specialty retail. So a lot of positives there on the pool side when you look at the revenue and revenue distribution and frankly what we think it might look like in 2019 2020. So here's more of a if you guys like charts, graphs, drawings, animations and you're not so much on the words, this is an example of full distribution solutions.
This is if we didn't have full distribution solution, this is how the product would make it to the store. You've got you can see up here, these are weekly deliveries and you've got essentially LTL to terminal, LTL to terminal and then you've got LTL to basically a delivery store. And you can do this different ways. You've got parcel ways of doing this. You've got LTL ways of doing this, but you've got a lot of different providers, a lot of different touches and a lot of potential for damage or loss freight here.
Plus you can't hit your tight time windows. You've got too much going on. So if you look at sort of the elegant solution that is pool, you have an Origin DC, you truckload the product out of the Origin DC, right? So it's consolidated multiple stores and you take that to one of the Ford Air Solutions pool facility. And there at the pool facility, you deconsolidate it, you split it into store shipments and you deliver it.
You've got multiple stores here and frankly this doesn't show up because you actually can consolidate multiple stores potentially on a truck to go to 1 mall, multiple store deliveries. So without pool, it's more expensive, it's less frequent, you have multiple carriers, more touches and you're occupying a heck of a lot more of the retail specialty managers' time. So pool in and of itself is a nice solution. Certainly, when you look at the finances involved, you also look at the chances for overage, shortage, damage, etcetera of this freight, which you lose a box of 1 of these specialty retail product, it will cost you as we all know.
All right. With that, I
will turn it over to Chris to do
a quick operations overview. Okay. Thanks, Matt. If you look at our pool map, you'll notice that we are primarily where we have retail dense markets, particularly in the Southwest, in Texas, in Florida and in the Mid Atlantic. But what also is important with the network that we have and with the 20 locations that we own and operate is it provides a national distribution network that allows us to provide regional connectivity between stores and between markets for our customers.
As I said, we have 20 company owned operated locations and we have 8 customer domiciled locations where we're on-site with the customer and then we have 8 agent locations as well. Long and experienced team, long tenure team, really solid management team that really help in providing customized solutions for our retailers, our larger retailers. We sort and consolidate over 600,000 cartons in those 20 locations and we utilize nearly or we utilize over 700 local delivery drivers. And again, that's about a fifty-fifty split between independent contractors and company drivers. Of all the segments I manage, that's the one where time definite matters the most to the retailers.
You typically have a 2 to 4 hour window to make that delivery. We've also pushed it to after store deliveries and midnight delivery, so we can flip see the truck, we can be more efficient with those routes. What I'm most excited about in this space is and it's taken a while to get a foothold is what Matt spoke to is the non wearable verticals. We just recently started a few of those. We're excited about those.
It's the same value proposition for those non retailers as in the wearables and excited about both our pipeline and how well we've started in those. And I'll let Tom speak to that growth vertical a little bit more.
Thank you, Matt and Chris. Let me just as you said, let me highlight a few points. The first one is this says at the top of this chart, pool growth strategy. So we are a for profit business, so this should be a profitable growth strategy. And so the main two things that we're doing to increase, and Mike will talk about the financials a bit, to increase the profitable part of profitable growth are twofold.
One is, we really have been working with those retailers now for a number of years and we do know what excellence looks like. The way we perform in our top terminals and buildings for retailers take the top third is very different from the way we perform in the locations where we have, to put it mildly, quite a bit of untapped upside. So pulling up the below average and the bottom third to the same level of excellence that we have at the top third retailers will make a significant difference to the performance of our retail pool business. And the second part is obviously, as we talked about, after 5 years of retail, more retail and getting better and more excellent with retail, having a top third actually performs quite admirably. We also now this year finally started getting into those other verticals that we believe from a value creation perspective and a value capture perspective is equally or frankly in some cases more attractive than retail.
So retail, let's get the medium ones and the bottom third to top third performance. And then secondly, what we started doing with industrial parts, you see on the left hand side here and with our hospitality, the bottom on the left hand side, there's way more similar value creation, value capture opportunity in non retail verticals in addition to stepping up the performance within the retail segment to a top third caliber. Talking about performance of the pool segment, Mike.
Thanks. We'll do the financials in pool real quick. We've had good steady double digit revenue growth in pool. Price increases have historically been a more regular occurring phenomenon here. We've also had some expansion within the markets that they operate in.
EBIT growth has also been double digit over this time frame, but a bit lumpy. We made a lot of progress in the past 2 years in terms of the overall operational footprint, in terms of the team. And we do expect that EBIT margin should continue to improve as we grow in these other verticals that Tom talked about because right now most of that is going to flow through the existing terminal footprint. So as we add density into this terminal footprint, we should see margins pick up. This business unit probably has the 2nd highest amount of fixed cost in the portfolio.
So it should definitely benefit from density as we grow into these non retail verticals. And similar to truckload, there's some Daa in this model. And so you see an EBITDA margin profile that's much stronger. Okay. We've covered our 4 segments.
We're making great time. This is the part in the agenda where we take a break. So we'll set the timer for 15 minutes and then we'll come back. He retired.
Yes, I
don't know who's there. Okay. Thank you. Hope you enjoyed the break. We'll come back to our agenda.
Just a reminder, we're going to pivot to the corporate, then I'll do some consolidated financials discussion, and then we'll move to Q and A, and then have some closing remarks from Tom and finish our meeting. On the corporate side, we've talked about this in the past Couple of conference calls, we got a couple of questions as we've accelerated the investments. We are doing a lot to strengthen our foundation for growth. There's been a little bit of catch up, to be frank, in terms of some of the technology that we needed to upgrade and the process efficiency that we needed to drive. But in addition, we had to build a platform that would be strong across a variety of functions in order to effectively accommodate the growth that we've been talking about today.
We are spending about $5,000,000 this year on this longer term strengthening of our corporate capability set. And we talked a little bit about that on the Q1. It is widely spread across the functions as we look to bring on a more robust team from a personnel perspective, stand up more robust technologies from a process and efficiency perspective. And we do believe that once we get caught up in the next year or so, we'll be well positioned to grow as a company. So with that introduction, what we're going to do is go through the first four.
Tom is going to cover the growth management side. Kyle is going to take people. Then we're going to go to Michael on safety and Jay on IT, and then we'll come back to the financials discussion. So Tom, turn it over to you.
Thank you. So just a quick reminder, when we go back mentally to the chart that we had where we looked at competing collectively with 1 sales and marketing effort in addition to inorganic growth all within Matt your responsibility. So on an every single day basis, we are getting with the sales and marketing teams very, very consistent the way we actually attract. Thank you. Is this better?
Okay. Thank you. So we're getting better every single day and more consistent across attracting people, stretching people in the sales and marketing space, making sure we do things the same way. That's the business of selling and the business of marketing the same way as Chris runs the business of operations. On top of in addition to running the everyday kind of sales machine at a rigorous consistent level under Matt's leadership, we're putting kind of a turbocharge in.
That turbocharge on top of the everyday sales and marketing business we call Grow Forward. We had a little bit of a contest going on. We asked a whole bunch of people. I write an e mail every Saturday to all of our employees who have e mail access and the winner by popular vote was Grow Forward, kind of sounds natural. So the rest of it, we didn't just make up.
The name we made up based on popular vote, which is fine. But the rest is kind of a bit more systemic. So to give you a little bit of context behind this, while I've got a 26 year background, not quite as long as some of us in the room, but up there, 26 year long background in transportation logistics distribution. The last few years, I spent with before I joined Forward Air last year in September, I spent with DB Schenker based in Germany on their management board. And in those last 3 years as well as most of the previous years, CEO, FedEx Supply Chain, Other Stops, Purolator CEO, My focus primarily was profitable growth.
And I emphasize both parts, profitable growth. At Schenker, back to that station 2015 to 2018, as the Chief Commercial Officer on the Global Management Board, we ran a global grow forward equivalent program. We called it go for business. And, DBSENKR for a decade or so, these are public numbers, so I can use them, had been stuck at like €15,000,000,000 in revenue. And with this little machine that we put in place and a lot of effort by literally thousands of people across the globe that $15,000,000,000 company became $16,000,000,000 the following year, dollars 17,000,000,000 last year and it's really got into a growth step.
Behind it is not rocket science, behind it's rigorous definition and execution of very specific ways to find business, to keep business and to expand business. And so what we did do was a colleague of mine from DB Schenker just relocated to North America and joined us at Go Forward to run this program in addition to running our pricing team, Stefan Bushenmayer, a very good German name. If you think I've got an accent, listen to him. So he joined us and he's helping Matt, Chris, the entire team coordinating a grow forward growth initiative, profitable growth initiative, finding, keeping and expanding business. If you looked at some of the pieces in there, again, they're not rocket science.
They're just extremely KPI dashboard based efforts where we list whether it's the domestic forwarders, whether it's the international forwarders, whether it's 3PLs, large underpenetrated accounts and we go for systemic ways to take that first initiative. We go for systemic ways to get more profitable business from them. Most of these initiatives are fairly self explanatory. The good news is, I know for a fact they matter. I know for a fact you get upside from those, profitable upside, whether it's something called potential based selling where you actually geographically look for people with different profiles that you currently not have, very simple stuff to do.
There's Hoover databases, there's Dun and Bradstreet databases. This is a rigorous process. You just know how to do it and then you have to execute on that. Same with retention, the best revenue dollar is the one that you don't lose. Always helps to track your customers and look for declining patterns and at the moment you see a pattern that's actually outside the swim lanes.
Any and all of these efforts, cross selling is another good one. We have a very similar, Matt, to your point, very similar customer base in the pool business and in the motor drayage business. Well, we should be listing which we have now the top 25 opportunities where we can actually leverage the relationships and the business and the trust that we earned in one of the two areas and bring it over to the other area. So the basic takeaway here is we are running a highly professional sales and marketing business every single day. And as a turbocharged amplifier, we are putting in place, and this is underway as of a couple of months ago, a grow forward program to put another growth layer of profitable growth on top of it.
And again, there's no guarantees in most of life, but I do know that this stuff works because we've done it before and we're going to be doing it again here. So with that, whether it's growing business or anything else, it only works with people.
Kyle? That was right. Is this on? Yes, good. All right.
So thank you, Tom. Tom hit the nail on the head when he said we're in the people business. And we thought it was important to share with you guys a little bit of what we're doing to enhance our people offerings. We have 5,300 plus employees, 2,100 plus contractors and all this goodness that the teams up here talking about today can't happen without those people and developing those people. So I'm going to give my 2 disclaimers right now.
1, this is a topic that's very near and dear to me and I could spend 5 hours talking about this. So I'm going to try to do it in 5 minutes. So, and 2, I'm pretty animated with my hands usually. So I'm going to try to keep this mic close to my mouth. But if you look at the slides or the slide that you have, we broke it out into 2 sections here.
And our goal or what Victory looks like for us is pretty simple concept, but not as easy to execute on. And that is we want to make
Air an outstanding professional home
for our employees and for our contractors. On the left side, you have what it would be a summary or a quick summary of the initiatives that we're taking on our employee side. And I'll quickly walk you through some of those initiatives. So starting with attract, So we're attracting employees and there are several things that we're doing on this front. It starts with compensation and total rewards.
So making sure that we're staying competitive to market and attracting the best talent into our organization. We're also focused on growing our college and university presence. Big piece of attracting talent is getting them early and getting them in the door. So standing up a tuition or tuition reimbursement programs and internship programs throughout university connections is another big initiative for us on the Assess or the Attract side. Moving from attraction, we moved down to the Assess area.
And assessing talent once we get it in is key to us being able to retain and keep them in the organization. So the key way we're doing that is by working with Jay and his team and introducing some technology to use predictive analytics. So on the front end as we're attracting or as we're trying to attract people into our organization, we are using same resource to look at our current talent and look at where they have opportunities to grow and develop within the organization. Another thing we're doing on the Assess side is we're using technology to streamline and automate a lot of our performance management and goal setting. So using a 3rd party tool that we purchased to be able to have real time conversations with our folks about how they're performing and where they need to improve or where they have opportunities to develop is really allowing us, like I said, to have those real time conversations and help keep people engaged.
Moving from assess, we go into developing our people. Really the key here is we're building our talent bench not only for today but for into the future for our growth. We're doing this really through 3 main things. It's and it's utilizing the same tools that we're using on the assess side, the predictive analytics side. But it allows us to set up and have on the job learning and education and coaching for our employees.
We're standing up our 1st ever leadership development program and we will look to launch that in the Q3 this year. And then it also allows us to have a formalized career path for our employees. So as we bring in talent, this thing is starting to come full circle here as we bring them in and as we get them ingrained into our organization, it's really about setting a path for them to know where they're going and where they can go in the future. Lastly, on the bottom corner is we have our rewards section. And rewards is really a combination of rewards and retention.
And what we're doing there is we've actually commissioned an employee engagement committee. I should back up real quickly and say and it's really exciting, I should have started with it, but we did it for the first time ever something at Forward Air this year. And that was we did our first ever enterprise wide employee engagement survey. And we did it for employees and we did a separate one for our fleet, our independent contractors as well. And we're using those results to set a lot of these initiatives and the path forward.
And one of the things, the outcomes of it, we did we commissioned an employee engagement committee. This committee is made up of several people throughout the organization in different roles and areas of responsibility. And what we're working with them on and we've challenged them is actually building an enterprise wide rewards and engagement program. And we'll look to stand that up later this year as well. It's in development right now.
But another thing is key to this retention or rewards is listening to the voice of our employees. And again, that's why we're doing these engagement surveys and making the initiatives or taking the initiative to do so. But sometimes it's as simple as saying thank you and having a good way of doing that goes a long way with our people. So why are we doing all this? I summarized it or went through it, but in summary, this is leading to all of these 4 buckets are leading to overall engagement.
And we believe firmly and strongly that if we have an engaged employee base that they are going to serve the company well and then in turn serve the customer well, which allows us to grow our business. So it's all about putting the right people in the right positions to make us successful and help us grow. On the other side, I'm going to go through these, but I'm going to skip over this brand awareness for now and I'm going to start with capacity creation. There's a good reason I'm doing that. On capacity creation, we're doing several or making several efforts there to grow a fleet in a let's all face it a very challenging capacity marketplace.
The first thing we're doing and we're getting tremendous success from is we initiated a program last September called our Fleet Forward program. Fleet Forward was put in place to allow us to grow our base of owner operators through our fleet owners. So individuals that own multiple trucks within our space and are contracted to do business with us. This program put in place an accelerated rate program. So the more trucks, the more miles they drive with us, the higher rates they can earn.
This program, like I said, since inception in September has been extremely successful for us. We've actually grown our owner operator fleet owner fleet by 85 plus net trucks since inception in September. Another initiative that we have on the capacity creation side is having a good scalable lease purchase program to allow company drivers, experienced company drivers within the industry that have interest in becoming owner operators, a great opportunity to do so. Now this is done through 3rd parties. We do not have an internal lease purchase program and we're not interested in doing that.
But we have some third parties that we have partnered with that have newer equipment. An important piece of that newer equipment is it has safety technology on that equipment. So we have people coming into those programs that have trucks that have collision mitigation and the most current safety equipment available to them. But those programs, so it's attainable, it's got a pathway to ownership and it creates opportunity to again create that capacity in the marketplace. And then the third thing on the capacity side is going into last year with all the challenges that were taking place in capacity, we really worked together as a team and came up with a solution on a small scale to strategically place company assets or trucks in positions where they could help us in over the road markets.
Very small group, very high focus on asset light and remaining asset light, but it helped us get through last year and positioned us well to grow the fleet this year. Moving on down to the left corner of process improvements and we've taken a very lean approach to process improvement here. So really looking at how we do things and where we have room for improvement efficiency gains and then tackling those one at a time. There's a lot in the works here. I'm just going to give you a couple of quick highlights.
But one is we're expanding our orientation footprint. So we've talked to people. Historically, our orientations were done in Columbus, Ohio. As of 5 weeks ago, we have 2 orientation facilities now. 1 is in Columbus and then our other one is out on the West Coast in LA.
We've added 7 teams and 5 solo owner operators since we've launched that program. So I'd say in short order, it's been a success. But we look to continue to grow and expand that as we see fit. Another thing that we're in the process of implementing is an electronic onboarding process for our contractors. So that for those of us that have lived in this world, the contractor onboarding is a tedious process and it can take a long time and you lose a lot of people in that process flow.
So by instituting and implementing an electronic onboarding process, we've been able to substantially increase the speed of that and therefore losing less people in the funnel in the pipeline during that process. Year over year, our days to hire or days to contract for our independent contractors has increased by 40% by us initiating this process. And we feel there are still significant gains to be had there. On the bottom right, driver experience, this is a big one for us as well. Similar to what we did on the employee side on the employee engagement committee, we've also commissioned 2 boards on the driver side and that is our driver board which consists of internal drivers within our fleet that we meet with quarterly to address issues and their concerns and then also an external board, which we call our capacity board, which is made up of industry experts from all different areas around recruiting, retention, advertising, safety, regulatory compliance and technology to meet with us again quarterly to discuss opportunities within our marketplace and address the most pressing issues so we can continue to have successful growth of our fleet.
Yes?
Am I live? Okay, thank you. Just another example, I want to make sure this gets across this. Yes, we're becoming a larger company and we still keep that small team feel. So you mentioned that, and I think this is worth repeating.
You mentioned this driver board. So we actually have put together a nomination process across all of those independent contractors, more than 2,000 people for them to nominate 12 of their peers to be on their driver board. And we meet with them quarterly, including myself, Chris, Kyle, and listen and then we take action, the same way we do with our employee base. We listen and we take action like some of the things you're talking about. And these guys take that seriously.
So the same way this gentleman called me yesterday because he needed the concert equipment or in this case was LinkedIn. I get a call last week from one of the drivers in our driver board. There's like, hey, we are the voice of the drivers and I need you right now. So he had a load coverage issue. And again, similar to like this is small team feel, we're not perfect, but just driving to get there.
By the end of the day, the particular issue that really irritated the heck out of him was solved. So all I need to get across here is we're in the people business. It starts with our own people. And then as you said, Kyle, our own people then go above and beyond to provide exceptional service. And then hopefully, if we do our jobs right collectively, it's not just hope, it actually will have profitable outcomes as a consequence.
People service profit in that sequence the same way other world class service companies are doing that. So but that small team feel is still very much alive. And again, this driver board, I have to tell you, I mean, I've been in transportation for 26 years. Some of those drivers have been in transportation for more than that. They were absolutely floored that we would actually have that group to come together with us once a quarter to actually solve together what's important to them.
Thanks, Tom. And just to add to that quickly, another outcome of that meeting is from talking to the drivers in the first meeting we had, they addressed quickly with us their concerns or challenges they had with call times and hold times as they call into operations and dispatch for help. And because of those meetings and because of the interaction, we were able to immediately start addressing that. And we've been following up and talking with them. We're putting KPIs in place to measure it.
But almost instantaneously, we've gotten feedback that call time wait times have improved dramatically since then. So it's working. The last piece on our driver experience is we're really focusing on bringing technology to the fleet. And this is ranging very widely, but starting with having TVs and satellite services available to our contractors and drivers for having that equipment in their truck to bring home to them to more actively helping them manage their business and their day to day. So we're in the process again working with Jay's team and developing an app, a driver app, a world class driver app that will allow our contractors and our drivers to stay connected to their fleets, stay connected to the operations through live chat functionality and really give them the performance metrics and visibility to how their fleets and their trucks are performing.
This we feel will be a huge differentiator and set us apart from what a lot of other people are doing and really brings some stickiness to our fleet and to our partnership with our fleet owners. So lastly, I'm going to circle back to brand awareness. And we are well within what I'll call the digital marketing age of things. I've been in transportation and around fleet recruiting for 10 plus years now. And when I started everything was print and it's all about magazine ads and print publications and those don't exist anymore.
I mean they still exist, but you're not getting anything by utilizing them. So, ranking and it's around pay per click and it's around making sure that our social media presence is strong. And what we've done is we've decided as an organization that we're going to use advertising and marketing as a differentiator to separate us from our competition by taking a fresh new and unique way of advertising who we are and what we have to offer to the community and to owner operators and drivers. So with that being said, we actually brought with us and we're going to show you guys our most recent recruiting video that we put out. It is 90 seconds long.
I can tell you that this video alone got 1,100,000 impressions within the 1st 3 months that we launched it. So it's working. Our approach is working and it's helping us grow our fleet. Before they launch this, there's probably a question and maybe I'll just answer it upfront here. But when it comes to what's driving, are we growing the fleet, is this stuff working, I can absolutely say it is.
And then there's the question around macro. Does the macro play a piece in this? Capacity is looser. Yes, sure, it does. It helps.
But these efforts are yielding tremendous results, record growth for us on the fleet side. Year over year, if you look at our overall over the road fleet and the growth that we've had year over year, we are up just under 200 trucks or 20%, huge growth. And 100 of those are teams in the LTL fleet. So our efforts are paying off. And with that, enjoy the video.
Anywhere near Times Square today, might be seeing that run a loop on the tower. Thanks, Kyle. Let's turn to Michael, hit safety. It's
a tough act to follow. So safety is a core value at Forward Air. As Tom mentioned earlier, it's a top priority for us. We believe that delivering excellence to our customers begins with safety, and we're working really hard to create a record in the safety area that's best in the world. That's our goal to be world class in safety.
So how are we going to do that? Well, it starts with leadership. So Tom and our executive team, we're all safety champions. We are responsible for promoting that value throughout the organization. In 2018, we took a look at how we were doing in safety and decided that we needed to renew our focus in the area of safety and that's what we did.
So what do we do? Well, 1st, we elevated Matt Casey, who you saw him on a previous slide, his name on a previous slide to the Senior Vice President of Safety within our organization. Matt's a guy who has deep experience in transportation and in the safety industry and he does a great job leading our safety team. We also, as you know, in 2018, it was a very difficult time to recruit drivers. We demonstrated that renewed focus on safety during that time by turning away a lot of drivers who came to our door because they didn't meet our qualifications or they didn't pass our proficiency standards, which I'll talk a little bit more about.
And that was evident in our financials and then our purchase transportation cost went up because we were not utilizing our own fleet power. Additionally, what that has meant is it's been putting a lot of dollars into people, processes and safety systems. And what that has allowed our safety team to do is really transition from more of a reactive approach to safety to a proactive approach to safety. And I would categorize and sort of broadly categorize our investments into 2 big buckets. One of those buckets would be the driver vetting bucket and the other bucket would be behavior identification and behavior modification.
And I'm just going to give you a few highlights about what's within each of those buckets. On the driver vetting side, we've spent a considerable amount of money on simulators, driver simulators, 2 of those. And now every driver who comes through our door has to be has to go through a vetting process where they have to prove their proficiency using those simulators. That has been a really valuable tool because it has allowed us to weed out people, even though we have significant experience requirements and they would present as meeting those, sometimes could not pass the proficiency requirements. So we think that's really enhanced our the safety of our fleet.
On the behavior identification and modification side, I would highlight 3 technologies really that are we think making a real difference. 1, our camera systems. So in 2018, we sort of set forth the goal of getting to a camera unit in 100% of our over the road fleet. We're now at about 64% there. But those camera systems, if you're not familiar with them, they allow our safety team to get real time data back from what's happening on the roadway that will allow us to work with our contractors to ensure they're meeting their contractual requirements about obtaining or maintaining safety standards.
A triggering event sets off an alert that then goes to a 3rd party vendor that then pushes a video to us, whether that's following too closely and not obeying a posted speed limit or a number of others. And that allows the safety team then to be able to intervene and to work with our contractors to intervene to identify that risky behavior before it actually turns into an accident. So that's a win for us obviously and that's a win for our contractors as well. I would also point out speed reporting. We now on almost 100% of our over the road fleet have the ability to know the real time speeds of our drivers to know whether or not they're adhering to their contractual obligations to adhere to speed limits.
And as our Safety Vice President will tell you, the industry has been saying this for a long time, but speed and following distance, if you can correct those two things, you have a real chance at lessening the impacts or avoiding accidents altogether. And then lastly, collision mitigation systems, Kyle mentioned those before. We are incentivizing our contractors to bring equipment to us that has collision mitigation on it. And we also are on any company lease power that we have ourselves, all of that equipment today, I think we're up to about 5.75 units, has collision mitigation on it, and that will be a continuing thing going forward. What that's yielded, just a brief comment about results.
You can see on the slide, we've seen a 58% reduction in DOT reported injury and accidents from 2017 to 2018 and a 26% reduction in year over year Department of Transportation roadside vehicle inspection violations. So we're seeing good trending and that's where we are from a safety perspective.
Okay, let's cover IT.
Thanks, Michael. All right. Well, guys, I'm so excited to be a
part of this team. So I'm a week on the job. So you can ask me any tough question you like and it's going to be the only time I'll be in front of you and I can claim ignorance. So fire away. I'm really excited to be a part of this team.
Like I said, I was just extremely compelled by the growth story that Tom told. Tom and I didn't work together at FedEx, but I come from a FedEx background and just very impressed with his leadership and just have a tremendous amount of just tremendous amount of attracted to the competence of the management team here. So with that, I want to talk a little bit about what we what our vision and what our mission is going to be going forward within IT. So obviously you have heard a tremendous amount of technology underpinning everything that we've talked about today. So it's our job to make that happen.
We're going to be building on the great foundation that my predecessor and that the team has performed over the last few years. But really what we're going to be pursuing is a digital transformation strategy to leapfrog the industry. We're going to be focusing not just on what we deliver in terms of driving business value, but we're going to be focusing on the culture of technology and the technology team and how we deliver it. So we're going to be bringing into practice industry leading, cutting edge things like agile development. We're going to be talking about DevOps.
We're going to be focusing on a cloud native culture within IT to really help attract the next generation workforce. So as Kyle said, people are really what powers this business and we want technology to really attract the next generation of technology leaders as well. Now with that, I want to talk about the 3 priorities that IT is going to be focusing on. So innovation is obviously extremely important, but we can't innovate without focusing on ensuring that we are keeping the business running from a precision execution perspective that Tom mentioned. The precision execution and operation excellence is obviously a high priority for us.
And then last but not least, focusing on protecting the brand from an information security and compliance and risk management perspective. Now within the innovation area, our goal is going to be to reduce the coefficient of friction between business and IT because in today's world, IT is the business. There is no business without IT. So we don't see ourselves as separate and apart from the business. We see ourselves as the business.
So IT will literally be powering the business going forward. Just a sampling of some of the things that we are working on within IT going forward and you'll be hearing a lot more from me hopefully over the coming months and next few years that I'll be with Forward Air. But some of the customer experience driven items that we will be focusing on, we're looking at 3 areas, the office experience. So professionals inside the office, are they using modern tool sets? Are they using predictive analytics for data driven decisioning?
So we want to bring the tools to bear that are not only industry standard, but leveraging all of the data that we have within our various operating systems, within the various parts of our company to help drive proactive decision making within the company. Again, driving the corporate tools that we know that we need to succeed to deliver that common platform of capabilities across the company. Secondly, from an inside the terminal perspective, a lot of focus on automation within the facility, whether it be dimensioners, scanners, scanning technology, a lot of things that help improve the productivity of the workforce inside of the terminal. Thirdly, from a customer experience perspective for the driver, we want to focus on on the road technologies. We also want to reduce the onboarding friction that a driver has within to get to drive for the company.
We want to focus on some technology that helps us look at vehicle telematics and prevent accidents on the road and improve our safety record because that's a huge, huge focus for us safety above all. So with that, we'll also be looking at some of the things around our dispatching and our pickup and delivery system ultimately to drive fuel efficiency. So just a quick sampling of what's going on within the technology area. Our focus is to drive agility for the business to keep the business moving, to focus on the innovation items as well as to help us drive the M and A activity that we know will fuel our growth. Thank you.
Okay. Thanks a lot, Jay. So we've covered the corporate. We'll move to a few slides on the financial overview and then get to Q and A. 2018 is fading a bit in the rearview mirror.
We're already here in the summer, But it is worth mentioning that it was a record year across the board for Forward Air, Double digit growth in revenue, double digit growth in operating income. As Tom has talked about, which we'll talk about some more, that's the pace we want to keep at. The new tax law in late 2017 created some big one time non cash stuff revaluing deferreds and whatnot, which skewed growth rates and net income and EPS. If you adjust for all that, EPS grew at about 13% as well. EBITDA is reflecting a shift from an ownership to a leasing model.
If you were to look at it on an EBITDAR basis, you'd see a similar type growth rate as you see in revenue and operating income. And then a really big year for free cash flow, I think a good example of how free cash flow can behave in this model, A big piece of that was working capital improvement around acquired companies, particularly with respect to Atlantic, which was a large intermodal acquisition that did in 2017 and we brought their AR to a much better place post acquisition. Also, if you adjust for this non cash tax stuff, you saw a good improvement in the actual cash component of net income as it flows through free cash flow. And along the way, we bought 2 intermodal companies last year for $20,000,000 Excuse me. This is an interesting chart.
2018, It's the sum of all the pie charts from the previous sections. You may not have seen a chart like this in the past with respect to Forward Air. Simply just trying to indicate that we have achieved a measure of diversification in our portfolio with respect to our revenue mix. And as we talked about in the strategic slides, we expect to continue to serve the domestic forwarder for a long period of time, but also look to grow in these other verticals and customer sets as we grow our company. Last quarter, also a record across the board.
We did get a lot of leverage in PT in a slowing freight environment, not all of it dropped through to EBIT as we talked about on the call. We had some one timers around weather and whatnot and we had some premeditated spend around corporate and some other items like that, but still a record Q1 for the company and the free cash flow for that quarter was a record of any quarter in the company's entire history. So staying on that cadence of double digit, if we step back and look at this decade and we're not cherry picking off a low point in 2,009, so we're starting as end of 2010 is the beginning. We have managed to keep this cadence of double digit growth rates in revenue, growth rates in EBIT and EBITDA and EPS. As we'll talk about, we believe we can continue this cadence going forward over the medium term.
For those of you that know us, we are a high cash flow model. We're asset light, but we have some fixed cost in our cost structure that we can generate operating leverage through the cycle, but we don't have capital intensity pulling a lot of that operating cash flow back into fleet maintenance and whatnot as you might see in an asset based carrier. So the hallmark of our model is that through the cycle, we drop a lot of that cash flow to financing, very high free cash flow model. Over the past 5 years, we've averaged net income to free cash flow conversion of essentially 100%. The volatility along the way is mostly working capital driven, which is very much impacted by the working capital effects of M and A that we do in the portfolio.
We do think it's a fair modeling assumption that over the medium term that, that relationship would be maintained. We believe we've maintained a very shareholder friendly model and we've shown a commitment to return capital to shareholders. We've raised our dividend twice in the past 3 years. We've also increased the amount of share repurchase we've done. Since year end 2015, The next slide stacks up our capital allocation, where the dollars have gone over the past 5 years, give you a relative sense of capital redeployment.
Our CapEx has averaged about 2.5% to 3% of revenue. We don't see anything in the medium term outlook that would change the CapEx relationship. We don't see any big investments we have to make to accomplish the growth that we've described today. We do expect our dividends to rise over time, commensurate with our earnings. It may not be very predictable, but over a medium term timeframe, we do think we can achieve continued increases in our dividend.
We like the 1% dividend yield from the research I've done here when I was at Conway, that 1% seems to be about where trucking companies to pay dividends like to keep it and we prefer that yield. M and A is going to continue to play a role in our strategy. We talked about that. We need about $20,000,000 in the construct of our current portfolio on the balance sheet to handle intra period liquidity fluctuations. Outside of that, capital is available for repurchase as an outlet for free cash flow when we don't have M and A opportunities.
We talked on several calls about leverage. We about a 0.3 debt to EBITDA right now. We can see that gradually walking up over time to one turn of leverage. Frankly, we could run at a higher level of leverage and be comfortable if we had to lever up a little more to accomplish M and A. Really think about the liquidity as dry powder.
The cycle slows if assets become more attractive, if multiples compress, it could represent a good source of funding to grow our franchise. Last slide here is stepping back where we could see ourselves over the medium term. Soon after Tom joined, he brought top 20, 25 leaders together in the company. And we met in the middle of the month, 6 months in a row and put together a roadmap for the strategy for the company, which Tom and Matt and Chris laid out today. We took that strategy and we put it through our models, got a sense of what could we look like over the medium term.
Sometimes we get questions, what is the medium term? It kind of depends on where the cycle goes. I mean, if the cycle slows down, it could be a little bit longer towards 5 years. If things pick up, it could be a little shorter, 4 years, maybe even 3 years. But we do believe that we can maintain our historic cadence of revenue growth.
Nominal GDP over the past 5 years, I believe, was 4.0%. The consensus forecast that we look at it have at about 4.1%, but we are going to move a little more with GDP than we have historically. We've become a much bigger company, a little more exposed to the macros. But we do believe we can maintain a double digit cadence in our revenue growth rate. Last year's margin, total company 9.2 percent EBIT margin, we think that over the medium term, that will be in the zone of 10%.
Let me come back to that. And from a returns perspective, an ROIC of nearly 16% last year, we see that walking up over time to 20%, 20 plus percent ROIC. On the EBIT margin, before we go to Q and A, let me unpack that a little bit because I'd probably get a few questions on that. Inside of this 10%, we do see core LTL before you get into any final mile dilution from M and A. We do see core LTL walking up to a 15% full year margin.
As we talked about earlier, as we bring more density into the network as we grow out our capability sets and pickup and delivery. Final Mile, as we also talked about, could create some mathematical dilution as we do M and A in that space, bringing on assets that we purchased at attractive multiples that we walk their margin up, that could be a drag of couple of 100 basis points depending on where we are in the M and A cycle. In Intermodal, we see the core Intermodal platform at a 10% to 12% operating margin. But again, the same phenomenon with respect to M and A at any point in time, where are we in the M and A cycle As that comes on and gets top graded up from a margin perspective, you'll see some dilution there. Truckload is probably working its way to more of a 5% -ish operating margin in a purely brokered model or a largely brokered model.
For using a broker, there's an extra margin in there to the broker. And once we bring the fleet back, depending on where we are in the cycle, they could probably gain 200 basis points on top of that. Pool is probably at about a 5% operating margin on core retail. As you see new verticals come online, I think you could pick up 100 to 200 basis points over the medium term as long as we're using the existing footprint and getting density and better absorption of those fixed costs. But when you bring it all together and kind of take our best guess at where we're going to be, growing organically, bringing density into our networks, but at the same time growing through M and A within a good value box, getting assets at lower margin and walking them up.
We think mathematically when you add this all together over the medium term, we're probably going to be in a zone of 10%, in a strong macro where we're getting a lot of operating leverage, it could perhaps get a little bit higher. But if you balance it out over the medium run, we see that at about a 10% operating margin. So I hope that extra color helps a little bit. We're going to move to Q and A. Just in terms of accomplishing our Q and A, so Katie, you have a mic.
Brandon, you have a mic. I had a mic. If you could raise your hand and then we'll I guess you guys will see where we're going and then take it from there. Okay. Matt, you want to get us started?
And we need the mics so the people on the webcast can hear.
So just looking at Page 20 7, the addressable market page and triangulating the comments you made on the Q4 call about the 3PL tonnage growing triple digit, which I think you mentioned again today. It looks like that and another $4,000,000,000 of 3PL TAM that's in there, I think your total 3PL revenue is about 7% or 8%. So does that mean that revenue from 3PL is contributing a few points of growth per year? I mean that just I'm thinking about the business organically, it seems like that in your biggest segment with your biggest market opportunity of white space should be a huge opportunity. And also with the margin, I know you talked about growing into businesses and having to sacrifice margin.
It seems like that should be in the same network. It shouldn't be dilutive to margin. So I'm just trying to understand like going out over that medium term, try to break out the granularity of that revenue growth. How much of it can 3PL really drive and shouldn't that be at a better margin?
Matt, so and then we're probably going to do this for most of the Q and A back and forth. Just before we get into that question specifically, timing wise, so please perhaps last energy boost for the next half hour or so. Once you're through Q and A, the only thing is that's keeping you from the rest of your day is I'm going to do a quick recap of half dozen points and then we're all good to go. So but we will definitely keep to our schedule by 12 o'clock you're out of here, hopefully somewhat energized about thinking forward. So specific to your question, I'm going to start and then Matt, if you have any additional color.
So 3PLs, 3 or 4 points. The first one is to answer your question specifically, this should be a high top line growth and a high margin business for us. And the reason I'm saying that is, first of all, 3PLs, depending on how you cut it, you could actually say up to a third or so of the expedited LTL market flows through 3PLs. So no matter what exactly the number is, it's significant. Now you could say, I could be scared of that because it is the home for many small, medium sized businesses to go to saying, hey, you figure out how to use for us as long as you come back with the lowest price.
So this could be kind of a low cost race to the bottom rate engine type game. That's not the game we're interested in. That's not the game we're playing. Now the 3PLs we're working with and frankly the 3PLs that we're growing with spectacularly right now are the ones that actually work with us and saying, we actually have criteria that we're working with our customers on that include damage rates, that include delivery windows. And so you bid for these types of business segments that fit the forward air mode of high value, time sensitive, low damage rates, highest reliability.
And for those, it's not a race to the bottom of a low cost answer, it's actually the high quality answer within the 3PL network. So if you combine very and this is where you don't have to be rocket scientist. The 3PL space is huge and we're going for a still large subset of that that actually gets us to the answer that I said 2 minutes ago. I am very confident this is a high growth and high margin business for us the way we're playing it, which is going for the value sensitive part of the 3PL market that actually fits our mode.
The $4,000,000,000 TAM that you have on that page, is that the value sensitive part or is that the whole thing including the core pricing part?
That'd be the
value sense part? The value sense part.
That should be ours.
The other is much bigger because if you apply the filters that we look at to make it fit the Ford Air model, which is that higher margin business, it's going to be smaller, right? So it's that $4,000,000,000 But if you go and look at the broad retail market, it's huge. It's massive.
So what's preventing you? Do you have the lanes and you have the expedited expertise? What's preventing you whether it be competition or new customers that you're working whether developing relationships, What's preventing you from taking a lot of share in that business or at least pricing out the extra capacity that you have to fill it up?
Yes, Matt, let me start. So you're making it, the short answer would be nothing. One of the things that you will be seeing from us even more than you have in the past is a lot of bias towards action and constructive impatience. We are shooting extremely hard to actually grow with that segment fast. So the proof in the pudding is, well, words are easy, let's see whether efforts and results are not being confused here, right?
So the efforts are clearly there. We want to grow dramatically in that segment. The 1st part of the year in a very tough environment has shown us we can and we are and no nothing should prevent us from keep doing that and accelerating that.
Great, thank you.
Matt, could you pass it back to Jack?
Great. Thanks, guys. This is Jack Atkins with Stephens. First of all, thank you for having this Analyst Day. It's been very informative and great to hear the strategies we look forward.
Couple of questions from me. I guess, first, as we think about the incremental margin potential within the LTL, Expedited LTL business, we sort of think about maybe low double digit growth in the top line there. I know you didn't give individual revenue growth, but just kind of thinking about that conceptually. And then getting to a 15% margin that would imply about 18% or so incremental margins. Historically, they've been better than that.
What would prevent you from seeing something in the 20s or maybe mid-20s in terms of incremental margins within Expedited LTL, given that you're going to be leveraging your footprint there? And then I've got a follow-up question on drivers, but I'll let you take that one first.
So your question was what would prevent us?
Why shouldn't you have something like mid-20s incremental margins at LTL? Yes.
I mean what would prevent us from doing it is if we didn't have success growing the density and bringing in the heavier weight shipments into the network that were within that premium TAM that we were just talking about. We believe we can and we believe we will. We've modeled, as your math suggests, some slightly higher incrementals on it. What would prevent us from doing it is if we just weren't successful or the cycle was such that there wasn't enough freight where we wanted to get it. But we are not really inventing anything terribly new other than putting a pickup and delivery on our network and that gives us the ability to go after this kind of freight.
Everything else about it is the same.
Okay, got you. And then just following up before handing over on the drivers, as we think about sort of how your percentage of outside miles fluctuates through a cycle here, Obviously, outside miles go up, but when the truckload cycle eats up and they come down when the truckload cycle comes down, I know you guys have done a lot to improve your recruiting there and that was very clear this morning. But can you talk about what you're going to be doing to sort of stay ahead of the truckload cycle and ahead of fluctuations in terms of just the broader sort of macro so that you can kind of keep those outside miles down and keep PT down So you just don't get behind in terms of your driver pay. Is that something that's going to be a focus going forward and would love to hear more about that? So let me
thank you, Jack. So I'm going to start and then I'm going to ask Kyle and Chris perhaps to add some color to that. If you look at the last year, Jack, we actually started getting PT as a percentage of our transportation spend going down when the times were really, really tough still. So even at the kind of peak of the driver shortage like mid year last year, kind of into fall of last year, our PET% started coming down. And this goes back, Carl, to your point earlier.
Yes, a market cycle helps or hurts because it makes it tougher or easier. And completely separately from that, we actually objectively got better. And that's the SEO, SEM type of a bit more surgical and analytical way of attracting and keeping drivers than perhaps in the past. So my first statement would be, we know empirically from the last 12 months, we actually are getting better even when times are tough. I'm not sure whether you Chris or you Carl want to add anything to that.
You need the mic. And I know that once we're through with this, we're going to come over to this side here.
And then we'll go over to Bruce.
Okay. Bruce, yes.
So just to add to Tom, Tom is spot on. It's a great question. The market there's a percentage of what takes place of talent attraction or capacity attraction that's dictated by the macro. And that to Tom's point is always going to take place. It's what you do outside of that that sets you apart.
And the efforts what I talked about this morning, the efforts we're making, if you look at over the last 18 months plus what we've done to not fall back into that behind the cycle position, you continue to take rate increases, right? You continue to look at your market competitiveness on rates and other offerings to your fleet and you make sure that you're staying in a sweet spot in a market range to make sure you don't fall behind. So what's easy to take place is when you get into a loose capacity market, which we've been guilty of in the past is you don't pay attention. You take your eye off that ball and then you fall behind and when capacity tight, now you're playing catch up and there is a lag cycle to that. So we learned from that in the past.
We're not going to let that happen again. We're going to stay focused on the digital approach and making sure that we're staying in front of our audience and attracting the right people, the right drivers, but then also making sure that when that cycle turns we are positioned ahead of market or in the right space in market to not lag behind again.
Hey, Jack, just one add on. Can we light up Chris's Mike right here?
Yes. Jack, one thing that I've been with the business 23 years and I saw those same things that you talk about. But the change that probably made the most impact was moving to fleets, where 2 years ago fleets meaning a driver owner operator owned more than one vehicle made up less than 6% of our overall fleet. Today, it's nearly 30%. And what you get with the fleet owner is a more educated businessman that has less turnover, provides better service and stays with us for the long term.
In fact, and we talked about fleets 2 or 3 years ago trying to go out and get fleets, but the difference is we started to incentivize fleet owners to grow 3, 4, 6, 10 trucks. And it's made a real difference in both our ability to grow teams in spite of the macro, because from an owner operator standpoint, it gives them an opportunity to grow as our business grows. And it also give us a heck of a lot more stability in our fleet.
And as we've seen in our driver board, those educated fleet owners are more educated businessmen and businesswomen. We actually have both.
Sorry. Good account. You guys decide.
Well, thanks. I really do appreciate you guys having an Analyst Day. And I got 2 questions, if you don't mind. The first one's on intermodal. And obviously, when you look at the map, you're east of the Mississippi.
Do you have plans to go west? If so, would you like to do that through M and A or Greenfield operations?
Yes. So really our concern like getting to the actual West Coast, that's probably going to be an agent. We'll probably use an agent on the West Coast, probably use an agent up in the Northeast. I don't think we want a company store there. It's just not a real friendly environment for our model.
But there are some other places that are not all the way to LA that are pretty good that we may look at to do a company store and have company drivers. So it's not off the list of things to do, but it's just not the emphasis right now. We've got plenty of other locations we can grow into and have plans to grow into before we go west or go northeast. Okay. And
it's a bit that math exercise that we talked about before, which is so one of those criteria has to do with employee, employer friendliness, competitive environment. And so we create these opportunities, right? If we have the perfect opportunity that's west of the Mississippi on every single count, except for perhaps we don't like this particular geography quite as much as some others, they might still score out well enough to be in our hopper, right? So but it's a math Everything else being equal, obviously, what Matt, what he said makes sense.
Okay, thanks. And then last question on Final Mile. Do you worry about it becoming a crowded space? We see XPO, J. B.
Hunt, Ryder and now FedEx seems to be embracing the Final Mile too. So do you worry about it being crowded? And also when you're in your final mile delivery, do you go into someone's home and like set up appliances and things like that? Or is it just more dropping off, say, patio furniture?
Let me start. And then again, one thing I do want to also make sure is when and this is to all of us here on this side of the virtual table. So when we obviously answer questions, we should say everything it has to be said, but not everything has to be said by every one of us, right. So let me start and if there's obviously anything that you want me to add and add it. So the first question is the first answer is, I'm very confident that we will play in that space in the same way we play in every other space.
And that's if you go back to that training muscle of highly sensitive value add. So to your question specifically, it's not a drop and run. It's a value add. So yes, we do install that washer dryer unit. We do install that dishwasher because again, if all we did was being a last mile drop off person, there's other people in that business, including the ones that you mentioned, right?
If this is about bigger than a box, tight time windows, value add, in this case, getting a tight time window and installation. I like our odds.
Hey, thanks. Selwyn Clark, Deutsche Bank. Getting back to expedited LTL for a second. How has your outlook on this business evolved as Amazon has started to build out its own internal aircraft and sortation capabilities?
This one actually, I mean, I can any one of us probably can answer. Who wants to go first?
You guys? Sure.
Yes. How has it evolved kind of over time?
Yes. Just kind of how your outlook has evolved. Is this something you see like X Y LTL growing with? Or is this eventually potential competitive threat down the road? Just kind of how do you think about their entrance into the Air business?
Amazon's
entrance? Yes. Okay. Sorry, I missed that very important word. I think we're not viewing them right now as a competitor in the present market, but I think you always have to think about Amazon as a competitor sometime in the future.
I think everybody thinks about that. And you have to think about how do we differentiate our service from their service and remain relevant in our market. I think our total addressable market is large. Matt believes it's larger and I hope he's right in terms of like 3PLs and things like that. I think that there's always going to be a need for those folks that aren't driven by Amazon or part of the Amazon network.
There's always going to be a need for expedited LTL. And if you look at where the market space is going, just in time is the sweet spot and we play in that all day long. Precision, precision, precision and you'd be hard pressed to find somebody who gets it better than us.
Let me just perhaps add to that one. The same way we had a conversation about the 3PLs, domestic forwarders historically and still going forward, obviously, 3PLs international forwarders, Amazon. I'm very, very confident that for any and all of those segments and that company, there is a time sensitive high value part where they actually are knocking at our door. So we can actually do that part for them. The same way that the global transes come to us or the FedEx rates come to us or the UPS rates come to us, international airlines, they will come to us for some part of that because it's outside their highly efficient drop and run box model.
Okay, thanks. And then just kind of continuing on that. You gave a lot of information on your customer size by type. Could you give us a sense of how that breaks down by customer size, how much your largest customer is as major
piece of our revenue. So I think the major piece of our revenue. So I think the diversification across customer size is achieved as well. There was a slice in the LTL, which is a good example of that called other. And we were talking about what exactly is in other.
There's a lot of stuff that moves through our network that is not from a big customer or anyone you would have heard from. So I think we have a good measure of diversification across customer size as well as cross customer set and that will continue to be the case. There's a lot of small and midsized businesses that access our network. So I hope that's
And clearly back to your point, I mean, when you're talking some of the giants on the customer side like the Amazon's, Walmart's and so for some of our transportation supply chain kind of competitors and other players in that space, we're not even close to having a double digit margin, double digit of our total revenue base customer, not even close.
Okay. Let's go over to Bruce.
Bruce Stent from Stifel.
I want to echo the thanks gents for hosting us today. I know I was pick on pool, but I can't help myself. So I appreciate that it's a long sales cycle in that business, but I feel like we've been talking about adding these additional customer verticals for a number of years now, the pharma, the industrial. So I just want to get your sense on the timeline for building out those customers. And then two follow ups there.
The first, how much if any is e commerce in pool? How much is Amazon? And the second question to Mike's point is, you talked about network investments in pool, where are we in terms of the network and as we build out these additional verticals, how much investment is required? Thank you.
So I'm going to start on that one and Matt or Mike if you want to add to that. So the first question about like how much patience or how constructively impatient are we about walking up this business. We have a, obviously, a shareholder responsibility, which is value maximization of our business. And that's true for Forward Air overall. Some of our shareholders actually are sitting here, so can speak to you directly.
So we want to maximize the value of your shares. That requires that actually every single one of our pieces of our portfolio, we have 4 reporting segments right now, steps up and contributes at the level that Mike summarized a few minutes ago, right, where we're talking about double digit growth, top line double digit margins. So now it's a team sport and every one of our team members has to participate. So we're stretching and pushing. I talked about walking the retail piece up to the top performance part of the retail piece for all of them.
I'm talking about the additional segments with P and L ing every single one of those segments and see kind of what's the value capture that we're actually getting there. And we do have a responsibility to deliver the type of value that you would expect as a shareholder from us as a company and each one of our businesses. And I'm very, very constructively and patiently holding all of our segments to that same standard.
In terms of the investment, there really isn't any significant investment. We're not currently planning to stand up new terminals or anything like that. You might see an automated conveyor show up in
com And then just as far as e comm
exposure or Amazon exposure, is there anything to mention there?
No. No. No. No. They don't plan that today.
Okay. Good. Let's try Bascome here. We'll go to the middle.
We'll work our way.
Bascome Majors Susquehanna. Tom, you come from a commercial back ground at a very large global organization and you gave us a pretty high level overview of the strategic objectives for the sales organization here. Can you talk a little more about tactics? When you came in, what did you see that you felt needed to change to really supercharge organic growth in whether it's incentives or structure or new talent, how you're what you've done so far and what that's going to look like over the next 6, 12, 18 months?
So the short answer would be yes to many of the things that you just mentioned, but much perhaps more substantially and that's a team sport between primarily Matt and myself. So the first thing I think I should say is if you look at the DNA of companies and yes, I came from a FedEx, I came from a DB Schenker. A lot of companies have a major and some of them are operations driven, some of them are sales and marketing driven. For a long time with Forward Air, with the domestic forwarder base, one of the brilliant ideas that got executed very, very well was that the domestic forwarders, one were a channel, but they also were indirectly a sales force for Forward Air. So if you look at sheer numbers, our sales force at Forward Air actually in sheer numbers is smaller than you would typically expect by just benchmarking other companies.
That may or may not change very quickly, but one thing that Matt and I are looking at extremely closely is everything from sales force size and structure. Do we need to have enterprise sales people that actually then take that cross selling that we put up on that chart a bit more kind of deeply more quickly. Salesforce size and structure is certainly one of our pieces, but then everything actually from a salesforce attraction, same thing, Karl, you talked about for the overall people force or Forward Air, attracting people, managing the business of sales using CRM, you saw that on the chart, so that this becomes more of a science, less of an art. And then also obviously sales force technology to make sure that we understand the profitability of the business and also sales force compensation. All of these things actually individually inside each segment, the sales force has done a tremendous job of doing.
The one thing we are doing because frankly, I've seen it world class, we've done it world class before, we're just going to get extremely consistent, attracting, developing, assessing, rewarding those salespeople and the overall sales force size and structure will be adjusted also. In my mind between the sales force leaders and we have very, very strong sales leaders on our team, Matt, myself and then certainly with the support of the team here, that's a team sport over the next 6 to 12 months where I feel very confident that this is not going to be a marathon that's going to be more a mid distance race at best to get to where I wanted to be.
Thank you for giving me a chance to speak here. 1, if I can make a quick comment because of the question Matt asked about Page 27 and the market being $4,000,000,000 for 3PL having provided the data, the total LTL is a $43,000,000,000 dollars The 3PLs control over $12,000,000,000 of it, but the size which is the target for them at a high premium is the force. So that is a very good number. It's only expanded. So there are opportunities even more to grow in it.
So just because I provided the data. I have two questions. 1, want to really ask Matt because he was putting daggers in me when he talked about pool distribution because I had a role to play and you're getting into it. You mentioned about your businesses are asset light. Food Distribution has become kind of like asset based business.
And with some of the competitors going out of the business, e commerce affecting it, You mentioned that your EBIT is going to go up to 5% when your other businesses, drayage and LPL, are at double digit. Is that a business that you should continue to be in or take the resources and assets and reinvest that in becoming bigger in the LTL and the trade. So I'm going
to actually so you talked to Matt, so I'm going to give him a chance to answer also. But I do want to just very, very strongly reinforce the point that we had just in the conversation with Bruce, which 5 minutes ago. You and I are on the same page on one very important point. It's our responsibility and not 10 years from now, but now to maximize shareholder value. And we have 4 businesses and you just pointed out one of them, all 4 of them have a role to play in that.
And we are holding all of them to a very high standard, stretching them to either stay there, advance or get there. And that's our responsibility to do with some constructive impatience.
Yes. I mean, there's nothing really to add beyond that. I mean, you handled the question with Bruce, which is a similar question, which is they've all got to be measured, they've all got to hold up. We've got to return shareholder value. That's what we'll do.
And the second one, the last one is, you've company started focusing on serving the 3PL freight forwarders. The business units that you have now, many of them are going directly at a shipper. Your dray business, BCOs are direct shippers. Your final mile is with some direct shippers. Even in final mile, you're competing with Pilot Airfreight, which is a customer of yours on the freight forwarding and LTL side.
Have you looked at what it could mean for your company now that you've got full door to door capability to go directly to all the shippers? And yes, it will put you in competition with freight forwarder, but that seems like a natural evolution. You have an advantage over them. All they are is the sales agent. Why not look at and then look at what your market size could be total.
So there's a couple of quick answers to that one. The first one is there's a beautiful term that got coined probably about 20 years ago called coopetition. Sometimes it's competition, sometimes it's cooperation. So and
perhaps to put it differently, this
is an and not an or. I'm very, very confident that forwarders have a role to play and we can actually help them sharpen their value proposition and be extremely compelling for a good part of what they have been doing and will be doing. At the same time, for those aspects, whether it's in the model today, whether it's parts of LTL tomorrow, for those aspects, where those domestic forwarders do not credibly find a way together with our support and partnership to differentiate themselves, that's where the end comes in. We will support them and we will also work with other segments and including PCOs directly if and when there is no value proposition for us to play. I was with an international forwarder, as you know, for the last 3 years.
I spent time with many, many PCOs who said told me to my face, Tom, for this, that and that, we need you guys because you have a value proposition here. For this, sorry, we're going to go to these guys directly. Because those conversations are playing out, we're smart enough to make sure that we are taking advantage of both sides of that equation.
But that will actually expand your total market target market. Helps that point.
Okay. Let's Seldon took Amit's question, so I'll give Amit a question. And then we'll go to Ben.
Great. So Deutsche Bank, we appreciate the time. Thanks very much. First question is more macro. The transportation and logistics industry seems to be kind of going through this dramatic evolution right now and sort of right in front of our eyes through trial and error.
A lot of that spurred by e commerce. So it's a $500,000,000,000 market today going to $1,000,000,000,000 in 5 years. Has a lot of real implications for some of the KPIs you watch, whether it's length of haul, weight per shipment, proliferation of supply chain, things like that. So I guess, 1st and foremost, if you look at your business on the expedited LTL side, how much of your business you would say is really e commerce centric today? And second, how does your business what are some of maybe the opportunities and frankly risks because just yesterday there were reports of another large shipping company that was looking to incentivize airfreight, which could or could not be good for your business, I don't know.
It seems like your weight per shipment is £600, which is a little bit heavier. So any sense there of threats and opportunities as this evolution continues in front of our eyes? And then I have a density based question. Thanks.
So we talk about this obviously all the time. I'm going to let Mike and Matt tag team this one and I'll take it to a minute time out about you doing that.
A lot of the freight that goes through the expedited LTL network, think of as finished goods, I'll call it retail freight. And what we've seen is driven by e commerce and some of the trends we talked about earlier, a general reduction in the length of haul as you see the regionalization of supply chain, a general reduction in the weight per shipment as you have this kind of lighter, less dense freight moving through the network, seeking an expedited channel given the increased service requirements around that freight. It's hard to know if a piece of this freight was a double click or whether it's following a different channel through a retail mall. We're a wholesaler. But we definitely see that trend has happened this decade.
I think our weight per shipment over the course of since 2011 is down from like 14%. That's an opportunity for us as long as we can handle it properly, as long as we can price it properly. DIMMs come into that discussion. But at the same time, that base load density gives us a place to grow into other intermediaries we talked about earlier and put density on top of that, maybe get higher incremental margins and take advantage of that as we grow the network out.
Yes. So, Selwyn, I actually had this exact conversation on Friday with Lance Small, who runs our field sales on the LTL side. 10% to 15% and the reason why we this is for certain that we know 10% to 15% could be more, but we know at least 10% to 15%. And that's because those certain domestic freight forwarders, we know exactly who their customer is that they're working with. It's been mentioned that name has been mentioned a lot today in this room.
So we know that that is e commerce. But beyond that, we get into the murky, we don't know. So at least 10% to 15% today. And that's because the focus of those particular domestic freight forwarders is on e commerce.
Got it. And just on the density because I think this is such an important driver of a network based model. It seems to make a lot of sense that the PUD kind of platform feeds density into the point to point. That makes a lot of sense. But it would be helpful, I think, to just understand the runway there.
You run, what was it, 18 or you said you mentioned something about kind of lanes you run every day. And it would be helpful to understand kind of how many of those lanes are balanced or unbalanced and what the utilization of those lanes are so that we can get some sense back to Jack's questions about how much incremental spare capacity utilization is there? And then just as a quick tack on intermodal,
one of the
interesting things is in drayage, we're seeing as more containership traffic migrates east, there's a lot of understand kind of are you seeing any of that secular shift? Because I think it has implications for also intermodal traffic too. Thanks.
Should we object as compound or something compound question? Yes.
The first part again? It was the density,
any KPIs around how we understand density,
unbalanced lanes. You can just lay on PUD as
I think what you're
Yes, sure. However you want to attack it.
We'll probably lap the establishment of the more owner operator based PUD network as we go into the second half of the year. I think that it's going to take over the medium term, let's say, to stand that density up to where it's kind of flowing all the way through and driving a higher weight per shipment. Most of the leverage you get is on the line haul. The PUD is just feeding that.
Any capacity utilization on the line haul? Any spare capacity utilization on the line haul?
Well, we don't with the owner operator model, we can add given the cycle and where we are in the recruiting discussion we had earlier, we can bring capacity on, bring capacity off. We don't have a tremendous amount of door pressure in some of the key nodes in the network. So we have room to move that freight and I don't think PUD is going to choke that in any way. On the intermodal? Yes.
So I think what you're referring to is inland ports, right? Like a right outside of Charleston there's an inland port, Savannah has got an inland port, they've got a new port that's north of Atlanta, where kind of the carpet companies are. If anything, we see those as opportunities still. I know the idea is to take more trucks off the road, rail it. We've personally seen experience where they did a spur from Charleston to a particular area and they're actually taking the containers off the spur and putting them back on the road because the transit times were so short.
So if you're kind of playing in the premium space, you don't really have that time for that extra rail. We play in that all day long. We actually see it as an opportunity. And in fact, we try to set up around those areas because there is going to be that little final mile piece from that because the spur doesn't go right into the company. There's got to be a final mile piece wherever that spur goes to.
So we try to set up there as well. So we'll set up at the port and then in the inland port. So it's an opportunity for growth.
Thank you. Let's go to Ben. And then I think we're at your closing remarks after that. Okay. Yes, we
got a couple in, if that's okay. First one on the terminal side, I think both you and Mike have talked about success being measured by your 1st terminal opening away from an airport. Is there any sort of reasonable timeframe that you have in mind for that first to happen? And then at 92, what is steady state in your mind for this network when it's all said and done for the number of terminals in the network?
So I think for the first question, if you ask a very specific question, do we have a terminal outside the airport network preselected? No. Have we had conversations about it? Absolutely. And again, I'm a big fan of we talked about it as a team on multiple fronts on something that's called fail fast.
So try something that you think intuitively makes sense for some rigor and analysis behind it. And if it works terrific and if it fails then fail fast and then do it again. So there's nothing that should be preventing us from getting there reasonably quickly.
In terms of the number, I'll look to Chris for help, I mean, 10, 15, it kind of depends on how much demand there is, how success we are, how successful we are in growing 3PL. But I think the main lanes that we can reach, we know what they are and it's just a question of how could we evolve the network to get there over time.
10 to 15 more.
I mean just to put a rough number around you because you were like what's the end beyond 92. I think there's some key pockets that you'd want to go after that.
And then
Tom, I want to come back to the GRI initiative that you have and maybe it builds off of Satish's point. Obviously with the current concerns that we have about the broader macro at the moment, pricing concerns in the industry. What opportunity does Forward Air have to kind of price above market? You've got this untapped growth opportunity that you've talked about on the domestic 3PL side. A quarter of your overall revenue is BCL oriented, but very small if any within expedited LTL.
We can envision that perhaps over time growing. Do you view this as an above market pricing opportunity that Forward Air has in front of it to monetize the network in the face of what's becoming a tough pricing environment?
Yes, I mean this is a it's obviously a very complex topic, but I think I'm very, very firm and confident about some things to be true. One thing that we're going to be always true to is we are a high quality provider and we need to be fairly compensated for the exceptional precision execution we provide. So we will be holding very firm to a firm pricing philosophy and firm pricing execution. Meaning, I mentioned this many times before, depending on what your faith is or so every year there's Easter, there's Christmas and there's a price increase. And all three of these things happen to be true and will be true for us.
So, now having said that, we have to be realistic what the market takes. Sometimes you have inflation, sometimes you have 0 inflation, sometimes you have labor shortage, sometimes you're not. And we have to make sure that those rates are realistic. The second thing I strongly believe in, when we select the business that we should be owning, if we find customers, it goes back to the density point, if you find customers who can give us more business that we can leverage our existing assets for, we also, Matt and I talked about this and we are executing on it. I'm a big fan of save more as you spend more, meaning you can there's a firm pricing guideline.
If you hit it out of the park of giving us profitable business in predefined tiers that are significant growth and that leverage our assets density of our network even more, I'm very willing to work with people for rewarding them for the incremental good business that they're giving us off of a pre existing pricing structure that we hold very firm to. This may sound a bit more complex than it's meant to be, but the baseline is we are a strong believer in being compensated for what we do. We are also working with customers. If they give us more good business, we're going to find ways to incent them to do that. The third thing I've just in principle I want to say, the fastest route from here to a bad spot is giving business away.
The best companies on earth are holding very firm on quality and being compensated for it. We are one of them.
Okay. Let's go to closing remarks, Tom.
So I should certainly before I get into the content pieces, which is only a half dozen of them, we're 5 minutes away or so from 12 noon. This is a precision execution company. So being on time, delivering what we do thousands of times every single day is a big part of that. Delivering you back to the rest of your day is a part of that too. So I do want to say before I get into these points, a big, big thank you to all of you.
You didn't have to be here, you chose to be here. And I should also thank you for those of you who have trusted us with your business over the last years and are investing in this company over the last several years. Thank you for that. We're going to do everything possible to make it worthwhile for you going forward also and to be a to make it easy and lighter for you to be part of the Forward Air team, whether it's covering us, whether it's owning us, we want you to be on our team. So thank you for putting a big foot forward by making this investment and we're going to do our part to pay back to you.
If you walk away
from here, there's perhaps 6 points I would like for you to remember. And you heard these things throughout the last 3.5 hours. We are in the precision execution business. Remember, this is how we started taking that airfreight down. So everything we should be expecting from Forward Air has that in common, a DNA of precision execution.
When you look at mentally this chart with all these dots that came together in the LTL footprint and then all the other footprints, we have a tremendously powerful national network across all of the U. S. So there's a precision execution DNA and it's covering the United States. We as a company have found a way, especially also over the last few months to really, really, really get focused. Remember that compete supporting them with tools, rewarding them.
That's one way of commercially representing Forward Air across all of what we do. And we also have one set of KPIs, disciplines, processes from an operational perspective, how we run each one of these factories in a very consistent way. We talked a bit about numbers and it's a high quality problem when you look at a chart where you say, we are very good at what we do, our customers are telling us we always want to get better. And we own only 5% of the market that we actually are addressing. And then we have a beauty contest of whether the 5% really are only 3% and there's 97% open.
That's a terrific problem to have, a high quality problem to have. So there's significant untapped upside. Mike, you mentioned at the end, we are a for profit business that actually strives to get better. So we are looking for double digit growth and for double digit profit margins as we are growing. And this is a final kind of ask for a little bit of team sport and team energy.
So let's try this together. So I talked about why we're in business. And I said earlier, there's very simple ways to get this across. So hopefully, you're all ready for this. So and we can all say this out loud together, actually speaking together actually releases energy.
So and it's bigger than a box and it really matters, think forward, Okay. So thank you very much and thank you for your support.