Thank you for joining Forward Air Corporation's Fourth Quarter 2018 Earnings Release Conference Call. Before we begin, I'd like to point out that both the press release and webcast presentation for this call are accessible on the Investor Relations section of Forward Air's website at www.forwardaircorp.com.

With us, this morning, are CEO, Tom Schmitt; and CFO, Mike Morris. By now, you should have received the press release announcing our fourth quarter 2018 results, which was furnished to the SEC on Form 8-K and on the wire yesterday after the market closed.

Please be aware that during this conference call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the company's outlook for the first quarter and fiscal year of 2019 and those forward-looking statements identified in the presentation.

These statements are based on current information and our current expectations. As such, they are subject to risks and other factors that may cause actual operations and results to differ materially from the results discussed in the forward-looking statements.

For additional information concerning these risks and factors, please refer to our filings with the Securities and Exchange Commission and the press release and webcast presentation relating to this earnings call.

The company undertakes no obligation to update any forward-looking statements whether as a result of new information future events or otherwise. And now, I'll turn the call over to Tom Schmitt, CEO of Forward Air..

Thank you, Stacey and good morning to all of you on the call. Before Mike here highlights our record results, let me give you a snapshot after my first five months here with Team Forward Air. Before starting here in September, I was told I would find great people, rock solid operations and lots of untapped upside.

Now, its five months later, and I know what I was told, was actually correct. I did have no oh surprise moments yet. And so we went to work when I got here in September and set out three priorities together. The first one is obvious to finish 2018 strong.

And together as a team, we did on nearly every dimension that matters, financials and most importantly actually safety. Our overall accident rate was down 20% last year with a big drop in severity. More work to do but a significant step in truly living a safety culture.

The second priority we set out was achieving a solid profitable growth here in 2019, and we are one-month in obviously and we are executing. Yes, we do have some headwinds of slowing growth. And at the same time, we are pulling all the levers to make sure, we actually make out and even compensate or overcompensate for any headwinds that we face.

Good example, perfect example is actually revenue management, which we have started to go into in a very, very precise significant rigorous way. People like great value, as a company, through our exceptional service and I couldn't be more proud of that, with significant investments though in both human and capital.

So what we actually need to make sure, as we create that exceptional value, that we capture our fair share of it. And we did go through, we reassessed our rates, we reassessed surcharges, accessorial charges with that mindset.

And we are making some necessary adjustments to be more simple, more compelling, and in some cases, frankly, more market competitive. For instance in oversized charges and also in predictable annual rate reviews, this year resulted in a 4.9% GRI in May. We also are making an adjustment in the oversized charge with that same effective date in May.

Our third priority that we set out to do is shaping a multiyear beyond 2019 picture, where we take our capabilities in time-critical and high-value shipments and stretch them to all they should be.

Whenever there is a bigger than partial shipment that actually has to get there on time and damage free, think Forward Air, think Forward for freight, Intermodal and increasingly also for final mile, we got it covered. We give you peace of mind, you do what you do. And we take care of you when it matters most.

In that context of giving that peace of mind with that exceptional service value creation value capture, two of our business units LTL Intermodal have hit their stride on their journey beyond 2019. In LTL, we are stretching more and more into B2B door-to-door. And for 3PLs, we're doing that for domestic and International forwarders.

We also are stretching more and more into B2C final mile. We currently have actually over a 100 trucks on the road each day, providing over the threshold installations of heavy bulk appliances, interactively expanding in that space. We're far from done. In intermodal, we got a great acquisition integration and execution machine going.

And they'll keep doing this, potentially bigger, faster, at the maximum scale for the returns that we have come to expect. Frankly, our other two segments, Truckload and Pool, they do fit our purpose perfectly. We give you peace in of mind when it matters most to you. And we are stretching those two businesses.

In Truckload, both on the fleet and the brokerage side, and in Pool, with automation that drives margins in retail. And we also are taking a sharper operating model into other verticals where that value creation and capture is very, very compelling.

So having said all of that, nearing 2018, a solid profitable growth by 2019, and now a multiyear picture in the making beyond 2019, how high is up for that beyond 2019 picture. We simply will be all we can be and should be as a business. And that's true for our business units.

I just briefly sketched that out, but also for our first class supporting and enabling functions. We are going to adopt more and more evolving technologies as soon as they make a difference for us.

That's true in the office when it comes to taking very, very specific rigorous actions on a length-specific basis, on a customer-specific basis, that’s true in our terminals, where we actually enhanced our automation on an ongoing basis.

It's also true on the road, where we use a lot of real-time monitoring for enhanced productivity but also for enhanced safety, which gets me back to safety, the thing that matters most. We are going to be world-class in safety by any metric that matters. Talking about world-class, we also are going to continue making this a great place to work.

I know logistics may not be the sexiest industry on earth. But there are logistics companies that are absolutely first-class and are making these professional homes of a first-class level. I noticed from my own past with FedEx where I spent many, many years. Logistics companies can be absolutely top-notch places to work.

Forward Air certainly is one of them. Talking about top-notch, Bruce Campbell and his amazing Forward Air team have created a wonderful base, full of possibilities, and we will turn those possibilities into a remarkable reality together. We are far from done. Bruce Campbell also brings one other and final note to mind.

Yesterday, we filed an 8-K, announcing changes to our Board of Directors. And after a long successful career Bruce Campbell is retiring this May. I'm very fortunate. Bruce actually will remain a resource to me and our leadership team for the next two years.

And following Bruce's retirement, it is also a testament through the solid game planning here and solid execution, it's expected that I will replace him as Chairman. And that Craig Carlock will replace Bob Campbell as our Lead Independent Director.

As lead for the past five years, Bob has done a great job supporting our growth and he will actually remain on the board. And at the same time, Craig's background is very much aligned with our future objectives. And we are looking forward to working closely with Craig and the entire board to leverage their diverse experiences and insights.

Here at Forward Air, we will never confuse efforts with results. And our results give me a lot confidence, in fact, tons of confidence. So, with that, over to you Mike..

Thanks, Tom. 2018 was a record year for Forward Air across every key financial metric. I personally want to thank the operations and corporate teams for an outstanding job done. We generated a lot of cash flow last year, which we deployed towards growth and shareholder returns.

Our growth investments included continued CapEx spending on equipment and technology as well as acquiring two Intermodal companies. Our shareholder initiatives included a 20% increase to our dividend. And our repurchase of $66 million worth of stock, which lowered our year-over-year fourth quarter share count by 2.7%.

Our leverage increased slightly in 2018 and remains at roughly 0.25 turn of EBITDA. Over time, we will look to optimize our capital structure by carrying a more permanent level of debt, which we do not expect will exceed one turn of EBITDA.

As we developed the growth strategies and platforms that Tom described in his remarks, we are also planning an Investor Day to communicate the future of Forward Air. More details to come, but we're currently targeting June 25 in New York City. Finally, we have launched a new Investor Relations website, which can be accessed at forwardaircorp.com.

We consider it the go-to place for our investor information. So please check it out. With that, Stacey, let's open the line for Q&A..

[Operator Instructions] And we'll go to Jack Atkins with Stephens. Please go ahead..

Hey, good morning, Tom and Mike. Tom congratulations on your promotion to Chairman later on this year..

Hey, Jack, if you could hold on one sec. Stacey, we are having some disruption on the line..

Jack's line is open..

Hey, guys can you hear me?.

Yes, if could speak slowly. There's some interference on our line..

Sorry about that, guys. Just wanted to say, good morning and congratulations to Tom..

Thanks, Jack..

Thank you, Jack..

So let's kind of dive in here first on the Expedited LTL segment for a moment.

Could you maybe just talk about how the fourth quarter progressed in LTL relative to your expectations? And sort of what type of peak season did you guys see relative to your expectations?.

Jack, I do apologize. We're really hearing a lot of crackle on the line. But I think you were talking about fourth quarter LTL relative to our expectations. So maybe I'll start there. And Tom, you can comment as you want to. So from a tonnage standpoint it fell short of our expectations. But we did very well from a yield standpoint Jack.

We get this question, so let me put out our tonnage per day throughout the quarter. It was down to 4.2% for the quarter. For October it was down 3.8%, November it was up 0.5% and December was down 10.6%. We are from a tonnage standpoint lapping the upturn. We had a pretty stiff comparable in 4Q 2017.

And we do expect a stiff comparable to remain for the first half of 2018. The calendar was also a little tough in December with the loss of a Friday and Christmas moving to a Tuesday. Our Airport-to-Airport tonnage was down. But I think a good story in here was that our door-to-door daily tonnage was up. And the driver there was 3PL.

That tonnage grew over 100%. And our shipments in 3PL grew 68%. So we're excited about the progress that we've made in door-to-door. But Airport-to-Airport is still the bigger number and weighed down our tonnage. Yield did very well. You see the numbers in our press release with fuel and without fuel. We got a tailwind to our June 2018 GRI.

And also growth in door-to-door helps yield, because we're getting paid more because we're doing more things. We're picking it up and delivering it. When you strip all this out and you look at revenue per ton per mile and you lash out the length of haul and wait for shipment effects, it was up 6%. So it was very strong.

So despite the tonnage decline, we thought we did pretty well in the fourth quarter..

Okay. That's great.

Mike, can you hear me a bit better now?.

It is a little bit better now. Yes..

Okay, great. Sorry about that. Must have been an issue with my headset. So that's helpful color, Mike. Thank you. And let me kind of pivot a bit and sort of ask, Tom, you talked a good bit about reassessing rates and accessorial charges in your prepared comments. When you think about 2019, sort of, where we are? I know it's early in the year.

But what portion of the work that you plan to do on the rate side do you think has already been implemented? And how would you expect rates and yields within the core Expedited LTL business and perhaps other segments as well, to trend as you move through 2019?.

Yes. Completely fair questions. I mean, let me perhaps put the whole revenue management piece in context. And it all goes back Jack a little bit to your question about tonnage trends. The one thing that we are doing extremely consciously is managing the quality of the business that we're getting.

And as our – actually, I think if it's good for our customers, it's also good for us. We want to make sure that we move the things that actually really matter a lot of them. Good for them. And then, frankly, from value-creation, value-capture perspective also good for us. So that's why tonnage is important, revenue is important.

But I have always liked saying, if it's just revenue on its own that's income salaries. So we are very, very precise what type of business we're targeting. And you might actually see some of the top line and even the tonnage being impacted. But there's a lot of precision and rigor that we are actually inserting to that process.

So having said that to your specific question about how much of that is done versus not done. So what we are going to be doing and I think I've mentioned this on my last call, we want to make sure we are extremely predictable and plannable for our customers, and frankly, also for our own business. So, there will be a rhythm to rate adjustment.

So on the basis of that is obviously a general rate review. That's not only true for LTL, that's most relevant there, but it's true for all of our business lines. So every year depending on your denomination you may have -- you may celebrate a bit different events. But for many people there is on December 25 every year Christmas day.

That will be every year a rate review. And it's going to be date similar and so that people can actually budget and plan for that. This is where the main review for LTL this year comes in and there will be a similar rate review next year.

The second thing is on the surcharges and on the accessorial charges, so we went to some of them and you will start seeing the impact, I mentioned oversized, where we were frankly not competitive in what we charge, but extremely competitive in the service that we actually provide.

That adjustment will come together with the GRI in May and we also are making very certain that our customers get something that is expected by them and is comparable to our lead competitors, especially also in fuel. So fuel goes up fuel goes down. That's obviously a market symptom not a Forward Air specific symptom.

But we need to make sure that we are in the range where our leading competition is. And we are making sure with that by adjusting our rate table actually next month in March. So Jack from a very specific perspective, the first kind of set of adjustments you would see over the next three months between March and May.

And then there will probably be a second wave a little bit later where we actually go through some of the other accessorial charges. If we provide additional services where we frankly so far haven't reflected that fully there maybe something coming.

But on the basis of a rate adjustment or rate increase every year, fuel surcharge being competitive and the oversized charge I think a lot of what you will be seeing, you'll be seeing between March next month and between May. So, nothing much yet in act in practice. A lot happening in March and May.

And then we often go to other surcharges accessorial in the second wave. And then maybe a second part of that coming later..

Okay. Great. Tom, thank you for that color. Let me ask a couple of more questions and I'll hand it over. But within the LTL segment, again, just sticking with that business for a moment.

Could you give us an update on where outside miles trended in the fourth quarter? And Mike should we think about -- I'm just a little curious how we should be thinking about purchase transportation within Expedited LTL in 2019? Do you feel like you've been able to turn a corner there? And do you expect to get some traction within the PT line in 2019?.

Yeah, Jack, I'll take that one. So first off broker power was 25.9% of miles in the fourth quarter of 2018 compared to 21.8% of miles in the fourth quarter of 2017. So PT is still a headwind. The truckload market loosened in the fourth quarter. But it's still relatively tight and notably for teams and teams are very important in our fleet mix.

We need to have the optimal level of teams during to run the long-haul lanes in our networks, with the greatest efficiencies. So we did turn the corner a little bit. The broker power was still greater quarter-on-quarter.

Where we made a lot of progress was the LTL team’s ability to improve density in the network and also our new pickup and delivery structure where we use owner-operators lower our PUD cost while PUD was growing in our network. So our billable talent per mile was up about 2.5%. And we got a lot of leverage on the new PUD network that helped lower cost.

That may not be the areas where you expected us to be turning the corner maybe some were but that is I think part of turning the corner. We do anticipate, PT headwinds remaining knock on wood. They'll abate a little bit, but it is still a challenge to get teams.

And we really need teams to provide the Expedited service levels that we promise our customers..

Okay, okay. Great. Last question for me, and I'll hand it over. Just on cash flow, excellent free cash flow year in 2018.

Mike, could you give us some insight into how you're thinking about cash flow in 2019? Should we be expecting improvements in terms of free cash flow on a year-over-year basis? I know, you don't want to give specific guidance just trying to think about the direction of cash flow year-over-year in 2019 versus 2018?.

2018 was a stellar year. And working capital played a big role in the levels we achieved. I'm going to remain conservative and assume that as our revenue grows our working capital may not perform as well, but I think working capital will kind of be the swing factor between how 2019 stacks up to 2018. The tax rates have already worked their way through.

We don't see any big fundamental shifts in the model. So I think working capital and the assumptions you've put in your model Jack will kind of be the driver of year-on-year..

Okay, okay. Thank you again. Congratulations on a great fourth quarter..

Thanks, Jack..

Thanks, Jack..

We'll go to Ben Hartford with Baird. Please go ahead..

Good morning, guys. Tom maybe just to come back to couple of the recent comments you made the remarks in the opening.

So well, but how high is up? When you talk about -- when you think about Expedited LTL over the next several years it sounds like based on fourth quarter and some of the comments that you had just made that there might be a little bit more of a lean towards yield as opposed to volume.

So is there anyway that you could give us an idea as to what you think kind of an annual revenue growth profile is for Expedited LTL over the next three to five years? And maybe what the mix is between yield and volume in that number? Thanks..

Ben, I am going to -- first of all I am going to give you a little bit of a flavor that's semi-quantitative. And then Mike, if you want to add to that that would be terrific. The one thing I do want to say upfront, this is end not in or.

So we definitely are getting extremely precise to make sure that we actually move the business that really is the critical business for our customers because that's frankly where the value creation for them comes in and the opportunity for us getting our fair share. It's the kind of making sure it's -- we are actually actively matters most part.

So that really is getting to your point Ben about focusing on the quality of the revenue and on yield. Having said that, for us, we believe there's tons of upside also in actually the market share that we should be going after. Specifically -- and it goes back also to the previous question that Jack had about kind of PT and what we see there.

We've had a -- I think a very tremendous good trend over the last few months in terms of getting better with our surgical driver attraction and retention efforts. And frankly we are going above and beyond with our team to make sure we do make this the most appealing professional home for drivers. The success actually starts coming.

We also are getting up another notch with driver contests going forward beyond in the traditional tools that we've been taking. So I do expect us to be able to dial that valves about quality of revenue yield that you've been talking about. And at the same time, make sure we get a bigger amount of quality drivers going forward.

So we can actually dial a number of valves which is the quantity of revenue because; frankly with Expedited LTL and going beyond airport-to-airport, we talked earlier about increase in door-to-door. We have a lot of upside in terms of possibility and opportunity with our customer segments, the three PLC, Domestic International Forwarders.

If we serve three or five airports for one of them today, there's the next five or 10 airports we can be serving for them. So I do believe and I'm not sure it's 50-50 in terms of the impact, this is a modeling exercise that we are doing and that you also are doing.

But this is clearly a somewhat equally balanced end between the quality of the revenue yield and the actual volume that we're dialing up at the same time because we can increasingly based on our increasing ability to attract and retain drivers at levels more recently that we have not seen in the year before..

Okay, that's great. That's helpful. Thanks. Mike, if I could come back to your comments on the fourth quarter, I guess specifically, was there a reason that you can attribute to the volume shortfall relative to expectations? You guys have been expected flat volume. It was obviously down.

I know we had a comp issue, but just normalizing for that, any specific drivers of the weakness? And maybe in that vein, obviously import volumes have been relatively healthy at the start of the year.

We have heard any thoughts on tight warehouse space across the West Coast? Can you talk about having the impact -- positive, negative neutral to your business as you see it in the first quarter in terms of the balance of the year given some of those dynamics?.

Yes I don't have any specific details for you, Ben, in terms of this did that and this did this. But we did see reductions in our airport to airport tonnage. But as you mentioned, we made a lot of that back on door-to-door daily tonnage.

In terms of the import volumes, I mean that probably takes a few weeks to work its way through to our intermodal business. Once that congestion works itself out maybe a two to three week lag before it starts showing up at the Midwest railheads.

We are in the first quarter, a little concerned about the flow-through effects of what was probably a partial pulled forward into the fourth quarter, followed by an early Chinese New Year, which I think started this week. And as those Asian factories close given two to three weeks and you see volume slow on the intermodal side.

So, probably a little more headwind on the intermodal side for the last part of your comment..

Okay, that's helpful. Thanks. And then one last one with respect to the free cash flow point of view. Maybe, could you provide an update as to where you sit from an acquisition front, and anything imminent? If not what would be the most likely use of the excess free cash that's likely to build here in 2019? Thanks..

Yeah. Not -- I don't have any transactions to announce for you today. Our capital stack stays as it has been. Free cash flow, obviously, covers CapEx. We're going to continue to do a healthy amount of CapEx. A lot more in technology now that we've gotten our trailer fleet age down to an optimal level. We've been swapping out some old vintages.

But we're going to divert some of those saved CapEx cash flows into some pretty heavy technology spending to support the types of initiatives that Tom talked about earlier. We'll cover our dividend and then we'll see where we are in M&A. There is clearly an M&A game plan in the intermodal space.

But we're also looking at M&A in other spaces and final mile. We're looking at M&A in different pockets of the portfolio. And then whatever is left we look to buyback. As we've said publicly before, we like to roam at around about $20 million of cash on the balance sheet to provide necessary liquidity.

But we'll see where multiples go in 2019 based upon the macros. We got a lot of dry powder in terms of our cash flow, but we also have a lot of dry powder in terms of our underlevered position. And who knows if the cycle rolls over and assets become little cheaper and multiples compress, yeah, it's a great time to grow the company..

And then let me just reinforce, Ben, the point Mike that you made. There is a lot of mind share on our and going into inorganic growth where it makes sense. And over the last few years you've seen this intermodal. And Mike you mentioned last mile. So there’s a lot of mind share.

We do believe, obviously, that we always will have the discipline to use our cash flow in the most rational way. But we also believe frankly that with the untapped upside I talked about earlier, some of those best options may not only be share repurchases. So I think to be continued and more to come..

Okay, that’s great. Thanks for the time..

Thanks, Ben..

We'll go to Seldon Clarke with Deutsche Bank. Please go ahead..

Hey, good morning. Thanks for the question. In terms of your Q1 guidance, you're guiding to lets call it high single-digit revenue growth and low single-digit growth in net income.

Could you just help us walk through the puts and takes implied by that guidance? And maybe why some of the operating leverage momentum that you saw in the fourth quarter wouldn't continue into Q1?.

Yes, I'll take that Seldon. So we are a little concerned about the continuation of elevated PT cost. As I mentioned earlier, we made a lot of progress on solos. But we do need to make some progress on teams. Obviously, tonnage levels are going to drop quarter-on-quarter which could impact our density.

I don't know what weather is going to do, but it is a bit concerning. Nice down here in Atlanta, but in other parts of the world, it's pretty difficult. And finally, Seldon, we do see an increase in corporate cost. We have some self-insurance headwinds. We have some CEO transition cost.

And we are making some corporate investments to enable and support the growth that Tom talked about in revenue management. I mentioned, IT, safety, recruiting. We are going to do a little bit of spending on the corporate side so that we can enable and support the growth. That's my bridge if you will in response to your question..

Okay. That's helpful.

And I guess just in terms of intermodal, could you give us a sense of what the Southwest acquisition contributed to intermodal results in the quarter? Maybe like what the right run rate is to think about that business going forward?.

Well I wish -- I knew the right run rate with this outstanding team we have. We set high expectations and they just continue to obliterate them. From a revenue perspective, Southwest was about $3.5 million last year..

For you guys?.

Yes, I'm just giving you some clarity. So the intermodal revenue quarter-on-quarter was up about $8 million. And about $3.5 million of that was Southwest. Southwest is a very important acquisition for us. We're thrilled to have them be part of the organization. Puts us in that Texas market. We're very bullish on that market.

We think it's a big growth opportunity for us. A big expansion of our footprint. So whatever positive answer I give you I'm pretty sure they're going to do even better..

Okay. That's helpful. And is there any -- I guess on that side, you're a little bit less impacted by the PT.

So I'm just kind of curious as to should we see a step down in EBIT from Q4 to Q1 in intermodal?.

That depends. I'll give you a little more color. It really depends on how the continued acquisition integrations go. Southwest is working it's way through. We made a lot of progress on Atlantic. And we may have more progress coming there..

The challenge I think Seldon overall that we -- it's a high-quality problem that we see is a when you do even with a -- I am not even talking about potentially larger acquisitions that fit the same high-value, high-return criteria that the tuck-in acquisitions have been playing. So there are may be larger ones around the corner.

We definitely are putting mind sharing to those. But even if it's only in quotation marks highly accretive tuck-in acquisitions like the Southwest which is a great acquisition as Mike mentioned. There probably will be -- over the last five years we had eight of those. So, there will be more of those even in 2019 more likely than not.

So, doing the quarter-over-quarter always will have that lag effect of partial years or partial quarters from the next acquisition starting to kick-in. And then you lap it, obviously, so you know the modeling as well better than I do. So, you'll have that going on. You'll have that going on most likely in 2019 also.

And then I would call that a high quality problem of just making a comparability a bit more difficult. And then on top of that I hope to have the even higher quality problems at some point.

So, do we have that same issue with a larger acquisition?.

Yes, Seldon, I was pausing for a sec looking for a number on a crib sheet. Let me reference back the earlier comments I made about concerns around important rails per congestion. And then the flow-through effects of Chinese New Year. Those are some headwinds.

I know that the recruiting discussion tends to focus on LTL, but intermodal is also seeing its owner-operator fleet down needs to destroy that. That puts some PT pressures on. So, without giving any specific guidance, Seldon, we got some good guys and some bad guys that we're going to have to see how they shake out through the course of the quarter..

Okay that's helpful. And then just last one for me on the LTL segment. Pardon me if I missed it earlier.

But did you give January tonnage?.

I did not. But it's a good question. Quarter-to-date LTL January tonnage is up 1.6%..

Okay. And could you give us -- just given the initiatives, could you give us a sense of how like revenue is trending on a per day basis? Just given the focus on yield.

I feel like it's -- tonnage is kind of not as useful given the growth you've seen in yield over the last couple of quarters?.

Yes, there's a lot going on in the revenue line. It's obviously impacted by fuel. But it is in line with our expectations..

Okay. I appreciate the time..

Thanks Seldon..

Thank you..

We'll go to Kevin Sterling with Seaport Global. Please go ahead..

Thank you. Good morning Tom and Mike..

Good morning Kevin..

Congratulations on a very nice quarter. So, let me start with your intermodal growth. Obviously that's quite impressive.

So, where are you seeing most of that growth? Is it mainly East Coast? And is it -- some for these intermodal rail spurs we see popping up in the East Coast to help relieve congestion? Can you kind of talk about some of the dynamics that we're seeing that would really help drive that growth?.

Yes, I mean, there is organic growth in terms of price and volume. We talked a little bit about. To the extent there was some put forward effect in the fourth quarter. It's inorganic growth through the two acquisitions that we did last year. But when those acquisitions come in there tend to be cross-selling type synergies.

I'm not a big fan of that word but it's very true here. Where customers of the legacy platform can't get into that Texas market with us or get into that Southeast market with us. The way that they could once we make that acquisition. So Atlantic that was a huge part of Atlantic, I think, you'll see more of that in Texas.

And vice versa the companies that we have acquired didn't have that footprint in our Midwest locations and so you see a lot of pickup coming from that. Another aspect of the inorganic growth is the top grading process that the CST team does when they come into an acquisition. They do a lot around rates around charging for accessorials.

And so as you kind of blend all this together when you got good a macro tailwind it's driving a lot of growth in intermodal..

Got you. Now that makes sense. Thank you, Mike.

And you talked about the Midwest, do you see opportunities for maybe expanding beyond the Midwest or the West Coast in intermodal?.

We're not really looking at the West Coast. We like our footprint as it is. We think there's a lot of opportunities to continue to build presence within our existing footprint. But we have recently with Southwest, we've grown into the south if you will. Texas, maybe that's the Southwest.

But also looking further East, and maybe a little bit North, in the Northeast. But we'll see how all of that shakes out..

There is still open spots on the map quite a few of them. And frankly, I need to be very specific about this. Even in the market spread where we are very present, I mean, that just heavily exchanged this morning with Matt Jewell, our President of the Intermodal business. And he and the intermodal team in Dallas and his team they just spend some time.

And that's even in the markets where we have a very, very significant presence. There is still quite a bit of upside there. And then to Mike's point, if you just take the map of the U.S. Atlantic certainly has -- certainly white spots or significant upside.

So I am very, very bullish on the opportunities to grow in spaces that are hitting our sweet spot in a tremendous way. And I think I mentioned it even last time.

We have -- this is a machine that that team, the CST intermodal team basically almost drove to perfection over the last five years of knowing exactly where we can provide significant value and then to capture our fair share. And we have a screen. We have targets. And there is quite a bit on that list that is more than growth-bound to pursue.

And so yes, geographically certainly Midwest South, as Mike mentioned. But also the Atlantic seaboard is still -- has a lot of open spots where we can actually make a lot of a dent..

Great. Thanks for that Tom. Tell Matt to keep up the good work..

You just did..

Keep working him hard..

And then we'll go to Bruce Chan with Stifel. Please go ahead..

Yes. Good morning, gentlemen. Congrats on really nice quarter here. Maybe just a quick one on the CapEx side, Mike. You talked about pivoting towards a little bit more IT spending and tech planning. Can you give us a bit more flavor on where that's coming in? Maybe just by division or by platform? I know you guys had some nice success with TCG.

So just a little bit more color on where you're going to be spending that CapEx?.

Well, to do everything that Tom is asking us to do my answer is everywhere. I think you're going to see a lot of organic in term – sorry, internally developed capabilities.

And I think you'll see us like the TCG examples bring in outside technology, where it makes the most sense to let us stand up these operational goals and the support functional goals. I think it's going to be pretty widespread through the portfolio and not really concentrated in any particular place Bruce..

And then Bruce, I am a big fan of simplicity. This maybe actually overly simple, but the way, I described it before and the reinforcing Mike your comment about the balance or the ubiquity of that. I mean, obviously if you think about technology and how it impacts our business? There is quite a bit of that it's in the decision making.

You mentioned just yourself those TCG, right? Being extremely knowledgeable about customers, but also industry verticals lanes of traffic and kind of where good business is more than in other places. That's obviously something that we're standing up right now.

We're getting every single week more precise about what's good business for our customers and for us. That's actually – that's basically the decision-support kind of office environment. Then, you go into the physical basis. And then in a lighter sense you have buildings terminals in each one of our businesses.

And you have on the road, right? And you bought us those spaces I've mentioned examples before. Especially in our larger facilities, when it comes to dock automation. Yes, some of it is frankly, just good business where you look at the flows inside the terminals. How can I shorten the ways and how can that simplify the flows in and out.

But some of it actually is obviously automation.

And so that – we are turning some of that up, and then on the road there's a lot of that as we're doing with real-time monitoring of – kind of what's good practices in – for our drivers has helped us all helped us with coaching and so there is a lot that we're doing in that space making sure that we actually have a lot of on-the-road insights into kind of how we actually operate that business.

So I think back to your point Mike in all three of those almost in a very balanced way also across all of our business lines it's – that would be technology investments in the office, in the building of operationally and on the road..

Okay. Great. Thanks. The flavor is certainly helpful. And then yeah, maybe just one more on a TLS since it hasn't gotten a whole lot of love here today.

What are your all thinking in terms of when we start to see some of the top line bleedings stand? And where we stand as far as some of the Reaper opportunities that I think you'd identified for that division a little while ago?.

I'll start Bruce, and Tom can chime in. I think next quarter should be the first quarter in a year where revenue gross has TLS. You recall -- I think it was actually your question, the four act play example I gave of the actions that truckload has taken to respond to the upturn and the capacity tightening that happened in the fourth quarter of 2017.

To recall, we played a long game with our customers and honored our commitments. And then took the opportunity to see great relief in the greater ability to broker. So, I think you'll see us turn the corner in terms of revenue growth in the first quarter of this year. Having fully lapped that process.

Reaper is a growth opportunity for truckload, and I think as we have the strategic discussions that Tom described in his beyond-2019 comments, we'll have a better perspective about where that fits in longer term..

Perfect. Thank you..

Thank you..

Thanks, Bruce..

And that does concludes Forward Air's fourth quarter 2018 earnings conference call. Please remember the webcast will be available on the Investor Relations section of Forward Air's website at www.forwardaircorp.com shortly after this call. You may now disconnect..