ArcBest Corporation

Greetings and welcome to the ARCBEST fourth quarter 2020 earnings conference call. During the presentation, all participant lines will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, February 2, 2021. I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead.

Welcome to the ArcBest Fourth Quarter 2020 Earnings Conference Call. Our presentation this morning will be done by Judy McReynolds, Chairman, President, and Chief Executive Officer of ArcBest, and David Cobb, Chief Financial Officer of ArcBest. We thank you for joining us today. In order to help you better understand ArcBest and its results, Some forward-looking statements could be made during this call. As we all know, forward-looking statements, by their very nature, are subject to uncertainties and risk. For more complete discussion of factors that could affect the company's future results, please refer to the forward-looking statement section of the company's earnings press release and the company's most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. We will now begin with Judy.

Thank you, David, and good morning, everyone. 2020 was a year we won't forget. The pandemic caused uncertainty and disruption in our customers' businesses and in all of our lives. At ArcBest, we were challenged in new ways, but because of the character and heart shown by our employees, we turned many of those challenges into opportunities. Our people creatively and purposefully served customers and executed well on initiatives to improve efficiencies in our business. I'm proud to say the hard work of the ArcBest team produced the second best non-GAAP operating income in the last 14 years. We positioned ArcBest to be more responsive to customers and to meet their changing needs. We look to customers to inform our strategy and the deep relationships we build allows us to know their needs and pain points and to use that information to develop options and solutions. Our approach worked well in 2020 as we recognize the unique nature of the pandemic effects on our customers. As a logistics solutions provider, We've worked alongside our customers and capacity providers to move essential goods to their destinations and to normalize disrupted supply chains. The opportunities we have at ARCBES are tremendous and we are committed to growing the company in any economic environment. We have a multi-year strategy and last year, despite the pandemic, we made progress in three important areas. Expanding revenue opportunities, balancing our mix of revenue and profit, and optimizing our cost structure. 14% year-over-year total revenue growth for fourth quarter is representative of our progress. Our total revenue growth was made up of solid asset-based growth of 8% and significant asset-light growth of 27%. ArcBest's quarterly revenue growth resulted from expanding customer relationships and onboarding new ones. Our assured capacity options and the seamless integration we provide created value in the marketplace. As a result, we gained momentum on our goal toward 50% of our revenue coming from our asset light segment, with asset light revenues representing 35% in the fourth quarter. Returning ABF freight to historical operating Martians has also been a long-stated goal for us. And I'm excited to say for the second consecutive year, we will pay a profit-sharing bonus to all eligible union-represented employees at ABF. This bonus reflects the 2020 95.30R produced by ABF Freight. This is a significant accomplishment, and I'm proud of our team. And now I'll discuss some additional detail on the fourth quarter performance of our service offerings. The fourth quarter results in our asset base segment reflect the positive impacts of improving customer business levels compared to the prior year. On a per day basis versus last year, tonnage and shipment growth in each month of the quarter combined with larger average shipments and the resulting increase in shipment revenue were factors in the fourth quarter revenue increase. In addition to the effects of an improved economic environment, the larger size LTL shipments in our asset-based network were the result of continuing initiatives designed to improve capacity utilization on our equipment and in specific distribution lanes throughout our system. Similar to the previous quarter, we didn't experience a meaningful impact from traditional truckload shipments spilling over into our LTL network. The impact of the pandemic on consumer moving activities caused the timing of the traditional busy period in our UPAC household goods moving business to shift from the second and third quarters into the fourth quarter. Combined with continued growth in residential delivery shipments associated with online consumer shopping activities, this represented a meaningful portion of the fourth quarter revenue increase we saw in the asset-based business. Actions taken by our operations team to manage labor and properly match available personnel to existing freight levels continue to positively impact our financial results. These operational strategies included the use of more local and line haul purchase transportation to supplement our own resources, and thus these costs increase as a percent of total revenue. However, key operating metrics that we watch closely relative to freight handling on our docks, local delivery and pickup of shipments to and from our customers' locations, and efficiency measures in our over-the-road networks improved during the quarter and contributed positively to greater profitability. Cargo care was another highlight in our asset-based business. In this past year, we improved our cargo claim ratio for the 23rd time in the last 25 years. ABF was awarded the American Trekking Association's Excellence in Cargo Claims and Loss Prevention Award for an unprecedented eighth time. These important achievements are a testament to our customer obsession and to our focus on improving customers' experience through safe and efficient handling of their shipments. In addition to serving our customers in a superior way, these actions reduce our costs and improve our profitability. Current market conditions and the high demand for available equipment capacity are positively contributing to the rational pricing environment. our total asset-based revenue per hundredweight was slightly positive in the recent quarter related to changes in account mix and freight profile. The shipment size increase I mentioned earlier impacted comparisons of overall pricing metrics relative to the prior year period, as have lower fuel surcharges. However, increases on contract and deferred pricing agreements secured during the fourth quarter improved to levels last seen in late 2019 and early 2020, before the effects of the pandemic had begun. Improvement in pricing trends on these accounts, which are generally our most price sensitive, are encouraging. In our asset light business during the fourth quarter, further improvement in customer demand, limited availability of marketplace equipment capacity, and an improving rate environment resulted in better profitability versus last year's fourth quarter and the recent third quarter. Additional year-over-year shipments, along with a market-driven increase in average shipment revenue, contributed to the significant top-line growth that we experienced in this portion of our business. As a percent of revenue, costs for equipment capacity from our asset-light transportation partners were higher versus the previous year, consistent with the trends we experienced throughout 2020. Despite the resulting impact on margins, improved operating profit resulted from effective cost management and improved operational efficiencies, enhanced by beneficial technologies and increasing digital connectivity with our customers. At FleetNet, a decrease in total events during the fourth quarter reflected fewer daily events in both roadside repair and preventative maintenance service. Despite having fewer events, solid improvements in average revenue per event contributed to fourth quarter revenue growth over the previous year. Operating income was lower due to a combination of two primary things, the payback of wage reductions from earlier in the year and efforts to maintain a consistent workforce despite lower events. Last year, FleetNet implemented various initiatives to digitally connect with its customers and service providers, and that should contribute to operating efficiencies in the future. To illustrate the progress made in this area, in November, FleetNet received their 500,000th electronic status update from a service provider partner. During 2020, we continued to take actions to enhance shareholder value. Throughout the year, we paid our quarterly dividend and we bought back shares of our stock. David will provide more specific details, and he will also discuss the recent action we took to improve shareholder returns by extending the amount of our share repurchase program. Our strong financial position, combined with capitalizing on opportunities available to us in the marketplace, offers many options for profitably growing our company through investments in our existing businesses. And now I'll turn it over to David Cobb for a discussion of the earnings results and operating statistics.