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Forward Air Corporation (FWRD) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribers – Oct 29, 2021 at 4:00PM

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FWRD earnings call for the period ending September 30, 2021.

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Forward Air Corporation (FWRD 0.92%)
Q3 2021 Earnings Call
Oct 29, 2021, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for joining Forward Air Corporations Third Quarter 2021 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, Rebecca Garbrick. By now, you should have received the press release announcing our third quarter 2021 results, which was furnished to the SEC on Form 8-K and on the wire yesterday after the market closed.

Please be aware that certain statements in the Company's earnings press release announcement and on this conference call are making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements which are based on expectation, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts.

Forward looking statements can be identified by using -- by the use of words such as anticipate, intends, believe, estimate, plan, seek, project, expect, may, will, would, could or should and the negative of these terms or other comparable terminology. This conference call and the company's earnings press release contain forward-looking statements which include, but are not limited to, statements related to future operations and results, any statements of plans, strategies and objectives of management for future operations and any others -- any statements about future financial or operational targets.

These statements are not guarantee of future performance and are subjected to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such 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.

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Tom Schmitt -- Chief Executive Officer

Thank you, David. And also, and most importantly, a big thank you to all of my Forward Air teammates and our independent contractors who made our record third quarter possible, a record quarter that actually culminated in a record month for our company, the month of September. And let me just take a moment to go inside our businesses for the quarter and give you a little bit of a sense.

Intermodal, one of our two segments had a very, very consistent three months period, producing the expected, what we call, double-double, a double digit margin and a double digit growth rate. They are very consistently producing those types of numbers and I'm very proud of our team there.

Then let me go into our other segment Expedited Freight. Two of the three lines of business, Final Mile and Truckload, also were very consistent throughout the three month period. Now the third business inside Expedited Freight, our LTL business was a different story in a very good way.

We executed a transition throughout that quarter. And I mentioned on our last earnings call in July what that transition would be about. We are working and we did work very closely with our LTL customers, eliminating inefficient freight.

Inefficient meaning, lose, oversize, non-palletized from our system to ensure one thing and one thing only that our network is unclogged, and delivers the speedy, no damage, on time service our customers expect.

July and August, inside that quarter were a bit of a handoff of the Peloton from that inefficient freight which we dialed down and out to dialing up more dense high value freight. That Peloton handoff was superb. It also frankly caused us coming in on the revenue side slightly below guidance.

Now in September, the whole thing came beautifully together inefficient freight gone, dense or high value freight dialed up, resulting in a September 2021 over a September 2020, in our LTL line of business, where the weight per shipment was up by about 30%. Our revenue per shipment year-over-year, September was up by about 50% and an LTL operating margin for that line of business for the month of September of 17.5%. We're getting there.

So let me put where we are with the third quarter end of September into context. Let's go back a couple of years on Investor Day in New York 2019 we announced a double-double in the medium-term. We are prepared to go for a double-digit margin company and a double-digit revenue growth on an ongoing basis.

We had a growth over program to go after more high-value freight. Now then, that's when luck means preparedness meets opportunity. We were actually prepared to dial up high value freight. We didn't know that last year, the opportunity that actually came ringing was called COVID.

Now all we did with all the events business temporarily gone, we used our go forward program to dial up high value freight faster, just doing good things faster. So again, like is when preparedness meets opportunity we were prepared, we just didn't know, what opportunity would cause us to run even faster.

So we dialed up high value dense freight at record speed. And that resulted in a first set of double-double months in April and June of this year. So less than two years after our double-double announcement in New York. It resulted in a full quarter double-double in the second quarter of this year.

Again, a double-double in this quarter, which was talking about your Q3, and then obviously, having dialed up our high value freight at record speed, allowed us to go ahead with that exact cleansing who has talked about of our low value, inefficient freight out. And higher value freight in that got us to our record quarter and to the September that we just briefly discussed.

So where do we go from here? October continues to be very, very strong. In fact, again, for the LTL line of business, the first two weeks of October, were the highest and a third highest tonnage week in the history of our company, with revenue about 35% over the same two weeks last year.

We expect that strength to continue, putting us into a position for another record quarter. We expect Q fear sorry, Q4 to come in at an adjusted EPS of $1.27, for a full year EPS of $4.32. We also expect looking forward to next year 2020 we won't do just double-double months or double-double quarters, 2020 clearly will be a double-double year for our company. That takes us to one year further out to 2023 to give you a sense there, we are targeting revenue for 2023, between $2 billion and $2.6 billion and EPS between $6.30 and $6.70 that's comparing to the $4.32 that we expect for this year.

Now, let me talk briefly about that revenue range from 2 to 2.6 that I just talked about. The high end of that range will be achieved only if we step up significantly, with more focus on brokerage, making sure we have controlled access to high quality outside miles when we have to flex up in support of our customers. The lower end of that range is when we keep growing organically the way we have small tuck-in acquisitions the way we have. But it's still going to be significant organic growth on the LTL side, for instance, including a handful or so of terminals that we're going to roll out next year. Secondary terminals that are of significant size in primary markets.

So organic growth will happen that's getting us to the lower end of that range. If we do more aggressive M&A, specifically also enhancing brokerage organically or inorganically to secure the access to our driver pool that we need to support our growth that's what would get us to the higher end of that revenue range. We still feel very, very comfortable with a range of EPS between 630 and 670 for 2023.

So stepping back, before I turn it over back to David, if you think of the last two earnings calls in April, we talked about hitting the stride. In July, we talked about running. I can say today, we're actually at a point where it's stretch time.

So with that, David, I'll give it back to you. And you can open up the lines for Q&A.

Questions and Answers:

Operator

Thank you. The floor is now open for questions and comments. [Operator Instructions] Our first question will come from the line of Todd Fowler with KeyBanc Capital Markets. Please go ahead.

Zach Haggerty -- KeyBanc Capital Markets -- Analyst

Hey, good morning, guys. It's Zach on for Todd. Tom, I appreciate the detail you gave on the 2023 target to sound like the high ends a bit more inorganic, but just looking at the EPS range at $6.30 to $6.70. Is that also an inorganic number at the high end? Or is that organic for both? Because, when I put in the high end for the EPS, I'm coming to a margin that's more in line with where you guys are at. So, just some additional color on the 2023 targets would be helpful? Thanks.

Tom Schmitt -- Chief Executive Officer

Yeah. Let me start and then I'm going to ask Rebecca, to add to that. So we feel very, very strong that on the organic side, we're going to continue expanding our margins. So whatever we saw in Q3, and whatever we saw, specifically in the month of September, I used inside the extra freight segment the LTL margin as a comparison point. We're going to continue seeing improvement there. We always said even back to last year's calls for us as a company to have a comfortable double-double LTL inside Expedited Freight has to be in the mid-teens or better. So that's what we expect for 2023 to be in the mid-teens or better. Let me just leave it there and Rebecca, if you can perhaps add on to that.

Rebecca Garbrick -- Chief Financial Officer

Sure. So just adding on a little more to what Tom said. So if we kind of back up a little bit and just talk through our revenue mix in organic space that Tom talked about. So I just want to add and unpack that for you. In terms of where we've been, right. So if we think back to 2014, we've done 12 intermodal acquisitions that have been true, tuck-in acquisitions. We've gotten attractive multiples. And they've certainly been accretive to our business. So we believe that those tuck-ins certainly will help us in terms of growing our margins as we head into 2023. Then if we take a look at our Final Mile acquisitions in 2019 and 2020, that is certainly indicated that we are capable of extending beyond those tuck-in acquisitions. And we believe as we look through our research that inorganic growth can continue to extend and stretch us more beyond those tuck-ins. We believe that our corporate development teams comprised of highly skilled professionals that have a proven track record. So we plan to use our capital in a way that will focus on achieving a high return on our investment.

And then if we look at our organic growth, as Tom has previously mentioned, about focusing on specific SIC codes, like our automotive industrials and healthcare, where we can capture the high value of that higher quality freight. So as we look to organic growth, we will certainly focus on capitalizing on the growth levers for our LTL business which is a higher incremental margin business. And then that strength of our LTL business will help to support our solid operating margins from our Final Mile truckload and intermodal lines of business. And then as we holistically think about it, we have not made any radical shifts in our tax rates when we came to our EPS range, and we didn't change any of our significant lever ratios. We have thought about these 2023 targets and we believe that targets are reasonable and we think that based on our strategy that we can achieve those.

Zach Haggerty -- KeyBanc Capital Markets -- Analyst

Okay. Appreciate all the color there. And then I guess just more of like a near term question.

Tom Schmitt -- Chief Executive Officer

Zack. Zack, did we lose you?

Operator

Pardon me just a moment.

Tom Schmitt -- Chief Executive Officer

Hey, David. This is Tom. Can you still hear me clear?

Operator

Yes, sir, I can. And pardon me just a moment, I believe he may have -- his line may have accidentally dropped. And I apologies. [Operator Instructions] We're going to go on to the line of Jack Atkins.

Tom Schmitt -- Chief Executive Officer

Thank you.

Jack Atkins -- Stephens -- Analyst

Okay, great. Hey, Tom. Hey, Rebecca. Good morning. And congrats on a great quarter.

Tom Schmitt -- Chief Executive Officer

Thank you, Jack.

Jack Atkins -- Stephens -- Analyst

So, I apologies, if I missed it, I kind of hop in between calls this morning. But I guess I would just love to maybe dig in a bit on some of the longer term targets that you laid out with the 2023 outlook. If I understand it correctly, the revenue range has acquired revenue in there, but the bottom line ranges is more organic. I guess, can you maybe help us think through some of the bigger pieces that are going to be moving you there from a core business perspective, I think it's really encouraging that you're talking about earnings growth into 2023. But would just like if you could maybe kind of expand a bit on on the strategy to drive that core earnings base higher in 2023.

Tom Schmitt -- Chief Executive Officer

Okay, thank you, Jack. And I'll do it in kind of broad strokes. But hopefully, I think that will give you a pretty good sense. So again, you won't be pointed out correctly, that revenue range is pretty broad. There's between 2 billion and 2.6 billion. The only difference on the revenues engine that's a significant difference is like a $0.5 billion differences, if we do things beyond the execution of the current business model, which is high organic growth, complemented with tuck-in style acquisition.

So if we did brokerage, like super high organic and or an acquisition of a brokerage, just to make very certain we are both ROIC friendly, and we also have access to our quality drivers at all times, so that we can flex up our LTL and TL volumes, the way we would need to, we might do an brokerage or acquisition, or we might just organically share has tremendous experience in growing brokerage businesses organically.

That's the difference between the 2 billion and 2.6 billion. It's brokerage enhanced one way or another. And it's also but we did the Chain B haul on the LTL side, if we actually want to, in addition to building out significant size terminals, which we will do over the next year.

If you in addition to that want to do a bigger LTL acquisition, that's considered there. The quality of the revenue is tremendous inside kind of the low end of that 2 billion to 2.6 billion range. So that's kind of 2 billion, 2.1 billion. And that would assume from what we're ending up this year 1.6 or so that we have high organic growth that's high quality organic growth.

This is where I said, I fully expect us with a high value of freight that we have right now that we are going to continue moving up the LTL margins into the mid teens, and perhaps even slightly above the midpoint of the teens over the next couple of years.

What we did in Q3 and in September, specifically to me, is the clean starting point for where we're at right now. The quality of the freight even in a looser environment allows us to actually price it in a very disciplined way. When you do a relatively kind of low value, low density e-commerce products, if the market gets softer, I think it's going to be harder to maintain pricing discipline.

When you do high value dense freight and Rebecca mentioned some of the industries like medical equipment, high tech, industrial parts, spare parts, for those types of higher value moves I like our odds tremendously of having the same pricing discipline or better in the next two years that we had in the last two years. So that hopefully gives you a bit of a flavor where that 2 billion to 2.6 billion comes from and increasing quality of what's inside the lower end of that range organically.

Jack Atkins -- Stephens -- Analyst

No, it absolutely does. Thank you for that Tom. So I guess maybe shifting gears a little bit and I'd like to talk a bit about your vision for your LTL network. As you look out over the next several years. You know, I think historically the expedite LTL business that Forward Air has operated has been heavily reliant on 3PL as the principal customer base there. With some airlines and at some of the integrators just customers as well.

As you look out into the future, Tom, is that still the way you think the business should be structured or do you think that also there's a role for working directly with the actual ship or the beneficial cargo owner would make sense over time as well?

Tom Schmitt -- Chief Executive Officer

Yeah. So the first thing I should say -- and this is Jack not a question asking directly, but I do want to give you a little bit of a broader sense in our other lines of business. So inside expedite freight take final mile, even truckload or certainly take intermodal, in those lines of business, we have a tremendous amount of experience today already working directly with BCOs with people who actually make stuff or ship stuff directly. So LTL, your point has been a bit different in that way. The vast majority of what we do is through third parties, domestic forwarders, international forwarders, airlines, PPPs.

Going forward, this will be an end not an ore, so we are building out selling directly to BCOs to commercial shippers. We also are working very closely with our kind of forward or PPL partners. They tend to go after medium sized large complex shippers and designate a vast space available to us into small medium sized business arena, where we actually complement what we do with our middlemen type customers versus stepping on their toes. So this could be an engine.

And by the way, those domestic forwarders, international forwarders, they will always be super important to us. And now especially that that our freight is higher value freight for them, we're going to continue working with them on that because they frankly, once the type of service we provide, the reliability the speed, to know propensity to damages for those types of moves, and they're going to continue using us we're going to do everything possible to be by far the most compelling partner for them that makes them win.

At the same time, there's ample space, ample space, selling more to BCOs directly in the SMB space, where we are complementary to what I just said about the forwarder customers. I like our ability to grow on both fronts tremendously, and frankly, doing this in a very, very complimentary partner based way.

Jack Atkins -- Stephens -- Analyst

Okay. That's exciting to hear. And it really opens up a pretty significant portion of the market to you as well. I guess maybe, again, sing along the lines of the both the thinking about the longer term nature of the LTL business. But how are you thinking about the ideal asset intensity of that business over time, as you look to sort of grow your network, add more terminals. Does it make sense to remain principally non-asset based business, when you think about the trucks that sort of move the freight around your network? Or do you think about maybe having more company controlled, company owned equipment, make sense over time as you as you add capacity to your network?

Tom Schmitt -- Chief Executive Officer

Yes. To me that this whole game is about access to high quality resources. So when I talked before enhancing our focus on brokerage, think about it this way. So in a soft economy, we have a very small but sped superbly qualified staple of employee drivers, we always did have that we always will have that. We have our core roster of independent contractors who frankly have been tremendous with us for decades.

Now what you've seen the last year, in our cases -- there will be cases where our customers are calling on us and they will want to rely on us to be moved they're afraid and they're asking us to flex beyond those two sources of power. Enhanced focus on brokerage means finding access to quality power that allows us to flex up in those situations. That's what we're going to be doing that does not mean Jack that we should be buying a whole bunch of trucks. It does means that we should have quality access to high quality drivers and brokerage allows us to do that organically and inorganically depending on what gets us there better.

The same with terminals. The vast majority of our terminals aren't on long-term leases, we do own a few and as we build out strong second terminals in primary cities and primary locations, we will do whatever it takes if that in some cases means actually owning a piece of property we can do that. We are very much in the asset light spectrum. Leasing some and buying one or two will not get us out of that asset light spectrum. Remember Columbus, we do -- we are doing a significant expansion. This is actually a terminal that we own. So, that is our own capital that we're putting in there.

To me, go forward picture is high organic growth with access to quality resources, in some cases it might require a capital, again, think of Columbus. And it may be that one or two of our terminals that we're going to be expanding into requires that in most cases, it's ensuring access and does not require buying something. Good example is the brokerage business that's just allowed us to flex up and down in a high quality way.

Jack Atkins -- Stephens -- Analyst

Okay, all right. That's helpful. And then last question for me, and I'll turn it over. But as you think about doing more with these BCOs versus 3PLs or freight forwarders, obviously, those are going to remain a very key customer base for you. How do you think about the final mile attachment and not thinking about B2C final mile, but B2B final mile taking that cargo to your customers in location versus having them coming to your facility to pick it up? Where is that attachment rate today? I think that's the way we long time ago talked about it is that final mile attachment? Where is that today and where do you think that goes over time, and do you need to make investments in that local cartridge network to make that happen?

Tom Schmitt -- Chief Executive Officer

So, first of all, I mean, if you look at it, the way we actually check, and you notice as well as I do, the way we typically tend to talk about it is airport-to-airport versus door-to-door.

Jack Atkins -- Stephens -- Analyst

Right.

Tom Schmitt -- Chief Executive Officer

That has gotten from a take 20 years ago, even like 12 years ago, where it was 100% airport-to-airport that has gotten to roughly 50/50. And my expectation is as long as we keep doing more premium freight, from anywhere to anywhere that attachment rate is most likely to go up.

Jack Atkins -- Stephens -- Analyst

Okay, OK. That that makes sense. Thanks for the time Tom. Appreciate it.

Tom Schmitt -- Chief Executive Officer

Thank you, Jack.

Operator

Our next question will come from the line of Scott Group with Wolfe Research. Please go ahead.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Good morning, guys.

Tom Schmitt -- Chief Executive Officer

Morning.

Scott Group -- Wolfe Research -- Analyst

So lots of mixed changes in the quarter, maybe can you just help us with the monthly cadence of tonnage and shipments throughout third quarter, and if you have some thoughts on October?

Rebecca Garbrick -- Chief Financial Officer

Sure, Scott, I can tell you. So for the quarter, our daily tonnage was up 8% year-over-year. So for the month of July, it was 7.5%, in August, it was 7.7%, in September it was 9.1%. As we look, quarter-to-date, in October, our year-over-year daily tonnage was at 13.1%. So we are certainly seeing a growth and an increase in that daily tonnage. And as Tom mentioned earlier in the call, we've seen some record tonnage come in, in October.

Scott Group -- Wolfe Research -- Analyst

Curious, do you have the same thing from a shipment basis. And what I'm trying to understand also is with this mix shift and shipments down but ton of job, do you feel like you have excess capacity in the network or not?

Tom Schmitt -- Chief Executive Officer

Yeah, actually, that's -- Scott what you are actually pointing toward is exactly what we intended to achieve. So we roughly speaking tonnage wise, are in a small to medium growth space. I mean, what we just talked about 13% up October year-over-year. On the shipment basis, as you pointed out, we're down. So these are much frothier heavier more dense, higher value shipments that we're actually delivering for our customers.

That's exactly, what we want to do. At the same time with shipments being fewer, our floors look so much cleaner. And that when you walk into one of those terminals to you will actually look emptier, they have more space. So what that allows us to do is as we grow and again, I said organically, we're going to grow significantly double digits in LTL12% 14% 16% year, every year.

In revenue, this gives us actually room to stretch into. We would have been, if we had not adjusted the mix. The way we did over the last several months we would have been run out of space in some of our core terminals. And this would have been screwed up the exact customer base with the exact high value freight that we actually want to move where the on time performance including in like damages would have would have gone up on performance would have gone down.

So there's a significant a significant upside on capacity, that the cleansing of the freight that we did allows us to do. We still believe that the way we intend to grow those second terminals in primary cities, a handful of them open next year. There'll be something that we will be putting in place and need to be putting in place at the same time across our network. It almost feels like we have 15% to 20% more capacity.

Last point to that Scott, my immediate project EagleEye in collaboration with Oliver Wyman, we actually estimated like how much additional capacity the cleansing of the freight gives us. And again, 20% is not outside the realm of possibility here. So we in essence created 20% more capacity without changing any brick and mortar component.

Scott Group -- Wolfe Research -- Analyst

Okay, helpful. Can you talk to Tom, about underlying pricing trends and expectations going forward?

Tom Schmitt -- Chief Executive Officer

Hi. So, we have a pricing discipline, I think today and perhaps going back over the last couple of years great teams have Stefan Bush and Mark, Kathy Fox a group of now nine people that used to be three people two years ago, with tools that they should be using and are using in a very, very surgical way.

And pricing actually in a way that makes sense for us and our customers, longer lanes differently from shorter lanes because of team driver demand versus solo demand, sort of destinations very different. We had a very aggressive price increase GRI earlier this year, which we needed to take to make sure we invest in the drivers in technology and safety that our customers expect of us. And that we actually always make the moves for them and not punt.

We're going to do the same thing again next year. I'm I feel very bullish about the price increase GRI in February, it's going to be necessary, but it's also going to be what actually puts us in a position to be the best possible provider for our customers to take our acceptance rate next year will be similar to what we had this year. But the beauty Scott is, again as mentioned a few minutes ago with a high value freight, the MRI equipment goes to a hospital, when we do this, the best possible way and we are the most compelling provider with the fastest service and hitting the tight window and make sure that it's actually not damaged, we can ensure that pricing discipline much better than if you moved a whole bunch of frogs.

Scott Group -- Wolfe Research -- Analyst

Okay. And then just last thing, where are we from a events projects business today versus where we were and what have you assumed in terms of the 2023 guidance in terms of how much that comes back?

Tom Schmitt -- Chief Executive Officer

Yeah. Great point. So I'm not sure about you, Scott. But last couple of weeks I went to a conference. Actually, it was the South Carolina International Trade Conference, which in 46 years of its existence had highest in-person attendance last weekend. So that was promising. And I've also been to my first couple of concerts for last few weeks.

Having said all of that, if you look at the overall stats, and I'm not trying to realize that, we planned our Q4 pretty much with a very, very, like sporadic, at best, event based business. There's no cruise line moves built in there. We do believe that in 2022, a good fraction of that will come back.

Percentage wise, it's kind of hard to express. With 2022 its like 60%, 70% of what it was before COVID. That may be realistic and everything else on top, I think, gives us upside against what will be our plan.

So we are planning very conservatively and expect to probably beat those estimates. But we do want -- we do not want our business success to be dependent on kind of COVID disappearance rates.

Scott Group -- Wolfe Research -- Analyst

Okay. Thank you, guys. Appreciate it.

Tom Schmitt -- Chief Executive Officer

Okay. Thank you, Scott.

Operator

And we would like to invite the phone line of Todd Fowler to join us again in the Q&A.. We are going to move on to Bruce Chan. Please, go ahead.

Bruce Chan -- Stifel -- Analyst

Hey, good morning, Tom and Rebecca, and thanks for the question here. Want to talk about the B2c Final Mile a little bit? When you think about the motivations behind your freight cleansing, it makes a lot of sense, right? Higher value, denser, easier to handle. But that also seems a little bit at odds with what we traditionally think of as Final Mile delivery freight, especially when you start to think about integrating those facilities into the network.

So we haven't heard a lot about Final Mile this quarter. Maybe you could offer some comments around the strategy there. Is it unchanged? Are we going to see a little bit less focus on that segment? Are you still pursuing M&A growth as aggressively there? You're going to be more focused on other acquisitions in business lines like brokerage?

Tom Schmitt -- Chief Executive Officer

Yeah. I mean, first of all, I mean, final mile has been a tremendous part of Expedited Freight. And I can't overemphasize, Bruce, I mean, when you look at the last two years, how much kind of local collaboration between the Final Mile business and LTL business has helped us. Final Mile actually helped us launch LTL service in some secondary markets for us, because Final Mile already was there and LTL was not there, so that now is a good example.

And then also, we talked about as before, we do route together in some cases. We also in some cases hold, kind of, inventory in each other's facilities. So there's quite a bit of goodness, where Final Mile, by itself, is a very, very good high growth business for us, that actually helps us with our EPS tremendously and at the same time, makes us frankly, do the LTL business a bit more successfully in those situations I just mentioned.

From a focus perspective, Bruce, I did mention before, we have, in essence, four primary focus areas on the inorganic side, two of them you are very familiar with. Over the last two or three years, we built these platforms in final mile and into Intermodal, and we then put tuck-ins on top of it, Intermodal as it give you another example, very, very helpful to us. When we talk about EPS, more than 20% of that E comes from our Intermodal segment. So we will keep doing these tuck-ins both in the Intermodal space and Final Mile space. Having said that, and it goes back to the earlier part of his conversation. For us getting more access to more drivers in a high quality way is becoming tremendously important.

So in that will guide us more toward doing more of what we started with chain V-haul. Considering LTL acquisitions, this will also guide us to not doing much more in the brokerage space. And again, having a lead of a that actually has tremendous experience in that space will help us whether we move organically, inorganically or both. So this is one of those where what we have done.

What got us here. The tucki-ins in Intermodal, Final Mile are tremendously important. What will get us there will also have additional focus on what I just mentioned more LTL, organic and inorganic as well as more focused in brokerage, which could be organic and inorganic. So there's a bit of a shift where two other areas are becoming more important.

Bruce Chan -- Stifel -- Analyst

Okay, great. That's super helpful. And then maybe just a follow-up question on the driver comment. Where are you in terms of the IP versus broker fleet? Where did that mix shakeout this quarter? And how is it trending?

Rebecca Garbrick -- Chief Financial Officer

Yes. So we certainly as we saw -- as we cleansed our freight, as Tom mentioned earlier. You know, our use of outside power ebbs and flows depending on the tonnage that's coming through. And so, you know, is our shipments -- our tonnage was a little bit lower. In the month of July and August we used less power. And then as we ended the quarter in September, we used a little more power. So we're trending, you know, back up, as to probably where we were, although it's lower year-over-year from an outside used power standpoint.

Bruce Chan -- Stifel -- Analyst

Got it. So as we think about a number for, you know, next quarters, it's likely to be in that sort of sub 10% range?

Tom Schmitt -- Chief Executive Officer

It certainly not going to be sub 10%. It's going to be somewhere between 10 and 20. And again, the way it was to be very clear, the way we're looking at this is. There's nothing wrong about outside power. There's everything wrong about outside power, power that's not the quality and not the cost effectiveness that we expect. Hence, the enhanced focus on becoming more present in the brokerage space that you will see us play out.

We do believe that we will always have flex situations where the staple of employee drivers in IC roster, we shouldn't have them kind of on our roster indefinitely just for the highest peak week or peak month. We will have to access that first source of power outside miles. The only thing we want to make very, very certain we're doing it in a high quality and higher kind of controlled access way. So that's what brokerage comes in. I don't have a problem with that number being between 10% and 20%. As long as it is it is cost effective and the same quality that we would be getting from our IC employee drivers.

Bruce Chan -- Stifel -- Analyst

That's great. Makes a lot of sense. Thank you for the time.

Tom Schmitt -- Chief Executive Officer

Thank you, Bruce.

Operator

Our next question, we'll come from a line of Tyler Brown with Raymond James. Please go ahead.

Tyler Brown -- Raymond James -- Analyst

Hey, good morning.

Tom Schmitt -- Chief Executive Officer

Good morning, Tyler.

Tyler Brown -- Raymond James -- Analyst

Hey, Tom. I joined about 25 minutes late. So if you address any of these questions, please just tell me to read the transcript. But from a modeling perspective, where did you guys exit the quarter in terms of weight per shipment? Was it higher than the 8.14? I mean, I assume that mix shift didn't occur day one of the quarter?

Tom Schmitt -- Chief Executive Officer

The make shift was actually kind of throughout the quarter. Rebecca is actually making sure that I don't screw this up too much. But we have seen those numbers going up month-by-month. We had instances in weeks where that number started with a nine toward the end of the quarter. So that number keeps going up. Do you have any more specific?

Rebecca Garbrick -- Chief Financial Officer

No. That's exactly right. As Tom mentioned, it certainly, we could see it progressively getting better, and better. So, on average, that's where we landed, within the 800. And so, yes, to answer your questions, September was better than the average, given the fact that it was a slow, we saw the slow progress coming from, I wouldn't say necessarily slow, but the progress coming from the month of July, August, and then culminating to September.

Tyler Brown -- Raymond James -- Analyst

Okay. And then you mentioned the pricing is strong. But just to be clear, so your revenue per 100 weight ex-fuel, I think rose sequentially, despite being significantly heavier, that would have depressed yields, at least revenue per 100 weight, right?

Tom Schmitt -- Chief Executive Officer

Not sure.

Rebecca Garbrick -- Chief Financial Officer

Can you repeat the question again?

Tyler Brown -- Raymond James -- Analyst

Just was the was the did the mix with the heavier weighted shipments reduced or depress your revenue per 100 weight?

Rebecca Garbrick -- Chief Financial Officer

I think it certainly puts pressure on our yields. Yes, it certainly does. But, there's also benefit's from having, heavier, denser freight in the network.

Tyler Brown -- Raymond James -- Analyst

Sure.

Rebecca Garbrick -- Chief Financial Officer

So certainly, we did see some pressure on that. But yes, we did actually see the benefits of that that heavier denser freight coming in.

Tyler Brown -- Raymond James -- Analyst

Right, right. Revenue for shipment was up huge. Okay. I get that. Right. Okay. And then you you guided the call at it 4.30. Just round numbers for 2021 you gave 2023 guidance of 650 at the mid point. But can you kind of bridge those two incremental dollars? Just what were the key? Or what are the key drivers there? Does that assume the events business comes back? Are you assuming a rollover in the truckload spot market? Give a buyback in there? I'm just trying to understand what the buckets are? And what is idiosyncratic versus maybe just market driven?

Rebecca Garbrick -- Chief Financial Officer

Yeah. I think, at this point, we're we certainly, willing to share, some of our strategies as as we get there. At this point, we talked a little bit about, the mix earlier in the call and the mix between the organic and inorganic growth. So, certainly focusing, on both of those, as we think about it shifting in our where we land on the organic and inorganic, kind of based on where the freight cycle is at that point in time as we get there.

I think as we think ahead in terms of our operating margins, we are certainly focusing on something that's better than a double. And that's driven by our LTL line of business. You know, we plan to capitalize on those growth levers, since that is a higher incremental margin business, and that LTL strength of that operating margin is supported by our final mile truckload, and intermodal, lines of business.

As Tom mentioned earlier, we deeply into scale our brokerage business, we believe that that will help us to provide, some synergies in it. As we think ahead, kind of below the line of operating margins. We're not expecting any radical changes in the tax rate. We certainly believe that there are forthcoming tax rates changes coming.

And we don't believe that that we didn't model in any significant changes in our leverage ratios. So that's, as much information as today is we're willing to provide in that in terms of that bridge, between where we are today and where we plan to be in 2023.

Tyler Brown -- Raymond James -- Analyst

Okay. Sorry about that.

Tom Schmitt -- Chief Executive Officer

The only thing that I would add to that and that is in big strokes, the single biggest part is going to be growth of revenue in LTL. And the quality of the revenue i.e. margin in LTL. That's the single biggest driver of there was $2.

Tyler Brown -- Raymond James -- Analyst

Okay, so it seems like the revenue quality is improving quickly. So how do we think about cadence? Is it get, $1.22 and $1.23? Or is this more, earlier? Or is it back in weighted?

Tom Schmitt -- Chief Executive Officer

There is nothing wrong about thinking about for 35,36, 50.

Tyler Brown -- Raymond James -- Analyst

Okay. Okay, that's helpful. And then, obviously you guys have been generous with the guidance, but your free cash flow has converted over net income. I think for the past five years, it's I'm sure it's deal amortization.

But you've got this asset light model, Columbus is unsetting. I would assume that there's some leverage on the capex line. So is it reasonable to assume that the free cash flow outlook could be maybe even better than earnings? Or is it just too soon?

Rebecca Garbrick -- Chief Financial Officer

It's a little bit too soon. The one thing I will mention, just to clarify on the Columbus, as we complete Phase one this year, but we do enter into a Phase two next year. So you will continue to see some of that capex for that Columbus Phase two into next year, as we kind of think ahead,

Tyler Brown -- Raymond James -- Analyst

But not 23.

Rebecca Garbrick -- Chief Financial Officer

No, by 23, we will not. We will be done with our Columbia's expansion. That's right.

Tyler Brown -- Raymond James -- Analyst

Okay. Yes, but overall, the free cash flow profile here could be very strong.

Rebecca Garbrick -- Chief Financial Officer

Could be, yeah, that's what we're. That's right.

Tyler Brown -- Raymond James -- Analyst

Okay.

Rebecca Garbrick -- Chief Financial Officer

I think directionally, you're heading in the right place.

Tyler Brown -- Raymond James -- Analyst

Okay, perfect. Thank you, guys.

Tom Schmitt -- Chief Executive Officer

Okay, thanks, Tyler.

Operator

Ladies and gentlemen, that concludes Forward Air's Third Quarter 2021 Earnings Conference Call. Please remember, that this webcast will be available on the Investor Relations section of Forward Air's website at www.forwardaircorp.com that will be shortly after this call. Thank you. You may now disconnect.

Duration: 47 minutes

Call participants:

Tom Schmitt -- Chief Executive Officer

Rebecca Garbrick -- Chief Financial Officer

Zach Haggerty -- KeyBanc Capital Markets -- Analyst

Jack Atkins -- Stephens -- Analyst

Scott Group -- Wolfe Research -- Analyst

Bruce Chan -- Stifel -- Analyst

Tyler Brown -- Raymond James -- Analyst

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