Transportation & Logistics

TRANSPORTATION & LOGISTICS

STRATEGIC MARKET INSIGHTS Q2 2020 REPORT Transportation & Logistics Industry / Market Insights

Following an extremely volatile first quarter of 2020, we are starting to see signs of life across a variety of supply chain sectors. However, the duration and shape of this recovery is still yet to be determined:

The unprecedented stress placed on the U.S. supply chain infrastructure and its underlying cost structures throughout the first six months of 2020 has left a lasting mark across each of the sectors, stressing operations and management teams, creating historic job losses, and leaving those who were able to weather the headwinds with still more questions than answers.

However, as we look back at Q2 2020, there are some notable bright spots across the T&L sector that may be predictive of a more consistent and robust return to pre-COVID volumes and profits. Specifically, the value-added warehousing, e-commerce fulfillment, and last mile delivery sub-subsectors have seen tremendous growth as the volume of online order activity continues to increase and expand across a broader variety of product groups.

From an M&A perspective, we are seeing a ramp-up of transaction activity with many pre- COVID deals restarting and new deals kicking off in earnest. G2 anticipates a decline in year- over-year deal closings in Q2, but remains highly active and expects a rebound in activity and valuations in the 2nd half of 2020.

In this Newsletter, we will demonstrate the recent impacts on key Transportation & Logistics sectors and how the related M&A market has performed in the 2nd quarter of 2020.

>> Ocean Freight << The flow of goods West to East into the US is a big indicator of economic expansion or contraction, and during the majority of Q1, we saw a dramatic decrease in the volume of imports into the US from Asia (~18.5%), especially from our largest source point, China. Anticipating a slow start to the peak-shipping season of August through October, trans-Pacific carriers have cancelled more than 120 sailings out into July. However, despite some rate stabilization in Q1, the trade has witnessed a huge rise in Eastbound ocean freight rates into both the USWC and USEC ports as the phased State restarts and a resulting and unexpected increase in US import volumes from Asia collided with these blank sailings by carriers. As a result, NVOCC (Non-vessel operating common carriers) are seeing a large increase in the number of container bookings as shippers rush to find much needed capacity and lower rates to remain competitive and support their restarts.

>> Trucking << As retail and manufacturing sectors begin to come back on line in pace with the lifting of COVID-19 restrictions across the country, trucking capacity is tightening and spot market demand has increased substantially – driving national averages for both van and reefer rates to pre-COVID levels. As we head into the mid-summer season, U.S. TL and LTL providers are hoping for a consistent return of volumes to aid in more effective capacity planning and improved profitability.

www.g2cap.com 2 Transportation & Logistics Industry / Market Insights (Cont.)

>> Logistics & Warehousing <<

Traditional retailer and wholesaler brick and mortar-based distribution networks faced unprecedented systemic challenges in Q1. The state-wide shutdowns caused drastic changes in consumption patterns, shifting tremendous volume away from traditional retail “walk-in” order traffic to exponentially large online purchases. This structural shift forced both private and 3rd party-based warehousing and fulfillment companies to fundamentally change where and how inventory is stored, selected, or picked, packed and shipped virtually over night. Undoubtedly, this trend will become the norm – prompting, among other things, the rapid development of new, smaller warehouse locations that are closer to the U.S. population centers as well as alternative in-store pickup and last mile delivery options within existing retail locations.

>> Air & Global Parcel Logistics <<

Given the drastic reductions in non-essential air freight and passenger capacity in Q1 due to COVID-19, air cargo demand – particularly for personal protective equipment (PPE) manufactured in Asia and expanded U.S. domestic e-commerce consumption - has been racing ahead of capacity. As a result, carriers are quickly trying to meet a changing demand profile through creative passenger-to-freight aircraft conversions while, at the same time, dealing with a shortage of ground-handling personnel at major hubs. The sector saw rates begin to increase during the month of May, with yields improving by 5% compared with the April level, which was in turn 63% up on March. Worldwide yields/rates improving from $3.74 per kg to $3.95 per kg, despite additional capacity coming to the market vis-à-vis P2F conversions.

>> Rail <<

With the dramatic drop in retail demand and the resulting reduction in imported product thus far this year, intermodal volumes on U.S. Class I railroads is down 14% in volume from the last 5-year average. Given the fact that diesel rates are quite low, the rate delta between contract intermodal and over-the-road trucking options has narrowed – further drawing volumes away from the railroads. These dynamics are causing analysts to suggest that the intermodal segment will not see a material rebound until well into 2021, despite some recent upticks in volume and rates due to spikes in e-commerce orders and the reduction of rail car capacity in the Spring.

www.g2cap.com 3 Transportation & Logistics Transportation & Logistics Transactions Some notable transactions occurred this quarter across the sector, reflecting both the resurgence in deal activity and the shifting supply chain dynamics that are supporting “essential” and e-commerce related companies.

§ Fitzmark acquired Logistics Made Simple (04/01/2020) – Indianapolis-based FitzMark Inc. has acquired Logistics Made Simple, a flatbed-focused logistics firm headquartered in Tennessee. § A.P. Moller Maersk acquired Performance Group (04/01/2020) – Copenhagen, Denmark- based Maersk, an integrated container logistics services provider has acquired El Segundo, Calif.-based Performance Team, a provider of warehousing and distribution services, for $545 million. § Lineage Logistics acquired Henningsen Cold Storage (05/28/2020) - Leading logistics solutions provider, Lineage Logistics, signed an agreement to acquire Henningsen Cold Storage, a major player within the public refrigerated warehousing market. § Nippon Express acquired MD Logistics (05/22/2020) – Nippon Express, a global logistics company, has agreed to acquire MD Logistics, an established logistics provider for the pharmaceutical industry in the United States. § TFI International acquired Gusgo Transport (06/18/2020) – TFI International, a North American leader in the transportation and logistics industry, has acquired Gusgo Transport, a container transport and storage company headquartered in Ontario, Canada. § STORD acquired Cove Logistics (06/12/2020) – STORD, an on-demand warehousing and distribution provider, expanded its freight service capabilities by acquiring Cove Logistics, a transportation provider headquartered in Springfield, MO. § Lineage Logistics acquired Emergent Cold (06/03/2020) – Temperature-controlled logistics provider, Lineage Logistics, has acquired Emergent Cold, the United States-based cold storage and services company. § Transplace acquired ScanData Systems (06/02/2020) – Transplace, a provider of logistics technology and services, has acquired ScanData, a major player across the parcel transportation management solutions industry. § Expeditors International of Washington acquired Fleet Logistics (05/26/2020) – Expeditors International of Washington, a leading provider of global logistics solutions, has acquired the digital platform of Fleet Logistics. § NovEx Supply Chain acquired BGS Fulfillment (04/28/2020) – NovEx Supply Chain, a technology-driven fulfillment company, has acquired BGS Fulfillment, a Memphis-based full service warehousing and fulfillment company. § SDS Rx acquired Medical Delivery Services (06/30/2020) – SDS Rx, a healthcare focused supply chain solutions provider, has acquired Medical Delivery Services, a nationwide specialized carrier for the legal and safe transport of radiopharmaceuticals.

Source: S&P Capital IQ, Transport Topics, Logistics Management

www.g2cap.com 4 Transportation & Logistics Public Trading EV/EBITDA Performance Overall valuations across the sub-sectors rebounded significantly since last quarter with an 18% increase between April and June This was a reversal of the prior quarter decline of 19%, driven by a +1.7x and +1.6x increase in the warehousing/logistics and LTL sectors respectively.

Q2 2020 EV / LTM EBITDA by Sub-Sector

12.0x 11.2x 10.8x

10.0x 9.2x Average: 8.8x 7.7x 7.5x 8.0x 6.9x 6.8x 6.0x

4.0x

2.0x

0.0x Logistics Rail Global Parcel Ocean LTL Air Truckload / Logistics Freight

LTM EV/EBITDA Performance YTD 2020 EV/EBITDA Performance

15% 10%

10% 5% 6/30 5% – 0% 0% -5% -5% -10% 18% increase from 4/1 -10% -15% -15%

-20% -20%

-25% -25%

-30% Jul-19 Oct-19 Apr-20 Jan-20 Jun-20 Feb-20 Ma r-20 Aug-19 Sep-19 Nov-19 Dec-19 1/1 1/21 2/10 3/1 3/21 4/10 4/30 5/20 6/9 6/29 Ma y-20

T&L EV/EBITDA S&P 500 EV/EBITDA

Data sourced from S&P Capital IQ as of trading on June 30, 2020

www.g2cap.com 5 Transportation & Logistics Public Trading EV/EBITDA Performance by Segment

With few notable exceptions, sector-wide performance has rebounded from the lows in Q1 2020 and several sectors have strengthened valuation multiples over the LTM period.

Ocean Freight Global Parcel / Logistics

15% 20% 10% 10% 5% 0% 0% -5% -10% -10% -15% -20% -20% -30% -25% -30% -40%

Jul-19 Jul-19 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Air Truckload

15% 25% 10% 20% 15% 5% 10% 0% 5% -5% 0% -10% -5% -10% -15% -15% -20% -20% -25% -25%

Jul-19 Jul-19 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

LTL Logistics & Warehousing

40% 15% 30% 10% 20% 5% 0% 10% -5% 0% -10% -10% -15% -20% -20% -30% -25%

Jul-19 Jul-19 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

LTM Rev. EBITDA LTM EV/EBITDA Rail Growth Margin Performance

15% Ocean Freight -4% 21% -18% 10% Global Parcel / Logistics 0% 9% -16% 5% 0% Air 7% 18% 6% -5% -10% Truckload -2% 16% 13% -15% LTL 0% 13% 29% -20% -25% Logistics & Warehousing -2% 10% 7% -30% Rail -1% 45% -6%

Jul-19 Aug-19 Sep-19 Oc t-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 Jun-20 May-20 S&P 500 3% 18% 7% T&L EV/EBITDA S&P 500 EV/EBITDA Data sourced from S&P Capital IQ as of trading on June 30, 2020

www.g2cap.com 6 Transportation & Logistics Public Trading Metrics by Sector

Enterprise Share LTM Rev. LTM Margins TEV / LTM:

Company Name Value ($mils) Stock Price Growth EBITDA EBIT Revenue EBITDA EBIT

Ocean Freight Hapag-Lloyd $ 17,012 $ 58.41 1.0% 11.2% 5.5% 1.2x 7.8x 20.4x Kirby Corporation $ 4,763 $ 53.56 (6.9%) 16.3% 8.2% 1.7x 9.2x 21.1x Matson, Inc. $ 2,420 $ 29.10 (2.7%) 9.8% 5.1% 1.1x 7.8x 19.0x Costamare Inc. $ 2,026 $ 5.56 13.9% 66.0% 43.1% 4.2x 6.0x 9.1x Nordic American Tankers Limited $ 924 $ 4.06 15.3% 36.2% 17.5% 2.6x 7.3x 15.1x SEACOR Holdings Inc. $ 927 $ 28.32 (6.9%) 11.8% 3.0% 1.2x 8.0x 59.0x Diana Shipping Inc. $ 503 $ 1.50 (14.9%) 32.1% 10.0% 2.5x 7.9x 26.8x Sino-Global Shipping America, Ltd. $ 6 $ 0.61 (31.6%) (15.9%) (16.7%) 0.2x NM NM

Average $ 3,573 $ 22.64 (4.1%) 20.9% 9.5% 1.8x 7.7x 24.4x

Global Parcel / Logistics United Parcel Service, Inc. $ 118,015 $ 111.18 3.4% 10.3% 7.0% 1.6x 12.2x 22.4x FedEx Corporation $ 67,872 $ 140.22 (0.7%) 9.2% 3.9% 1.0x 6.7x 24.9x Deutsche Post AG $ 61,672 $ 36.63 (1.9%) 6.9% 4.3% 0.9x 8.5x 20.1x

Average $ 82,520 $ 96.01 0.3% 8.8% 5.1% 1.1x 9.2x 22.4x

Air Atlas Air Worldwide Holdings, Inc. $ 3,831 $ 43.03 (2.2%) 17.7% 7.1% 1.4x 5.9x 19.9x Air Transport Services Group, Inc. $ 2,853 $ 22.27 27.8% 30.2% 11.8% 1.9x 6.2x 17.9x Air T, Inc. $ 129 $ 11.75 (3.4%) 5.5% 3.1% 0.5x 8.6x 20.2x

Average $ 2,271 $ 25.68 7.4% 17.8% 7.3% 1.3x 6.9x 19.3x

Truckload J.B. Hunt Transport Services, Inc. $ 14,075 $ 120.34 5.4% 13.5% 8.1% 1.5x 10.8x 18.6x Knight-Swift Transportation Holdings $ 8,038 $ 41.71 (8.2%) 18.9% 9.0% 1.7x 7.9x 18.7x Schneider National, Inc. $ 4,059 $ 24.67 (6.7%) 13.6% 7.4% 0.9x 6.0x 11.7x Werner Enterprises, Inc. $ 3,197 $ 43.53 (1.6%) 18.2% 7.7% 1.3x 7.0x 16.8x Heartland Express, Inc. $ 1,630 $ 20.82 7.5% 27.1% 10.3% 2.6x 9.6x 25.5x Marten Transport, Ltd. $ 1,345 $ 25.16 5.9% 19.3% 7.9% 1.6x 8.0x 19.8x Daseke, Inc. $ 1,014 $ 3.93 (5.4%) 8.5% 0.5% 0.6x 5.5x 126.7x Covenant Transportation Group, Inc. $ 589 $ - (6.8%) 10.1% 1.3% 0.7x 5.0x 40.5x P.A.M. Transportation Services, Inc. $ 414 $ 30.75 (4.7%) 13.5% 2.6% 0.8x 1.7x 30.9x

Average $ 3,818 $ 34.55 (1.6%) 15.9% 6.1% 1.3x 6.8x 34.3x

Data sourced from S&P Capital IQ as of trading on June 30, 2020. Size figures in Millions USD (converted where necessary)

www.g2cap.com 7 Transportation & Logistics Public Trading Metrics by Sector

Enterprise Share LTM Rev. LTM Margins TEV / LTM:

Company Name Value ($mils) Stock Price Growth EBITDA EBIT Revenue EBITDA EBIT

LTL ArcBest Corporation $ 752 $ 26.51 (3.4%) 6.4% 2.6% 0.3x 3.5x 9.9x Old Dominion Freight Line, Inc. $ 19,691 $ 169.59 (0.7%) 26.3% 20.1% 4.8x 18.2x 23.9x TFI International Inc. $ 4,457 $ 35.43 (7.5%) 14.4% 8.8% 1.2x 7.1x 13.3x Saia, Inc. $ 3,182 $ 111.18 6.8% 15.7% 8.8% 1.7x 10.1x 19.8x YRC Worldwide Inc. $ 1,152 $ 1.85 (3.3%) 3.5% 0.4% 0.2x 3.2x 57.3x Forward Air Corporation $ 1,627 $ 49.82 5.6% 10.2% 7.4% 1.1x 2.7x 15.3x

Average $ 5,143 $ 65.73 (0.4%) 12.7% 8.0% 1.6x 7.5x 23.2x

Logistics & Warehousing Kuehne + Nagel International AG $ 21,198 $ 166.20 (1.3%) 5.7% 4.4% 1.0x 11.8x 21.8x XPO Logistics, Inc. $ 14,277 $ 77.25 (4.0%) 9.8% 5.3% 0.9x 5.6x 16.4x Expeditors International of $ 11,923 $ 76.04 (3.9%) 9.8% 9.2% 1.5x 13.3x 16.2x Washington, Inc. C.H. Robinson Worldwide, Inc. $ 12,118 $ 79.06 (4.5%) 4.9% 4.4% 0.8x 14.4x 18.0x Ryder System, Inc. $ 10,021 $ 37.51 0.7% 25.1% 4.6% 1.1x 4.3x 24.4x Americold Realty Trust $ 9,075 $ 36.30 13.7% 18.9% 10.3% 4.8x 23.8x 46.9x Landstar System, Inc. $ 4,239 $ 112.31 (10.8%) 7.9% 6.8% 1.1x 13.5x 15.6x Hub Group, Inc. $ 1,777 $ 47.86 (6.1%) 7.2% 3.8% 0.5x 6.6x 13.0x Universal Logistics Holdings, Inc. $ 1,022 $ 17.38 (0.3%) 10.9% 5.8% 0.7x 5.0x 11.7x Echo Global Logistics, Inc. $ 740 $ 21.62 (5.2%) 2.2% 1.2% 0.3x 13.8x 27.8x

Average $ 8,639 $ 67.15 (2.2%) 10.2% 5.6% 1.3x 11.2x 21.2x

Rail Canadian National Railway $ 73,920 $ 88.57 (8.2%) 50.9% 40.7% 6.7x 12.8x 16.5x Company Union Pacific Corporation $ 143,077 $ 169.07 (4.9%) 51.1% 40.8% 6.6x 12.7x 16.3x CSX Corporation $ 68,140 $ 69.74 (4.6%) 53.1% 41.6% 5.8x 10.1x 13.7x Norfolk Southern Corporation $ 56,856 $ 175.57 (4.5%) 46.9% 36.5% 5.1x 11.0x 14.1x Canadian Pacific Railway Limited $ 41,656 $ 255.34 (2.6%) 55.5% 46.9% 7.0x 12.4x 15.0x Kansas City Southern $ 17,720 $ 149.29 5.1% 50.4% 38.4% 6.1x 11.6x 15.8x The Greenbrier Companies, Inc. $ 1,691 $ 22.75 12.6% 9.4% 6.2% 0.5x 5.3x 8.8x

Average $ 57,580 $ 132.90 (1.0%) 45.3% 35.9% 5.4x 10.8x 14.3x

Data sourced from S&P Capital IQ as of trading on June 30, 2020. Size figures in Millions USD (converted where necessary)

www.g2cap.com 8 Transportation & Logistics Selected Ongoing G2 Projects G2 has a robust backlog of mandates ranging across its sell-side, buy-side, capital markets, and restructuring service offerings.

Project Frozen § Project Frozen – G2 is currently advising a temperature-controlled transportation service provider Sell-Side primarily serving the food & beverage end market on a Temperature-Controlled carve out sale from a large asset-based trucking Trucking carrier.

Project Jet § Project Jet – G2 is currently advising a leading provider of expedited international air freight forwarding Sell-Side services on a recapitalization of the business. The Specialized Air Freight company’s services include pickup, freight Forwarder consolidation, customs management, and tracking.

Project Rx § Project Rx – G2 is currently advising a leading asset-light provider of pharmaceutical delivery & Buy-Side logistics services. The company is seeking acquisition Pharmaceutical Delivery opportunities that will expand its market penetration and Logistics Services and geographic footprint.

§ Project Ferrari – G2 is currently advising a Project Ferrari contract logistics service provider supporting the Capital Markets automotive end market on a refinancing engagement. The company is seeking to find a new partner to Contract Logistics support ongoing operations and growth initiatives.

Project Easton § Project Easton – G2 is currently advising a provider of integrated supply chain and logistics Restructuring services, including warehousing and distribution, Warehousing and brokerage and installation services, on a restructuring Distribution engagement.

§ Project Iron Hoop – G2 is currently advising a Project Iron Hoop provider of transportation and hauling services that Restructuring supports the waste management sector on a restructuring engagement. Transportation and Hauling

www.g2cap.com 9 G2 Overview Chris Hughes, Managing Director G2 Capital Advisors’ Transportation & Logistics industry Practice Leader, Chris Hughes, brings 20+ years of C-level leadership and operating experience to the Transportation & Logistics practice group.

Company Title Role End-to-end e-commerce services company specializing in complex order fulfillment for B2B and B2C end markets. Restructured the e- CEO commerce fulfillment company’s technology stack, led a private equity recapitalization process, and grew EBITDA by 105% in 18 months.

iOT/telematics services company focused on the temperature-controlled T&L sector. Restructured the Company’s supply chain, and CEO re-designed the Company’s North American product and solution offering that drove top line growth by 52% in 24 months.

Co-founded the 4th largest 3rd Party cold storage warehousing and distribution company Chris Hughes President Practice Leader in the world through 20+ M&A transactions Transportation & Logistics across Europe, South America, and the U.S.

G2 Overview Christopher Casteleyn, Director

G2 Capital Advisors’ Transportation & Logistics industry Director, Christopher Casteleyn, brings ~15 years of experience in finance, specializing in providing advisory services for merger, acquisition, and divestiture transactions as well as strategic assessments. Christopher has significant experience executing cross- border and private company transactions within the Transportation & Logistics practice group.

Company Title Role

Involved in all aspects of M&A and divestiture Antares processes including sourcing, positioning, and International VP negotiating transactions. Executed over $1B in Partners, Inc. total transaction value over 5 years.

Specialized in a variety of finance and technical accounting roles including Strategy, Operational Fin Finance, SEC Reporting, Internal Audit, Chris Casteleyn Sarbanes Oxley Compliance, Financial Planning Director and Analysis and Treasury / Cash Management. Transportation & Logistics

www.g2cap.com 10 Reference Glossary of Terms

Term Definition

Total revenue from the sale of goods and services rendered during the reporting period, in normal course of Revenue business, reduced by sales returns and allowances, and sales discounts. For banks, this item is defined as net interest income after loan loss provisions

Earnings before interest, taxes, depreciation, and amortization. Calculated as Revenue – Expenses, excluding EBITDA interest, taxes, depreciation and amortization

Market value of a company using most recently reported basic weighted average shares outstanding. Market Cap Calculated as Market Price (as of period end) * Basic Weighted Average Shares Outstanding

Sum of the carrying values as of the balance sheet date of long-term debt with a maturity beyond one year or Long-Term Debt the normal operating cycle, if longer

Net Debt shows the company’s overall debt situation by netting the value of debts with cash and other similar Net Debt liquid assets. Calculated as Total Debt – Cash & Cash Equivalents and Short Term Investments

Enterprise Value represents the combined economic value of a company as of the most recent fiscal year end. Enterprise Value Calculated as Diluted Market Capitalization + Total Debt + Minority Interest + Preferred Stock – Cash and Short Term investments

A valuation ratio of a company stock price compared to its per share earnings. Calculated as Market Price / P/E Earnings per Share for the last annual period

Tangible Book Value Total Shareholder’s Equity – Goodwill and Intangible Assets

For more information about G2, please visit: www.g2cap.com Our corporate headquarters is located at: 420 Boylston Street, Suite 302, Boston, MA 02116 Boston | Chicago | Indianapolis | Naples | San Francisco

The information included in this Presentation is not a complete analysis of all material facts regarding any company, industry, or security and does not constitute investment advice. Opinions expressed or implied by the materials here presented reflect only the judgement of its author as of the date of the Presentation and is subject to change without notice. The information in this Presentation has been obtained from sources which G2 generally considers reliable, but we make no representation or warranty, express or implied, as to the accuracy or completeness of any information herein. This Presentation has been prepared for informational purposes only and upon the express understanding that it will be used only for the purposes set forth in the Section captioned G2 Overview above. G2 expressly disclaims any and all liability which may be based on such information, errors therein or omissions there from. Securities offered through Western International Securities, Inc., Member FINRA & SIPC. G2 Capital Advisors, LLC (dba G2 Securities) and Western International Securities are separate and unaffiliated entities.