Challenging market conditions in intermodal and truckload brokerage

Positive momentum for less-than-truckload services

Precision execution of revenue growth strategies designed to win market share

Forward Air Corporation (NASDAQ:FWRD) (the “Company”, “we”, “our”, or “us”) today reported financial results for the three and six months ended June 30, 2023 as presented in the tables below.

Tom Schmitt, Chairman, President and CEO, commenting on second quarter results said, “Weaker-than-expected demand for our intermodal and truckload brokerage services resulted in our reported net income per diluted share of $0.76 and adjusted net income per diluted share of $0.91 coming in below the low end of our $1.28 to $1.32 guidance range. Demand for intermodal and truckload brokerage capacity has been significantly impacted by the trough in the freight cycle. Furthermore, the challenging market conditions led to decreased customer demand for our accessorial services within the intermodal line of business. The softer than anticipated demand for intermodal and truckload services throughout the second quarter and the significant decrease in the price of diesel fuel resulted in a 22% decline in revenue on a consolidated basis, below the low end of our guidance range of minus 7% to 17%.”

Mr. Schmitt continued, “Despite the softer economic environment, we have seen momentum in the less-than-truckload service with a sequential improvement in pounds per day from (12%) in the first quarter over the same period in the prior year to (7%) in the second quarter over the same period in the prior year. The positive momentum continued in the month of July. In the current week, we are enjoying year-over-year growth of +7%. Precision execution of our revenue growth strategies led to the sequential growth trends and improvement in our revenue quality metrics. Weight per shipment increased from 770 pounds in the first quarter to 801 pounds in the second quarter and weight per piece increased 2.4% from the first quarter to the second quarter. We believe the continued execution of our revenue growth strategies, strong collaboration with customers on selecting, handling and pricing of higher quality freight, and planned network expansion with a target of opening 30 new terminals over the next five years positions us well to win market share over the long-term. We are seeing the benefits of our strategy work with the addition of six new terminals in the first six months of 2023 allowing us to better serve the needs of customers in new markets.”

In closing, Mr. Schmitt said, “We are committed to exceptional customer service which is reflected in our on-time performance of 99% and a cargo claims ratio of 0.1% during the second quarter. I am so proud of our teammates and independent contractors who make us the best in the LTL industry in damage-free, intact, on-time shipments. We are the most compelling choice for customers with shipments of consequence.”

Regarding the Company’s third quarter 2023 guidance, Rebecca J. Garbrick, CFO, said, “We expect our year-over-year revenue to decline 11% to 21% and adjusted net income per diluted share in the range of $1.12 to $1.16, compared to reported net income per diluted share of $1.93 in the third quarter of 2022.”

On July 25, 2023, our Board of Directors declared a quarterly cash dividend of $0.24 per share of common stock. The dividend is payable to shareholders of record at the close of business on August 17, 2023 and is expected to be paid on September 7, 2023. This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.96 for the full year 2023, payable in quarterly increments of $0.24 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company’s financial performance and position.

Review of Financial Results

Forward Air will hold a conference call to discuss second quarter 2023 results on Thursday, August 3, 2023 at 9:00 a.m. EDT. The Company’s conference call will be available online on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, or by dialing (877) 336-4440, Access Code: 6257043.

A replay of the conference call will be available on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, which we use as a primary mechanism to communicate with our investors. Investors are urged to monitor the Investor Relations portion of the Company’s website to easily find or navigate to current and pertinent information about us.

About Forward Air Corporation

Forward Air is a leading asset-light provider of transportation services across the United States, Canada and Mexico. We provide expedited less-than-truckload (“LTL”) services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals. In addition, we offer final mile services, including delivery of heavy-bulky freight, truckload brokerage services, including dedicated fleet services; and intermodal, first-and last-mile, high-value drayage services, both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services. We are more than a transportation company. Forward is a single resource for your shipping needs. For more information, visit our website at www.forwardaircorp.com.

Forward Air Corporation Reconciliation of Non-GAAP Financial Measures

In this press release, the Company uses non-GAAP financial measures that are derived on the basis of methodologies other than in accordance with GAAP. The Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions as well as evaluating the Company’s performance.

For the three and six months ended June 30, 2023 and 2022, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”), free cash flow, adjusted income from operations, adjusted net income, and adjusted net income per diluted share.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts. The Company believes that free cash flow is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance shareholder value. The Company believes providing adjusted income from operations, net income and net income per share allows investors to compare Company performance consistently over various periods without regard to the impact of unusual, nonrecurring or nonoperational items.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s financial results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the Company has included, for the periods indicated, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure.

Due to the forward-looking nature of the third quarter 2023 guidance for adjusted net income per diluted share, the Company is unable to reconcile this non-GAAP measure to the most directly comparable GAAP measure because the comparable GAAP measure is not reasonably accessible or reliable due to the inherent difficulty in forecasting and quantifying measures that would be required for such reconciliation.

The following is a reconciliation of net income to EBITDA for the three and six months ended June 30, 2023 and 2022 (in thousands):

The following is a reconciliation of net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2023 and 2022 (in thousands):

The following is a reconciliation of reported income from operations, net income, and net income per diluted share to adjusted income from operations, net income, and net income per diluted share for the three and six months ended June 30, 2023 and 2022 (in thousands, except net income per diluted share):

The following information is provided to supplement this press release.

Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements included in this press release relate to expectations of the Company as the freight recession abates, expectations regarding the performance of the Company’s LTL services, expectations regarding the impact of the Company’s revenue growth strategies, collaboration with customers and planned network expansion, expectations regarding the Company's third quarter 2023 guidance, including with respect to revenue and net income per diluted share, the future declaration of dividends and, the quarterly and full year 2023 anticipated dividends per share.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the COVID-19 pandemic, our ability to manage our growth and ability to grow, in part, through acquisitions, while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition, and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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