4Q24 Earnings Presentation Statements & Disclaimers Forward Looking Statements This presentation 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-looki ...

Forward Air Corporation (NASDAQ:FWRD) Q4 2024 Earnings Conference Call February 26, 2025 4:30 PM ET Company Participants Tony Carreno - SVP, Treasury & IR Shawn Stewart - CEO Jamie Pierson - CFO Conference Call Participants Andrew Cox - Stifel Bascome Majors - Susquehanna Joe Hafling - Jefferies Christopher Kuhn - Benchmark Company Operator Welcome to the Forward Air Fourth Quarter and Full Year 2024 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floo ...

Financial Guidance - The Company reaffirmed its previously issued financial guidance for the fiscal year ended December 31, 2024[9]. Credit Agreement Amendments - Amendment No. 3 to the Credit Agreement increases the maximum consolidated first lien net leverage ratio to 6.75:1.00 for the quarters ending December 31, 2024, through September 30, 2025[11]. - The revolving credit commitments under the Credit Agreement are reduced from $340 million to $300 million, with a potential further reduction to $250 million if the leverage ratio exceeds 6.50:1.00[11]. - An anti-cash hoarding covenant will require the Borrower to prepay revolving credit loans if unrestricted cash exceeds $120 million at the end of any month[11]. - The financial performance covenant has been modified to allow for greater leverage during the specified period[11]. - The Company plans to restrict certain payments unless its consolidated total net leverage ratio is below 4.00:1.00[11]. Strategic Initiatives - The Company is implementing the initial phase of its transformation strategy to maximize shareholder value[12]. - The Company aims to provide additional financial flexibility to fund future growth opportunities in support of its long-term strategy[6]. - The Company is exploring strategic alternatives to enhance shareholder value[12]. Financial Advisory Services - The financial institutions involved in the Credit Agreement may perform various financial advisory services for the Company, receiving customary fees[7].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 000-22490 FORWARD AIR CORPORATION (Exact name of registrant as specified in its charter) | --- | --- | --- | |------------------------------------------------------------------ ...

Financial Data and Key Metrics Changes - Revenue for Q3 2024 was $656 million, representing a 92% or $315 million increase compared to the same quarter last year, largely driven by the Omni acquisition [23] - Consolidated EBITDA for the quarter was $77 million, down from $81 million in Q2 2024, primarily due to challenges in the expedited segment [28][29] - Cash provided by operating activities improved to $53 million from a loss of $45 million in the previous quarter, with total cash at the end of the quarter reaching $138 million [30][31] Business Line Data and Key Metrics Changes - Revenue from the Expedited segment increased by $6 million or 2% to $285 million, driven by a 4.5% increase in weight per shipment, but offset by a 3.8% decrease in revenue per hundredweight [25] - Intermodal revenue decreased by $5 million or 8% to $57 million, primarily due to an 8.7% reduction in shipments as customers diverted freight ahead of a potential strike [26] - Omni segment revenue was $335 million, with a sequential increase of $23 million or 7% compared to Q2 2024 [27] Market Data and Key Metrics Changes - The broader transportation market remains challenging, with demand for services under pressure, but the company is preparing for future demand normalization [13] - The company opened a new warehouse and freight station in Miami, enhancing its logistics capabilities in Latin America [17][18] Company Strategy and Development Direction - The company aims to transform into a unified logistics provider, integrating various services from international freight forwarding to domestic expedited LTL ground service [10][12] - A transformation management office has been established to oversee the integration and rationalization of IT systems, aiming for a vertically integrated company [12][14] - The company is focused on maintaining best-in-class customer service while addressing pricing strategies to improve profitability [11][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $75 million in annualized savings from the integration, tracking ahead of plan [32] - The company updated its full-year 2024 consolidated EBITDA guidance to a range of $300 million to $310 million, citing a muted macro environment [38] - Management sees more opportunities than risks ahead, despite the current challenges in the market [38] Other Important Information - The company appointed Jerome Lorrain to the Board of Directors, bringing over 30 years of experience in logistics and transportation [39] - The company is actively analyzing potential sales of non-core assets from the Omni acquisition but has not made any decisions yet [43][44] Q&A Session Summary Question: Updates on potential sale of individual pieces given current liquidity position - Management is still in the analysis phase regarding potential sales of non-core assets and will announce any decisions when appropriate [43][44] Question: Yield progression in network LTL and unwinding class-based freight program - Management is adjusting pricing to reflect the quality of service provided, moving away from traditional LTL pricing [45][46] Question: Trends in various segments and customer behavior - Management noted that while overall volume demand is down, the need for premium expedited services remains strong [52] Question: Fourth quarter EBITDA ramp and seasonality - The expected increase in EBITDA for Q4 is attributed to normal seasonal trends rather than unique factors [58] Question: Monthly tonnage trends and October updates - Management does not provide intra-quarter guidance but emphasizes the importance of completing the integration and transformation [80]

Company Overview - Forward Air (FWRD) shares increased by 6.2% to $40.16, with a higher-than-average trading volume, compared to a 3.8% gain over the past four weeks [1] - The rise in share price is attributed to reports that Forward Air has engaged two prominent investment bankers to explore the sale of the company, following pressure from shareholders like Alta Fox [1] Financial Performance - Forward Air is expected to report a quarterly loss of $0.05 per share, reflecting a year-over-year decline of 105.1%, while revenues are projected to be $656.07 million, an increase of 58.7% from the previous year [2] - The consensus EPS estimate for Forward Air has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [2] Industry Context - Forward Air operates within the Zacks Transportation - Truck industry, where another company, Werner Enterprises (WERN), saw a 1.5% decline in its stock price, closing at $37.44, with a return of 1.3% over the past month [2] - Werner's consensus EPS estimate has decreased by 11.3% over the past month to $0.22, representing a year-over-year change of -47.6% [3]

Core Viewpoint - An activist investor, Alta Fox, is advocating for the outright sale of Forward Air, which has led to a significant increase in the company's stock price by over 6% amid broader market declines [1][2]. Group 1: Activist Investor's Influence - Alta Fox holds a small 3% stake in Forward Air and has called for a change in ownership, specifically urging for a sale of the business [2]. - The activist investor criticized Forward Air's management for ignoring shareholder interests and emphasized the need for a formal sales process to maximize shareholder value [3]. - Alta Fox claims that other investors owning approximately 25% of Forward Air support exploring strategic alternatives, which often indicates a potential sale [3]. Group 2: Company Response - Forward Air responded to the activist's letter with a neutral statement, indicating that the refreshed Board and management are analyzing the business strategy to enhance shareholder value [5]. - The company has faced scrutiny regarding its recent acquisition of Omni Logistics, which has reportedly strained its finances [4].

Group 1: Ancora's Activism and Investment Strategy - Ancora is a family wealth investment advisory firm with $9.5 billion in assets under management, focusing on activist efforts in niche areas like banks and closed-end funds [1] - The firm has shifted its tactics from primarily targeting micro-cap companies to taking sub-5% stakes in larger companies in recent years [1][3] - Ancora's previous campaign at Forward Air resulted in a 58.63% return on investment, significantly outperforming the Russell 2000 [3] Group 2: Forward Air's Business and Recent Developments - Forward Air is an asset-light transportation company, with 80% of its profits generated from its core Expedited LTL business in 2023 [2] - The company announced an acquisition of Omni Logistics at a high multiple, which led to a decline in its stock price [4] - Ancora opposed the Omni deal, viewing it as a means for management entrenchment and excessive compensation [4] Group 3: Current Situation and Future Outlook - By late 2023, Forward Air's stock price had dropped significantly, with Ancora re-establishing itself as a top shareholder [4] - Ancora is advocating for the sale of Forward Air, citing the need for operational restructuring and a reduction of its over-levered balance sheet [5][6] - The involvement of private equity firm Clearlake Capital, which holds a 13.8% stake, suggests potential strategic alternatives for Forward Air [6][7]

Financial Data and Key Metrics Changes - The company reported Q2 2024 revenue of $644 million, a 93% increase or $310 million compared to the same quarter last year, primarily driven by the Omni transaction [16][18] - Consolidated EBITDA for Q2 2024 was $81 million, representing a $26 million increase from Q1 2024 [19] - The company incurred a noncash impairment charge of $1.1 billion related to the Omni reporting unit, which negatively impacted the quarter [18] Business Line Data and Key Metrics Changes - Revenue from the Expedited segment increased by $22 million or 8% to $291 million compared to the previous year, driven by increases in shipments and revenue per shipment [16][17] - Revenue from the Intermodal segment decreased by $5 million or 8% to $59 million, primarily due to a 4.8% decrease in shipments [17] - Omni's revenue contribution was $311 million, as it was not included in the previous year's comparable quarter [17] Market Data and Key Metrics Changes - The company is experiencing a normalization in the freight market, impacting the Intermodal segment negatively [17] - The integration of the two companies is progressing as planned, with expected annualized savings of approximately $75 million by the end of Q1 2025 [22] Company Strategy and Development Direction - The company is transitioning from two separate entities to a unified global logistics enterprise, focusing on operational efficiency and customer service [5][10] - The integration is expected to improve operating leverage and reduce operating expenses, real estate footprint, and employee headcount [7][11] - The company aims to enhance its service offerings through synergy selling across its combined capabilities in air, ocean, ground, and contract logistics [9][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the external macro environment but expressed confidence in achieving consolidated EBITDA guidance of $310 million to $325 million for 2024 [27] - The management team emphasized the importance of customer service and maintaining relationships during the integration process [8][54] - There is a focus on improving cash flow and reducing cash consumption as the company moves towards becoming cash flow positive [25][34] Other Important Information - The company ended the quarter with total cash of $105 million and liquidity of $445 million, indicating a strong position to support operations [21][37] - The company is committed to deleveraging and has initiated a full portfolio review to focus on core operations [23] Q&A Session Summary Question: Has there been significant attrition in the sales force post-acquisition? - Management reported no significant attrition and noted an invigorated sales team with an increasing pipeline [28] Question: Can you provide guidance on revenue and operating ratio assumptions for 2024? - Management refrained from providing detailed guidance beyond what was previously shared, citing ongoing volatility [29][30] Question: What are the assumptions for achieving cash flow positivity in the second half of the year? - The primary assumptions include reducing one-time integration costs and improving operational performance, particularly in the Expedited segment [33][34] Question: What keeps management up at night regarding the integration and performance? - Concerns include balancing the integration process while maintaining customer service and focusing on vital operational improvements [39] Question: Can you clarify the difference between adjusted operating income loss and adjusted EBITDA? - Management explained that transaction costs and severance are included in the operating income loss, while EBITDA adjustments allow for certain add-backs [41][42] Question: What is the outlook for July tonnage revenue trends? - Management declined to provide intra-quarter guidance, focusing instead on the integration process [49] Question: How does the company plan to reshape its portfolio for cross-selling opportunities? - The strategy involves leveraging combined services to enhance customer offerings and improve service stickiness [55][56]

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