Forward Air announced it is “nearing the conclusion” of a strategic review. The comments were made on a call discussing fourth-quarter results on Monday after the market closed. The company announced early last year it would undergo a review of its entire business and may sell part or all of the enterprise. The decision was made as pressure from investors mounted following a contested merger with Omni Logistics. Forward (NASDAQ: FWRD) reported a $28.3 million net loss (“attributable to Forward Air”), or ...

Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 7.8% or approximately $19.5 million to $270.6 million [6] - Consolidated adjusted operating income decreased by 39.4% to $10.9 million due to margin compression in several segments [7] - Net indebtedness increased by $76.9 million to $296.6 million, resulting in an adjusted leverage ratio of approximately 2.3 times and a debt-to-capital ratio of 42.3% [8] - Average age of tractors increased to 24 months from 20 months year-over-year [9] - Adjusted return on average invested capital was 5.6%, down from 8.1% in the prior year [9] Business Line Data and Key Metrics Changes - The expedited segment reported an adjusted operating ratio of 97.2%, which did not meet expectations due to external challenges including a U.S. government shutdown [9] - Dedicated segment achieved a 92.2 adjusted operating ratio, the best for any quarter during the year, with a fleet growth of 90 average tractors or approximately 6.3% [10] - Managed freight saw significant revenue improvement due to the Star Logistics Solutions acquisition, but margins were compressed due to rising costs [11] - Warehousing segment experienced a 4.6% increase in freight revenue, but adjusted operating income declined due to startup costs and operational inefficiencies [12] Market Data and Key Metrics Changes - The freight market is evolving towards equilibrium, with spot rates rising meaningfully and increased bid activity from shippers [3] - Bids in January were up 33% compared to the fourth quarter, indicating heightened interest from shippers [24] - Concerns about capacity and cargo theft have increased among shippers, influencing their bidding strategies [26] Company Strategy and Development Direction - The company aims to reduce balance sheet leverage and improve return on capital through fleet optimization and targeted rate increases [5] - Focus will be on growing high-service niches within the dedicated segment while reducing exposure to commoditized freight [10] - The acquisition of Star Logistics Solutions is expected to be accretive to earnings in the first half of 2026, diversifying the business mix [6] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about improving freight fundamentals and expects to capture operating leverage in 2026 [13] - The first quarter of 2026 may be impacted by seasonality and extreme weather, but improvements are anticipated later in the year [13] - Management believes that the trucking industry is beginning to recover, with increased bids and new business at higher rates [77] Other Important Information - The company has deferred some trades and moved a group of assets to held-for-sale status to improve operations and balance sheet [4] - The company plans to integrate the Star acquisition and focus on capital allocation efficiency in 2026 [35] Q&A Session Summary Question: What are the expectations for price increases in the expedited segment? - Management indicated that the average price increase is around 3.5% for the first three weeks of January, with positive conversations with customers [16][17] Question: How is the warehousing segment performing? - Management expects improvements in the warehousing segment, with Q1 anticipated to be better than Q4 due to the onboarding of new customers [31] Question: What is the outlook for managed freight revenue? - Managed freight revenue is expected to be flat to up sequentially, with incremental growth anticipated in the third and fourth quarters [62] Question: How will the company respond to potential demand recovery in 2026? - The company plans to reclaim profits lost over the past four years and focus on rate increases rather than adding excessive capacity [96] Question: What percentage of the customer book renews in each quarter? - Approximately 40% of customers renew in the second quarter, with 60% expected to take multiple rate increases [99][100]

Core Viewpoint - Forward Air's shares surged 16% in after-hours trading due to ongoing strategic review discussions, which may include a potential sale of the company [1] Financial Performance - The company reported a net loss of $16.3 million, or 52 cents per share, for the third quarter, with consolidated revenue of $632 million, reflecting a 4% year-over-year decline [3] - Consolidated EBITDA was $78 million, down 10% year-over-year but up 5% sequentially [3] - Last 12 months' consolidated adjusted EBITDA reached $299 million, showing a slight increase of $1 million from the second quarter [8] Operational Insights - The expedited segment, which includes less-than-truckload operations, generated revenue of $259 million, a 9% year-over-year decline, with tonnage per day down 14% [4] - The decline in tonnage was attributed to a 12% drop in shipments and a 2% decrease in weight per shipment [5] - The expedited unit reported a 7.5% operating margin, which was 70 basis points higher year-over-year but 10 basis points lower sequentially [5] Cost Management - Salaries, wages, and benefits expenses as a percentage of revenue increased by 20 basis points year-over-year, while purchased transportation expenses decreased by 70 basis points [6] - The company has reduced its workforce by over 300 full-time employees in the past year and improved labor utilization by flexing drivers across different modes [6] - A broader cost-saving plan has resulted in $12 million in annual cost reductions [7] Strategic Developments - The company is continuing discussions with interested parties regarding its strategic review, which was initiated following investor criticism over a contested merger with Omni Logistics [2] - The integration of expedited operations in the U.S. and Canada is expected to drive further cost savings and efficiencies [7] - Omni reported revenue of $340 million, a 2% year-over-year increase, with adjusted EBITDA of $33 million, which is 22% higher year-over-year [7] Debt and Leverage - The company's net debt stood at $1.65 billion, with a leverage ratio of 5.5 times LTM adjusted EBITDA, down from 5.7 times at the end of the second quarter [8] - The debt leverage covenant is set to decrease by 25 basis points each quarter to 5.5 times by the fourth quarter of 2026 [8]