Document

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.”



	Three Months Ended
(in thousands, except per share data)	June 30, 2023			June 30, 2022			Change		Percent Change
Operating revenue	$	402,182		$	515,219		$	(113,037)	(21.9)	%
Income from operations	$	30,211		$	75,545		$	(45,334)	(60.0)	%
Operating margin	7.5		%	14.7		%	(720) bps
Net income	$	19,951		$	55,430		$	(35,479)	(64.0)	%
Net income per diluted share	$	0.76		$	2.04		$	(1.28)	(62.7)	%
Cash provided by operating activities	$	63,573		$	50,334		$	13,239	26.3	%

Non-GAAP Financial Measures: 1
Adjusted income from operations	$	35,711		$	75,545		$	(39,834)	(52.7)	%
Adjusted net income	$	23,923		$	55,430		$	(31,507)	(56.8)	%
Adjusted net income per diluted share	$	0.91		$	2.04		$	(1.13)	(55.4)	%
EBITDA	$	44,724		$	87,140		$	(42,416)	(48.7)	%
Free cash flow	$	54,143		$	41,825		$	12,318	29.5	%

1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.


	Six Months Ended
(in thousands, except per share data)	June 30, 2023			June 30, 2022			Change		Percent Change
Operating revenue	$	829,248		$	982,180		$	(152,932)	(15.6)	%
Income from operations	$	80,720		$	132,896		$	(52,176)	(39.3)	%
Operating margin	9.7		%	13.5		%	(380) bps
Net income	$	56,319		$	98,116		$	(41,797)	(42.6)	%
Net income per diluted share	$	2.13		$	3.61		$	(1.48)	(41.0)	%
Cash provided by operating activities	$	129,566		$	112,820		$	16,746	14.8	%

Non-GAAP Financial Measures: 1
Adjusted income from operations	$	86,220		$	132,602		$	(46,382)	(35.0)	%
Adjusted net income	$	60,291		$	97,896		$	(37,605)	(38.4)	%
Adjusted net income per diluted share	$	2.28		$	3.60		$	(1.32)	(36.7)	%
EBITDA	$	108,868		$	155,621		$	(46,753)	(30.0)	%
Free cash flow	$	115,162		$	94,914		$	20,248	21.3	%

1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.

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.

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
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, in thousands, except per share data)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Operating revenue:
Expedited Freight	$	337,996	$	408,857	$	676,930	$	785,448
Intermodal	64,251		106,411		152,420		196,851

Eliminations and other operations	(65)		(49)		(102)		(119)
Operating revenues	402,182		515,219		829,248		982,180
Operating expenses:
Purchased transportation	181,643		239,490		366,860		464,322
Salaries, wages and employee benefits	86,686		86,358		166,206		172,439
Operating leases	26,184		23,459		53,432		46,132
Depreciation and amortization	14,513		11,595		28,148		22,725
Insurance and claims	13,360		13,196		27,142		25,164
Fuel expense	5,274		8,314		11,058		14,179
Other operating expenses	44,311		57,262		95,682		104,323

Total operating expenses	371,971		439,674		748,528		849,284
Income (loss) from operations:
Expedited Freight	30,949		63,107		63,947		110,787
Intermodal	4,312		15,249		15,515		26,395

Other Operations	(5,050)		(2,811)		1,258		(4,286)
Income from operations	30,211		75,545		80,720		132,896
Other expense:
Interest expense, net	(2,585)		(1,193)		(4,940)		(1,977)

Total other expense	(2,585)		(1,193)		(4,940)		(1,977)
Income before income taxes	27,626		74,352		75,780		130,919
Income tax expense	7,675		18,922		19,461		32,803


Net income and comprehensive income	$	19,951	$	55,430	$	56,319	$	98,116

Net income per share:



Basic	$	0.76	$	2.05	$	2.14	$	3.63




Diluted	$	0.76	$	2.04	$	2.13	$	3.61

Dividends per share:	$	0.24	$	0.24	$	0.48	$	0.48


Expedited Freight Segment Information
(In thousands)
(Unaudited)

	Three Months Ended
	June 30, 2023		Percent of Revenue		June 30, 2022		Percent of Revenue		Change		Percent Change
Operating revenue:
Network 1	$	205,762	60.9	%	$	251,872	61.6	%	$	(46,110)	(18.3)	%
Truckload	40,432		12.0		60,144		14.7		(19,712)		(32.8)
Final Mile	68,560		20.3		73,028		17.9		(4,468)		(6.1)
Other	23,242		6.9		23,813		5.8		(571)		(2.4)
Total operating revenue	337,996		100.0		408,857		100.0		(70,861)		(17.3)

Operating expenses:
Purchased transportation	163,798		48.5		212,575		52.0		(48,777)		(22.9)
Salaries, wages and employee benefits	70,360		20.8		69,497		17.0		863		1.2
Operating leases	19,489		5.8		15,933		3.9		3,556		22.3
Depreciation and amortization	9,707		2.9		7,817		1.9		1,890		24.2
Insurance and claims	10,703		3.2		8,311		2.0		2,392		28.8
Fuel expense	2,583		0.8		3,229		0.8		(646)		(20.0)
Other operating expenses	30,407		9.0		28,388		7.0		2,019		7.1

Total operating expenses	307,047		90.8		345,750		84.6		(38,703)		(11.2)
Income from operations	$	30,949	9.2	%	$	63,107	15.4	%	$	(32,158)	(51.0)	%



1Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.


Expedited Freight Operating Statistics

	Three Months Ended
	June 30, 2023		June 30, 2022		Percent Change

Business days	64		64		—	%

Tonnage 1,2
Total pounds	673,878		730,128		(7.7)
Pounds per day	10,529		11,408		(7.7)

Shipments 1,2
Total shipments	842		961		(12.4)
Shipments per day	13.2		15.0		(12.0)

Weight per shipment	801		760		5.4

Revenue per hundredweight 3	$	30.79	$	34.75	(11.4)
Revenue per hundredweight, ex fuel 3	$	24.08	$	25.89	(7.0)

Revenue per shipment 3	$	246.59	$	264.09	(6.6)
Revenue per shipment, ex fuel 3	$	192.85	$	196.78	(2.0)



1 In thousands
2 Excludes accessorial, Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams


Intermodal Segment Information
(In thousands)
(Unaudited)

	Three Months Ended
	June 30, 2023		Percent of Revenue		June 30, 2022		Percent of Revenue		Change		Percent Change
Operating revenue	$	64,251	100.0	%	$	106,411	100.0	%	$	(42,160)	(39.6)	%

Operating expenses:
Purchased transportation	17,909		27.9		26,963		25.3		(9,054)		(33.6)
Salaries, wages and employee benefits	16,650		25.9		18,831		17.7		(2,181)		(11.6)
Operating leases	6,695		10.4		7,526		7.1		(831)		(11.0)
Depreciation and amortization	4,806		7.5		3,716		3.5		1,090		29.3
Insurance and claims	2,815		4.4		2,338		2.2		477		20.4
Fuel expense	2,691		4.2		5,084		4.8		(2,393)		(47.1)
Other operating expenses	8,373		13.0		26,704		25.1		(18,331)		(68.6)
Total operating expenses	59,939		93.3		91,162		85.7		(31,223)		(34.3)
Income from operations	$	4,312	6.7	%	$	15,249	14.3	%	$	(10,937)	(71.7)	%


Forward Air Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	18,281	$	45,822
Accounts receivable, net	175,968		221,028

Other current assets	21,538		37,465

Total current assets	215,787		304,315



Property and equipment, net	260,663		249,080
Operating lease right-of-use assets	144,847		141,865
Goodwill	356,763		306,184
Other acquired intangibles, net	151,218		154,801
Other assets	55,295		51,831

Total assets	$	1,184,573	$	1,208,076

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	37,085	$	54,601
Accrued expenses	53,265		54,291
Other current liabilities	12,112		3,956
Current portion of debt and finance lease obligations	13,963		9,444
Current portion of operating lease liabilities	52,801		47,106

Total current liabilities	169,226		169,398

Finance lease obligations, less current portion	23,461		15,844
Long-term debt, less current portion and debt issuance costs	119,766		106,588
Operating lease liabilities, less current portion	96,799		98,865
Other long-term liabilities	48,437		59,044
Deferred income taxes	53,275		51,093


Shareholders’ equity:

Preferred stock	—		—
Common stock	258		265
Additional paid-in capital	277,593		270,855
Retained earnings	395,758		436,124
Total shareholders’ equity	673,609		707,244
Total liabilities and shareholders’ equity	$	1,184,573	$	1,208,076


Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Three Months Ended
	June 30, 2023		June 30, 2022
Operating activities:
Net income from operations	$	19,951	$	55,430
Adjustments to reconcile net income of operations to net cash provided by operating activities of operations
Depreciation and amortization	14,513		11,595


Share-based compensation expense	3,160		3,306
Provision for revenue adjustments	3,372		1,630
Deferred income tax expense	325		319
Other	(132)		1,251
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	21,630		(6,473)
Other receivables	—		3,484
Other current and noncurrent assets	(299)		(9,900)
Accounts payable and accrued expenses	1,053		(10,308)
Net cash provided by operating activities	63,573		50,334

Investing activities:
Proceeds from sale of property and equipment	1,356		256
Purchases of property and equipment	(10,786)		(8,765)
Purchases of a business, net of cash acquired	(136)		(40,433)
Net cash used in investing activities	(9,566)		(48,942)

Financing activities:
Repayments of finance lease obligations	(1,869)		(1,513)

Payments on credit facility	(30,750)		(7,875)

Payment of earn-out liability	—		(91)

Payments of dividends to shareholders	(6,255)		(6,492)
Repurchases and retirement of common stock	(29,301)		—
Proceeds from common stock issued under employee stock purchase plan	421		374
Payment of minimum tax withholdings on share-based awards	—		(39)

Net cash used in financing activities	(67,754)		(15,636)






Net decrease in cash and cash equivalents	(13,747)		(14,244)

Cash and cash equivalents at beginning of period	32,028		61,630



Cash and cash equivalents at end of period	$	18,281	$	47,386


Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Six Months Ended
	June 30, 2023		June 30, 2022
Operating activities:
Net income from operations	$	56,319	$	98,116
Adjustments to reconcile net income of operations to net cash provided by operating activities of operations
Depreciation and amortization	28,148		22,725

Change in fair value of earn-out liability	—		(294)
Share-based compensation expense	6,309		6,067
Provision for revenue adjustments	5,529		2,934
Deferred income tax expense	2,182		1,962
Other	(432)		1,383
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	38,299		(36,751)
Other receivables	—		7,093
Other current and noncurrent assets	11,123		3,918
Accounts payable and accrued expenses	(17,911)		5,667
Net cash provided by operating activities	129,566		112,820

Investing activities:
Proceeds from sale of property and equipment	3,171		767
Purchases of property and equipment	(17,575)		(18,673)
Purchase of a business, net of cash acquired	(56,703)		(40,433)
Net cash used in investing activities	(71,107)		(58,339)

Financing activities:
Repayments of finance lease obligations	(3,987)		(2,583)
Proceeds from credit facility	45,000		—
Payments on credit facility	(30,750)		(8,250)

Payment of earn-out liability	—		(91)
Proceeds from issuance of common stock upon stock option exercises	—		206
Payments of dividends to shareholders	(12,600)		(12,994)
Repurchases and retirement of common stock	(79,792)		(17,780)
Proceeds from common stock issued under employee stock purchase plan	421		374
Payment of minimum tax withholdings on share-based awards	(4,292)		(3,293)

Net cash used in financing activities	(86,000)		(44,411)

Net (decrease) increase in cash and cash equivalents	(27,541)		10,070







Cash and cash equivalents at beginning of period	45,822		37,316



Cash and cash equivalents at end of period	$	18,281	$	47,386

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.


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	Income From Operations		Net Income1		Net Income Per Diluted Share1		Income From Operations		Net Income		Net Income Per Diluted Share
As Reported	$	30,211	$	19,951	$	0.76	$	75,545	$	55,430	$	2.04
Non-recurring strategic initiatives	5,500		3,972		0.15		—		—		—



As Adjusted	$	35,711	$	23,923	$	0.91	$	75,545	$	55,430	$	2.04

1 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is $1,528.



	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	Income From Operations		Net Income1		Net Income Per Diluted Share1		Income From Operations		Net Income2		Net Income Per Diluted Share2
As Reported	$	80,720	$	56,319	$	2.13	$	132,896	$	98,116	$	3.61
Non-recurring strategic initiatives	5,500		3,972		0.15		—		—		—




Change in the fair value of the earn-out liability	—		—		—		(294)		(220)		(0.01)
As Adjusted	$	86,220	$	60,291	$	2.28	$	132,602	$	97,896	$	3.60

1 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is $1,528.
2 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is ($74).


Actual	Three Months Ended June 30, 2023
Net income	$	19,951
Income allocated to participating securities	(121)
Numerator for diluted net income per share - net income	$	19,830

Weighted-average common shares and common share equivalent outstanding - diluted	26,035
Diluted net income per share	$	0.76

Projected	Full year 2023
Projected tax rate	25.7		%

Projected purchases of property and equipment, net of proceeds from sale of property and equipment	$	37,000

Projected	December 31, 2023
Projected weighted-average common shares and common share equivalent outstanding - diluted	26,000

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.


Intermodal Operating Statistics

	Three Months Ended
	June 30, 2023		June 30, 2022		Percent Change
Drayage shipments	68,180		94,986		(28.2)	%
Drayage revenue per shipment	$	853	$	1,026	(16.9)	%