Welcome to the Forward Air Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Tony Carreno, Senior Vice President of Treasury and Investor Relations. Tony Car

Thank you, operator, and good afternoon, everyone. Welcome to Forward Air's Second Quarter 2025 Earnings Conference Call. With us this afternoon are: Shawn Stewart, Chief Executive Officer; and Jamie Pierson, Chief Financial Officer. By now, you should have received a press release announcing Forward Air's Second quarter 2025 results, which was also furnished to the SEC on Form 8-K. We have also furnished a slide presentation outlining second quarter 2025 earnings, highlights and a business update. Both the press release and slide presentation for this call are accessible on the Investor Relations section of Forward Air's website forwardair.com. Please be aware that certain statements in the company's earnings release announcement and on the conference call are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes statements which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts, including statements regarding our fiscal year 2025. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the Securities and Exchange Commission and the press release and slide presentation relating to this earnings call. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. During the call, there may also be a discussion of financial metrics that do not conform to U.S. Generally Accepted Accounting Principles or GAAP. Management uses non-GAAP measures internally to understand, manage and evaluate our business and make operating decisions. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in today's press release and slide presentation. I will now turn the call over to Shawn.

Good afternoon, everyone, and thank you for joining us. I would like to begin today's call by recognizing recent awards that highlight our team's outstanding customer service, operational excellence and unwavering commitment to our partners. Omni Logistics was honored as the 2024 International and Domestic Forwarder of the Year by doTERRA International. This marks the first time a single logistics partner has received both distinctions from doTERRA, underscoring Omni's leadership and performance across the board. GLT Logistics selected Forward Air as the commitment to excellence Carrier of the Year for 2024. This award underscores Forward's performance, service and commitment to customer success and highlights the trust built within the strong business relationship. Our Omni Logistics team in Asia was recognized with an award from advanced micro devices for their agility and responsiveness during a significant demand surge in late 2024. The team successfully managed an overflow while maintaining the high service standards that we are known for. These honors are a reminder of the belief that and trust that our customers have in our company. They reflect the dedication of our people whose efforts continue to drive our reputation for excellence. As our global presence grows, it's clear that our focus on service, speed and reliability is making a lasting impact. While managing through the challenges of the current freight recession, we plan to continue demonstrating our unwavering commitment to our customers by strengthening relationships and consistently delivering value-added services that matter. We believe this approach will benefit our customers, employees and investors over the long term. Turning to the quarterly results. We had another solid operational quarter with consolidated EBITDA, which is calculated pursuant to our credit agreement, of $74 million compared to $69 million in the first quarter of this year. Consolidated EBITDA in the second quarter of last year was $89 million. Going forward, the quarterly results will be more comparable as the historical quarterly pro forma and synergy savings roll off, the quality of our earnings should also continue to improve. To that point, adjusted EBITDA in the second quarter was also $74 million compared to $69 million in the first quarter of this year. On a year-over-year basis, adjusted EBITDA improved by $1 million compared to $73 million in the second quarter of last year. At the Expedited Freight segment, we continue to make progress. As previously communicated, one of the first steps our management team took to improve financial performance was to take corrective actions on the pricing. After concluding the necessary diligence, we implemented those actions in the fourth quarter of 2024 and completed them in the first quarter of this year. Following these actions, although tonnage is down, we have significantly improved reported EBITDA and margin at the Expedited Freight segment. Reported EBITDA has grown from $18 million in the fourth quarter of 2024 to $30 million in the second quarter of 2025, and the margin has improved by 500 basis points from 6.6% to 11.6%. The 11.6% is the highest this segment has reported since the fourth quarter of 2023. We were able to achieve these operating efficiencies and margins in a down market by optimizing pricing and tightly managing all discretionary expenses, rationalizing every dollar and focusing on having the right type of freight in our network at the right price. We believe the variable nature and flexibility of our network positions us incredibly well for when the market normalizes. Based on actual past results, we know there is an additional opportunity to improve the Expedited Freight segment's margin. We also know that we need to grow volume in the network. As with most LTL networks, our network thrives in a tighter market. There is always more we can do to reduce cost. However, we are not willing to compromise the high quality of service that we are known for and our customers have come to expect from us. The Expedited Freight network includes one of the largest expedited LTL networks in North America and is an industry leader in serving time critical and high-value freight. In conditions such as this, it takes discipline not to sacrifice service, and we believe the quality of service we provide will be the driver of growth and ultimately pricing and profitability in the future. At the Omni Logistics segment, we continue to build momentum, and I am excited about the progress that we are seeing. On a year- over-year basis, we grew revenue $16 million to $328 million in the second quarter. Sequentially, from the first quarter to the second quarter of this year, reported EBITDA increased from $26 million to $30 million and the margin improved by 110 basis points from 7.9% to 9%. On a year-over-year basis, reported EBITDA improved from $20 million in the second quarter of last year to $30 million this year, which is a 47% increase. The margin also improved from 6.4% to 9% compared to the same period a year ago. The Intermodal segment remains a consistent performer in a turbulent and unpredictable market. Reported EBITDA in the second quarter of 2025 was $9 million and generally in line with the $9 million to $10 million of reported EBITDA in each of the last 4 quarters. In closing, as we begin the second half of the year, the logistics industry remains in a state of flux, shaped by macro risk, chiefly surrounded tariffs and their potential impact on consumer confidence as well as ensuing demand on resulting global freight flows. Overall, transportation volumes remain muted as the uncertainty clouds visibility for the rest of 2025 and as long as the global uncertainty lingers. Regardless of the macro environment, we remain focused on continuing the progress we have made over the last year. We remain committed to our strategy and are on the path to transform the company into a world-class logistics organization. This includes streamlining and simplifying our global structure as it positions us for future growth. We are incredibly excited about what the long-term future holds for our company and we believe we are well positioned to outgrow the market once the freight environment normalizes. With that, I will turn this call over to Jamie to go through the results for the second quarter.

Thanks, Shawn, and good afternoon, everyone. Before jumping into the script, I just want to note that this quarter marks our first clean quarterly year-over-year comparison since closing the transaction of last year. It has been an absolutely crazy year, but we have accomplished a ton. And going forward, we at least will have the ability to more cleanly compare year-over-year results. Beginning with the consolidated revenue, in the second quarter, we reported $619 million compared to $644 million in the prior year. The 3.9% decrease is primarily attributable to a decrease in revenue at the Expedited Freight segment partially offset by an increase in revenue at the Omni Logistics segment. On a sequential basis, second quarter consolidated revenue increased 1% compared to the $613 million in the first quarter of the year. As for the revenue at our 3 reporting segments, Expedited Freight, Omni Logistics and Intermodal, revenue at the Expedited Freight segment decreased $34 million or 11.5% to $258 million from the previous year's comparable quarter of $291 million. The decrease was driven by a 12.7% decrease in year-over-year tonnage per day that was partially offset by a 1.8% increase in the revenue per hundredweight, excluding fuel. At the Omni Logistics segment, revenue in the second quarter increased by $16 million to $328 million compared to the $312 million a year ago. The increase was driven by an increase in demand for our services, specifically in the contract logistics area. Revenue in the Intermodal segment of $59 million was flat compared to a year ago, an increase in revenue per shipment of 4.4% was largely offset by a 4% decrease in the number of trade shipments. As you heard from Shawn, adjusted EBITDA was $74 million or an 11.9% margin in the second quarter of this year compared to the $73 million or 11.3% margin a year ago. Consolidated EBITDA as defined in our credit agreement was $74 million or again an 11.9% margin compared to $89 million or 13.8% margin a year ago. On an LTM basis, consolidated EBITDA was $298 million. As usual, we have detailed the information used to build up adjusted and consolidated EBITDA results on Page 29 of the presentation. Turning to cash flow, cash and liquidity, we reported $13 million in cash used by operations in the second quarter which was a $32 million improvement compared to the $45 million in cash used by operations a year ago. For the first half of 2025, we reported $14 million of cash provided by operations, which is in $111 million improvement compared to the $97 million used by operations in the same period a year ago. As for liquidity, we ended the second quarter with $368 million in total liquidity, comprised of $95 million in cash and $273 million in availability under the revolver. The $25 million sequential decrease in total liquidity from $393 million in the first quarter included a $34 million semiannual interest payment on our senior secured notes that we paid in April and October of each year. And as usual, I'd like to leave you with a few additional thoughts for the quarter. And the first one, you can follow under the header of beating a dead horse, but as Shawn stated in his intro, the quality of earnings is continuing to improve the further we get away from the noise of the transaction. We haven't had any pro forma synergy or performance savings add-backs in either the last 2 quarters. As the historical add-backs in the transaction continue to roll off, we expect the difference of what you would normally define as adjusted EBITDA and consolidated EBITDA that we had been reporting to continue to narrow. The add-backs that we anticipate going forward will be more of a normal nonrecurring and noncash tax that you would expect under a non-GAAP definition of adjusted EBITDA. Moving to the second point, which will logically lead us to the third is our sequential quarter-over-quarter improvement in margins and consolidated EBITDA. Our recently enacted pricing strategy, combined with our stringent cost and expense control efforts, especially at the Expedited Freight segment have led to a sequential increase in consolidated EBITDA. The logical extension of increased consolidated EBITDA leads us to 0.3, which is our continued focus on cash generation and conversion thereof. Cash provided by operations has significantly improved in the first half of the year compared to a year ago. If you'll refer to Page 20 of the earnings presentation, you will see that on a non-GAAP basis, we are consistently generating approximately $40 million to $50 million a quarter in unlevered operating cash flow. Next is our unwavering commitment to service even in a soft market. When you invest in Forward, you are investing in a very unique portfolio of logistics and transportation assets, all unified by a shared dedication to customer service. We believe if you provide the world-class service that we do, financial results will follow, providing excellent service is a significant investment, often costly and time-consuming. However, the good news is, we have already made that investment. It is in our DNA and it is in the core of everything that we do. We have continued to optimize our LTL network which is known as North America's leading expedited network. With a more optimized network and with all things being equal, each incremental shipment that we drop into the network has a higher margin than the previous one. And penultimately, as we've shared with you on prior calls, the integration of the network is complete, and we over delivered on the previously committed synergies. As we have also shared with you, we are transitioning from integration to the more longer-term transformation of the combined companies, which we anticipate to be complete by the end of next year. To that end, we will continue to tightly manage all expenses, inclusive of the rationalization of the systems and support that we will need once the transformation is complete. More to come in the future, but just wanted everyone to be aware of our continued effort to right size the expense base commensurate with the support needed to continue to serve our customers. And finally, the strategic alternative review launched earlier this year is progressing. As such, before you ask, and I hope you're listening, we do not plan to update the market on the details of the process as it advances. If and when there is anything of substance to report, we will let you know. More importantly, we do not expect the process to take away from our commitment and focus on running the business. Our goal is to continue delivering the same award-winning services and solutions to our customers as we have in the past. I will now turn the mic back over to Shawn for closing comments before Q&A.

Thank you, Jamie. In closing, I am proud of our team for their continued commitment and focus on the customer, executing operationally and tightly managing cost. Amidst an uncertain macroeconomic landscape, I am confident that we possess a robust platform poised to drive sustainable growth. Together, we remain steadfast in our commitment to deliver tangible value for our customers, fostering opportunities for our team and creating lasting value for our shareholders. As Jamie said earlier, and I want to reiterate, when investing in Forward Air, you are investing in a unique portfolio of logistics assets. I will now turn the call over to the operator to take questions. Operator?

[Operator Instructions] Our first question is coming from Bruce Chan with Stifel.

This is Matt Milask on for Bruce. Just to start here with respect to Omni. Would you be able to provide an update on specific commercial synergy efforts taking place there? Perhaps what's going right so far? What the key areas of focus now are and perhaps any updated expectations that you might have on the timing of how these efforts might start to ramp more meaningfully through the P&L?

Sure, Matt. Thank you. We hired a new Chief Commercial Officer in earlier part of this year, and Eric's really got the team humming on both legacy organizations. And not only is everybody laser-focused on their product value streams, but consistently on the Omni side really working on the synergy selling of all of our great products around the world, and that focus is really starting to take hold. So majority of that is coming from working with the team, enabling the sales team, supporting them with laser focused on how and where to grow in the best interest of the combined organization.

Great. That's helpful. And then I know Jamie prefaced this in his remarks, but with respect to the strategic review, is there any -- perhaps anything on increased activity and inbound interest in any of the lines of business? Or perhaps how the current M&A environment might be affecting your ability to transact?

Yes. I'd say, Matt, that there is always interest in this collection of assets. Just proud and honored to be a part of the combined company. So in terms of increased interest, in terms of us putting a press release out there saying that we're entertaining a strategic alternatives review, I don't know how much more interest we could garner. If you mean about the individual assets, we believe that the value of the collective whole is greater than the sum of the individual parts.

We'll move next to Stephanie Moore with Jefferies.

I wanted to ask maybe a bigger picture question. Clearly, a lot of work has been done over the last year or so on both the expedited side but also Omni side. You can certainly see it across the board, whether it's the margin profile, the pricing actions and the like. So asking kind of a multiyear question here, what is your North Star and how you think about the underlying earnings contribution of the combined entity? And if it's not from a dollar standpoint, are there certain margin aspirations that you have your eyes set on and that can be for, again, the whole company? Or as you look at the LTL business or the forwarding business? But maybe just as you run the business, what are you targeting?

Yes, Stephanie, there's a great page in the back of the earnings presentation on Page 28. And what we try to do here is we've broken it down by our competitive set relative to us. And if you look at where the LTL carriers are, the freight forwarders and the call it the truck loading and Intermodal, we've broken up the opportunity there. Omni, Intermodal are crushing it. Omni, as you can see, has been growing. The margin has been steady, if not increasing. Intermodal has been at the high end of the comp set since they walked through the door. The biggest opportunity is in, call it the 8 percentage point on a $1 billion business that we have in the truckload business. Now I'm not saying that we're going to go straight to 18%, but if we're at 10% now, the market is in that kind of 18% to 20% range, given our premium service, given what we do, given the, I guess, high value and expedited nature of the service that we deliver. There's no reason in my mind that over the next couple of years, that we can't reach that same market margin.

Great. No, that's really helpful. And then maybe just taking a step further, clearly, a lot of action on the pricing front, what is next? Because I think as we look at that peer set, one key differentiation might just be kind of a scale advantage the like. But to your point, your service is high. You've made corrective pricing actions. What are the next steps to close that gap over the next couple of years?

Steph, it's Shawn. So outside of just growth in general, what you see us doing, I would say, under the hood is fine-tuning the organization, really getting lean. And when I say lean, lean is not just meaning cost cutting, but really looking at improving quality of operations, not only just in service, but also in cost around revenues. So that's from optimizing the LTL network to really focus on standards around the world, and focused on no rework, get it right the first time. Let's not do what -- let's not do it twice, do it once. And that's what you're seeing even in Q2 as the team has really focused here and done a fantastic job of adjusting operating costs to the revenues. And that's probably my most proudest moment over the last year is the teams just real confidence in what they're doing, how they're doing it and enjoying it in this very weird market we're in, it's a lot of fun to watch.

Steph, it's Jamie. I'll jump in there. You called out the pricing. Shawn talked about our ability to contain costs as we grow this business. But you say what is next is, right now, our net margins are solid. They're good. We're doing incredibly well on the linehaul side of the business and on the terminal side of the business. Pricing is just starting to kick in. You saw we actually showed a graph. Now it's two points higher on a revenue per hundredweight ex fuel and a little bit more than 4 points higher on a revenue per shipment basis, and what mix in terms of getting it to that next level and closing the gap. I think you're leading us to water a little bit in terms of how do you close that gap is on operating leverage. So if we can hold the net margin, marginally increase it with our pricing actions, but grow the top line and not grow the SG&A portion of the business, which we have a very, very stringent line to hold, then that's what's going to help us close that gap.

We'll take our next question from Scott Group with Wolfe Research.

So I know you probably can't say too much, but what do you think is the timing to hear on this process? Is this weeks away, months away? Any thoughts at all you can share with us?

Yes, Scott, I know you would ask it, we really can't share anything. We are in the process, and it's moving, as I say, on track and will. So as soon as we have something more, but I don't have necessarily a crystal ball to say timing at this point.

Okay. And then maybe just can you give us an update as Q2 played out, as Q3 started, just some of the volume trends that you're seeing so far into Q3? And then I know some of the LTLs have announced GRIs. How are you thinking about GRIs back half this year?

Yes. I'll take a sequential question and then let Shawn give the much more eloquent GRI versus the customer-specific increase. Scott, we don't give intra-quarter guidance. But all I would say is that where we ended the second quarter, we don't see anything that's meaningfully different as we enter the third.

And on the GRI, Scott, I'm a big fan and also talking to the customers when I arrived. I don't believe anything's in general. So I'm not a big fan of GRIs because I've seen multiple organizations. They'll impose the GRI and then the volume slides. And we're not in a market that, that's -- in my world, that's not very smart. So what we do, Scott, is what we call SRIs, which is more strategic. And we're working with each customer strategically on lane pairs that will need adjustment up. And sometimes, I can even adjust some down in exchange. So as volume fluctuates on OD pairs, we work directly with the customer to exchange those on an SRI basis, and we do that consistently. So I don't just find a period of time in an annualized situation to take a GRI, more SRI, if that makes sense.

No, it does. Okay. And then maybe just lastly, Jamie, small cash burn first half of the year, any thoughts on how you're thinking about back half cash flow?

Yes. The way I look at it, there's a great -- you've coached me well, Scott. There's Page 21, we do a cash bridge. And what we're showing here is about $45 million to $50 million in cash flow from ops every single quarter with a consistent, consistent regularity. And so we generate cash every other quarter. We burn a little bit of cash every other quarter, and that burn is only in the quarter when we have the $34 million senior secured note payment which is in April and October. If you look at it over a year, I think we're only down like $10 million in cash over the last 365 days and it's in the midst of integrating these 2 behemoth companies and an incredibly soft freight environment. So as we sit here right now, a little bit less than $400 million in liquidity, I'm feeling pretty d*** good.

But do you think that cash -- operating cash flow changes much in the back half of the year?

Yes, that would be given guidance, Scott, but I appreciate the effort.

We'll move next to Bascome Majors with Susquehanna.

I want to go back to some of the questions about the transition from integration to transformation. I mean you've called out some new services, some wins and press releases. Any way you can dimensionalize the kind of new revenue you're bringing on even directionally in aggregate. And we realize it's not a one-for-one add to what you did last quarter. I just wanted to -- want to see what you're seeing and the opportunity to grow some of the business, where that's happening?

Bascome, yes. So we're -- the couple of press releases, they're just really large ones that were worthy of press releases. I mean we're winning a lot more than what we've pressed. But we're seeing wins in the truckload space. We're seeing wins in the international airfreight space and then just in general ground. It just depends on whether it's a new logo or organic growth with an existing logo. But it's pretty much across the board, I would say, in general, Bascome.

And if we aggregate this, are we talking tens of millions, hundreds of millions of incremental revenue? I just want to understand kind of what this looks like and how it could potentially help with some of the general delays in the freight market?

Yes. I'd say it's a little bit of both because we talk about customers that are lost throughout this transition, and then down trading and up trading. So we've got as much customers that are up trading with us that are existing customers, then we have new logos. So -- and I hate to put it in such a crass way, but I'm almost indifferent of where the increase in revenue comes from as long as it comes. So -- and we all know everybody on this call including yourself, know that the cheapest dollar to win is the customer that you already have. So we continue to grow revenue with certain key accounts. And with the new platform, we do have a couple of big wins that we wouldn't have been able to win absent the combination. But given the state of the freight market, Bascome, I mean everyone right now is slugging it out. What we have to do is be very, very disciplined to the price that we are charging our customer that is commensurate with the expedited service delivery that we have. And we just got to -- we got to look into that discipline and sometimes make some tough decisions to not take on some business that is not profitable for our network. But from the -- I guess, the broader perspective, a couple of big wins that we would not have been able to achieve on a stand-alone basis.

Just one more for me. I appreciate the commentary on the earnings quality, improving and the add-backs getting a little more traditional in your EBITDA adjustment as we go forward and certainly year-to-date as well. Can you give us a little color on any of the ones this quarter were at the segment level? Or were they all at the corporate level? And maybe a little more on what's running through other where I think you added back $14 million this quarter and $11 million last?

Yes. So the vast majority of the other is a noncash stock comp. And what was that -- there's two big pieces of it. Here -- it is right here. So it's noncash comp and facility closing costs that make up over half of that. So that's the vast majority of it. And then you've got some noncash FX gain and loss. So noncash, by and large, and that's why I said in my opening comments, that it is more akin to what you and I would define as traditional adjusted EBITDA. Because the vast majority of it is either noncash or on restructuring and facility closing costs.

And just of those larger ones this quarter or any made at the segment level? Or are those all the corporate?

Well, FX is at a segment stock-based comp can be allocated to the segment, but we don't track it that way, Bascome. Right now, I roll all of those costs up at a corporate level, so that I've got visibility into that. I don't want it hidden down into the segments or around the smaller opcos. You don't want the opcos in indirect taxes, as an example.

[Operator Instructions] We'll move next to Christopher Kuhn with Benchmark Company.

Shawn, I know that you got some poorly priced freight out of the network business. Is that largely done? I don't know if you talked about that this quarter. I know last quarter, you pretty much had it done. I was just curious if some of that tonnage is really just market or some of the things you've done to?

Yes, Chris, that is primarily done. I mean it's always an ongoing assessment. But I would say we fixed the pricing number one, a new basis line. And with the new modeling tools on cost and pricing, I would say we make much more accurate assumptions with new logos and have fixed the existing logos. So you would see less to fix, if that makes sense.

Yes. Understood. And the pricing actions -- I'm sorry, go ahead.

If you pointed to there's a segment level profitability chart. If you look at Page 14 of the Expedited material, you'll see a 500 basis point improvement in just 2 quarters. So it's not just pricing of freight like we -- that's commensurate with the service that we provide that we show in the back. But it's also getting that negative contribution margin break out of the network. And I think this page right now is as strong as a testament of what Shawn was able to get accomplished over the last 2 quarters.

And how should we think about pricing from this level here in terms of revenue per hundredweight ex fuel?

How do we think of it in what way?

Should it improve sequentially? Do you really need the market to make better improvements or kind of where is pricing going from here in terms of...

I would say, Chris, if nothing else changes, that's pretty much a run here for the current market condition that we're in. I don't like to overcommit and underdeliver. So I think as the market -- if and when it starts to tighten, we can make sequential improvements on that as well.

So really, it sounds like that Expedited margin you need the leverage to be back in the model in terms of volume growth from here?

Well, just no, Chris, we don't give guidance on what's going to happen with pricing or the margin. I think, Shawn's response is spot on.

Okay. Just lastly, it sounds like the strategic view, I'm not going to really ask about that, but I just -- it sounds like there's not going to be a lot of portfolio reshaping anymore. I thought we're not any businesses that you're kind of looking to shed now as you think the whole is bigger than the sum of the parts?

Is that a question or a statement?

Yes. I was just asking, I mean, have you -- is there any portfolio reshaping as or not?

Yes. I'd tell you what, we have integrated these 2 companies, there's only probably one that would be nonstrategic or non-core. But if you collapse the other individual entities of Omni with Forward on a network basis, we've already made that decision, and we delivered $120 million in synergy savings. So to unwind it, I think, would be value destructive, but there might be one that we would consider.

And it does appear that there are no further questions at this time. I would now like to turn the call back to Mr. Stewart for any final remarks.

All right. Well, listen, we really appreciate your interest and support, and we remain confident in our strategy and look forward to updating you on our progress upcoming. So with that, if you have any follow-up questions, please contact Tony directly, and we'd be happy to follow up and/or schedule follow-up calls with you guys. Appreciate it. Take care.

This concludes today's Forward Air Second Quarter 2025 Earnings Conference Call. Please disconnect your lines at this time. Have a wonderful day.