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.”
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.
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 | |||||||||||||||
Condensed Consolidated Statements of Comprehensive Income | |||||||||||||||
(Unaudited, in thousands, except per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30,
| June 30,
| June 30,
| June 30,
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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 | ||||||||||||||
