Earnings call transcript: Forward Air reports Q1 2025 earnings miss, stock dips

Forward Air Corporation (FWRD) reported its first-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue compared to analyst forecasts. The company’s stock experienced a decline in aftermarket trading, reflecting investor disappointment. According to InvestingPro data, the company faces significant challenges with four analysts recently revising their earnings estimates downward, while operating with a concerning debt burden of $2.1 billion.

Key Takeaways

• Forward Air’s Q1 2025 EPS was reported at -$1.68, missing the forecast of -$0.44.
• Revenue for the quarter was $613 million, below the anticipated $651.3 million.
• The company’s stock decreased by 0.75% in aftermarket trading.
• Forward Air aims to double its revenue to $5 billion over five years.

Company Performance

Forward Air’s Q1 2025 performance showed a revenue increase of 13.2% year-over-year. Despite this growth, the company faced challenges in meeting market expectations, particularly in EPS and revenue. InvestingPro analysis indicates the company is currently trading above its Fair Value, with concerning metrics including negative free cash flow yield and a high EBIT valuation multiple. The company remains focused on expanding its service offerings and optimizing its network to improve profitability. Unlock 12 additional exclusive ProTips and comprehensive financial analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $613 million, up 13.2% YoY
• Consolidated EBITDA: $69 million, with an 11.2% margin
• Positive free cash flow: $28 million
• Liquidity: $393 million, increased by $11 million

Earnings vs. Forecast

Forward Air’s Q1 2025 EPS of -$1.68 fell short of the forecasted -$0.44, marking a significant miss. Revenue also did not meet expectations, coming in at $613 million against a forecast of $651.3 million. This performance contrasts with the company’s previous quarters, where it often met or exceeded market forecasts.

Market Reaction

Following the earnings release, Forward Air’s stock fell by 0.75% in aftermarket trading, closing at $17.10. This decline reflects investor concerns over the company’s ability to meet earnings expectations. InvestingPro data shows the stock has experienced a significant 53% decline over the past six months, though it has shown a strong 17% return in the past week. The stock remains within its 52-week range, which has seen a low of $9.79 and a high of $40.92. Get access to Forward Air’s detailed Pro Research Report, part of our comprehensive analysis of 1,400+ US stocks.

Outlook & Guidance

Forward Air has set an ambitious goal to double its revenue to $5 billion within five years, building on its current revenue of $2.47 billion. The company plans to achieve this through organic growth, strengthening customer relationships, and enhancing its sales force effectiveness. While future EPS forecasts indicate a gradual improvement, with positive EPS expected by Q3 2025, InvestingPro analysis suggests the company faces significant challenges with its current financial health score rated as WEAK and concerning cash burn rates.

Executive Commentary

CEO Sean Stewart emphasized the company’s long-term growth strategy, stating, "Our goal is to double the business over the next five years." CFO Jamie Pearson highlighted the company’s focus on transformation, saying, "We’re prioritizing and myopically focused on the broader transformation plan."

Risks and Challenges

• Market volatility and economic uncertainties could impact revenue growth.
• Competitive pressures in the logistics sector may affect pricing strategies.
• Tariff discussions and consumer confidence levels could influence demand.
• Achieving the ambitious revenue target may require significant investment and strategic execution.

Q&A

During the earnings call, analysts inquired about the impact of pricing actions and capacity management. The company reiterated its strategy to optimize its network and improve margins while maintaining flexibility to scale operations as volumes return.

Full transcript - Forward Air Corporation (FWRD) Q1 2025:

Operator: Welcome to the Forward Air’s First Quarter twenty twenty five Earnings Conference Call. At this time, all participants have been placed in a listen only mode. And the floor will be open for your questions following the presentation. I would now like to turn the call over to Tony Carino, Senior Vice President of Treasury and Investor Relations.

Sean Stewart, Chief Executive Officer, Forward Air: Thank you, operator, and good afternoon, everyone. Welcome to Forward Air’s first quarter twenty twenty five earnings conference call. With us this afternoon are Sean Stewart, Chief Executive Officer and Jamie Pearson, Chief Financial Officer. By now, you should have received a press release announcing Forward Air’s first quarter twenty twenty five results, which was also furnished to the SEC on Form eight ks. We have also furnished a slide presentation outlining first quarter twenty twenty five 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 at forwardair.com. Please be aware that certain statements in the company’s earnings release announcement and on this 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 influence on these forward looking statements, which speak only as of the date of the 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 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 Sean. Good afternoon, everyone. Before I get into the substance of today’s call, I want to take a moment to thank our customers for their trust and loyalty during this unprecedented time in the global logistics market.

We have always prided ourselves in solving our customers’ problems and it is during these times when we can add the most value to their supply chains. So with that, thank you. I appreciate you entrusting us with your business. I also want to thank our employees around the world for their dedication to meeting our customers’ needs on such a consistent basis. Our employees set this industry standard for exemplary service and commitment to best in class service.

To our shareholders and lenders, thank you for investing your time and money in our company. We communicate with you on a regular basis, and I sincerely appreciate your belief in our team and in the transformation journey that we are on. As you have heard from us in the past, we are committed to increasing transparency into our business. We are excited to share our new investor slide presentation that matches how we view the new combined business, which also provides direction on how we intend to report on the business by the end of the year. Continuing on the theme of transparency, as we look to the remainder of 2025 and into 2026, we expect to have fully integrated the two legacy companies and be progressing down the path of transforming the company from a tangled web of global legal entities with multiple and sometimes duplicative technology systems to a more streamlined entity with the appropriate level of support and simplicity to grow the business.

With this backdrop, our goal is to double the business over the next five years going from the $2,500,000,000 revenue entity that it is today to $5,000,000,000 Obviously, that assumes that we return to a normal freight environment and the macro headwinds do not persist for an extended period. While we are in uncertain times, what is certain is the tremendous opportunity we have ahead of us. It is an exciting time to lead our company as we continue to transform Forward Air into a global logistics leader. With that, I want to cover three topics on today’s call. First, review our first quarter consolidated results.

Second, share an update on the actions to improve the expedited freight segment and third, provide an overview of our sales by service and by region before turning the call over to Jamie to cover the financial results in more detail. Starting with the results. We had a solid quarter and reported a consolidated EBITDA of $69,000,000 compared to $63,000,000 a year ago. On a sequential basis, the results are consistent with the $69,000,000 we reported in the fourth quarter of last year. With the year over year improvement, the last twelve months consolidated EBITDA was $313,000,000 Importantly, we generated positive free cash flow during the first quarter and increased liquidity by $11,000,000 to $393,000,000 Second, a key area of emphasis has been on correcting the previous pricing strategies at the Expedited Freight segment that focus more on growth than profitability.

As previously communicated, we began taking corrective pricing actions during the fourth quarter of twenty twenty four and finished implementing the improvement strategy in February of this year. We’re pleased to share that in the back half of the quarter, we began to see the improvement that we were anticipating. As expected and shared on the last earnings call, we shed some of the poorly priced freight from our network as a result of our pricing actions, which leads to some additional capacity in our network. What is incredible was the team’s ability to cut cost in line with the decrease in volume on an almost real time basis, which led to a 10.4% reported EBITDA margin for the quarter, up almost 400 basis points from last quarter. I have been very clear that it usually takes months to rectify a single poor pricing decision and shedding unprofitable freight is part of the process.

While we all know that there was additional opportunity in the expedited freight segment’s margin, I am very proud of how our team reacted and handled a very difficult situation, especially when you consider the incredible volatile environment in which they did it This quarter’s results affirm my view that the fundamentals are intact. The expedited freight segment includes one of the largest expedited LTL networks in North America and is an industry leader in serving time critical and high value freight. We believe the quality of service we provide will be the driver of customer retention, growth and ultimately pricing and profitability. The third topic is providing additional detail on our revenue, both in terms of service provided and customer region. With the first year as a combined company behind us, we plan to go to market and eventually transition to reporting our financial results by service as we move away from the legacy legal reporting structure.

The four main products consist of ground transportation, air and ocean forwarding, intermodal drayage, warehousing and value added services. Based on our 2024 consolidated revenue, approximately 70% of our business was attributable to ground transportation business in North America across our legacy Ford and Omni businesses. This includes less than truckload, pickup and delivery, truckload brokerage services. Approximately 12% of our 2024 revenue was from air and ocean forwarding with another approximately 9% from our intermodal drayage business. The final product category is warehousing and value added services, which also is approximately 9%.

Supplementing these products is our customs brokerage that we’re able to integrate as needed. You can see the summary of the product breakout on pages seven and eight of the slide presentation issued today. As for our revenue by region, utilizing twenty twenty four calendar year customer billing data, we estimate that approximately 88% of our revenue is attributable to customers billed in The United States. Another estimated 7% of our revenue is from customers billed in Asia Pacific region, while approximately 4% is from customers billed in North, Central And South America, excluding The United States. Finally, less than 1% of our revenue is from customers built in Europe, The Middle East and Africa.

You can see a summary of the estimated revenue by region on Page nine of the slide presentation. Please note that we do not have information on our customers’ shipments points of origin, especially as it pertains to our intermodal segment. In pursuit of continuing to improve the transparency of our disclosures, I hope you find the additional information helpful to you understanding of what is combined business is capable of. When you combine the services we offer with our global reach, we believe Forward Air is uniquely positioned and that separates us from the competitors and sets the stage for growth. We have more than two fifty facilities in 21 countries and can offer our customers one stop shopping and single point of contact with end to end international services for specialized products.

As we look ahead, I am very excited about our sales opportunities to drive growth and margin expansion. With that, I will now turn the call over to Jamie to go through the results for the first quarter.

Jamie Pearson, Chief Financial Officer, Forward Air: Thanks, Sean, and good afternoon, everyone. As Sean already stated, we reported solid results in the first quarter of this year with $613,000,000 in revenue, which was a 13.2% or $71,000,000 increase on a required GAAP basis as compared to the first quarter of the prior year. Increase in revenue was primarily driven by the Omni acquisition that closed on January twenty five of last year. Since we did not own Omni for the entire first quarter of twenty twenty four, I will also include comparisons for the Omni segment on a sequential basis. The good news is that this is the last time that I’m going have to say that, as next quarter will be our first fully comparative period.

However, back to the point and on a more sequential and comparative basis, consolidated revenue decreased 3.1% or $20,000,000 from $633,000,000 in the fourth quarter of last year to $613,000,000 this quarter. As for our three reporting segments, expedited freight, omni logistics and intermodal, revenue at expedited freight decreased $24,000,000 or 8.8% to $249,000,000 from the previous year’s comparable quarter of $273,000,000 The decrease was driven by a 10.9% decrease in year over year tonnage per day and one less business day in the first quarter of twenty twenty five compared to the first quarter of twenty twenty four. And that was partially offset by 2.5% increase in revenue per hundredweight excluding fuel. You can see the revenue per hundredweight by quarter on Slide 14 of today’s presentation. The 2.5% increase outperformed the LTL industry average on a year over year basis as did the 4.3% sequential increase from the fourth quarter to the first quarter.

At OmniLogistics, revenue in the first quarter increased by $99,000,000 to $323,000,000 compared to the $224,000,000 a year ago. Again, the increase was primarily due to the twenty four days of less ownership in 1Q twenty twenty four compared to 1Q twenty twenty five. More relevantly, however, on a sequential basis, the first quarter revenue of $323,000,000 was essentially flat to the fourth quarter twenty twenty four revenue of $326,000,000 Revenue in the Intermodal segment in the first quarter increased $6,000,000 or 11% to $62,000,000 compared to the prior year’s comparable $56,000,000 The increase is attributable to a 7.4 increase in revenue per shipment and a 2.9% increase in the number of drayage shipments. As you heard from Sean, consolidated EBITDA as defined in our credit agreement was $69,000,000 or 11.2% margin compared to the $63,000,000 or 10.2% margin on a pro form a basis a year ago. With the Omni acquisition closing in the first quarter of last year, there were a ton of transaction related expenses.

And as promised, we are now seeing the quality of earnings improve when compared to the last year’s comparative period. To that end and as usual, we have detailed the information used to build up the consolidated EBITDA results on Page 28 of the presentation. Turning to cash flow, cash and liquidity, we reported $28,000,000 in positive cash flow from operations in the first quarter, which was a $79,000,000 improvement compared to the $52,000,000 of cash used by operations a year ago. On a sequential basis, that same $28,000,000 in positive cash flow from ops in the first quarter is a $51,000,000 improvement compared to the $23,000,000 in cash used by operations in the fourth quarter of last year. As for liquidity, we ended the fourth quarter with almost $400,000,000 in total liquidity, specifically $393,000,000 which was comprised of $116,000,000 in cash and $277,000,000 in availability under the revolver.

This represents an $11,000,000 improvement compared to the end of the fourth quarter of last year. And as usual, in commensurate with my past practice, I would like to leave you with a few additional thoughts for the quarter. The first of which is an update on our consolidated first lien net leverage ratio. As one of the only financial covenants in our credit facility, net debt to consolidated LTM EBITDA was 5.3 times compared to a maximum allowable level of 6.75 times. The good news is both cash and LTM consolidated EBITDA were up sequentially, which led to a $66,000,000 cushion at the end of the quarter.

This is an improvement of $7,000,000 when compared to the $59,000,000 of implied cushion at the end of the fourth quarter of last year. Point two is our continued focus on cash conversion and liquidity. Cash flow from ops and thus cash increased quarter over quarter leaving us again with a little less than $400,000,000 in total liquidity at the end of the quarter. Given our cash flow performance and our current $393,000,000 liquidity, we believe we’re in very good shape today. Point three, as provided by Sean in his opening remarks, you now have an overview of our sales by service and by region around the world.

We know that you’ve been asking for more details on what the combined company looks like and I think this quarter’s earnings presentation is a huge step in that direction. And as for the potential impacts of tariffs, I’m going to steal a line from one of my peers and say that you would have to be Nostradamus to actually know what the future holds. However, we do not believe that we’re overly exposed to any one region around the world outside of The United States, with approximately 1% of our twenty twenty four revenue coming out of customers billed in Mainland China and approximately 5% from customers build in Hong Kong. In my opinion, the real impact of tariffs will not be from the inflationary impact of the tariffs themselves, but rather the impact the headlines have on consumer confidence and the downstream impacts purchasing has on volumes. And given the daily news out of Washington, including this weekend, we may not know what those impacts may or may not be for another sixty to ninety days.

Finally, as everyone knows, we filed an eight ks on January 6, that we are launching a strategic alternatives review process. Since the announcement, we have completed a significant amount of work with our advisors and have recently commenced discussions with potentially interested parties. There is no guarantee that we will enter into a transaction of any kind and do not plan to update the market on the details of the process as it progresses. If and when there is anything of substance to update, we will let you know. Until then, just know that we will continue running the business and providing the same best in class services and solutions as we did before and plan to provide in the future.

I will now pass the mic over to Sean for closing comments before Q and A.

Sean Stewart, Chief Executive Officer, Forward Air: Thank you, Jamie. I will wrap up our comments with a focus on the remainder of 2025 and early twenty twenty six. Right now, some market participants are narrowly focused on either last quarter’s historical results or even the current quarter’s tariff results. As for our company, and more specifically, our leadership team, we are focused on our employees and our customers, knowing that if we get those right, they will take care of our shareholders. In closing, I would say that in the face of a very challenging industry and equally volatile macro environment, our team has made tremendous progress since the transaction closed.

As you have heard us say before, we do not expect progress to be linear. However, we also do not intend to let the recent market noise slow us down as we look ahead and focus on the rest of the year and into 2026. Either the investments have been made or the plans have been developed and are in process of being implemented, and I remain confident in our ability to execute our strategy, grow the company and enhance shareholder value. Finally, before we begin the Q and A, I want to acknowledge the public disclosure this morning from one of our investors. As you just heard from us, the Board and management team are entirely focused on taking deliberate actions to maximize shareholder value.

The Board is actively engaged in leading the strategic review process, which, as we noted, is underway. And the continued oversight of our transformation strategy. We firmly believe that all of our directors are vital to these efforts. We look forward to filing our definitive proxy materials in the coming days. Beyond that, we’re not going to comment any further, and we ask that you keep your questions focused on our earning results.

I will now turn the call over to the operator to take questions. Operator?

Operator: The floor is now open for questions. Our first question is coming from Bruce Chan with Stifel. Please go ahead. Your line is open.

Andrew Cox, Analyst, Stifel: Hey, good afternoon team. This is Andrew Cox on for Bruce. Appreciate the consolidated revenue breakout here and understand the lack of visibility into some of the problems some of the shipments in intermodal. But we just wanted to kind of get a sense of we felt that expedited might have a little bit more exposure to international end markets than maybe some of the LTL peer set. And we just kind of wanted to know if you felt that was a fair statement.

And if you could give an estimate or give some color on how much of that the revenue in that division or volumes, however you want to discuss it, may be tied to inbound China or Asian volumes?

Sean Stewart, Chief Executive Officer, Forward Air: So Andrew, this is Sean. It’s a great question. So when we gave our guidance on the 10% to 15%, it’s actually below 10%, and we’ve put in a buffer. We don’t always know in the expedited LTL because it’s coming out of a USDC mainly. We don’t know where its original country of origin was.

And so that’s unknown to anybody in the space. So we put in a buffer to kind of who we know, if we know the customer and if we know they’re importing, and that’s where we get it from. But it’s a pretty good coverage. I can’t say it’s 100% scientific, but it’s a pretty good coverage of that exposure.

Andrew Cox, Analyst, Stifel: Okay. That’s helpful. And as a follow-up here, there’s been kind of mixed opinions on whether numbers this quarter have been a result of pull forward, not just at forward, but across the space. We just kind of wanted to get a sense of maybe conversations you’ve had with customers and how much you think there might be some pull forward in the numbers here? And maybe if you have any detail, categories or divisions have you seen it in?

And are you baking in an air pocket potentially coming through starting here soon? Yes.

Sean Stewart, Chief Executive Officer, Forward Air: We didn’t see a whole lot of pull forward. I won’t say there was not any. But towards the end, the last two weeks of March, there was quite a bit of significant uptick. But we don’t know how much of that was truly a pull forward versus just projects seasonality projects that we had hit. And it wasn’t just us, it was some of our indirect customers as well through our network that had the same project.

So I can’t really comment that it was so much of a pull forward, but I can tell you, I hope there’s more coming in Q2.

Andrew Cox, Analyst, Stifel: Thank you.

Operator: We’ll take our next question from Stephanie Moore from Jefferies. Please go ahead. Your line is open.

Stephanie Moore, Analyst, Jefferies: Good afternoon. Thank you. I wanted to touch on the pricing performance within expedited for the quarter. Maybe just trying to get kind of a better understanding of the run rate as we go through the rest of the year. It looks like very strong yield performance in 1Q and benefiting from the corrective actions that you’ve taken.

But how much just given the timing of those actions, which I think you called out, didn’t fully get influenced at the end of the first quarter. So as you look at the run rate for the first quarter, should we then expect a bit of a step up in 2Q and then for the rest of the year as those actions kind of fully take hold? Thanks.

Sean Stewart, Chief Executive Officer, Forward Air: Hi, Stephanie, and welcome back. Yes. So the pricing actions, it’s kind of a it’s a double edged sword. So the pricing actions that we took in regards to our class based tariffs are solid, and we’re seeing the necessary results. And just for a context of the timing, the final action was February 6.

And so we basically have half of February and all of March. So let’s just say half of the quarter was impacted, if that helps you. In regards to you also lose some volume, although more of our volume declination was overall market and not just from our pricing actions. So what you heard in my opening was we also have to make sure that we are reducing the cost of the network and optimizing that network based on volume, whether it be by customer declinations, the greater market or pricing actions that we choose to take. So it’s not just about pricing.

It’s also about how we adjust our network and our modeling from an optimization standpoint to bring the cost down when the revenue is not there. So it’s a double edged sword in how we really control that from making sure that we’re bringing the most margin into the organization as possible with those actions.

Jamie Pearson, Chief Financial Officer, Forward Air: And Stephanie, it’s Jamie. If I can add, since those the previous pricing action that led to the situation was taken in late twenty twenty three, ’20 ’20 ’4 should be all else being equal a fairly easy comp. So you compound the fact that what Sean said about only this only half of the impact was captured in the first quarter with the fact that that pricing action happened in late twenty twenty three carried throughout most of 2024, I would anticipate fairly easy comps. That doesn’t mean that we shouldn’t do better, but this space on a year over year basis, we should see fairly good performance.

Stephanie Moore, Analyst, Jefferies: Got it. Then just maybe touching on the margin expectations for this year. Look, think Jamie, Sean, you both have talked about the opportunity to continue to improve the expedited margin profile and kind of compare it to other LTL peers. But can you talk a little bit about what we should expect in terms of OR improvement expected in 2025?

Jamie Pearson, Chief Financial Officer, Forward Air: Yes. Well, Stephanie, I would say on that is if you look at Page 25 of the

Stephanie Moore, Analyst, Jefferies: I’m on the slide.

Sean Stewart, Chief Executive Officer, Forward Air: You’re on

Jamie Pearson, Chief Financial Officer, Forward Air: the slide. You’re being used to I’m on it. Yes. If you think about a $1,000,000,000 business on the LTL side of the house being a $1,000,000,000 business, if you just do simple math, the average is 18.5, we’re at 9.8, so that’s about an 8.7% gap. And then if you go back even five to seven years ago, not recently, I’m leaving COVID out for a very specific reason, We were at that 15 to 17% range.

So this network and this company is capable of hitting they have, it’s not that they’re just capable of we actually have hit these numbers before, And I don’t mean this offensively to our peers, but I think we have a far superior service and product offering. So there’s no reason why we shouldn’t be at least average.

Stephanie Moore, Analyst, Jefferies: And maybe just a follow-up to that and I promise I’m done here. We talked about obviously the pricing side coming in and impressed by those results. You’ve talked about your just now your superior service, which I would agree. So what is left, I guess, to ultimately close that gap, if anything?

Jamie Pearson, Chief Financial Officer, Forward Air: Yes. For me, and I’ll let Sean as the closer kind of clean up, is we took these pricing actions. In those pricing actions, we created excess capacity in the network. And you know as well as anybody else how the operating leverage works in this space. So from my perspective, and we need to be disciplined on pricing and simply add volume to the network.

We’ve created space in the network, space already existed in the network. So now going forward, if priced appropriately, there’s no reason why every incremental dollar shouldn’t have that additional operating leverage included.

Sean Stewart, Chief Executive Officer, Forward Air: We just got to grow it, Okay. Now the network is good. The pricing is solid, the service and solution is solid, we just got to grow.

Operator: We’ll take our next question from Scott Group with Wolfe Research. Go ahead. Your line is open.

Scott Group, Analyst, Wolfe Research: Hey, thanks. Any chance you can give us the monthly tonnage trends throughout the quarter in April? And I just want to make sure I’m getting the message right just near term, right? We’ve got a full quarter benefit of the pricing actions in Q2, so that will help. But there’s this sort of import cliff or whatever you want to call it that I imagine impacts the airport to airport business.

So sort of do you think we should expect to see sequential improvement in expedited revenue and margin and earnings in Q2? Or is that too much to ask? I don’t know.

Jamie Pearson, Chief Financial Officer, Forward Air: Of course, it’s too much to ask, Scott, but I wouldn’t expect anything other than that from you. And I mean that lovingly. So the way I would answer that is if you look at 1Q twenty twenty five as the baseline, if we can anchor Scott on 1Q twenty twenty five, what we’re seeing are similar trends as our peers as they have pre released. And what historical patterns would imply, which is very directly a little softer in April and a little stronger in May relative to April. So it’s following similar trends to what our peers are pre released to and also similar trends of what we’ve historically performed at.

Right now, we are prioritizing and myopically focused on the broader transformation plan and the longer term profitability of the company. And I mean this to say, last quarter is in the rearview mirror. The current quarter is turbulent. It’s noisy. It’s full of headlines than it is really actual performance.

And we’re focused on making really just the necessary investments and the decisions to fundamentally improve the operating characteristics of this company, especially in the back half of this year moving into 2026. I think I can speak for the entire ELT is that we’re looking forward to putting points on the board and reporting our results in the next quarter here in a few short months.

Scott Group, Analyst, Wolfe Research: And then I think you had a comment that $2,500,000,000 of revenue is going to $5,000,000,000 of revenue. Is that an organic comment? Or is there some assumption of M and A? And then just like the other like strategic question, at least to me, this talk about bonded warehousing is somewhat new. Just how big of a market is it?

How big of a business is it for you? And like do you have any color you can share? Because I think it’s interesting to the market overall. Like is the activity in these bonded warehouses like going through the roof right now? Or is it sort of just business as normal?

Sean Stewart, Chief Executive Officer, Forward Air: Yes, it’s a lot. So I would say, yes, organic expansion by strengthening and scaling our customer relationships. We’re also promoting we haven’t done a great job in cross selling of our products and services across the current and future customer base, meaning giving all of our services, not just selling one service that we were in the previous legacy companies, and obviously driving our sales force effectiveness and improve their pipeline. So that’s really the main areas that we see taking it from where we are today to that $5,000,000,000 in five years. Yes, to answer your next question, bonded warehouses and foreign trade zones in The United States are going to be very important are important today and even more important tomorrow.

And so where we have our bonded warehouses today and fairly good coverage around The United States, we are in the process right now of expanding our foreign trade zones in those bonded warehouses to further take it a strategic advantage to the market and based on what our customers’ needs are.

Scott Group, Analyst, Wolfe Research: Mike, do you have any can you give us any perspective how big is this business for you? Like how rapidly is it growing right now?

Sean Stewart, Chief Executive Officer, Forward Air: I can’t. I would be licking my finger and holding up to catch the wind. So it’s not fair to really comment on that one.

Operator: We’ll take our next question from Bascome Majors with Susquehanna. Please go ahead. Your line is open.

Bascome Majors, Analyst, Susquehanna: Thanks for taking my questions. To follow-up on some of the mix disclosure here, within that 12% of Air and Ocean Forwarding, you give us a rough breakdown between the Air and the Ocean contribution? And if we look at that plus the warehousing value add, as really the legacy Omni contribution to that, call it sixty-forty Air Ocean, warehousing value add on the revenue top line. How does the bottom line contribution differ from that sixty-forty split? Thank you.

Jamie Pearson, Chief Financial Officer, Forward Air: Yes, Bascome. We’re just trepiduously putting our toe in the water on this one. We’re going to start with revenue. By the time we get to the end the year, we intend to actually continue to increase those disclosures. But right now to say that what the kind of break apart Air Ocean and warehouse and VAS outside of what we’ve already disclosed, we’re not prepared to do so.

I would say I agree with your direction. Air is a little bit bigger than ocean within that segment. But I think everyone is very well aware of what’s going on with our warehousing operations relative to the volume on ocean in particular and air.

Bascome Majors, Analyst, Susquehanna: Thank you for that. And I appreciate the guidance approach here, but we really don’t have a baseline of what seasonality looks like in the combined business. Could you just give us a high level view of what a normal and of course is anything but normal environment directionally look like in some of the broad stroke business lines in a typical 1Q to 2Q? And I guess we can do our own work on where we think it might diverge for what’s happening. Well,

Sean Stewart, Chief Executive Officer, Forward Air: you just said it for me, Bascome. But seasonality is, I think, out the window. But if we went typical, your Q1 is usually lower than the other three quarters in a normal calendar segment. You end with you end Q1 with a strong March typically. You usually start off Q2 with a light April with an improvement in the following quarters, I mean, the following months.

So typically, Q2 is a little lighter. Q3 to Q4 end up ramping up to end the year. So that’s typical. But I think we’re anywhere from typical. What we don’t have the crystal ball on is, yes, we’ve got the ninety day reprieve.

What’s that going to do? We did see a large destocking. What did it get to like 14% on the destocking, yes, prior to all this tariff conversation. Our sources are now telling us that’s probably back up to the levels that post COVID-twenty three levels. So a lot of forward stocking coming back in.

So we just don’t know. Jamie and I look at consumer confidence as probably the main KPI because how goes consumer confidence, all else is just kind of a feed to that. So that’s what we’re going to continue to watch. And if the consumer confidence starts to come back up, I think things, especially for you as an analyst, should start to trigger some positive things to come. But I think we’re going to have to seize more of that.

Yes, Vascon. And by the

Jamie Pearson, Chief Financial Officer, Forward Air: way, normal, who knows? But if you just look at pages, I would say thirteen, sixteen and seventeen in the materials, you’ll see the shape of the curve. And I’m going to work backwards on this one. 17 is intermodal. It’s like a PEZ dispenser.

You hit the button, 10,000,000 comes out. If you look at 16,000,000 on Omni going into the beginning of twenty twenty four, there’s probably some transaction related, what I’d say headwinds there, but the shape of the curve there looks about right. And then on 13,000,000 for expedited freight, we all know that 4Q shouldn’t be that low. So if you were to extrapolate a little bit better for fourth quarter, that probably is not too dissimilar to what I would say outside of a tariff related industry and a weak freight environment would be, probably not too dissimilar to what I would expect.

Bascome Majors, Analyst, Susquehanna: Thank you both.

Operator: We’ll take our next question from Christopher Koot with Benchmark. Please go ahead. Your line is open.

Christopher Koot, Analyst, Benchmark: Yes. Hi. Thanks for taking the questions. It sounds like so in expedited, the volume decline, I think you said was largely due to market. Some is due to that shedding of poorly priced freight.

Do you expect that to continue as the year progresses? Or have you shed most of that freight?

Sean Stewart, Chief Executive Officer, Forward Air: I think most of it, Chris, has shed. We’ve been in further dialogue with some of those customers on some revisit, not that we’re changing pricing, but just to continue the conversations and the need if their needs change, we’ll see what we can do as well. But yes, I think the majority of that. So it’s really down to the market situation, if that’s really your question.

Christopher Koot, Analyst, Benchmark: Yes. No, that’s helpful. And so that was my next question. I mean, do you think it’s possible some of these customers come back just given your service level compared to where their alternative is?

Sean Stewart, Chief Executive Officer, Forward Air: Well, I’m a pretty humble guy. So I don’t want to be cocky here. But I think our service any time somebody leaves and goes and tries something else, we’re kind of hard to beat. And I’m being proud and humble at the same time. So yes, I do think so.

But we’re going to continue to we’re not just sitting on our hands and we’re making this network better every day. And we have an outstanding team that is looking for perfection and not just staying status quo. And so as we continue to make things better, make things faster, quality is improving, and it’s hard to improve from a pretty outstanding quality that it is today. Yes, we’re kind of hard not to use.

Christopher Koot, Analyst, Benchmark: Okay. And then you’ve taken the cost out. You’ve done a good job there to offset the volume loss. Do you think, though, that you have enough capacity if we’re all hoping volumes come back?

Sean Stewart, Chief Executive Officer, Forward Air: For sure. Yes, there’s no doubt about it. We run pretty between our fleet owners and partners to our independent contractors to our own employee drivers, we can scale this thing up and down pretty, pretty damn quick. So yes, that’s not going to be a problem for us. That will be a good situation, not a problem.

Christopher Koot, Analyst, Benchmark: Yes, exactly. Just lastly, it’s small, but the intermodal business, what is the impact of the Lower West Coast imports? And will it actually benefit from some East Coast imports picking up again as the Red Sea situation is alleviated?

Sean Stewart, Chief Executive Officer, Forward Air: Man, you’re like my top sales guy for intermodal right now. So yes, you’ll love this. So our intermodal team, which is a fantastic group, we pretty much are focused up and down the East Coast into The Gulf. And then we have one operation in Seattle Tacoma. That’s where our sweet spot is.

Catch most of our West Coast traffic in the inter country rail yards from an intermodal standpoint, and that’s where we grab the cans. So we’re not heavily focused ourselves on the West Coast, L. Long Beach ports. And so we feel that we’re in the right sweet spot for grabbing as much as we have today and increased off the East Coast because that’s where we are.

Christopher Koot, Analyst, Benchmark: Got it. Thanks for the questions. Appreciate

Sean Stewart, Chief Executive Officer, Forward Air: it. And

Operator: we’ll take our next question, a follow-up from Scott Group with Wolfe Research. Please go ahead. Your line is open.

Scott Group, Analyst, Wolfe Research: Hey, guys. Thanks for the follow-up. I guess I want to try to understand a little bit better. And I totally get we’re not giving guidance and there’s a lot of there’s not a ton of visibility right now. And the disclosure is helpful, 88% U.

S. Customers, 70% ground transportation. But my assumption has been that a lot of that ground business is the airport to airport and thus ultimately tied to imports in The U. S. And so if there’s a drop in imports into The U.

S, that shows up as a headwind to volume in May and June, right, as we start to see this drop in import. Is that the right way to think about your business? And are you seeing that? Or you think it’s more truly domestic and it’s going to be more like what the other LTLs are talking about seeing. I just want to make sure I’m understanding like how to think about the business drivers.

Hopefully, that makes Yes, Scott.

Sean Stewart, Chief Executive Officer, Forward Air: It does. I would say that we’re an import consuming country. And so I can’t even give you the right number, but I would say so much of what we consume in The United States is imported into The United States. So it’s an impact. But I would also say what a lot of people and this is my view, what a lot of people don’t understand is the tariff conversation.

If this was Trump administration’s first period, we would all have a lot more questions. But since it’s not, and this is Trump two point zero, a lot of these concerns, in my opinion, are already mitigated because we had the first four years and another four years to prepare for this. And so I know a lot of people don’t understand it’s new conversation, but a lot of what we call China plus one has already moved to those plus one countries where these tariffs aren’t as impactful as China. And so where people are seeing the biggest decline right now is in China, but most of that, which is not really a conversation, is coming off the cancellation of the three-two-one de minimis rule. And so a lot of this is more the volume is coming down out of China for the e commerce business, the small parcel business than it is about the density real cargo that rides in our network.

So I don’t know if I helped you or confused you more, but I don’t think that this is going to be a real impact to our total volume in the LTL sector.

Scott Group, Analyst, Wolfe Research: That’s super and just so I understand, it doesn’t sound like the stuff that the typical stuff that’s part of the de minimis, like the TMO machines of the world, that stuff doesn’t really flow through your network on the airport?

Sean Stewart, Chief Executive Officer, Forward Air: I won’t say it doesn’t flow, but it’s minimal.

Scott Group, Analyst, Wolfe Research: Okay. Very helpful. Thank

Jamie Pearson, Chief Financial Officer, Forward Air: you. Appreciate question has got their exposure compared to other LTL. I think Sean articulated it perfectly.

Scott Group, Analyst, Wolfe Research: Thank you.

Operator: And we do have a follow-up question from Bruce Chan with Stifel. Go ahead. Your line is open.

Andrew Cox, Analyst, Stifel: Guys. Thanks for letting me jump again. Andrew, again. I just wanted to kind of get a temperature check on price competition in the premium LTL services. It seems like others have been pretty deliberate about building market share in this segment, including standing up smaller A2A networks.

So how would you characterize the competition in the competitive environment right now? So

Sean Stewart, Chief Executive Officer, Forward Air: Andrew, I don’t I mean, again, to be humble, we have people playing in the space, but they don’t have true networks, not a full bespoke like we have. So yes, there’s people out there playing the space. Pricing competition for our service, I don’t really see it on a day to day basis. If they want to lower their rates, if they’ve got good density lanes and they’re buying it, let them have it for a lower margin. But what we’re doing is focused on our quality and the rate that is market competitive to have the great service we provide.

And that’s where we’re playing and let them do what they want to do. We’re staying focused really on us and being better every day than comparing ourselves to them.

Andrew Cox, Analyst, Stifel: Okay. And I guess if I can just have one more here. Apologies if we’ve missed it, but just wanted to get an update on the PT in sourcing. Do you still feel like you’re in a good place there, especially with respect to line haul? And are you seeing that market get any tighter or really any changes to that market?

Thank you.

Sean Stewart, Chief Executive Officer, Forward Air: You’re talking about purchase transportation? JPT? Yes. Yes. I think best in class there.

We’ve got really outstanding drivers and owner operators and fleet owners. There’s not a huge influx of overall demand there. So we give them a great rate to run our cargo as well as we work very closely with them to ensure that they get home as much as possible. And so it’s not just about rate, it’s how they’re treated. And we feel like we do that best in class against any of our competitors.

So I don’t see that really being a huge issue this year in 2025.

Andrew Cox, Analyst, Stifel: And

Operator: there are no further questions in queue at this time. Let me turn the call back over to Mr. Stewart for any final remarks.

Sean Stewart, Chief Executive Officer, Forward Air: All right. Well, I want to personally thank everyone for joining the call today. Really appreciate it and look forward to connecting with you soon. If you have any questions, please follow-up directly with Tony, and he’ll get back to us if needed Really appreciate it.

Take care.

Operator: This concludes Forward Air’s first quarter twenty twenty five earnings conference call. Please disconnect your line at this time, and have a wonderful evening.

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