Forward Air Corporation

Thank you for joining Forward Air Corporation's second quarter 2021 earnings release conference call. Before we begin, I'd like to point out that both the press release and webcast presentation for this call are accessible on the investor relations section of Forward Air's website at www.forwardaircorp.com. With us this morning are CEO Tom Schmidt and CFO Rebecca Garbrick. By now, you should have received the press release announcing our second quarter 2021 results, which was furnished to the SCC on form 8.K and on the wire yesterday after the market closed. Please be aware that certain statements in the company's earnings press release announcement and on this conference call are making forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995, including 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. 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 Exchange Commission and the press release and webcast presentation relating to this earnings call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. And now I'll turn the call over to Tom Schmidt, CEO of Forward Air.

Thank you, Tani, and good morning to all of you on the call. On our last call in May, I did reinforce five observations that I had made in February, observations that gave me confidence for our double-double. As I said in May, we are hitting our stride. If you go a bit further back all the way to March of last year, you could actually argue we were crawling last year in March, then walking, jogging, hitting our stride by May with our first quarter, and now we're running. And if I go back to those five observations, the first one was a beat. We had a good beat in Q1. We have a stronger beat now in Q2. In fact, as one of our analysts pointed out, we did have a double-double the first time since 2018, double-digit margin as a company and double-digit revenue growth. The second observation is momentum. We actually finished the quarter with the month of June being the best month ever in the history of our company. Top line, bottom line, we never had more revenue, we never had more operating income. That's a super strong entry ramp into our third quarter. The third observation is around discipline pricing. We keep being very, very surgical in fine-tuning by weight, by distance, accessorial, so that we actually can move our customers' freight very, very smoothly, and we can do it also economically. Good for them, good for us ultimately. The fourth observation is around organic growth. We keep doing that. In fact, last week we talked about opening up a new access point for our LTL business in Vancouver, Canada, the third location that we have up north in addition to Toronto and Montreal. And worthwhile for us to remember, I always said we're going to do more with our trading partners north and south. Both of them are on the Olympic Spirit podium as two of our top three trading partners. We will be doing more with them. And U.S. domestically, when you look at organic growth, we currently have record weight per shipment. We never had higher weight per shipment in LTL than we have right now. And then the fifth observation gives me confidence is around inorganic growth. Last time I talked about for the first time in six years, we actually didn't just buy tuck-in acquisitions in Intermodal or Final Mile. We actually bought an acquisition chain, P. Hall Express, in our core LTL business. There will be more in the making here too. We are running. And when you're running, you actually get kind of a runner's high. And I think that will show too going forward. Commercially, We are going to be even more surgical with our customers on ensuring that we move their freight on time without any damages. We are super focused on palletization, on safe stacking, dimensional focus, and we're working with our customers hand in hand that the freight that they give us will be in a shape that will be smoothly running through our system and will be delivered on time without damage. And as I had mentioned, we are still in mostly Q4 and 2022 bringing our events business back. We see some of that now. In fact, on Sunday, just a couple of days from now, I'm heading out to the National Home Delivery Association Conference in San Diego, where I'm going to meet with some of our customers, some of our teammates, and it's an in-person event. So more of those coming back a little bit now in the third quarter. more in the fourth quarter and definitely going into 2022, that will help us also. Operationally, as you saw in the release, we have an operational enhancement initiative underway where we fully expect to see profit improvement in our core LTL operations from having taken a fresh look, we actually call the project Eagle Eye, taking a very fresh look how we actually route and what we do inside our four walls, inside our terminals. M&A, I did say we have a proven machine in place here, and we're going to definitely take advantage of that machine more going forward. And again, organically, let's not forget we keep expanding. In the last 12 months, we actually added 10 LTL terminals to our network, and we're going to keep that pace going over the next several quarters. So running indeed, and again, Obviously, as we keep running, we also need to make very thoughtful consideration how we actually allocate our capital. And on that topic, our brand new CFO, Rebecca Garbrick, my partner here, welcome to the earnings call, is actually going to take us through some of our thoughts around capital allocation before we open it up for questions and answers. So with that, over to you, Rebecca.

Great. Thanks, Tom. I'm happy to be with all of you today, and I look forward to playing a bigger role in driving profitable growth at FordAir. I know you've read our earnings release, so I'm not going to repeat our solid second quarter results. Instead, like Tom mentioned, let me offer you some comments on our capital allocation. Our overall capital allocation philosophy remains unchanged. We will use our cash flow to cover our CapEx needs, which we expect will remain modest over the medium term after we complete our Columbus investment. Our free cash flow will continue to support our dividend, which we would look to increase over time commensurate with the increase in our earnings. In the past seven years, we have raised our dividend four times. When we see M&A opportunities, we will ensure that these can be realized, as we recently did with our J&P Hall acquisition. As a side note, for your modeling purposes, we expect J&P Hall's run rate, revenue contribution, to be about $19 million per year, and our run rate EBITDA contribution to be about $1.6 million per year. Any excess cash flow will be returned to shareholders. In the past six years, we've repurchased over a quarter of a billion dollars of shares, and year-to-date we've repurchased roughly $34 million of shares. We expect to continue our repurchases in 2021 and beyond since we believe in our growth prospects. And with that, I will turn it back to Tani to open the line for Q&A.