Forward Air Corporation

Thank you for joining Forward Air Corporation's fourth 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 Investors 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 fourth quarter 2021 results, which was furnished to the SEC on form 8K 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 forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements which are based on exemptions, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts. Forward-looking statements can be identified by the use of words such as anticipate, intend, believe, estimate, plan, seek, project, expect, may, will, would, could or should, and the negative of these terms or other comparable terminology. This conference call and the company's earnings press release contain forward-looking statements, which include but are not limited to statements relating to future operations and results, any statements of plans, strategies, and objectives of management for future operations, and any statements about future financial or operational targets and the likelihood of achieving the same. 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. 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. Please go ahead.

Thank you, Brad. And good morning to all of you listening in. On our last earnings call in October, I said that 2022 will be our double-double, double-digit margins, double-digit annual revenue growth. as we had committed in 2019, if you think back on our investor day in New York in June. So I'm very grateful that my teammates and all of our independent contractors decided actually that they are living one of our leadership imperatives and decided they don't wait. So they pulled the double-double forward from 2022 to 2021. Last year, 2021 actually was a double-double. easily on the revenue growth side, and the adjusted operating margin actually came in at 10.1% for the year. Our record fourth quarter with a $1.40 EPS helped us get there. So congratulations to all of our teammates, to our independent contractors. I'm so proud of pulling this double-double off in 2021. We took this momentum into 2022, January, we just finished obviously the first month of the year, had very, very strong LTL volumes, up almost 11% over January of 2021. And the revenue of that LTL volume was almost 34% up over last year's January. So that gave us a lot of confidence, that strong month for our Q1. which led us to a guide of a record $1.17 at midpoint EPS for the first quarter. We also feel pretty strongly that we are ahead of the EPS target for 2023. At this point, we gave a 2023 full year target in our October earnings release. And again, at this point, we are ahead of pace for that target. Now, we will keep the momentum going with more shipments in LTL, both from our existing customer base and also through digital access to smaller, medium-sized businesses that we are going to be selling to more and more directly. We also will not just get more shipments in place with existing and new customers. We also are getting more real-time dynamic pricing. So when we have slower periods, slower days, slower months, we can adjust pricing almost real-time. Between more shipments with existing and new customers, digital access, and dynamic pricing, we are very confident that we have a good chance of margin expansion in LTL, one and a half to two percentage points this year, one and a half to two percentage points next year also. We also will, with that growth, further expand our footprint. If you remember the last 18 months, we expanded our footprint primarily with more access points in secondary markets. The second half of this year, we're actually going to add second terminals in some of our primary hub markets, four or five for this year and further footprint expansion to come in the subsequent years. Now, this is not just a LTL show. This is the main show LTL, but our complementary businesses are doing their part also. Truckload is tag teaming tremendously well with LTL, both from a recruiting front and as well as a load coverage front. Final Mile is winning more awards from some of the most demanding retailers on earth, and those awards actually translate in getting awards for additional markets. We just launched Memphis Enrichment. Intermodal in 2022 will just keep doing what they're doing, which is consistent double-double performance. And on the M&A side, in addition to the organic growth in LTL, TL, Final Mile, Intermodal, we will do more and possibly also bigger. We had tremendous success with our tuck-ins, specifically in Intermodal. We had three tuck-ins last year, building out our geographic footprint. We'll continue doing that. And we also said that the J&P Hall in the LTL space last year was perhaps an appetizer, an amazing appetizer on the LTL acquisition front, and the main course may follow here also. Brokerage, we're primarily building out our capabilities organically. However, as and if and when it makes sense for us to add to that organic build-out inorganically, we certainly will be open to doing that. So if you look at all of this together, we've got a ton of untapped upside. We're on it. And I feel extremely confident about the performance potential. And I'm very grateful about the performance reality that our teammates and independent contractors made possible. So we're on it. And we're going to go straight to our Q&A. And Rebecca and I will tag team as always. So with that, Brad, let's open the lines for Q&A.

Thank you. And the floor is now open for questions and comments. And ladies and gentlemen, if you wish to ask a question, please press 1 and 0 on your telephone keypad. You may withdraw your question at any time by repeating the one then zero command. If using a speakerphone, please pick up your handset before pressing the numbers. Once again, if you have any questions, please press one then zero at this time. One moment please for our first question. And our first question comes from the line of Todd Fowler with KeyBank Capital Market. Please go ahead.