Forward Air Corporation

Thank you for joining Forward Air Corporation's third quarter 2023 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 third quarter 2023 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 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 expected fourth quarter 2023 and fiscal year 2023. 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 Security and Exchange Commission and the press release and webcast 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 the press release issued, which is available in the Investors tab on our website. And now I'd like to turn the conference over to Tom Schmidt, CEO of Forward Air.

Thank you, Rich. And good morning to all of you on the call. Let me start by addressing our performance and our trends first. On our last earnings call, I did say that this freight recession is tricky. And I did talk about intermodal and truckload were lagging the LTL recovery. That was still the case for our third quarter. And also LTL itself, we had a weak July, and we were still showing negative year-over-year volume trends in July. That was in LTL turning towards flat in August, and we had positive volume trends in September. August and September both ended up in 85 OR territory, and October is showing further volume improvements. Over the past couple of years, and especially in the past few months, You gave us a lot of feedback around our LTL focus and around corporate clarity. We are listening and we are stepping up. Our Grow Forward program is all about LTL. It's about rigorous focus on high-value freight priced appropriately with industry-leading service in a cleansed operating environment and accessing a larger customer and revenue base. That strategy of Grow Forward remains unchanged. and first results can be seen in our OR trends. When we announced on August 10th the acquisition of Omni, that was all about going after more of that $15 billion high-value freight LTL market, that fourth block of growth forward, accessing a larger customer and revenue base. We will execute that focus organically in three ways. First and foremost, growing with the core, and that's the most important part. Our domestic forwarders have been our core partners since our beginning, and we're growing with them again. In fact, since we announced on August 10th the acquisition of Omni, we actually have grown with our domestic forwarder customers. We have given them our commitment that we will continue to give them the service and terms that will make them win more business, and we'll scorecard track revenue with them, win rates for them, and make sure that we do everything possible to make them win more business with us. We will not confuse efforts with results with them. Secondly, we will sell full steam direct to those customers who do not work with forwarders. With the August announcement, it should have been clear to everyone that we believe in our superior service and we want to make it available to everyone, large, medium, and small. Half the market uses forwarders and we want to make them win more. The other half does not, and we're going now fully after that other half as well. Building out our direct sales force significantly over the next few months, and also we will be laser sharp on getting the volume and pricing sweet spot right for door-to-door service and for direct service. When you look at our numbers, you see we still have work to do on getting the volume pricing sweet spot right for direct and for door-to-door. The third point, we will live more corporate clarity. Starting in Q1 2024, LTL will be its own reporting segment. And over the next few weeks, we are finalizing clear short and midterm targets, action and dashboards laying out very specifically our increased LTL revenue plans, margin plans, and a percentage of LTL as a revenue of the overall company. Corporate clarity is something we will be living more. Portfolio review in an accelerated fashion is a big part of that. Forward focus is LTL and what's essential to make LTL stronger. With that, Rich, let's open it up at the lines for comments and for questions.

Thank you. The floor is now open for questions and comments. If you'd like to place yourself into the queue, you may press 1, then 0 on your telephone keypad. You may remove yourself from that queue by repeating the 1-0 commands. If you are using a speakerphone, we ask that you please pick up the handset before pressing the numbers. Once again, if you'd like to place yourself in the queue, you may press 1, then 0 at this time. We will begin with the line of Jack Atkins with Stevens. Please go ahead.