Forward Air Corporation

Welcome to the Forward Air fourth quarter and full year 2024 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. If you would like to ask a question at that time, please press star and 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the question queue by pressing star and 2 so others can hear your questions clearly we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star and zero. I would now like to turn the call over to Tony Carino, Senior Vice President of Treasury and Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Forward Air's fourth quarter and year-end 2024 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 the press release announcing Forward Air's fourth quarter 2024 results, which was also furnished to the SEC on Form 8K. We have also filed a slide presentation outlining fourth quarter 2024 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 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 advance, 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 today's press release and slide presentation. I will now turn the call over to Sean.

Good afternoon, everyone, and thanks for joining the call today. I appreciate your interest in Ford Air and the transformational journey we are on. As is always the case with turnarounds with this much size, scale, and complexity, there are usually bumps along the way, and this quarter was no exception. but we remain resolute and excited about our future. Today, there are three main topics that I want to cover. First, I will review some of the key achievements in 2024. Second, I will share some thoughts on our 2025 priorities, and I will close with an overview of the fourth quarter performance. For the full year 2024, we reported consolidated EBITDA of $308 million. which is near the top of our guidance range of 300 to 310 million. We successfully closed out a very busy and noisy year that began with the closing of the Omni transaction last January, just 13 months ago. I joined the company three months after the transaction closed and quickly centered our efforts on stabilizing the company, integrating the networks, and I am pleased with the pace and rigor at which we moved. Over the course of the year, we built out our leadership team that has both the experience and industry know-how to not only lead these two legacy companies into the future, but also unite them to get the most out of their individual and combined value props. Above the team, most importantly, in our first year as a combined company, We put the customer first and focused on providing best-in-class solutions, leveraging the known capabilities of both Forward Air and Omni's global footprint. We are building on their individual strengths and leveraging the global freight forwarding capabilities of the legacy Omni entities while continuing our domestic expedited LTL truckload and intermodal offerings. We remain committed to providing our customers, including and especially our legacy freight forwarders and 3PL customers with the same award-winning service they have relied on for years to grow their businesses. We view ourselves as moving more than just our customer shipments. With an undisputed dedication, we take ownership of their supply chain challenges, solving them with unique solutions that deliver possibilities for growth, innovation, and most importantly, a peace of mind. We delivered on the targeted 75 million of integration synergies and cost savings that were circled out at the onset of the transaction. We are at pace to exceed the initial target and remain on schedule to be at a full run rate of savings and complete the network integration at the end of the first quarter of 2025. These initiatives reduced our operating expenses, our real estate footprint, and employee headcount, and serve as a springboard for the transformational phase we are entering. In the second and fourth quarters of 2024, we took additional steps to reducing operating expenses by incremental approximately $40 million per annum, including reductions in our workforce, direct operating expenses, and the use of third-party vendors. To date, we have executed on more than a hundred million in annualized savings from synergies and cost out actions contributing to a more financially efficient company while maintaining our high level of customer satisfaction. During the year, we made several key additions to our leadership team, including Jamie Pearson as Chief Financial Officer, Jessica Herron as Supply Chain Solutions and Customer Experience Officer, Doug Smith as Chief People Officer, and most recently, Eric Brandt as Chief Commercial Officer. In addition, Tim Osborne assumed the responsibility for all North America ground operations. With our management team largely complete, I could not be more excited about the talent and industry experience they all bring. As we look ahead, The foundational changes and investments made in 2024 are expected to benefit 2025 and beyond. Our priorities include driving profitable long-term growth by expanding synergistic service offerings for our customers, which will in turn lead to a higher and more profitable revenue. In parallel, Operationally, we are officially turning our efforts from completing the integration to a much broader transformation strategy focused on rationalizing our IT systems, improving the quality of our data, and decision making. We are also standing up a global shared services organization to assist us in integrating and managing our back office operations. With Eric joining the company in January and leading our worldwide sales team, we are excited to grow revenue across our newly aligned global business. He is a seasoned leader with a deep understanding of global logistics and supply chain management. Giving his tenure and experience in the space, he has a firsthand knowledge and relationship with our existing customer base and has already set the path for our future growth. Regarding transformation, It is being led by our Transformation Management Office and will impact Legacy Forward Air, plus the 12 companies that make up Omni that were previously not integrated. During 2025, and with some work continuing into 2026, we plan to move away from multiple TMS, ERP, and HRIS systems to a rationalized IT network that is more appropriate for a unified singular company. We expect these changes to reduce redundancies and enhance efficiencies across the organization. Working with 6,600 professionals that delivered on the targeted integration synergies gives me confidence that we will be just as successful in executing the transformation. I will wrap up with a few comments on the fourth quarter and then turn the call over to Jamie. Our results for the quarter were driven by consistent performance in the intermodal segment and yet another solid quarter at the Omni logistics segment, achieving its best quarterly reported EBITDA result since the transaction. Those results were further enhanced with additional round of cost reduction actions previously announced that equate to approximately $20 million on an annualized basis. The expedite freight segment, on the other hand, did not meet our expectations and income from operations declined compared to a year ago, primarily due to the decrease in volume in line with the market at large and a pricing strategy put in place prior to the transaction that focused more on growth than profitability. As noted, The decrease in volume is generally in line with the LTL market, which continues to be impacted by the prolonged slowdown in the freight environment. The expedited freight segment fundamentals remain intact. We continue to be one of the best providers in the expedited service in all of North America in both on-time service and claims ratio performance. We believe the service we provide will be the ultimate driver of customer retention and growth going forward. The single largest issue was the pricing strategy that we discussed last quarter. What may not be as understood is the change in the mix of freight and how long it takes to remedy historical pricing actions. The change in mix was a shift from our most profitable dense freight and then subsequent growth in our class-based customers. As you know, class-rated tariffs are less profitable than our traditional density-rated tariffs. And as everyone knows, it takes months to rectify a single poor pricing decision. As covered on our previously earnings calls, the good news is we started implementing corrective pricing actions during the fourth quarter and are seeing improvement that aligns with our expectations. We expect to see the full impact of the corrective actions by the end of February and expect to shed some poorly priced freight from our system as a result. All else being equal, we also expect to see a commensurate yield improvement in the second quarter and beyond. Our pricing strategy, whether class-based or density-based, will reflect the quality of our service we provide. I want to reiterate and assure you the value and integrity of our network remains intact. Going forward, we expect to closely monitor how our volume is impacted, and take appropriate cost actions to mirror the change to profitably run our network. With that, I will now turn the call over to Jamie to go through the results from the quarter.