Forward Air Corporation Reports Fourth Quarter 2022 Results

Record fourth quarter and full year revenue, operating income and net income per diluted share

Full year revenue growth of 18.7%, operating margin expansion of 390 basis points and net income per diluted share growth of 69.2%

GREENEVILLE, Tenn., February 08, 2023--(BUSINESS WIRE)--Forward Air Corporation (NASDAQ:FWRD) (the "Company," "we," "our," or "us") today reported financial results for the three and twelve months ended December 31, 2022 as presented in the tables below on a continuing operations basis.

Tom Schmitt, Chairman, President and CEO, commenting on fourth quarter and full year 2022 results from continuing operations said, "We had a record fourth quarter and a record year by a mile. For that, I extend my thanks to our amazing employees, independent contractors and business partners. However, we missed our own guidance for the fourth quarter of 2022 with revenue growth of 5% coming in below our guidance range of 7% to 11%, and reported net income per diluted share of $1.60 and adjusted net income per diluted share of $1.65 coming in below our guidance range of $1.98 to $2.02. We anticipated our continuing drive towards high value freight to yield a sequentially better fourth quarter than third quarter. We believe, however, the temporarily inflated inventory levels caused shipment sizes to fall faster and steeper than both we and our customers expected. As we mentioned in our mid-quarter update, we saw an unexpected decrease in the size of shipments from our customers with weight per shipment down more than 12%. As shipments become more full we believe so will our volumes. These headwinds led to a challenging fourth quarter and likely will impact the first half of 2023 until inventory levels normalize.

"Despite contending with these challenges that we believe are short-term in nature, we are growing new customers in our targeted areas. We grew our LTL direct shipper customer count by more than 200% from fourth quarter of 2021 to fourth quarter of 2022 to over 200 direct shipper customers. Additionally, our core customers are continuing to choose us, with the number of LTL shipments in the fourth quarter of 2022 remaining stable given a slight 0.4% decline in shipments as compared to the same period in the prior year. We believe our service, that was recently validated by a third party industry expert as being best in the LTL industry in damage-free, intact, on-time shipments, continues to make us the most compelling choice for customers with high value freight needs.

"Changes in our freight mix continue to showcase our precision execution focus on high value freight. From 2021 to 2022, industrial and electronics shipments are up over 50%, medical is up almost 25% and live events business up by 120%. Our top four high value verticals went from 18% of our freight mix in 2021 to 29% in 2022, resulting in fourth quarter of 2022 weight per piece up by 12.1% over the same period in the prior year. In addition to the positive changes in our freight mix, our fourth quarter 2022 revenue per hundredweight is up by 13.1% including fuel surcharge revenue and 3.8% excluding fuel surcharge revenue over the same period in the prior year."

Mr. Schmitt continued, "In addition to Forward Force, our initiative to grow high-value freight, we implemented a cost reduction initiative - which we call Forward Game Shape. We instituted a hiring freeze (excluding impacts from the Land Air Express acquisition, our employee headcount has decreased by more than 100 employees over the past two months), limited travel to essential only, and reduced our LTL outside miles to below 5%."

In closing, Mr. Schmitt said, "We remain laser focused on growing our high value freight with customers, both inorganically, most recently with the Land Air Express acquisition, and organically, by opening new terminals. On Monday, we opened our third Chicago LTL terminal.

"All up, despite a challenging first half we continue to target 2023 net income per diluted share to beat 2022."

Regarding the Company’s first quarter 2023 continuing operations guidance, Rebecca J. Garbrick, CFO, said, "We expect our year-over-year revenue will remain flat, with a range of up 2% to down 4%, and net income per diluted share will be between $1.30 to $1.34, compared to reported net income per diluted share of $1.57 in the first quarter of 2022."

Continuing Operations		Three Months Ended
(in thousands, except per share data)		December 31, 2022				December 31, 2021				Change			Percent Change
Operating revenue		$	481,200			$	459,929			$	21,271		4.6	%
Income from operations		$	61,415			$	51,977			$	9,438		18.2	%
Operating margin			12.8	%			11.3	%		150 bps
Net income		$	42,942			$	38,197			$	4,745		12.4	%
Net income per diluted share		$	1.60			$	1.40			$	0.20		14.3	%
Cash provided by operating activities		$	62,276			$	42,144			$	20,132		47.8	%
Non-GAAP Financial Measures: 1
Adjusted income from operations		$	63,449			$	51,866			$	11,583		22.3	%
Adjusted net income		$	44,402			$	38,114			$	6,288		16.5	%
Adjusted net income per diluted share		$	1.65			$	1.40			$	0.25		17.9	%
EBITDA		$	73,807			$	63,462			$	10,345		16.3	%
Free cash flow		$	47,897			$	26,354			$	21,543		81.7	%
1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.
Continuing Operations		Twelve Months Ended
(in thousands, except per share data)		December 31, 2022				December 31, 2021				Change			Percent Change
Operating revenue		$	1,973,403			$	1,662,427			$	310,976		18.7	%
Income from operations		$	265,976			$	159,301			$	106,675		67.0	%
Operating margin			13.5	%			9.6	%		390 bps
Net income		$	193,191			$	116,091			$	77,100		66.4	%
Net income per diluted share		$	7.14			$	4.22			$	2.92		69.2	%
Cash provided by operating activities		$	259,090			$	124,896			$	134,194		107.4	%
Non-GAAP Financial Measures: 1
Adjusted income from operations		$	267,716			$	166,729			$	100,987		60.6	%
Adjusted net income		$	194,481			$	121,654			$	72,827		59.9	%
Adjusted net income per diluted share		$	7.18			$	4.43			$	2.75		62.1	%
EBITDA		$	313,362			$	198,853			$	114,509		57.6	%
Free cash flow		$	220,733			$	88,430			$	132,303		149.6	%
1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.

On February 7, 2023, our Board of Directors declared a quarterly cash dividend of $0.24 per share of common stock. The dividend is payable to shareholders of record at the close of business on March 2, 2023 and is expected to be paid on March 17, 2023.

This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.96 for the full year 2023, payable in quarterly increments of $0.24 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company’s financial performance and position.

The Board approved a strategy to divest the Pool Distribution business ("Pool") on April 23, 2020, and the sale of Pool was completed on February 12, 2021. Accordingly, the results of operations and cash flows for Pool have been presented as a discontinued operation and have been excluded from continuing operations in this release for all periods presented.

Review of Financial Results
Forward Air will hold a conference call to discuss fourth quarter 2022 results on Thursday, February 9, 2023 at 9:00 a.m. ET. The Company’s conference call will be available online on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, or by dialing (877) 226-8189, Access Code: 8042513.

A replay of the conference call will be available on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, which we use as a primary mechanism to communicate with our investors. Investors are urged to monitor the Investors Relations portion of the Company’s website to easily find or navigate to current and pertinent information about us.

About Forward Air Corporation
Forward Air is a leading asset-light provider of transportation services across the United States, Canada and Mexico. We provide expedited less-than-truckload ("LTL") services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals. In addition, we offer final mile services, including delivery of heavy-bulky freight, truckload brokerage services, including dedicated fleet services; and intermodal, first-and last-mile, high-value drayage services, both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services. We are more than a transportation company. Forward is a single resource for your shipping needs. For more information, visit our website at www.forwardaircorp.com.

Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, in thousands, except per share data)
	Three Months Ended								Twelve Months Ended
	December 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Operating revenue:
Expedited Freight	$	372,807			$	376,792			$	1,553,890			$	1,374,270
Intermodal		108,446				83,394				419,718				289,214
Eliminations and other operations		(53	)			(257	)			(205	)			(1,057	)
Operating revenue		481,200				459,929				1,973,403				1,662,427
Operating expenses:
Purchased transportation		212,901				227,776				906,549				833,075
Salaries, wages and employee benefits		84,776				83,866				347,970				327,814
Operating leases		25,997				19,560				97,094				79,633
Depreciation and amortization		12,392				11,485				47,386				39,552
Insurance and claims		12,502				11,570				49,759				42,186
Fuel expense		6,632				4,809				27,583				17,027
Other operating expenses		64,585				48,886				231,086				163,839
Total operating expenses		419,785				407,952				1,707,427				1,503,126
Income (loss) from continuing operations
Expedited Freight		43,877				45,467				210,968				139,321
Intermodal		13,869				8,510				56,874				30,117
Other operations		3,669				(2,000	)			(1,866	)			(10,137	)
Income from continuing operations		61,415				51,977				265,976				159,301
Other expense:
Interest expense		(1,617	)			(877	)			(5,138	)			(4,338	)
Other, net		—				—				—				—
Total other expense		(1,617	)			(877	)			(5,138	)			(4,338	)
Income before income taxes		59,798				51,100				260,838				154,963
Income tax expense		16,856				12,903				67,647				38,872
Net income from continuing operations		42,942				38,197				193,191				116,091
Income (Loss) from discontinued operation, net of tax		—				2,268				—				(10,232	)
Net income and comprehensive income	...