2023 Q4 Carrier Earnings: Forward Air

It’s time.

Today we close out the review of our Q4 Earnings releases by the publicly-traded LTL carriers with Forward Air.??

This up-and-coming LTL player has certainly been in the news lately - their ‘shotgun wedding’ with Omni Logistics closed in late January this year, having started WAY back in August 2023 and dragged along until then (due to some…cold feet.)

We covered this Merger dispute as more information was released in an earlier edition of our #LetsTalkLogistics newsletter. Click here to access that article and catch up on this dispute!

Within 2 weeks of this merger taking place, both CEOs from these companies got canned

Interim leadership has been put in place, and the combined accounting team is scrambling to close out their fiscal year.?

Hardly any details have been provided at this point; leadership promises ‘complete disclosure’ once they file their annual report (which has also been delayed).

This is the last of the carriers in our Q4 Earnings series…and it seems like it was an interesting end to 2023 all around. In the latest part of this series, we reviewed reports from TForce Freight and took a look at what they’re dealing with going into 2024...you can find more information on their Earnings results for Q4 here!

As we get through the rest of these top-performing LTL carriers in the industry, we’ll keep conversations going throughout the year that will tie into what we discuss in these quarterly earnings analyses. Up next are reports for Q1, which we should start to hear about this springtime.

These articles are meant to emphasize why these events are relevant to you as a shipper and break down what to do with the information we mention in our quarterly series.

For more information or for answers about how carrier performance reporting relates to your LTL, click here to connect with someone on our team today.

It’s been quite a turbulent story (their words, not mine). The team is now attempting to complete a successful landing of 2023’ so they can then prepare for launch and take off in 2024.??

Let’s get into what these results said:

Carrier #8: Forward Air

• Amidst all the turmoil taking place AND concerns about the alienation of their customer base, revenue levels at Forward Air still held up fairly well.??

Revenue was down -5.3% over last year….but other carriers also showed reduced revenue.?

In Forward Air's case, the drop seems like it’s due to both a reduction in business and a deterioration in pricing levels. They may have had to cut prices to keep some of their business.

• On a sequential basis, revenue change was flat (but pricing levels do show softness).

• Shipments were down -4.4% over last year, but tonnage was up a healthy 6.6% as shipment size jumped a whopping 11.3%.??

Forward Air's average shipment size of 885 pounds is still the lowest out of all publicly traded carriers.

• Revenue per cwt (excluding fuel) dropped 8%...which is not what you want to see in this market.??

There might be some mix changes (lower class, denser freight) taking place beyond larger shipments.

A 3-Pronged Marketing Strategy?

• Forward Air effected a 5.9% increase in February which should help their yield metrics…it feels like this is aligned with other expected cost increases for 2024.

Their updated marketing strategy puts emphasis on three specific areas:???

1. Wholesale - legacy verticals of Freight Forwarders, 3PLs, and Airlines
2. Shipper Asset - “normal” direct LTL shipper customers
3. Omni - legacy Omni Logistics

• Forward Air believes that they are THE category leader in Expedited LTL and that their LTL service is the best in the industry for damage-free intact on-time service. (just because you believe it does not mean you can achieve it haha)

Their LTL has been bundled in with "Expedited Freight" which includes Final Mile, Truckload, Consolidations, and other services along with LTL.?

They had initially intended to separate LTL from this bundle to give everyone much greater clarity and made mention of it in Q3. (Read more about it in our Q3 Earnings analysis for Forward Air, found here!)

• And as for their service levels…it’d be interesting to see Forward Air at least show up on the Mastio rankings to get a true sense of where they stand.?

Hard to trust this claim when Forward Air does not show up on the preeminent LTL carrier ranking service.?

If only there was a company out there that tracks carrier performance and audits each carrier's actual metrics...and if only you could get in touch with them here…

Treading water… or sinking?

• Their leverage ratio (debt as a % of income) is at a HIGH 5.2 and is based on very aggressive assumptions for cost control.??

Their target is a ratio of 2.0, so they have a long way to go here. Outstanding debt is a very large $1.17B, and total interest expense for 2024 is projected to be a whopping $181M.??

…Ouch.

• Noted that they were cash flow positive in February, so they feel that they will be able to service their debt levels.??

But it sure would be nice if that $15M per month was not going to service their debt.??

Omni Logistics: Merger or Bust?

• A good chunk of the analyst conference call consisted of management explaining that they have ‘few metrics and details to offer’ as they still evaluate how to combine the two entities properly.?

…sure gets the message across that Forward Air put its focus heavily on getting out of the merger rather than planning what to do with the merger once it closed.??

It seems like the last 6 months were a big waste of time in terms of taking advantage of the opportunity. Forward Air needs to successfully and quickly integrate to start tackling what’s really needed for success.??

Their unique light-asset model is geared towards expedited movement between major markets; if they can leverage this unique model properly, it could be quite the story.??

But a large part of that story will be built on the success of this merger.??

Forward Air has invested significantly in this merger… in the form of debt. A ‘curious’ investment strategy given how everyone else is investing in network expansion and upgrades instead.??

This could be a unique lever that only Forward Air could pull, OR it could be a major setback.?

The “Normal” LTL Customer

One key challenge is how Forward Air can grow its direct LTL business with “normal” LTL customers rather than relying so heavily on the Forwarder and transactional 3PL segments.?

They need regular LTL customers willing to pay a premium price for service in their expedited lanes WITH THE UNDERSTANDING that Forward Air may not be able to properly serve secondary points.??

Forward Air needs to walk the talk when it comes to service, and position pricing properly for TMS rate shoppers.

And with that, we end our Q4 Earnings series!!

Catch up on our other Q3 Earnings analyses here:

FedEx Freight

Knight-Swift

TForce Freight

Old Dominion

ABF Freight

Saia

XPO Logistics

This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.

Disagree with these opinions? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.