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Forward Air Corporation Reports Third Quarter 2023 Results

Strong momentum in LTL volumes

Growth with LTL freight forwarders and direct shippers

Continued weak demand for intermodal and truckload brokerage services

Forward Air Corporation (NASDAQ:FWRD) (the “Company”, “we”, “our”, or “us”) today reported financial results for the three and nine months ended September 30, 2023 as presented in the tables below.

Tom Schmitt, Chairman, President and CEO, commenting on third quarter results said, “Precision execution of our revenue growth strategies led to positive volume trends and improved freight quality metrics. In the first weeks of the fourth quarter, we have seen continued momentum with +6% pounds per day growth over the same period in the prior year. In addition to the growth of our LTL volumes, our third quarter of 2023 weight per shipment increased +8% over the same period in the prior year. After a sluggish start to the third quarter, our LTL line of business achieved an operating ratio of approximately 85.5% for September 2023, a sequential improvement of 80 basis points from June 2023.”

Mr. Schmitt continued, “We are growing with both our domestic freight forwarder and direct shipper customers. Subsequent to the announcement of our proposed acquisition of Omni Logistics on August 10, our average daily volumes with domestic freight forwarders increased by more than 14%. In addition, we grew our LTL direct shipper customer count by more than 33% from third quarter of 2022 to third quarter of 2023 to over 240 direct shipper customers. We are winning market share with the direct shipper customer who does not use a domestic freight forwarder. A key focus area has been the expansion of our door-to-door solution. We built a commercial team dedicated to working closely with customers on selecting, pricing and handling freight, and we added new terminals in 2023 that were strategically located in markets closer to current and future customers. In the third quarter of 2023, our door-to-door revenue increased 12% over the same period in the prior year. We believe our service, being the 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.”

In closing, Mr. Schmitt said, “Over the next few weeks, we are excited to share the next phase of the Grow Forward revenue strategy that includes a further enhanced LTL focus. Also, to ensure corporate clarity, we are accelerating our strategic portfolio review.”

Regarding the third quarter results, Rebecca J. Garbrick, CFO, said, “Market demand continues to be challenged for our intermodal and truckload brokerage services as both lines of business are navigating an extended weak freight environment. Softer demand for our intermodal and truckload brokerage services combined with a decrease in the price of diesel over the same period in the prior year resulted in a 19% decline in revenues on a consolidated basis, and reported net income per diluted share of $0.36 and adjusted net income per diluted share of $0.99.”

Ms. Garbrick continued, regarding fourth quarter of 2023 guidance, “We expect our year-over-year revenue to decline 7% to 17% and adjusted net income per diluted share in the range of $0.98 to $1.02, compared to reported net income per diluted share of $1.60 and adjusted net income per diluted share of $1.65 in the fourth quarter of 2022.”

 

 

Three Months Ended

(in thousands, except per share data)

 

September 30,

2023

 

September 30,

2022

 

Change

 

Percent

Change

Operating revenue

 

$

413,447

 

 

$

510,023

 

 

$

(96,576

)

 

(18.9

)%

Income from operations

 

$

15,493

 

 

$

71,665

 

 

$

(56,172

)

 

(78.4

)%

Operating margin

 

 

3.7

%

 

 

14.1

%

 

(1,040) bps

Net income

 

$

9,288

 

 

$

52,133

 

 

$

(42,845

)

 

(82.2

)%

Net income per diluted share

 

$

0.36

 

 

$

1.93

 

 

$

(1.57

)

 

(81.3

)%

Cash provided by operating activities

 

$

29,865

 

 

$

83,994

 

 

$

(54,129

)

 

(64.4

)%

 

 

 

 

 

 

 

 

 

Non-GAAP Financial Measures: 1

 

 

 

 

 

 

 

 

Adjusted income from operations

 

$

37,864

 

 

$

71,665

 

 

$

(33,801

)

 

(47.2

)%

Adjusted net income

 

$

25,462

 

 

$

52,133

 

 

$

(26,671

)

 

(51.2

)%

Adjusted net income per diluted share

 

$

0.99

 

 

$

1.93

 

 

$

(0.94

)

 

(48.9

)%

EBITDA

 

$

30,999

 

 

$

83,934

 

 

$

(52,935

)

 

(63.1

)%

Free cash flow

 

$

24,126

 

 

$

77,922

 

 

$

(53,796

)

 

(69.0

)%

 

 

 

 

 

 

 

 

 

1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

(in thousands, except per share data)

 

September 30,

2023

 

September 30,

2022

 

Change

 

Percent

Change

Operating revenue

 

$

1,242,695

 

 

$

1,492,203

 

 

$

(249,508

)

 

(16.7

)%

Income from operations

 

$

96,213

 

 

$

204,561

 

 

$

(108,348

)

 

(53.0

)%

Operating margin

 

 

7.7

%

 

 

13.7

%

 

(600) bps

Net income

 

$

65,607

 

 

$

150,249

 

 

$

(84,642

)

 

(56.3

)%

Net income per diluted share

 

$

2.50

 

 

$

5.53

 

 

$

(3.03

)

 

(54.8

)%

Cash provided by operating activities

 

$

159,431

 

 

$

196,814

 

 

$

(37,383

)

 

(19.0

)%

 

 

 

 

 

 

 

 

 

Non-GAAP Financial Measures: 1

 

 

 

 

 

 

 

 

Adjusted income from operations

 

$

124,084

 

 

$

204,267

 

 

$

(80,183

)

 

(39.3

)%

Adjusted net income

 

$

86,232

 

 

$

150,029

 

 

$

(63,797

)

 

(42.5

)%

Adjusted net income per diluted share

 

$

3.29

 

 

$

5.53

 

 

$

(2.24

)

 

(40.5

)%

EBITDA

 

$

139,867

 

 

$

239,555

 

 

$

(99,688

)

 

(41.6

)%

Free cash flow

 

$

139,288

 

 

$

172,836

 

 

$

(33,548

)

 

(19.4

)%

 

 

 

 

 

 

 

 

 

1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.

On October 24, 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 November 22, 2023 and is expected to be paid on December 7, 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.

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2023 results on Tuesday, October 31, 2023 at 9:00 a.m. EDT. 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 (844) 767-5679, Access Code: 7274129.

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 Investor 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

 

Nine Months Ended

 

September 30,

2023

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Operating revenue:

 

 

 

 

 

 

 

Expedited Freight

$

351,346

 

 

$

395,635

 

 

$

1,028,276

 

 

$

1,181,083

 

Intermodal

 

62,183

 

 

 

114,421

 

 

 

214,603

 

 

 

311,272

 

Eliminations and other operations

 

(82

)

 

 

(33

)

 

 

(184

)

 

 

(152

)

Operating revenues

 

413,447

 

 

 

510,023

 

 

 

1,242,695

 

 

 

1,492,203

 

Operating expenses:

 

 

 

 

 

 

 

Purchased transportation

 

190,766

 

 

 

229,326

 

 

 

557,626

 

 

 

693,648

 

Salaries, wages and employee benefits

 

88,159

 

 

 

90,755

 

 

 

254,365

 

 

 

263,194

 

Operating leases

 

22,662

 

 

 

24,965

 

 

 

76,094

 

 

 

71,097

 

Depreciation and amortization

 

15,506

 

 

 

12,269

 

 

 

43,654

 

 

 

34,994

 

Insurance and claims

 

13,626

 

 

 

12,093

 

 

 

40,768

 

 

 

37,257

 

Fuel expense

 

5,917

 

 

 

6,772

 

 

 

16,975

 

 

 

20,951

 

Other operating expenses

 

61,318

 

 

 

62,178

 

 

 

157,000

 

 

 

166,501

 

Total operating expenses

 

397,954

 

 

 

438,358

 

 

 

1,146,482

 

 

 

1,287,642

 

Income (loss) from operations:

 

 

 

 

 

 

 

Expedited Freight

 

36,351

 

 

 

56,304

 

 

 

100,298

 

 

 

167,091

 

Intermodal

 

4,744

 

 

 

16,610

 

 

 

20,259

 

 

 

43,005

 

Other Operations

 

(25,602

)

 

 

(1,249

)

 

 

(24,344

)

 

 

(5,535

)

Income from operations

 

15,493

 

 

 

71,665

 

 

 

96,213

 

 

 

204,561

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

 

(2,655

)

 

 

(1,544

)

 

 

(7,595

)

 

 

(3,521

)

Total other expense

 

(2,655

)

 

 

(1,544

)

 

 

(7,595

)

 

 

(3,521

)

Income before income taxes

 

12,838

 

 

 

70,121

 

 

 

88,618

 

 

 

201,040

 

Income tax expense

 

3,550

 

 

 

17,988

 

 

 

23,011

 

 

 

50,791

 

Net income and comprehensive income

$

9,288

 

 

$

52,133

 

 

$

65,607

 

 

$

150,249

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.36

 

 

$

1.94

 

 

$

2.51

 

 

$

5.56

 

Diluted

$

0.36

 

 

$

1.93

 

 

$

2.50

 

 

$

5.53

 

 

 

 

 

 

 

 

 

Dividends per share:

$

0.24

 

 

$

0.24

 

 

$

0.72

 

 

$

0.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expedited Freight Segment Information

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30,

2023

 

Percent of

Revenue

 

September 30,

2022

 

Percent of

Revenue

 

Change

 

Percent

Change

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

Network 1

$

216,977

 

61.8

%

 

$

240,482

 

60.8

%

 

$

(23,505

)

 

(9.8

)%

Truckload

 

38,800

 

11.0

 

 

 

55,607

 

14.1

 

 

 

(16,807

)

 

(30.2

)

Final Mile

 

72,471

 

20.6

 

 

 

76,822

 

19.4

 

 

 

(4,351

)

 

(5.7

)

Other

 

23,098

 

6.6

 

 

 

22,724

 

5.7

 

 

 

374

 

 

1.6

 

Total operating revenue

 

351,346

 

100.0

 

 

 

395,635

 

100.0

 

 

 

(44,289

)

 

(11.2

)

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation

 

171,910

 

48.9

 

 

 

200,783

 

50.7

 

 

 

(28,873

)

 

(14.4

)

Salaries, wages and employee benefits

 

69,468

 

19.8

 

 

 

71,543

 

18.1

 

 

 

(2,075

)

 

(2.9

)

Operating leases

 

17,518

 

5.0

 

 

 

15,819

 

4.0

 

 

 

1,699

 

 

10.7

 

Depreciation and amortization

 

10,319

 

2.9

 

 

 

8,140

 

2.1

 

 

 

2,179

 

 

26.8

 

Insurance and claims

 

10,190

 

2.9

 

 

 

9,196

 

2.3

 

 

 

994

 

 

10.8

 

Fuel expense

 

3,026

 

0.9

 

 

 

2,873

 

0.7

 

 

 

153

 

 

5.3

 

Other operating expenses

 

32,564

 

9.3

 

 

 

30,977

 

7.8

 

 

 

1,587

 

 

5.1

 

Total operating expenses

 

314,995

 

89.7

 

 

 

339,331

 

85.8

 

 

 

(24,336

)

 

(7.2

)

Income from operations

$

36,351

 

10.3

%

 

$

56,304

 

14.2

%

 

$

(19,953

)

 

(35.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

1Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

Expedited Freight Operating Statistics

 

 

 

Three Months Ended

 

September 30,

2023

 

September 30,

2022

 

Percent

Change

 

 

 

 

 

 

Business days

 

63

 

 

64

 

(1.6

)%

 

 

 

 

 

 

Tonnage 1,2

 

 

 

 

 

Total pounds

 

685,756

 

 

698,004

 

(1.8

)

Pounds per day

 

10,885

 

 

10,906

 

(0.2

)

 

 

 

 

 

 

Shipments 1,2

 

 

 

 

 

Total shipments

 

835

 

 

916

 

(8.8

)

Shipments per day

 

13.3

 

 

14.3

 

(7.0

)

 

 

 

 

 

 

Weight per shipment

 

821

 

 

762

 

7.7

 

 

 

 

 

 

 

Revenue per hundredweight 3

$

31.66

 

$

34.70

 

(8.8

)

Revenue per hundredweight, ex fuel 3

$

24.20

 

$

26.05

 

(7.1

)

 

 

 

 

 

 

Revenue per shipment 3

$

259.94

 

$

264.30

 

(1.6

)

Revenue per shipment, ex fuel 3

$

198.71

 

$

198.39

 

0.2

 

 

 

 

 

 

 

1 In thousands

2 Excludes accessorial, Truckload and Final Mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

Intermodal Segment Information

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30,

2023

 

Percent of

Revenue

 

September 30,

2022

 

Percent of

Revenue

 

Change

 

Percent

Change

Operating revenue

$

62,183

 

100.0

%

 

$

114,421

 

100.0

%

 

$

(52,238

)

 

(45.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation

 

18,945

 

30.5

 

 

 

28,610

 

25.0

 

 

 

(9,665

)

 

(33.8

)

Salaries, wages and employee benefits

 

16,118

 

25.9

 

 

 

17,945

 

15.7

 

 

 

(1,827

)

 

(10.2

)

Operating leases

 

5,144

 

8.3

 

 

 

9,146

 

8.0

 

 

 

(4,002

)

 

(43.8

)

Depreciation and amortization

 

5,187

 

8.3

 

 

 

4,129

 

3.6

 

 

 

1,058

 

 

25.6

 

Insurance and claims

 

2,758

 

4.4

 

 

 

2,241

 

2.0

 

 

 

517

 

 

23.1

 

Fuel expense

 

2,892

 

4.7

 

 

 

3,899

 

3.4

 

 

 

(1,007

)

 

(25.8

)

Other operating expenses

 

6,395

 

10.3

 

 

 

31,841

 

27.8

 

 

 

(25,446

)

 

(79.9

)

Total operating expenses

 

57,439

 

92.4

 

 

 

97,811

 

85.5

 

 

 

(40,372

)

 

(41.3

)

Income from operations

$

4,744

 

7.6

%

 

$

16,610

 

14.5

%

 

$

(11,866

)

 

(71.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

Intermodal Operating Statistics

 

 

 

Three Months Ended

 

September 30,

2023

 

September 30,

2022

 

Percent

Change

Drayage shipments

 

68,576

 

 

89,236

 

(23.2

)%

Drayage revenue per shipment

$

823

 

$

1,203

 

(31.6

)%

Forward Air Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

September 30,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

18,843

 

$

45,822

Accounts receivable, net

 

191,758

 

 

221,028

Other current assets

 

27,129

 

 

37,465

Total current assets

 

237,730

 

 

304,315

 

 

 

 

Property and equipment, net

 

258,248

 

 

249,080

Operating lease right-of-use assets

 

134,726

 

 

141,865

Goodwill

 

356,763

 

 

306,184

Other acquired intangibles, net

 

146,710

 

 

154,801

Other assets

 

56,404

 

 

51,831

Total assets

$

1,190,581

 

$

1,208,076

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

45,702

 

$

54,601

Accrued expenses

 

56,552

 

 

54,291

Other current liabilities

 

21,619

 

 

3,956

Current portion of debt and finance lease obligations

 

15,053

 

 

9,444

Current portion of operating lease liabilities

 

51,515

 

 

47,106

Total current liabilities

 

190,441

 

 

169,398

 

 

 

 

Finance lease obligations, less current portion

 

23,387

 

 

15,844

Long-term debt, less current portion and debt issuance costs

 

118,857

 

 

106,588

Operating lease liabilities, less current portion

 

87,938

 

 

98,865

Other long-term liabilities

 

50,966

 

 

59,044

Deferred income taxes

 

53,292

 

 

51,093

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred stock

 

 

 

Common stock

 

257

 

 

265

Additional paid-in capital

 

280,640

 

 

270,855

Retained earnings

 

384,803

 

 

436,124

Total shareholders’ equity

 

665,700

 

 

707,244

Total liabilities and shareholders’ equity

$

1,190,581

 

$

1,208,076

Forward Air Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Three Months Ended

 

September 30,

2023

 

September 30,

2022

Operating activities:

 

 

 

Net income from operations

$

9,288

 

 

$

52,133

 

Adjustments to reconcile net income of operations to net cash provided by operating activities of operations

 

 

 

Depreciation and amortization

 

15,506

 

 

 

12,269

 

Share-based compensation expense

 

3,043

 

 

 

2,676

 

Provision for revenue adjustments

 

2,782

 

 

 

4,368

 

Deferred income tax expense

 

17

 

 

 

 

Other

 

1,396

 

 

 

(966

)

Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:

 

 

 

Accounts receivable

 

(19,425

)

 

 

(6,421

)

Other receivables

 

 

 

 

1,004

 

Other current and noncurrent assets

 

(6,916

)

 

 

2,825

 

Accounts payable and accrued expenses

 

24,174

 

 

 

16,106

 

Net cash provided by operating activities

 

29,865

 

 

 

83,994

 

 

 

 

 

Investing activities:

 

 

 

Proceeds from sale of property and equipment

 

104

 

 

 

656

 

Purchases of property and equipment

 

(5,843

)

 

 

(6,728

)

Net cash used in investing activities

 

(5,739

)

 

 

(6,072

)

 

 

 

 

Financing activities:

 

 

 

Repayments of finance lease obligations

 

(2,949

)

 

 

(1,626

)

Payments on credit facility

 

(375

)

 

 

(40,375

)

Payments of dividends to shareholders

 

(6,198

)

 

 

(6,467

)

Repurchases and retirement of common stock

 

(14,019

)

 

 

(29,994

)

Payment of minimum tax withholdings on share-based awards

 

(23

)

 

 

 

Net cash used in financing activities

 

(23,564

)

 

 

(78,462

)

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

562

 

 

 

(540

)

 

 

 

 

Cash and cash equivalents at beginning of period

 

18,281

 

 

 

47,386

 

Cash and cash equivalents at end of period

$

18,843

 

 

$

46,846

 

 

 

 

 

Forward Air Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Nine Months Ended

 

September 30,

2023

 

September 30,

2022

Operating activities:

 

 

 

Net income from operations

$

65,607

 

 

$

150,249

 

Adjustments to reconcile net income of operations to net cash provided by operating activities of operations

 

 

 

Depreciation and amortization

 

43,654

 

 

 

34,994

 

Change in fair value of earn-out liability

 

 

 

 

(294

)

Share-based compensation expense

 

9,352

 

 

 

8,743

 

Provision for revenue adjustments

 

8,311

 

 

 

7,302

 

Deferred income tax expense

 

2,199

 

 

 

1,962

 

Other

 

964

 

 

 

417

 

Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:

 

 

 

Accounts receivable

 

18,874

 

 

 

(43,172

)

Other receivables

 

 

 

 

8,097

 

Other current and noncurrent assets

 

4,207

 

 

 

6,743

 

Accounts payable and accrued expenses

 

6,263

 

 

 

21,773

 

Net cash provided by operating activities

 

159,431

 

 

 

196,814

 

 

 

 

 

Investing activities:

 

 

 

Proceeds from sale of property and equipment

 

3,275

 

 

 

1,423

 

Purchases of property and equipment

 

(23,418

)

 

 

(25,401

)

Purchase of a business, net of cash acquired

 

(56,703

)

 

 

(40,433

)

Net cash used in investing activities

 

(76,846

)

 

 

(64,411

)

 

 

 

 

Financing activities:

 

 

 

Repayments of finance lease obligations

 

(6,936

)

 

 

(4,209

)

Proceeds from credit facility

 

45,000

 

 

 

 

Payments on credit facility

 

(31,125

)

 

 

(48,625

)

Payment of earn-out liability

 

 

 

 

(91

)

Proceeds from issuance of common stock upon stock option exercises

 

 

 

 

206

 

Payments of dividends to shareholders

 

(18,798

)

 

 

(19,461

)

Repurchases and retirement of common stock

 

(93,811

)

 

 

(47,774

)

Proceeds from common stock issued under employee stock purchase plan

 

421

 

 

 

374

 

Payment of minimum tax withholdings on share-based awards

 

(4,315

)

 

 

(3,293

)

Net cash used in financing activities

 

(109,564

)

 

 

(122,873

)

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(26,979

)

 

 

9,530

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

45,822

 

 

 

37,316

 

Cash and cash equivalents at end of period

$

18,843

 

 

$

46,846

 

Forward Air Corporation Reconciliation of Non-GAAP Financial Measures

In this press release, the Company uses non-GAAP financial measures that are derived on the basis of methodologies other than in accordance with GAAP. The Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions as well as evaluating the Company’s performance.

For the three and nine months ended September 30, 2023 and 2022, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”), free cash flow, adjusted income from operations, adjusted net income, and adjusted net income per diluted share.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts. The Company believes that free cash flow is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance shareholder value. The Company believes providing adjusted income from operations, net income and net income per share allows investors to compare Company performance consistently over various periods without regard to the impact of unusual, nonrecurring or nonoperational items.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s financial results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the Company has included, for the periods indicated, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure.

Due to the forward-looking nature of the fourth quarter 2023 guidance for adjusted net income per diluted share, the Company is unable to reconcile this non-GAAP measure to the most directly comparable GAAP measure because the comparable GAAP measure is not reasonably accessible or reliable due to the inherent difficulty in forecasting and quantifying measures that would be required for such reconciliation.

The following is a reconciliation of net income to EBITDA for the three and nine months ended September 30, 2023 and 2022 (in thousands):

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2023

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Net income

 

$

9,288

 

$

52,133

 

$

65,607

 

$

150,249

Interest expense

 

 

2,655

 

 

1,544

 

 

7,595

 

 

3,521

Income tax expense

 

 

3,550

 

 

17,988

 

 

23,011

 

 

50,791

Depreciation and amortization

 

 

15,506

 

 

12,269

 

 

43,654

 

 

34,994

EBITDA

 

$

30,999

 

$

83,934

 

$

139,867

 

$

239,555

 

 

 

 

 

 

 

 

 

The following is a reconciliation of net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2023 and 2022 (in thousands):

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2023

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Net cash provided by operating activities

 

$

29,865

 

 

$

83,994

 

 

$

159,431

 

 

$

196,814

 

Proceeds from sale of property and equipment

 

 

104

 

 

 

656

 

 

 

3,275

 

 

 

1,423

 

Purchases of property and equipment

 

 

(5,843

)

 

 

(6,728

)

 

 

(23,418

)

 

 

(25,401

)

Free cash flow

 

$

24,126

 

 

$

77,922

 

 

$

139,288

 

 

$

172,836

 

The following is a reconciliation of reported income from operations, net income, and net income per diluted share to adjusted income from operations, net income, and net income per diluted share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except net income per diluted share):

 

 

Three Months Ended September 30, 2023

 

Three Months Ended September 30, 2022

 

 

Income From

Operations

 

Net

Income1

 

Net Income

Per Diluted

Share1

 

Income From

Operations

 

Net

Income

 

Net Income

Per Diluted

Share

As Reported

 

$

15,493

 

$

9,288

 

$

0.36

 

$

71,665

 

 

$

52,133

 

 

$

1.93

 

Due diligence and transaction costs

 

 

22,371

 

 

16,174

 

 

0.63

 

 

 

 

 

 

 

 

 

As Adjusted

 

$

37,864

 

$

25,462

 

$

0.99

 

$

71,665

 

 

$

52,133

 

 

$

1.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is $6,197.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

Nine Months Ended September 30, 2022

 

 

Income From

Operations

 

Net

Income1

 

Net Income

Per Diluted

Share1

 

Income From

Operations

 

Net

Income2

 

Net Income

Per Diluted

Share2

As Reported

 

$

96,213

 

$

65,607

 

$

2.50

 

$

204,561

 

 

$

150,249

 

 

$

5.53

 

Due diligence and transaction costs

 

 

27,871

 

 

20,625

 

 

0.79

 

 

 

 

 

 

 

 

 

Change in the fair value of the earn-out liability

 

 

 

 

 

 

 

 

(294

)

 

 

(220

)

 

 

(0.01

)

As Adjusted

 

$

124,084

 

$

86,232

 

$

3.29

 

$

204,267

 

 

$

150,029

 

 

$

5.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is $7,246.

2 Net income and net income per diluted share amounts are based on the after-tax effect of each item. The income tax effect is calculated by applying the effective tax rate to the pre-tax amount. The total tax effect of the above item is ($74).

The following is a reconciliation of reported net income per diluted share to adjusted net income per diluted share for the three months ended December 31, 2022:

 

 

Net Income Per

Diluted Share1

Continuing Operations

 

Three Months Ended

December 31, 2022

As reported

 

$

1.60

Vehicle liability reserve

 

 

0.04

Due diligence and integration costs

 

 

0.01

As adjusted

 

$

1.65

1 Net income per diluted share is after tax

The following information is provided to supplement this press release.

Actual

 

Three Months Ended

September 30, 2023

Net income

 

$

9,288

 

Income allocated to participating securities

 

 

(57

)

Numerator for diluted net income per share - net income

 

$

9,231

 

 

 

 

Weighted-average common shares and common share equivalent outstanding - diluted

 

 

25,771

 

Diluted net income per share

 

$

0.36

 

 

 

 

Projected

 

Full year 2023

Projected tax rate

 

 

26.7

%

 

 

 

Projected purchases of property and equipment, net of proceeds from sale of property and equipment

 

$

32,000

 

 

 

 

Projected

 

December 31, 2023

Projected weighted-average common shares and common share equivalent outstanding - diluted

 

 

26,000

 

Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements included in this press release relate to expectations regarding the Company’s ability to grow its existing customer base, expectations of market share growth, expectations regarding the impact of the Company’s revenue growth strategies and its ongoing portfolio review, expectations regarding customer demand for the Company’s services as well as the performance of the Company’s LTL services, expectations regarding the Company's fourth quarter 2023 guidance, including with respect to revenue and net income per diluted share, the future declaration of dividends and, the quarterly and full year 2023 anticipated dividends per share, expectations regarding future debt and financing levels and expectations regarding the transactions involving Omni Logistics, including whether or not such transactions are consummated and, if consummated, whether such transactions meet expectations regarding timing, completion and the outcome thereof.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the outcome and related impact of the proposed acquisition of Omni Logistics, continued weakening of the freight environment, future debt and financing levels, the outcome of the transactions involving Omni Logistics, including any legal proceedings related to such transactions, our ability to manage our growth and ability to grow, in part, through acquisitions, (including the acquisition involving Omni Logistics) while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition, and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022, and as may be identified in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

We caution readers that any Forward-looking statement made by us in this press release is based only on information currently available to us and they should not place undue reliance on these forward-looking statements, which reflect management's opinion as of the date on which it is made. We undertake no obligation to publicly update any forward- looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise unless required by law.

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