Forward Air Corporation Reports Third Quarter 2021 Results

Achieves highest ever monthly net income for the month of September

Reports record quarterly income from operations and net income per diluted share

Guides record full year 2021 revenue and net income per diluted share

GREENEVILLE, Tenn.–(BUSINESS WIRE)–Forward Air Corporation (NASDAQ:FWRD) (the “Company”, “we”, “our”, or “us”) today reported financial results for the three and nine months ended September 30, 2021 as presented in the tables below on a continuing operations basis (Pool Distribution was previously reported as a discontinued operation).

Tom Schmitt, Chairman, President and CEO, commenting on third quarter results from continuing operations said, “During the months of July and August, we completed a process of cleansing our inefficient freight and replacing with higher quality freight. Our surgical collaboration with customers on selecting, handling, and pricing freight led to the highest ever monthly net income for the month of September with our less-than-truckload line of business reporting record levels in weight per shipment and revenue per shipment. Business momentum combined with the completion of our cleanse process culminated in record quarterly reported income from operations of $42.5 million and adjusted income from operations of $43.4 million. Our record reported net income per diluted share of $1.12 and adjusted net income per diluted share of $1.14 exceeded the high end of our $1.03 to $1.07 guidance range. Our third quarter revenue growth of 26% was slightly below the low end of our guidance range of 28% to 32%.”

Mr. Schmitt continued, “I am very encouraged by the results in the month of September, in particular the strong operating margin expansion in the Expedited Freight segment. We expect volumes in the fourth quarter 2021 to exceed volumes for the same period of 2020. Through October, our volumes were strong year-over-year. Our guidance reflects a record full year 2021 revenue and net income per diluted share. We fully expect our momentum to continue into 2022 and 2023. As we continue to execute upon our strategic priorities, our full year 2023 targets include revenue of $2.0 billion to $2.6 billion and net income per diluted share of $6.30 to $6.70.”

In closing, Mr. Schmitt said, “In the third quarter, we achieved the highest income from operations and net income per diluted share for a quarter in the history of the Company. I would like to thank all of our teammates and independent contractors for their hard work in helping to achieve this important milestone.”

Regarding the Company’s fourth quarter 2021 continuing operations guidance, Rebecca J. Garbrick, CFO, said, “We expect our year-over-year revenue growth will be 23% to 27% and net income per diluted share to be between $1.25 to $1.29, compared to reported net income per diluted share of $0.55 and adjusted net income per diluted share of $0.62 in the fourth quarter of 2020. Our full year 2021 net income per diluted share is expected to be between $4.08 to $4.12 and adjusted net income per diluted share to be between $4.30 to $4.34, compared to reported net income per diluted share of $1.89 and adjusted net income per diluted share of $1.99 in 2020.”


Continuing Operations	Three Months Ended
(in thousands, except per share data)	September 30, 2021			September 30, 2020			Change		Percent Change
Operating revenue	$	419,625		$	331,997		$	87,628	26.4	%
Income from operations	$	42,476		$	23,510		$	18,966	80.7	%
Operating margin	10.1		%	7.1		%	300 bps
Net income	$	30,503		$	16,992		$	13,511	79.5	%
Net income per diluted share	$	1.12		$	0.61		$	0.51	83.6	%
Cash provided by operating activities	$	42,581		$	20,564		$	22,017	107.1	%

Non-GAAP Financial Measures: ¹
Adjusted income from operations	$	43,445		$	25,810		$	17,635	68.3	%
Adjusted net income	$	31,215		$	18,752		$	12,463	66.5	%
Adjusted net income per diluted share	$	1.14		$	0.67		$	0.47	70.1	%
EBITDA	$	51,892		$	32,682		$	19,210	58.8	%
Free cash flow	$	29,166		$	18,766		$	10,400	55.4	%

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

Continuing Operations	Nine Months Ended
(in thousands, except per share data)	September 30, 2021			September 30, 2020			Change			Percent Change
Operating revenue	$	1,202,498		$	919,232		$	283,266		30.8	%
Income from operations	$	107,324		$	53,198		$	54,126		101.7	%
Operating margin	8.9		%	5.8		%	310 bps
Net income	$	77,894		$	37,634		$	40,260		107.0	%
Net income per diluted share	$	2.83		$	1.35		$	1.48		109.6	%
Cash provided by operating activities	$	82,242		$	80,493		$	1,749		2.2	%

Non-GAAP Financial Measures: ¹
Adjusted income from operations	$	115,248		$	54,343		$	60,905		112.1	%
Adjusted net income	$	83,837		$	38,498		$	45,339		117.8	%
Adjusted net income per diluted share	$	3.05		$	1.38		$	1.67		121.0	%
EBITDA	$	135,391		$	81,117		$	54,274		66.9	%
Free cash flow	$	61,566		$	65,469		$	(3,903	)	(6.0	)%

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

On October 26, 2021, our Board of Directors declared a quarterly cash dividend of $0.21 per share of common stock. The dividend is payable to shareholders of record at the close of business on November 24, 2021 and is expected to be paid on December 9, 2021. This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.84 for the full year 2021, payable in quarterly increments of $0.21 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. In addition, Pool assets and liabilities were reflected as “held for sale” on the Condensed Consolidated Balance Sheets in this press release for the prior period.

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2021 results on Thursday, October 28, 2021 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 (877) 226-8189, Access Code: 2220892.

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 freight and logistics company that provides services across the United States and Canada. 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. 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, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Operating revenue:
Expedited Freight	$	341,557		$	283,514		$	997,478		$	772,801
Intermodal	78,173			48,948			205,820			147,836
Eliminations and other operations	(105		)	(465		)	(800		)	(1,405		)
Operating revenues	419,625			331,997			1,202,498			919,232
Operating expenses:
Purchased transportation	205,474			173,054			605,299			465,721
Salaries, wages and employee benefits	84,410			66,927			243,948			200,258
Operating leases	20,536			17,327			60,073			52,598
Depreciation and amortization	9,416			9,172			28,067			27,919
Insurance and claims	9,984			8,671			30,616			26,437
Fuel expense	4,457			2,715			12,218			9,247
Other operating expenses	42,872			30,621			114,953			83,854
Total operating expenses	377,149			308,487			1,095,174			866,034
Income (loss) from continuing operations:
Expedited Freight	34,636			23,461			93,854			50,394
Intermodal	8,712			4,837			21,607			12,963
Other Operations	(872		)	(4,788		)	(8,137		)	(10,159		)
Income from continuing operations	42,476			23,510			107,324			53,198
Other expense:
Interest expense	(973		)	(1,304		)	(3,461		)	(3,355		)
Total other expense	(973		)	(1,304		)	(3,461		)	(3,355		)
Income before income taxes	41,503			22,206			103,863			49,843
Income tax (benefit) expense	11,000			5,214			25,969			12,209
Net income from continuing operations	30,503			16,992			77,894			37,634
Loss from discontinued operation, net of tax	(6,967		)	(345		)	(12,500		)	(9,458		)
Net income and comprehensive income	$	23,536		$	16,647		$	65,394		$	28,176

Net income per share:
Basic net income (loss) per share
Continuing operations	$	1.12		$	0.61		$	2.84		$	1.35
Discontinued operation	(0.26		)	(0.01		)	(0.46		)	(0.34		)
Net income per basic share¹	$	0.86		$	0.60		$	2.39		$	1.01

Diluted net income (loss) per share
Continuing operations	$	1.12		$	0.61		$	2.83		$	1.35
Discontinued operation	(0.26		)	(0.01		)	(0.46		)	(0.34		)
Net income per diluted share	$	0.86		$	0.60		$	2.37		$	1.01
Dividends per share	$	0.21		$	0.18		$	0.63		$	0.54

¹ Rounding may impact summation of amounts.

Expedited Freight Segment Information
(In thousands)
(Unaudited)

	Three Months Ended
	September 30, 2021		Percent of Revenue		September 30, 2020		Percent of Revenue		Change		Percent Change
Operating revenue:
Network ¹	$	207,656	60.8	%	$	169,300	59.7	%	$	38,356	22.7	%
Truckload	53,651		15.7		49,836		17.6		3,815		7.7
Final Mile	71,355		20.9		56,994		20.1		14,361		25.2
Other	8,895		2.6		7,384		2.6		1,511		20.5
Total operating revenue	341,557		100.0		283,514		100.0		58,043		20.5

Operating expenses:
Purchased transportation	182,596		53.5		156,078		55.1		26,518		17.0
Salaries, wages and employee benefits	65,898		19.3		54,091		19.1		11,807		21.8
Operating leases	14,687		4.3		13,438		4.7		1,249		9.3
Depreciation and amortization	6,784		2.0		6,757		2.4		27		0.4
Insurance and claims	8,074		2.4		5,765		2.0		2,309		40.1
Fuel expense	2,225		0.7		1,544		0.5		681		44.1
Other operating expenses	26,657		7.8		22,380		7.9		4,277		19.1
Total operating expenses	306,921		89.9		260,053		91.7		46,868		18.0
Income from operations	$	34,636	10.1	%	$	23,461	8.3	%	$	11,175	47.6	%

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, 2021			September 30, 2020			Percent Change

Business days	64			64			—		%

Tonnage ^1,2
Total pounds	687,816			636,194			8.1
Pounds per day	10,747			9,941			8.1

Shipments ^1,2
Total shipments	845			1,018			(17.0	)
Shipments per day	13.2			15.9			(17.0	)

Weight per shipment	814			625			30.2

Revenue per hundredweight ³	$	29.01		$	26.84		8.1
Revenue per hundredweight, ex fuel ³	$	24.73		$	23.41		5.6

Revenue per shipment ³	$	240.27		$	166.09		44.7
Revenue per shipment, ex fuel ³	$	205.42		$	144.66		42.0

Network revenue from door-to-door shipments as a percentage of network revenue ^3,4	46.7		%	51.3		%	(9.0	)

¹ In thousands
² Excludes accessorial, Truckload and Final Mile products
³ Includes intercompany revenue between the Network and Truckload revenue streams
⁴ Door-to-door shipments include all shipments with a pickup and/or delivery

Intermodal Segment Information
(In thousands)
(Unaudited)

	Three Months Ended
	September 30, 2021		Percent of Revenue		September 30, 2020		Percent of Revenue		Change		Percent Change
Operating revenue	$	78,173	100.0	%	$	48,948	100.0	%	$	29,225	59.7	%

Operating expenses:
Purchased transportation	22,984		29.4		17,270		35.3		5,714		33.1
Salaries, wages and employee benefits	17,596		22.5		11,637		23.8		5,959		51.2
Operating leases	5,856		7.5		3,932		8.0		1,924		48.9
Depreciation and amortization	2,616		3.3		2,356		4.8		260		11.0
Insurance and claims	2,708		3.5		2,058		4.2		650		31.6
Fuel expense	2,231		2.9		1,171		2.4		1,060		90.5
Other operating expenses	15,470		19.8		5,687		11.6		9,783		172.0
Total operating expenses	69,461		88.9		44,111		90.1		25,350		57.5
Income from operations	$	8,712	11.1	%	$	4,837	9.9	%	$	3,875	80.1	%

Intermodal Operating Statistics

	Three Months Ended
	September 30, 2021		September 30, 2020		Percent Change

Drayage shipments	91,774		74,506		23.2	%
Drayage revenue per shipment	$	723	$	562	28.6	%
Number of locations	29		24		20.8	%

Forward Air Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	51,930	$	40,254
Accounts receivable, net	205,165		156,490
Other receivables	14,218		—
Other current assets	17,948		28,150
Current assets held for sale	—		21,002
Total current assets	289,261		245,896

Property and equipment	396,094		380,519
Less accumulated depreciation and amortization	199,875		190,652
Total property and equipment, net	196,219		189,867
Operating lease right-of-use assets	142,623		123,338
Goodwill	254,776		244,982
Other acquired intangibles, net of accumulated amortization	142,196		145,032
Other assets	45,433		45,181
Noncurrent assets held for sale	—		53,097
Total assets	$	1,070,508	$	1,047,393

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	42,885	$	38,371
Accrued expenses	67,732		51,264
Other current liabilities	—		10,580
Current portion of debt and finance lease obligations	1,841		1,801
Current portion of operating lease liabilities	46,008		43,680
Current liabilities held for sale	—		25,924
Total current liabilities	158,466		171,620

Debt and finance lease obligations, less current portion	161,312		117,408
Operating lease liabilities, less current portion	97,181		80,346
Other long-term liabilities	57,354		54,129
Deferred income taxes	40,659		41,986
Noncurrent liabilities held for sale	—		34,575

Shareholders’ equity:
Common stock	270		273
Additional paid-in capital	255,071		242,916
Retained earnings	300,195		304,140
Total shareholders’ equity	555,536		547,329
Total liabilities and shareholders’ equity	$	1,070,508	$	1,047,393

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Three Months Ended
	September 30, 2021			September 30, 2020
Operating activities:
Net income from continuing operations	$	30,503		$	16,992
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization	9,416			9,172
Change in fair value of earn-out liability	—			493
Share-based compensation expense	2,601			2,345
Provision for revenue adjustments	1,979			1,185
Deferred income tax benefit	(812		)	(351		)
Other	217			17
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	1,655			(23,415		)
Other receivables	(727		)	—
Other current and noncurrent assets	1,438			1,283
Accounts payable and accrued expenses	(3,689		)	12,843
Net cash provided by operating activities of continuing operations	42,581			20,564

Investing activities:
Proceeds from sale of property and equipment	1,025			427
Purchases of property and equipment	(14,440		)	(2,225		)
Purchases of a business, net of cash acquired	—			—
Net cash used in investing activities of continuing operations	(13,415		)	(1,798		)

Financing activities:
Repayments of finance lease obligations	(492		)	147
Payments on revolving credit facility	—			(20,000		)
Payment of debt issuance costs	(119		)	—
Payment of earn-out liability	(6,519		)	—
Proceeds from issuance of common stock upon stock option exercises	—			1,901
Payments of dividends to shareholders	(5,705		)	(5,003		)
Repurchases and retirement of common stock	(14,997		)	(29,989		)
Proceeds from common stock issued under employee stock purchase plan	—			—
Payment of minimum tax withholdings on share-based awards	(248		)	(158		)
Contributions from (distributions to) subsidiary held for sale	—			(3,590		)
Net cash used in financing activities from continuing operations	(28,080		)	(56,692		)
Net increase (decrease) in cash of continuing operations	1,086			(37,926		)

Cash from discontinued operation:
Net cash used in operating activities of discontinued operation	—			(3,418		)
Net cash used in investing activities of discontinued operation	—			(172		)
Net cash provided by financing activities of discontinued operation	—			3,590
Net increase (decrease) in cash and cash equivalents	1,086			(37,926		)
Cash and cash equivalents at beginning of period of continuing operations	50,844			80,916
Cash at beginning of period of discontinued operation	—			—
Net increase (decrease) in cash and cash equivalents	1,086			(37,926		)
Less: cash at end of period of discontinued operation	—			—
Cash and cash equivalents at end of period of continuing operations	$	51,930		$	42,990

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Nine Months Ended
	September 30, 2021			September 30, 2020
Operating activities:
Net income from continuing operations	$	77,894		$	37,634
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization	28,067			27,919
Change in fair value of earn-out liability	(385		)	(2,209		)
Share-based compensation expense	8,179			7,852
Provision for revenue adjustments	5,504			2,972
Deferred income tax (benefit) expense	(1,384		)	4,317
Other	406			714
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	(49,363		)	(20,436		)
Other receivables	(14,218		)	—
Other current and noncurrent assets	8,184			1,253
Accounts payable and accrued expenses	19,358			20,477
Net cash provided by operating activities of continuing operations	82,242			80,493

Investing activities:
Proceeds from sale of property and equipment	2,339			1,415
Purchases of property and equipment	(23,015		)	(16,439		)
Purchase of a business, net of cash acquired	(22,543		)	(55,931		)
Net cash used in investing activities of continuing operations	(43,219		)	(70,955		)

Financing activities:
Repayments of finance lease obligations	(1,445		)	(529		)
Proceeds from revolving credit facility	45,000			65,000
Payments on revolving credit facility	—			(20,000		)
Payment of debt issuance costs	(119		)	—
Payment of earn-out liability	(6,519		)	(5,284		)
Proceeds from issuance of common stock upon stock option exercises	3,563			1,901
Payments of dividends to shareholders	(17,270		)	(15,090		)
Repurchases and retirement of common stock	(48,989		)	(45,248		)
Proceeds from common stock issued under employee stock purchase plan	388			294
Payment of minimum tax withholdings on share-based awards	(3,074		)	(3,444		)
Contributions from (distributions to) subsidiary held for sale	1,118			(8,897		)
Net cash used in financing activities from continuing operations	(27,347		)	(31,297		)
Net increase (decrease) in cash and cash equivalents of continuing operations	11,676			(21,759		)

Cash from discontinued operation:
Net cash used in operating activities of discontinued operation	(6,902		)	(8,090		)
Net cash provided by (used in) investing activities of discontinued operation	8,020			(807		)
Net cash (used in) provided by financing activities of discontinued operation	(1,118		)	8,897
Net increase (decrease) in cash and cash equivalents	11,676			(21,759		)
Cash and cash equivalents at beginning of period of continuing operations	40,254			64,749
Cash at beginning of period of discontinued operation	—			—
Net increase (decrease) in cash and cash equivalents	11,676			(21,759		)
Less: cash at end of period of discontinued operation	—			—
Cash and cash equivalents at end of period of continuing operations	$	51,930		$	42,990

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, 2021 and 2020, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”), free cash flow, and reported income from continuing operations, net income, and net income per diluted share to adjusted income from continuing operations, net income, and net income per diluted share. All non-GAAP financial measures are presented on a continuing operations basis.

The Company believes that EBITDA from continuing operations 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 from continuing operations 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 these unusual, nonrecurring or nonoperational items.

Contacts

Forward Air Corporation

Brandon Hammer, 423-636-7173

[email protected]

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Forward Air Corporation Reports Third Quarter 2021 Results

ByVitaliy Dadalyan