• Revenue: $644 million, an increase of 93% or $310 million compared to the prior year, driven by the Omni transaction.

• Expedited Revenue: Increased by $22 million or 8% to $291 million.

• Intermodal Revenue: Decreased by $5 million or 8% to $59 million.

• Omni Revenue: Contributed $311 million, not included in the previous year's comparable quarter.

• Impairment Charge: $1.1 billion related to the Omni reporting unit.

• Loss from Operations (Pre-Impairment): $3 million.

• Consolidated EBITDA: $81 million for Q2 2024, a $26 million increase from Q1 2024.

• Cash Used by Operations: $45 million in Q2 2024.

• Net Debt to Consolidated LTM EBITDA Covenant: 5.2 times, with a maximum covenant level of 6 times.

• Total Cash: $105 million at the end of the quarter.

• Liquidity: $445 million, including $340 million of availability under the revolving credit facility.

• Annualized Savings Expectation: $75 million, with an additional $20 million in headcount savings expected by Q1 2025.

• Full Year 2024 EBITDA Guidance: Expected between $310 million to $325 million.

• Warning! GuruFocus has detected 6 Warning Signs with FWRD.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Forward Air Corp (NASDAQ:FWRD) reported a significant revenue increase of 93% year-over-year, largely driven by the Omni transaction.

• The integration of the Omni acquisition is progressing as planned, with anticipated synergies and cost savings being realized.

• The company has been recognized as a top 100 third-party logistics provider by Inbound Logistics magazine for the fourth consecutive year.

• Forward Air Corp (NASDAQ:FWRD) expects to achieve $75 million in annualized savings from integration efforts by the end of the first quarter of 2025, with an additional $20 million in headcount savings already actioned.

• The company maintains strong liquidity with $445 million available, ensuring financial flexibility during the integration process.

Negative Points

• Forward Air Corp (NASDAQ:FWRD) incurred a $1.1 billion impairment charge related to the Omni reporting unit, negatively impacting the quarter's results.

• There was a decrease in Intermodal revenue by 8% due to fewer shipments and lower revenue per shipment as the market normalizes post-pandemic.

• The company experienced some customer attrition during the integration process, although efforts are being made to regain lost volumes.

• Cash used by operations was $45 million in the second quarter, with significant consumption from legacy transaction costs and interest payments.

• The integration process is complex and not linear, with challenges in harmonizing IT systems, business rules, and compensation plans.

Q & A Highlights

Q: Have there been any significant departures or attrition in the sales force, particularly from the legacy Omni business? A: Shawn Stewart, CEO: We've seen no real attrition. The team is invigorated, and the pipeline is increasing with high achievement rates in converting that pipeline. The Omni sales team remains a key strength.

Q: Can you provide any color on the revenue and operating ratio assumptions underpinning the 2024 EBITDA guidance? A: Jamie Pierson, CFO: We are not providing specific guidance beyond what has been given. There is still volatility in the numbers, and we are focusing on running the business better than our commitments.

Q: What are the assumptions to reach neutral to cash flow positive in the second half of the year? A: Jamie Pierson, CFO: The primary assumptions include reducing one-time legacy transaction and integration costs. We expect small operational improvements, particularly in the Expedited and Omni segments, to achieve cash flow breakeven or positive.

Q: What keeps you up at night regarding the execution of the transformation strategy? A: Jamie Pierson, CFO: Prioritizing opportunities that move the needle and balancing integration with sales growth are key concerns. We must focus on vital tasks and maintain customer service levels during this period of change.

Q: Can you clarify the difference between the adjusted operating income loss and adjusted EBITDA? A: Jamie Pierson, CFO: The negative $3 million operating income includes transaction and severance costs. The adjusted EBITDA calculation allows for add-backs under the credit agreement, including cost synergies and headcount reductions, which are not reflected in operating income.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.