Forward Air Q3 2026 Earnings Call Transcript

Forward Air (NASDAQ:FWRD) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Forward Air reported the highest quarterly revenue in company history for the second consecutive quarter, with operating revenue reaching $674 million, a $42 million increase from the previous year.

Operating income nearly tripled to $44 million compared to $15 million in the same quarter last year, and consolidated EBITDA improved by almost 30%, reaching $101 million.

The Expedited Freight segment achieved its best revenue, operating income, and EBITDA since 2024, with improvements in tonnage, shipments per day, and an operating ratio improvement of 330 basis points.

Omni Logistics and Intermodal segments also reported significant performance improvements, with Omni achieving its best EBITDA margin since 2024 and Intermodal seeing its best revenue in over three years.

The company announced a new agreement with a major customer to retain significant services for two years, with expectations for revenue growth from this agreement to surpass 2025 levels.

Management expressed confidence in maintaining momentum and focusing on customer service, while also emphasizing the company’s ability to manage costs effectively and leverage its operating capacity.

Cash flow from operations was $35 million in the quarter, and liquidity improved to $446 million, including cash and revolver availability.

The company completed the sale of two non-core businesses and has paused the sale of its Intermodal business, opting to revisit when market conditions better reflect its value.

Full Transcript

OPERATOR

Please stand by. Your meeting is about to begin. Good afternoon, everyone, and welcome to the Forward Air third quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you please pick up your handset for best sound quality.

And lastly, if you should require operator assistance today, please press star zero at any time. I would now like to turn the call over to Mr. Tony Carino, Senior Vice President of Treasury and Investor Relations. Please go ahead, sir.

Tony Carino (Senior Vice President of Treasury and Investor Relations)

Thank you, operator, and good afternoon, everyone. Welcome to Forward Air’s third quarter earnings conference call. With us this afternoon are Shawn Stewart, President and Chief Executive Officer, and Jamie Pierson, Chief Financial Officer. By now, you should have received a press release announcing Forward Air’s third quarter 2026 results, which was also furnished to the SEC on Form 8-K. We have also furnished a slide presentation outlining third quarter 2026 earnings highlights and a business update. Both the press release and slide presentation for this call are accessible on the Investor Relations section of Forward Air’s website at forwardair.com.

Please be aware that certain statements in the company’s earnings release announcement and on this conference call may be considered forward-looking statements. This includes statements which are based on expectations, intentions, and projections regarding the company’s future performance, anticipated events or trends, and other matters that are not historical facts, including statements regarding our fiscal year 2026. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the SEC and the press release and slide presentation relating to this earnings call. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call.

The company undertakes no obligation to update any forward-looking statements, whether as a result of new information or future events or otherwise, unless required by law. During the call, there may also be a discussion of financial metrics that do not conform to U.S. generally accepted accounting principles, or GAAP. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in today’s press release and slide presentation.

I will now turn the call over to Shawn.

Shawn Stewart (Chief Executive Officer)

Good afternoon, everyone, and thank you for joining us. I am pleased to announce that our team delivered another quarter of solid results. We have reported the best quarterly revenue in company history for the last two consecutive quarters. Operating revenue was 674 million this quarter, which is an increase of 42 million compared to 632 million in the third quarter of 2025, while operating income improved to 44 million compared to 15 million a year ago, and we posted our best consolidated EBITDA results in nearly three years.

Consolidated EBITDA, which is calculated pursuant to our credit agreement, improved by almost 30% to 101 million compared to 78 million a year ago. It is important to note that our improvement was not localized at any one particular segment but strong across the board. Expedited Freight reported its best revenue, best operating income, and best reported EBITDA since the beginning of 2024. The operating ratio also improved by 330 basis points from 92.5% to 89.2% compared to the third quarter of 2025. The improvement was positively impacted by an increase in demand of our already time-sensitive and expedited service offering with shipments and tonnage per day both notably higher compared to a year ago. The Omni Logistics segment also continues to see an increase in demand for its services, most namely our contract logistics and air and ocean services in the third quarter.

This segment achieved its best reported EBITDA margin since the beginning of 2024, and the Intermodal segment reported its best revenue in more than three years, led by an increase in drayage revenue per shipment, and has returned to its industry-leading margins. Overall, I believe our team has the company moving in the right direction. We have made a tremendous amount of progress in the current market condition, both on a macro and industry-specific basis. However, I believe we have an opportunity to continue improving. We plan to maintain the momentum and grow the business by consistently delivering best-in-class customer service. Our customers expect reliability, consistency, and dependable solutions, and our goal is to exceed those expectations across every single service we provide by remaining focused on continuous improvement, operations excellence, and customer satisfaction.

We plan to continue strengthening our already deep relationships and improving our value proposition regarding the broader logistics space. Capacity in the trucking industry has been tightening as the number of CDLs continue to be constrained. Combine that constraint with consistent demand, and that puts us in a very good place to continue improving profitability as we have each quarter this year. In constrained environments such as this, shippers typically focus on stability and consistency to ensure capacity and to mitigate risk. We believe we are well positioned to grow in this market environment through disciplined cost management and exceptional customer service.

As you saw a few weeks ago, we announced a definitive agreement with one of our largest customers to retain a significant portion of the services we provide for them. As previously disclosed, we have been engaged in discussions with the customer regarding its planned transition and our intent to retain as much of the business as possible. As also discussed, this change was a function of the customer’s operational and supplier diversification initiatives and had nothing to do with the exceptional service we have provided during our 20-plus-year relationship.

Under the new agreement, the customer has agreed to continue utilizing the company for a significant portion of the services currently provided to them for a period of two years. Of the services to be transitioned, we have already started that work, which is expected to occur starting this month through March of next year. The great news is the revenue from the services that are retained has continued to grow throughout 2026 and is expected to eclipse the total revenue for all of 2025 and is anticipated to continue growing into 2027 and beyond.

We are pleased to bring this agreement to completion, as we believe it reflects on our strength and our relationship with the customer and the exceptional level of service our team has and will continue to deliver. With that, I will now turn it over to Jamie to go through the detailed results for the third quarter.

Jamie Pierson (Chief Financial Officer)

Thanks as always, Shawn, and good afternoon, everyone. Jumping right into it, as you heard from Shawn, we reported $44 million in operating income for the quarter, which is almost triple the $15 million of operating income we reported a year ago. Consolidated EBITDA increased $23 million on a year-over-year basis in the third quarter to 101 million compared to $78 million for the third quarter of last year. The margin also improved by 280 basis points from 12.3% to 15.1%.

Continuing on to an LTM basis, consolidated EBITDA was 342 million as of the end of the third quarter, almost 50 million higher than the same LTM period last year. If I could refer you to page 30 of the presentation, on an adjusted EBITDA basis, the third quarter results improved by $24 million to $99 million compared to $75 million in the third quarter of last year, which demonstrates the steady improvement in the quality of our earnings and its subsequent conversion to cash.

Turning to the segments, Expedited Freight’s reported EBITDA improved by 50% compared to a year ago. It increased from 30 million last year to 45 million this year, and the margin improved by 180 basis points from 11.5% a year ago to 13.3% this year. Flipping back to page 14 of the presentation, on a year-over-year basis, the Expedited Freight segment delivered improvements across several key operating and revenue metrics including tonnage per day, shipments per day, average weight per shipment, and revenue per shipment excluding fuel.

As you heard from Shawn, the operating ratio also improved by 330 basis points to 89.2% compared to 92.5% a year ago. Our strategy remains focused on improving freight characteristics, increasing network density, and maximizing the efficiency of our operating infrastructure. The quarter-over-quarter margin expansion provides further evidence of the progress we are making and reinforces the importance of staying disciplined and continuing to execute on these strategic priorities.

At the Omni Logistics segment, reported EBITDA increased to 35 million in the third quarter compared to 33 million a year ago, and the margin improved by 170 basis points to 11.3% from 9.6% as we improve the efficiency and operating leverage of both our air and ocean and contract logistics offerings. At the Intermodal segment, we are seeing a return to the more consistent level of results that we are accustomed to see for this business. Reported EBITDA improved to 9 million compared to 8 million in the third quarter of last year, and the 14.3% margin this year was in line with the 14.5% margin a year ago.

And I’ll give you an update on the sales process in my closing remarks. Regarding cash flow, cash, and liquidity, we reported 35 million of cash provided by operating activities in the third quarter compared to 53 million a year ago. On a year-to-date basis, we reported 76 million of cash provided by operating activities, which is a $9 million improvement compared to the 67 million in the same period a year ago. As for liquidity, we ended the third quarter with 446 million, which is a $45 million sequential improvement compared to the second quarter of this year and a $33 million improvement compared to the third quarter a year ago.

The $446 million in liquidity is comprised of $185 million in cash and $261 million in availability under the revolver. Turning to an update on the sale of non-core assets as a part of our portfolio optimization strategy and as previously announced, we successfully completed the sale of two smaller businesses within the legacy Omni segment. The sale of the first business was completed in the second quarter, and we closed on the second disposition early in the third. Our liquidity benefited by approximately 25 million from the monetization of these businesses with minimal impact to consolidated EBITDA.

The remaining targeted divestiture that we announced was our intention to sell the Intermodal business. This business is back on track, and we have even more conviction today based on its recent performance and near-term prospects than ever before. The drayage market is on the upswing, and our pipeline is as robust as I’ve seen in my tenure here. Having said that, we have higher aspirations for it than the process yielded, so we’re going to pause while we continue to add a few more solid quarters under our belt.

We very well may revisit the sale if and when the market reflects what we believe is the fair value for this industry-leading management team and asset. By no means does this preclude a sale, just not on the original timeline that we previously communicated. And consistent with past practice, I would like to leave you with a few parting thoughts, and at the risk of sounding repetitive to what we said last quarter, this is yet another best quarter since the transaction, which is no small accomplishment, and it is another stair-step up. Up from the 78 million of consolidated EBITDA we reported a year ago, up from the 93 million last quarter, up to 101 million this quarter. This is no longer a data point, as we have now done this for two quarters in a row.

Secondarily is our ability to control what we control, specifically costs. We are doing a very good job of controlling our direct and overhead costs, creating operating leverage as evidenced by the increase in our margins. Next is our ability to start growing into our capital structure and decreasing leverage, ending this quarter below five times and nearly one full turn lower compared to this time last year, and the lowest in nearly three years.

Finally is the agreement with our major customer. Their reliance on our services as they continue to grow speaks to the long-standing partnership and the quality of service we provide. The agreement and organic growth exhibited by the customer in 2026 should bring stability to our earnings, profitability, and cash flow profile. I will now turn the call over to the operator to take questions.

OPERATOR

Thank you, gentlemen. Again, ladies and gentlemen, at this time the floor will be open for your questions. If you do have a question at this time, please press star one on your telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. Again, we ask that you please pick up your handset when posing your questions to provide optimal sound quality. And also, we ask that you please limit yourself to one question and one follow-up.

We’ll go first this afternoon to Bruce Chan with Stifel.

Bruce Chan (Analyst)

Yeah, thanks, operator, and good afternoon, gents. You know, first of all, congrats on all the progress this quarter. Obviously, you know, it’s been a fairly lumpy year getting to this point, so maybe just wanted to get an update on how we should start to think about, you know, normalized margins for, you know, the overall business, of course, but also the individual segments. You know, whether you care to give that as a, you know, kind of mid-cycle target or any thoughts on 2027 or, you know, even what you have left in the bag from a kind of turnaround and margin improvement perspective.

You know, any of that would be really helpful.

Jamie Pierson (Chief Financial Officer)

Hey, Bruce, Jamie here. You know, I’d say a few things, I guess, as we go into the fourth quarter. We’re seeing pretty similar trends—I mean, granted, we’re literally a month into it—seeing pretty similar trends to what we’re exiting the third quarter on. And, you know, strong revenue per shipment, excluding fuel surcharge on that, because I think that’s what we can control and that’s what we’re driving towards in terms of profitability of the network.

I’d also say I expect to see the usual seasonality that we have in the past couple of years, at least since we’ve been here. Just keep in mind, Bruce, that there’s fewer working days in the fourth quarter, and the third quarter of every calendar year is usually one of the best for us in the calendar. So, all those being, I guess, equal, we’re seeing pretty similar trends, just knowing that we’re going to have some seasonality and there’s fewer working days in the fourth.

Bruce Chan (Analyst)

Okay, that’s super helpful. And then just as far as 2027, I know it’s early and you don’t like to give a lot of guidance, but are we kind of at a sustainable margin level, or is there still a lot of wood to chop in terms of the margin improvement story?

Jamie Pierson (Chief Financial Officer)

Yeah, like when you said you don’t like to give a lot, we don’t like to give any. So very, very kind of you to give us a little bit of credit. You know, from my perspective, we spent the last two years stabilizing this company so that we could take advantage of the situation that we’re in. Shawn, I’m sure you’ve got something.

Shawn Stewart (Chief Executive Officer)

Yeah, I would say, Bruce, the company is running extremely well, and the disciplines that we have in running this company are in our culture and our DNA now. So I expect to see consistency. You know, we don’t have a crystal ball to what the market’s going to do in 2027, but you’ll see consistency from us for what we can control.

Bruce Chan (Analyst)

Okay, fair enough. I’ll turn it over. Thank you. Thank you.

OPERATOR

Thank you. We’ll go next now to Jacob Lacks with Wolfe Research.

Jacob Lacks (Analyst)

Hey, guys, thanks for your time. So you saw a big acceleration in volume growth. What’s really driving that? If there’s a particular end market that’s been unusually strong? And to the extent this continues, are you comfortable with the owner-operator pipeline that’s sufficient to handle further volume growth, or do we potentially need to increase purchase trends to attract some new drivers? Thanks.

Jamie Pierson (Chief Financial Officer)

Yeah. What’s driving it more than anything else is the way that we’re running this network. You know, we are going, you know, obviously in the, I guess, the IC market, going to have a little bit more variable cost than our peers, but also we also have the best service. Jacob, you know, keep in mind that we’ve got the lowest capex—it’s a fraction of our peers—and we’re holding our direct operating expenses flat. So we’re expanding margins. In terms of the volume pickup, it’s not just the shipments, it’s the weight.

You know, if you think about it, shipments are up 7.9%, weight’s up 6.9%, but also revenue excluding fuel is up 4.3%. So we’re not pricing for profit, we’re pricing for a network, and we’re pricing in specific lanes. At the end of the day, we’re looking for cash, not for price.

Shawn Stewart (Chief Executive Officer)

I would say to add to that, in the owner-operator network, our reputation is extremely strong out there. So, yeah, I mean, I’m really, really happy with the way we’re running this network and I’m really happy with our model. So no concerns from our part of continuing to add. We’ve added over 50 drivers from the beginning of this year to what we have today. So I’m not worried about getting drivers into our network as we flex.

Jacob Lacks (Analyst)

And is there any sense you can give in terms of how much further excess capacity you have in the network?

Jamie Pierson (Chief Financial Officer)

Somewhere between 15 to 18% right now.

Jacob Lacks (Analyst)

Okay. Okay, thanks. And then just on the customer agreement, is there any way you can help us how to think about 2027 Omni revenue? And I think you said retained services are expected to keep growing. Can Omni as a whole grow revenue? I’m just trying to better understand exactly how much revenue can grow as it relates to the customer agreement.

Shawn Stewart (Chief Executive Officer)

Can grow revenue, and will grow revenue, as it relates to the customer agreement. You know, we used 2025 as our initial statement out there, which was 250 million. So when you look at the services that will be transitioned versus the growth we saw in 2026, that’s what we’re seeing—the growth for what we’re transitioning away. But the growth in the business that we are retaining will be greater than the 250 million that we did in 2025.

Jacob Lacks (Analyst)

Okay, great. Thanks for your time.

OPERATOR

Thank you. And just a quick reminder, ladies and gentlemen, any further questions today, press star one, and we’ll pause for just one moment. And again, ladies and gentlemen, one final reminder: star one, please, for questions. And again, we’ll pause for just one moment. We do have a question coming in now from Christopher Kuhn with StoneX. Christopher, please go ahead.

Christopher Kuhn (Analyst)

Yeah. Hey, guys. Good afternoon. Thanks for the question. I know there’s a lot of moving pieces in that revenue per hundredweight ex fuel. So maybe just can you talk a little bit about pricing and kind of the sort of outlook for your pricing as we go forward here? I know the weight was up, and that certainly, you know, kind of distorts the actual revenue per hundredweight or the core pricing.

Jamie Pierson (Chief Financial Officer)

Yeah, I mean, I’m guess I’m struggling with what you’re looking for here. I mean, obviously with the weight per shipment being up as much as it is, it’s the reason I don’t like to look at revenue per hundredweight ex fuel, because we all know as soon as weight goes up, yield gets pressure. We don’t really ship yield, we ship revenue. So that’s when we like to look at revenue ex fuel being up 4.3%. That, to me, is as core as it gets.

Christopher Kuhn (Analyst)

Yeah, yeah. Oh, yeah. That’s where I was. Okay, that’s fair. And then just the chart you always show on where the Expedited Freight business is in terms of the average on the operating margin. How should we think about your progress or sort of the opportunity to either get there or to make progress going there? Obviously, this quarter was a good start.

Jamie Pierson (Chief Financial Officer)

Yeah, we’ve been at this now, Chris, for two-plus years to get us to where we are. We’ve got the foundation established, it’s been stabilized. Now we’re going to take advantage of the growth. If you look at the delta between us and the peers, by and large—keep in mind that we’re always on a one-quarter lag basis. We know we’re reporting coincidentally with this quarter—this chart is one quarter behind. Look, we’ve got excess capacity. Shawn said it.

And you think about capacity and its pieces: you’ve got trucks, trailers, terminals, and drivers. We are as flexible, if not the most flexible, in the entire space because we can add drivers, I guess, faster than just about anybody out there. So I’d like to soak up that extra 15-plus-or-minus percent capacity with the highest margin business that we can find.

Christopher Kuhn (Analyst)

Yeah, so there’s, I mean, there’s no reason why you can’t approach that at some point over time.

Jamie Pierson (Chief Financial Officer)

Approach what over time?

Christopher Kuhn (Analyst)

You know, the average target margin targets that you show on that chart there for the Expedited business.

Jamie Pierson (Chief Financial Officer)

I mean, Shawn said earlier, we’re always looking to improve. We’re not at all declaring victory, Chris. We’re not. We know there’s more geese left in the tank. Our question is just a matter of when we can get there.

OPERATOR

Thank you. And gentlemen, it appears we have no further questions today. Mr. Stewart, I’d like to turn things back to you, sir, for any closing comments.

Shawn Stewart (Chief Executive Officer)

That’s amazing. When you do great results, you don’t get that many questions. But listen, in closing, I’m very pleased that we have delivered another quarter of very solid results. All the hard work we’ve been pouring into this company, and it is showing up in the results. So we’re very pleased with that. So, you know, just in the third quarter alone, we delivered the highest quarterly revenue in the company history. The Expedited Freight segment achieved the best revenue, best operating income, and best reported EBITDA since the beginning of 2024. The Omni Logistics segment reported the best reported EBITDA margin since the beginning of 2024. The Intermodal segment reported the best revenue in more than three years. And finally, we announced the definitive agreement with one of our largest customers to retain a significant portion of the services we provide for the next two years.

So very, very happy with these results, and you’ll continue to see us charting the path forward. We look forward to updating you on our continued progress next quarter. And as usual, if you have any follow-up questions, please contact Tony. Thank you so much.

OPERATOR

Thank you, Mr. Stewart. Again, ladies and gentlemen, this will conclude the Forward Air third quarter earnings conference call. Again, we’d like to thank you all so much for joining us this afternoon and wish you all a great remainder of your day. Goodbye.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.