Forward Air Corporation (NASDAQ:FWRD) Q3 2023 Earnings Call Transcript

Tom Schmitt: The one thing, Scott, specifically on the LTL volumes, right, the volumes are getting better and we see that momentum continuing. What we — in all fairness are fully focused on and still need to get better at is finding that volume pricing sweet spot for the door-to-door business and for the direct business. The Airport-to-airport business, obviously, we have lived for 42 years. So we’ve got a very good understanding of how to price that for maximum profitability. We still need to be able to get that came up for the direct business and for the door-to-door business. That’s what’s reflected in some of the muted numbers that you’re looking at for Q4 guidance.

Operator: We’ll now go to the line of Bruce Chan with Stifel Nicolaus.

Bruce Chan : Thanks, operator, and good morning, Tom. Good morning. Rebecca. I just want to focus a little bit big picture here for a second. Obviously, there are some maybe questions or concerns or uncertainties about the underlying business strategy. I just want to get a sense of when you speak with your core legacy customers, what are they most worried about? And what are you doing to convince them to some of the fundamentals of your value proposition are still sound?

Tom Schmitt: Yes. I mean, the good news is, I mean, obviously, we’ve known not just the companies, but most importantly, the players who had those business partners and customers extremely well. I mean our sales leadership and frontline people have worked with them for a long time. So there is a strong relationship and there’s also a strong understanding of kind of what makes them win. I’m going to see actually one of them this afternoon, and we have a very open conversations. So what they obviously were concerned about with the acquisition announcement on August 10 is someone else getting preferential treatment. Are we still going to support them and make them win more business. And what do I think, we are very focused on and what we have been successful with is can you measure each other by our actions and by our results much more so than by our words.

At the end of the day, my test with our domestic forwarder business partners is when you use Forward Air, are you winning more business than you did without Forward Air. Are you making more margin and that you can keep score of that, but we can keep score of the revenue. And then when you use us, what’s the win rate when you use us? Is that going up or down? And Bruce, what we’re doing is we have those very specific scorecards in place with those customers. And if at the end of the month, end of the quarter and we’re actually keeping those scorecards up-to-date on a monthly basis. Those business partners see they’re actually winning more business and they’re making more money when they use us. And every single time they go to pad their percentage of winning actually looks better than it did 3 or 6 months ago, they say, okay, still works for us.

And in all fairness, since August 10, it’s now been more than 2.5 months. Our domestic forwarder customers are using us 14% more than they did before the announcement. So despite a lot of kind of, I guess, straight talk and some of the emotional conversations, the strength and depth of those relationships is very, very, very profound. And I think we’re living that and we’re keeping score together. And as long as we are well intending competent and make them win more business and move heaven and earth to do so, they’re going to keep growing with us. And that’s an and, not an or also accessing the direct sales, the direct market. With a small SMB focus that we’ve had for the last 2 years, we got our kind of training gear in place to make sure that we actually ask all the questions upfront to make sure that we are not stepping on our partner’s toes.