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

Operator: We’ll now go to the line of Bascome Majors with Susquehanna.

Bascome Majors : Rebecca, I think to help us reconcile the guidance without necessarily guiding non-GAAP things that you can’t guide. Is there any way that you could give us some bookends on what operating income for the expedited freight or intermodal segments are underlying that guide?

Rebecca Garbrick : Yes. I mean, happy to give you a bit of some flavor there. I think when we think about expedited frame, we think about the margin, we are expecting a bit of some margin — a bit of some margin expansion as we look from Q3 to Q4, not much, but I do think there is a little bit there. When we move down a bit to Intermodal, as I mentioned, from a seasonality standpoint, just looking at the intermodal business, Q3 is typically stronger than Q4, and that, in fact, it does hold true as we think about the guide to Q4. So we will see a step down from Intermodal from Q3 to Q4.

Bascome Majors : And are you talking specifically margins or operating profit on both of those signals?

Rebecca Garbrick : Operating margins.

Bascome Majors : On the — Tom, this is a legal question. I don’t know if you have someone from inside or outside counsel available or if you can just comment loosely. But the shareholder plaintiffs did appeal the ruling in your favor late last week. Any update on how long that would take to have some resolution on whether or not that appeal will be heard would be helpful?

Tom Schmitt: Yes. So — and I’ll tell you, obviously, what I know. So there is — you’re absolutely correct on this. I don’t know whether everybody is following this. This had to be with the — had to do with the temporary restraining order and that 3 plaintiffs, former employees and shareholders in Greeneville and they had the Chancery Court actually received and that temporary restraining order was lifted, which means there’s no — we actually, frankly, appreciated that outcome because it does mean, and that’s very important. We’re doing things the right way. I always say we’re not a hotdog stand. We need to make sure that we get this — get the right things done, but we also do them the right way. You’re right, Bascome. There was a I’m not sure whether the term appeal is technically correct, but there was — the plaint is asking the judge one more time to reconsider to getting a temporary straining order in place, and there is a hearing and/or ruling this afternoon in Greeneville about that.

So there should be more news coming out of Greeneville within the next hours or less. I think it’s a 4:00 meeting, so it’s more like 6, 7 hours from now. So that’s still undergoing. Again, our focus is — and we have a very, very seasoned mature team here. Our focus is on controlling the things we can control. There’s a very small group here, certainly Rebecca and me included, Michael Hance, our Chief Legal Officer, included that need to guide us through some of the ongoing kind of navigation of litigation issues. The other 99.99% of our team need to be fully focused on finishing this year strong. And the guidance, I think, is conservative. But let’s — let it be what it is. I just keep finishing the year strong. We have a very clear strategy.

We have a lot of untapped upside. We told the world on August 10 that we’re going after this untapped upside, which is going after it organically because that’s what we can control right now.

Bascome Majors : Two big picture questions to close. The direct sales strategy was always part of your attempt to Grow Forward. In August, we found out that you thought doing that acquisitively might be a better path to achieving that in and now we’re pivoting back to really doubling down on the organic direct sales strategy. Can you talk a little bit about what drove the change of heart and what didn’t work as fast as you hoped it would in the first year or 2 of that and why it can work now?