Forward Air Provides Update on First Quarter 2024 Non-GAAP Financial Measures

Rhea-AI Summary

Forward Air has revised its Consolidated EBITDA for the twelve months ending March 31, 2024, from $300 million to $324 million. This update follows a thorough assessment of addbacks permitted under its credit agreement. The company’s revised Consolidated First Lien Net Leverage Ratio is now 5.1x, down from the previously reported 5.5x. Forward Air anticipates adding approximately $20 million of incremental Consolidated EBITDA in the second quarter of 2024 through further cost reductions. CEO Shawn Stewart emphasized the company's commitment to transparency, profitability, and long-term growth, with more details to be shared in the upcoming earnings conference call.

Positive

• Revised Consolidated EBITDA increased to $324 million from $300 million for the twelve months ended March 31, 2024.
• Consolidated First Lien Net Leverage Ratio improved to 5.1x from 5.5x.
• Anticipated $20 million of incremental Consolidated EBITDA in Q2 2024 through further cost reductions.

Negative

• Net Income for the twelve months ending March 31, 2024, was a loss of $216 million.

Insights

Financial Analyst

Forward Air’s recent adjustments to their non-GAAP financial measures have notable implications for investors. The increase in Consolidated EBITDA from $300 million to $324 million is significant, driven by additional allowable addbacks under the company’s credit agreement. This adjustment brings the company’s First Lien Net Leverage Ratio down to 5.1%, compared to the previously reported 5.5%. Although this adjustment is under the threshold of 6.0% required by the credit agreement, it remains on the higher side, signaling substantial leverage and potential financial risk. Investors should be aware that while the adjusted EBITDA figure may improve comparability and offer insights into operational performance, it also includes numerous adjustments like transaction costs, severance and other non-recurring items, which might not reflect the company's core earnings power in a sustainable manner.

For context, the EBITDA metric is an indicator of a company's operating performance and is used to compare profitability between companies and industries because it eliminates effects of financing and accounting decisions. However, non-GAAP financial measures like this can sometimes obscure the real financial health of a company. Investors should be cautious and look at both GAAP and non-GAAP results to get a complete picture.

Forward Air's updated transparency approach, under new leadership, is a positive sign and shows their commitment to clarity in financial reporting. However, the high leverage ratio and numerous adjustments suggest there are underlying challenges. While the short-term outlook might benefit from the revised EBITDA and cost reduction actions, investors need to consider the potential long-term sustainability of these improvements.

Market Research Analyst

The revision in EBITDA and the accompanying changes in the leverage ratio can have multiple implications for Forward Air’s market position. From a market research perspective, the company’s effort to increase profitability through cost reduction actions and synergies from the Omni Logistics acquisition is commendable. The additional $20 million of incremental EBITDA expected in the second quarter reflects proactive management steps to streamline operations. Yet, it’s important to note that these measures, while positive, also indicate the company faced higher operational costs and integration challenges post-acquisition.

Forward Air operates in the global supply chain and transportation services sector, which is highly competitive and sensitive to economic cycles. The market typically rewards companies that can demonstrate strong, sustainable operational performance and efficient integration of acquisitions. The revised leverage ratio of 5.1% is still relatively high and suggests that the company might face challenges in navigating economic downturns or financial stress scenarios. This could impact Forward Air’s competitive standing if peers with lower leverage are able to capitalize on growth opportunities more effectively.

Investors should keep an eye on future earnings reports to verify if the projected cost synergies and profitability improvements materialize as expected. In the long run, consistent delivery on these fronts will be important to gaining investor confidence and enhancing market valuation.

Consolidated EBITDA Increases from $300 Million to $324 Million Following Addition of Allowable Addbacks

GREENEVILLE, Tenn.--(BUSINESS WIRE)-- Forward Air Corporation (NASDAQ: FWRD) (the “Company”, “Forward”, “we”, “our”, or “us”) today announced updates to certain previously released non-GAAP financial measures for the twelve months ended March 31, 2024, to include adjustments to the previously released non-GAAP financial measures.

When Forward released first quarter 2024 earnings on May 8, 2024, the Company made available to investors a conference call presentation, page 19 of which set forth a calculation intended to provide visibility into the Company’s calculation of “Consolidated EBITDA” under the Company’s existing credit agreement for the last twelve months (“LTM”) ended March 31, 2024. In the May 8, 2024 presentation, the Company calculated Consolidated EBITDA of $300 million, which included several one-time costs and pro forma adjustments related to the acquisition of Omni Logistics (“Omni”). After performing a thorough assessment of all available addbacks permitted under the credit agreement, the Company has revised its calculation of Consolidated EBITDA for the twelve months ended March 31, 2024 to approximately $324 million.

As a result, Forward’s revised Consolidated First Lien Net Leverage Ratio would have been 5.1x for the quarter ended March 31, 2024, compared to 5.5x as reported on May 8, 2024. Beginning with the fiscal quarter ending June 30, 2024, the Company is required to comply with a financial performance covenant under the credit agreement that sets a maximum Consolidated First Lien Net Leverage Ratio of 6.0x. In addition, the Company has taken further cost reduction actions that it believes will add approximately $20 million of incremental Consolidated EBITDA to Forward’s second quarter results.

Chief Executive Officer Shawn Stewart said, “We wanted to provide this adjustment to our first quarter reporting as part of the new leadership’s commitment to increased transparency. We are aggressively taking action to improve profitability, maximize synergy capture and drive our leadership in global supply chain and domestic transportation services so that we can create value for our customers, employees and shareholders. We are focused on execution and continue to be optimistic about the opportunities ahead and our long-term growth trajectory. We look forward to sharing more details on our progress on our second quarter earnings conference call.”

Revised LTM 3/31/24 Consolidated EBITDA (in millions)
	LTM
Net Income	(216	)
Business Dispositions (Final Mile)	(122	)
Omni Merger Transaction Costs	199
Other (severance, retention, change in fair value etc)	44
Consolidated Net Income	(95	)
Net interest expense	210
Taxes	(2	)
Depreciation and Amortization	111
Transaction Expenses, Integration Costs and Other Normalizing Adjustments	34
Cost Synergies	67
Consolidated EBITDA	324

Non-GAAP Financial Measures

In this press release, the Company presents Consolidated EBITDA, which is a non-GAAP financial measure 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 this non-GAAP financial measure in making financial, operating, compensation and planning decisions as well as evaluating the Company’s performance.

The Company defines Consolidated EBITDA as earnings before interest, taxes, depreciation and amortization, plus certain other add-backs and adjustments that are contemplated by the Company’s Credit Agreement dated December 19, 2023, as subsequently amended. The Company believes that Consolidated EBITDA 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 and the non-recurring impacts of the merger by and between Forward and Omni and making certain proforma adjustments as allowed under the credit agreement.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s financial results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the Company has included in the table above, for the periods indicated, a reconciliation of Consolidated EBITDA to the most directly comparable GAAP financial measure.

About Forward Air Corporation

Forward Air is a leading asset-light provider of transportation services across the United States, Canada and Mexico. We provide expedited less-than-truckload 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 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. Forward also operates a full portfolio of multimodal solutions, both domestically and internationally, via Omni Logistics. Omni Logistics is a global provider of air, ocean and ground services for mission-critical freight. We are more than a transportation company. Forward is a single resource for your shipping needs. For more information, visit our website at www.forwardaircorp.com.

This press release may contain statements that might be considered as forward-looking statements or predictions of future operations including with respect to the Company’s expectations regarding, among other things (i) its performance for the second quarter of 2024, and (ii) performance of the Company’s initiatives. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management’s belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties including that the Company’s performance in the second quarter of 2024 is worse than anticipated. Actual events may also differ from these expectations as a result of the risks identified from time to time in our filings with the Securities and Exchange Commission. We assume no duty to update these statements as of any future date.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240627486779/en/

Forward Air Corporation

Justin Moss

(404) 362-8933

jmoss@forwardair.com

Source: Forward Air Corporation

FAQ

What was Forward Air's revised Consolidated EBITDA for the twelve months ending March 31, 2024?

Forward Air's revised Consolidated EBITDA for the twelve months ending March 31, 2024, is $324 million, up from the previously reported $300 million.

What is Forward Air's revised Consolidated First Lien Net Leverage Ratio for the first quarter of 2024?

Forward Air's revised Consolidated First Lien Net Leverage Ratio for the first quarter of 2024 is 5.1x, compared to the previously reported 5.5x.

How much incremental Consolidated EBITDA does Forward Air expect to add in Q2 2024?

Forward Air expects to add approximately $20 million of incremental Consolidated EBITDA in Q2 2024.

What were the key figures impacting Forward Air's revised Consolidated EBITDA?

Key figures impacting Forward Air's revised Consolidated EBITDA include net income of -$216 million, business dispositions of -$122 million, and merger transaction costs of $199 million.