FORWARD AIR CORP (FWRD)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $618.844M, down 3.9% YoY and up 1.0% QoQ; operating income improved to $19.522M from a $1.096B loss YoY (impairment in prior year) and from $4.763M in Q1 .
• Versus S&P Global consensus, revenue missed ($627.982M est. vs $618.844M actual; -1.5%)* while Primary EPS (SPGI definition) appears to have beaten (–$0.26 est. vs $0.058 actual)* despite GAAP diluted EPS of –$0.41 .
• Consolidated EBITDA was $73.813M (11.9% margin), improving QoQ from $68.959M (11.3%) in Q1 and down YoY from $88.997M; add-backs included $5.987M transaction/integration, $0.830M severance, $6.864M TRA change, and $14.422M “other” .
• Management emphasized corrective pricing and cost discipline as drivers of margin gains in Expedited Freight (highest reported EBITDA margin since Q4 2023), steady Omni and Intermodal performance, and ongoing strategic alternatives review as a potential stock narrative catalyst .

What Went Well and What Went Wrong

• What Went Well

  • “We posted yet another solid quarter… improving most of our operating KPIs, we have improved margins in our Expedited Freight segment.” – CEO Shawn Stewart .
  • Expedited Freight reported EBITDA margin reached 11.6% with revenue per hundredweight ex-fuel up sequentially for the second consecutive quarter .
  • Liquidity ended at $368M; YTD cash from operations was $14M, a $111M improvement vs 1H24, reflecting operational cash conversion progress .

• What Went Wrong

  • Consolidated revenue fell 3.9% YoY due to weaker Expedited Freight tonnage per day (–12.7% YoY), partially offset by better price/mix .
  • Intermodal operating margin softened (7.5% vs 9.0% YoY) on slightly higher operating costs despite stable revenue .
  • Consolidated EBITDA declined YoY to $73.813M (from $88.997M) and free cash flow remained negative at –$17.157M for the quarter, reflecting continued freight softness and capital needs .

Financial Results

Consolidated results vs prior periods and estimates

Note: Values with asterisks (*) retrieved from S&P Global; “Primary EPS” and “EBITDA” definitions may differ from the company’s reported GAAP EPS and “Consolidated EBITDA” under the credit agreement, limiting direct comparability.

Segment revenue and operating income

¹Q4 2024 Omni operating income includes a favorable goodwill impairment adjustment of $(79.068)M recorded within operating expenses .

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “By tightly managing costs and improving most of our operating KPIs, we have improved margins in our Expedited Freight segment.” – CEO Shawn Stewart .
• “Adjusted EBITDA… $74 million compared to $69 million in the first quarter… As the historical add backs… continue to roll off, we expect the difference between adjusted EBITDA and consolidated EBITDA… to narrow.” – CFO Jamie Pierson .
• “We are transitioning from integration to the more longer term transformation… we anticipate [it] to be complete by the end of next year.” – CFO .
• “On the GRI… we work with each customer strategically on lane pairs… [prefer] SRI… to avoid volume slide in a soft market.” – CEO .
• “With the more optimized network… each incremental shipment… has a higher margin than the previous one.” – CFO .

Q&A Highlights

• Commercial synergies: New Chief Commercial Officer driving cross-selling; wins across truckload, international airfreight, and ground; growth from both new logos and up-trading existing accounts .
• Strategic alternatives timing: No specifics; process on track; belief that the whole is more valuable than the sum of parts .
• Pricing approach: Preference for strategic rate increases (SRI) over general rate increases (GRI) to preserve volumes in a soft market .
• Volume trends entering Q3: No intra-quarter guidance; no meaningful change vs Q2 exit run-rate .
• EBITDA add-backs: Majority “other” composed of non-cash stock comp and facility closing costs; moving toward traditional adjusted EBITDA add-backs; some FX at the segment level .

Estimates Context

• Revenue missed consensus by ~$9.1M (–1.5%); Primary EPS (SPGI definition) beat (–$0.26 est. vs $0.058 actual), while GAAP diluted EPS was –$0.41 .
• EBITDA comparison to SPGI “EBITDA” is not apples-to-apples with company “Consolidated EBITDA” (credit agreement); caution warranted*.
• FY 2025 consensus implies ~$2.50B revenue and –$1.46 EPS*, suggesting Street expectations for continued pressure and limited growth absent macro improvement.

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Sequential margin progress driven by pricing discipline and cost control in Expedited Freight; watch for volume leverage to amplify operating margin when freight normalizes .
• Mixed print vs estimates: revenue miss but apparent Primary EPS beat on SPGI basis; GAAP EPS remains negative—expect models to adjust mix and margin assumptions*.
• Liquidity remains solid ($368M) with no major maturities until late 2030; leverage at 5.7x LTM warrants continued focus on cash generation and add-back normalization .
• Transformation milestones (systems/shared services) through end of next year are critical for sustainable SG&A leverage and consolidated EBITDA quality .
• Strategic alternatives review could be a catalyst; limited disclosure suggests binary event risk profile—position sizing should reflect process uncertainty .
• Commercial momentum at Omni and integrated sales motions are yielding wins; expect cross-sell to partially offset freight malaise while protecting price .
• Near-term trading: Stock likely sensitive to volume trajectory and any update on strategic process; medium-term thesis hinges on closing EF margin gap vs peers and normalizing cash conversion .