Q2 2022 Forward Air Corp Earnings Call
Okay.
Yeah.
Yeah.
Thank you for joining forward air corporations second quarter 2022 earnings release Conference call.
Before we begin I'd like to point out that both the press release and webcast presentation for this call are accessible on the Investor Relations section of forward Air's website at Www Dot forward Air Corp Dotcom.
What does this morning are CEO , Tom Schmitt and CFO , Rebecca Gaborik by now you should have received the press release announcing our second quarter 2022 results.
Which was furnished to the SEC on form 8-K and on the wire yesterday after the market close.
Please be aware that certain statements in the company's earnings press release announcement and on this conference call are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements, which are based on expectation.
Pension and projections regarding the Companys future performance.
Anticipated events or trends.
And other matters that are not historical facts.
Forward looking statements can be identified by the use of words, such as anticipate intend believe estimate.
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And the negative of these terms or other comparable terminology.
This conference call in the company's earnings press release contain forward looking statements, which include but are not limited to statements relating to future operations and result, any statements of plans strategies and objectives of management for future operations and any statements about future financial or operational.
<unk> and the likelihood of achieving the same.
These statements are not a guarantee for 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 Securities and Exchange Commission and the press release and webcast presentation relating to this earnings call.
The company undertakes no obligation at any forward looking statements, whether as a result of new information future events or otherwise.
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.
Finishing then.
Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued which is available in the investor tab on our website.
And now I'll turn the call over to Tom Schmitt CEO of forward Air.
Thank you so much John and good morning to all of you on the call.
First I want to just keep getting better.
And I say, we I mean, our teammates.
With partners in those vehicles.
Sure.
All drivers and our customers.
<unk> sport.
Remember on our last earnings call, we celebrated our first quarter of this year as all best quarter ever finishing with a March that had a record 85 <unk> well this call we're doing an encore.
<unk> best quarter ever.
June was a record 80 points, we L T O R.
We talked about the good news behind those numbers on the last call too that goodness is still here.
A bit more of it.
The Best example is basically when you walk through our Mpls revenue basically more events business.
We estimated that about $200 million LTR revenue before COVID-19.
Events related and.
It's ramping up to cause that again may not get to 100% previously estimated this year would be 70%, 75%, but it's looking pretty darn impressive.
And it is high value freight often.
When we sell an events business.
Actually it's generating several revenue rebounds, we sell to.
How would you rank company ones and then you have up to 20 trips with 'twenty revenue ramps associated with it the actual Tradeshows concert tours are good examples.
Sometimes.
Shipments Cottonwood.
The original rounded.
Extra premium freight on top of the high value of ready to begin with.
Our go forward strategy higher value priced.
Priced correctly and operated diluted issued clean operating environment, which we started three years ago is clearly working.
On our last call three months ago, we said that the <unk> 30 EPS.
Argo group for 2023, we will already achieved this year in 2022 remember we said we don't right.
Now with six months under our belt forthright way too we feel confident that shooting for at least $7 EPS. This year is realistic.
And while we have not we set a 2023 guidance yet we expect us to continue to get better.
Now when you step back.
Gives us that confidence we do see the slowdown in the economy and fuel has started very slightly but that started to come down.
And still as a company, we have become more resilient and better.
A good example is when you look at our revenue per shipment this quarter versus second quarter last year up by 40%.
Even when you strip fuel out of it it is still up 26% this quarter versus same quarter last year.
So I would say if there is a recession bring.
Bring it on.
Oftentimes it feels like you're waiting for something that's more scary than the event itself.
So back to the confidence we have a specific forwards train three initiatives in place inside that forward trades, we manage our key revenue and margin initiatives very tightly.
And at this point, we still believe for this year and for next year, that's what we call the puts outweigh takes.
Specifically that you mentioned six large positive factors. The first one I mentioned before more events.
The second one and more late this year and probably even more next year.
Because we are selling now not just to the domestic forwarder Scott.
Before events division see articles and some small events companies directly.
Secondly, selling more direct overall in all of our lines of business.
Deeper penetration into our core traditional customers, we have done a great job of it Mike.
Hi, it's off to our customers.
Great Great job tag teaming with some of our legacy traditional customers that know us well and Dino Orlando to go after more high value play together with them.
Fourth fewer outside brokerage models I always said, we love working with our independent contractors, who know us and our customers well.
Now about 12% of our total miles flying all the LPL.
Outside carriers that we don't go so well, we do a great job, but that's not our regular roster that number of 12%.
Less than half of all you'd walk in the first quarter and I expect thanks to our operations and HR teams for that number the 12% to go down not up so thats the false positive put.
Number five.
Our three supporting business lines intermodal truckload and final mile has become more and more effective making our LPL mainly showed better for.
Now in final mile even be have local synergies, which you've always had and on top of that we have dropped we are driving line haul business for our <unk> business.
Sixth and finally.
Those supporting business lines are getting better and better are powerful power themselves.
We published our quarterly results to check out our intermodal division.
Issue out there.
<unk> for the quarter, it's spectacular.
So thats why we believe the new run all forward trading fee model for this year and for next year at $7 is the minimum for this year.
On top of that.
And we expect to get better.
<unk> 'twenty three because we believe what we control. These ports are outweighing those stakes.
I also mentioned that we have.
Have a ton of confidence pun intended.
Our company into our business. So our good practice of returning capital to our shareholders via continuing in 2022 also and that includes significant buybacks and also dividends, which we recently rates.
So we are as a team living our tenants leadership imperatives. One of those segment is called we remove the ceiling. So we are moving to feeling.
Getting better and better every single day.
We strive to keep getting better so with that back to you call me and they are going to open it up to questions right away.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press one then zero on your telephone keypad.
You may withdraw your question at any time by repeating the one zero command.
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Once again, if you have a question today. Please press one zero at this time.
And our first question will come from the line of Bruce Chan with Stifel. Please go ahead.
Thanks, operator, and good morning, Tom Good morning, Rebecca.
Just want.
To follow up on some of your comments there on.
Final mile and I guess that six positive factor six pillar.
I'm wondering if you could talk about some of the big initiatives that you've got going on to improve the final model operation and maybe get your sense of how you think about that business in the context of the higher quality freight mandate at LCL because.
I guess, it seems like fridges and peloton and.
Washer dryers or maybe not that consistent with that high quality freight mandate and especially if you start to share lighthall and share PP&E.
Mhm.
First of all thank you Bruce.
Good morning, Thanks for the question.
So our final mile business just for the whole audience is actually is the delivery and installation of high value appliances. For example, if the best most demanding retailers or.
Bruce.
Doing to make sure that final mile by itself is in the high single digit margin space.
And has visible and quantifiable synergies for our <unk> business, we are making sure that we're dealing with either high value appliances. This is.
Not dropping off recoup furniture on the patios, because frankly, that's the best to your point not in line with our high value proposition.
What we are doing specifically as we've got to make sure that we always are the top one towards the ranks ideally number one.
Costco was scorecards you may remember, we actually won the home depot appliance.
Provider or carrier of the year Award.
Last year, and what are we doing to get better and better so.
So first of all it has to be the same value proposition almost zero damages.
Looking to be the best in the industry empower now the same way OTR and LPL. So we actually are copying and pasting and cross fertilizing some of those sensitive handling principles and policies and.
That DNA that we actually have lived for 40 years in the <unk> business.
So we are looking for premium appliances were looking for premiums for delivering and installing them and we are obtaining those.
Secondly on the efficiency side.
<unk> talked about two years ago that we are expanding co locations.
If you remember, we actually opened up eight.
Terminals for LPL initially out of our final mile locations.
We are co routing locally on a light installation day.
The installer is actually picking up LPL pallets and now we've had.
Tremendous collaboration between our sales leaders.
Under the lessor feature on the <unk> side, and Jeff part of the final mile side more and more examples where the line haul that's associated with getting those appliance into specific cities is actually going with forward Air <unk> PL.
So in my mind final mile is a good example of the same high value freight out of DNA.
Lots of synergies that make the business instead of the main show, which is LDL as well as the supporting businesses in final mile and these slides can be operationally.
And from a damage from an on time performance perspective could be the best provider in the industry bar, none that is true for final Marvel Super LPL, So I do see that.
Cross fertilization happening boost analysis see actually the DNA to be truly a forward air DNA thats consistent across those lines of businesses.
That's really helpful.
Okay, Yes, no that's really helpful color and then just as.
A quick follow up here is we've been hearing a lot about 85 in the Supreme Court denying or any operational risk there.
With regard to final mile or the <unk> IC footprint or drayage.
Yes, we have.
It's 85% is obviously the.
The rules for California to implement the law that makes it less is harder for independent contractors to improve and status of their own businesses.
I think we as well as the rest of the best players in our industry. We have been prepared for this for the last two years.
And so we know what the independent contractors have to do to maintain their ethane contracted status as do they and VIP are helping them to make sure that they understand what they need to do.
But the outcome ultimately there'll be some of them may choose to actually exit the business that you would call would make the driver situation even tougher.
But this is really a responsibility for those business owners to do what they have to do to keep their status. We do everything possible to always make sure we get the best roster of drivers to drive for forward Air in final mile and LPL, our recruiting team has been getting better and better.
Carl mentioned $1 billion that entire team has done a tremendous job of making sure. We leave best practices in the recruiting space, we have a driver's school.
Do you have a driver board I've talked about many times before but in this case boost growth specifically the owners the.
The burden is on the independent contractors that may be additional costs that comes with them keeping their status assay, if and when that happens we have no choice, but to other than.
Quality that cost to our customers so business in and out of California might get even more expensive from a forward air perspective.
Guidance say luggage when preparing for this new opportunity I don't know I'm not sure I can call AB five lakh or not but we certainly are prepared for it.
Terrific well, thank you for that and congrats again on the result this quarter.
Thank you Bruce.
Thank you. Our next question will come from Jack Atkins with Stephens. Please go ahead.
Hey, great. Good morning, Tom Good morning, Rebecca Thanks for taking my questions.
Good morning, Jack.
I guess maybe to start.
Would love to get an update on what Youre seeing in July .
If you could maybe kind of give us a sense for.
Tonnage trends in the core <unk> business and any sort of sense for.
Revenue ex X fuel that'd be that'd be helpful.
Yeah. So I think we did put in the release that we see continued positive trends in our business in July .
We very specifically the first 20 business days as all of 2000 and actually malbec, even further in the first.
25 business days, we actually.
Tonnage wise versus the same number of days last year are up by 3%.
Carlo It's actually four July and from a revenue per tonnage perspective.
We received similar or exactly the same type of events that we saw over the last several months. So if tonnage is positive.
That said, we showed before but the revenue per shipment clearly holds because all of our.
Pricing discipline surcharge discipline.
It's been very consistent in stimulatory places.
So July actually if anything pound for pound looks better than June for us when crude was pretty was pretty phenomenal with $80 DLR.
I always looked at <unk> as the milestone silver and the other final destination.
So go ahead no no no that's great to hear I'm glad to hear you have got some positive tonnage and and.
I guess as you sort of think about.
Back filling some of the latent capacity that you have in the <unk> network that you have.
You've achieved through this cleansing process over the last 12 months.
Where do you think you are in that in that process from a sales perspective I know the macro.
Getting a little bit more challenging probably makes that a little more challenging but could you update us on that and I would think as you kind of go into 2023 as you sort of think about your six sort of buckets of opportunity that's got to be.
Near at the top of the list.
Oh it definitely is a.
A couple of things here right. So if I look at the six that are managed through the first three.
All about more organic LPL business of Super high quality remember again that did more events first.
Every single time, Rebecca and I'll walk through a parallel with the shareholder or customer.
And our operations leaders.
We see the efficiency that goes global and his team are putting in place.
Managing our terminals, which is so so so much advance from even a few years ago and they were good at the time.
But also the ICD events business lay out again, our guesstimate as it was about 20% pre COVID-19 of our total shipments is that we'll get back to that again, it's my expectation and more.
The second thing is selling more direct to some smaller and medium sized businesses that do not use.
Our customer base of forwarders.
So there is actually an and not an or we can do tremendous business partners to our legacy customers and sell a ton of high value freight direct to other customers that use forwarders.
Obviously the.
The deeper penetration into our existing forward the customers themselves.
I see.
So impressed with our domestic forwarder customers over the last year, how after we worked with them and this was not their choice. This was our choice. After we worked with them playing to all the <unk> inefficient freight out of our system.
And they had to find other outlets for those shipments that they couldnt upgrade to <unk>.
Started tremendous drop those customers getting us on there to use or they are selling teams and say, okay. Why do we go after the business together.
You should be only because we forward air.
Truly our sales value proposition for them for all the freight that has the most limited to try to handle that.
When I look at those trends.
Some of our largest domestic forwarders customers today.
Actually more tonnage with us today than a year ago, when they still had the inefficient trade with us on top of the high value right.
Turning to Lendingtree, so Jack just spreads.
In sum, we have several levers to increase tonnage, we do see the slowdown but business. If you remember we always committed our team too. If there is no size of pie gain to the one we are winning a slice of pie game right now the team is leading a slice of pie game that three.
2%.
Year over year.
In July that we see so far.
Growth.
Again this is my expectation.
You said that the royalties call in May.
Forward looking statements are not guarantees my expectation is that over the course over the quarter, our tonnage volume growth over last year same quarter is going to increase past that 3% and not get smaller.
To put that we have that we can control exceed to take our current estimation.
Okay, No that's great.
I really appreciate that additional insight I guess, maybe shifting to the <unk>.
For the full year outlook, and then sort of a longer term outlook for a moment I guess, maybe a two part question and then I'll turn it over but the $7 plus of EPS.
I was kind of take that in context with the <unk> outlook that would imply something if you're just $7 at about a $1 50 in earnings for the for the fourth quarter, which is a pretty meaningful step down sequentially I am guessing. That's just you guys erring on the conservative side, there, but I would love to kind of get you to maybe flush that out a bit.
If you could and then would you say Tom that you expect to continue to get better in 2023 is that code for you're expecting further earnings growth in 2023, I guess, just some clarification there because we've been getting some questions on that during the call.
Okay. So let me address both of them very succinctly and Rebecca if you want to add to that obviously always do.
So with.
The first part absolutely correct.
It has to be very blunt about it we said at least $7 that maybe don't know exactly how fast people is coming down or how much overall demand pullback will counter all the positives that we that.
And if you put 12, let's be very clear our model get this way past $7 for 2022.
So that's the first point and then you Jack already to say, Matt that we are running the number that you set for Q4.
That's got to be a lot of economic headwinds.
For us to not get.
Past that number comfortably okay. So.
So the second thing is about.
Growth and continue keeping getting better.
For 2023.
I do expect again from where we're sitting right now our puds are outweighing those takes.
Which is.
You'll remember exactly where we end up this year.
On the positive side $7 I expect that we will continue to get better margin expansion and cost six months ago was not a 2022 exercise exclusively so.
Expect to save between 23 and.
Again, we are very very aware of the slowdown in the economy and we are modeling fuel to come down in line with the forecast that are out there and in our model skill sets in 2023 from an EPS perspective, we continue to get better on top of wherever we end up in 2022, that's all math.
I did have a long time ago.
<unk> works.
Finance and accounting nature, an undergrad and Grad school, so the math actually I think thats up quite nicely.
You are talking to a history major here. So you are better.
Yes.
Back over to the queue. Thanks, Thanks, so much Tom Rebecca.
Your insights really appreciate it.
Okay.
Thanks.
Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Please go ahead.
Good morning.
Good morning, Tyler.
Obviously fantastic results, you've got a few questions here, but just to start.
Can you kind of give us an update on that direct selling effort. How thats proceeding are you on pace and then I know that you talked about it having a better margin profile, but you've got more freight in the system that may be sample from can you talk about how much better the margins are there.
Yes, so Tyler we are on pace.
You also said that this is a.
Significant untapped upside so it's hard for us to estimate of that $10 billion plus it could be as much as $17 billion, what we call high value freight how much of that is.
Sure.
<unk> B.
Run by small and medium sized businesses by several billion dollars. We said this first year of our effort in that space. It's a growth in learning a year, we expect about $20 million or so in revenue we are on track to make our feedstock.
We expect if you remember we talked about this for that trajectory to be significant steep incline over $20 million will not grow by from 20% to 40 to 60 will grow more from 20% to 50% to 100 over the next couple of years Thats our expectation at this point our sales team delivered top pieces completely bought into there.
In fact, you probably going for more aggressive numbers and ongoing four I'm pretty constructively impatient. So that's the first thing on that so it's going as we said.
But to be very clear.
For us in the LDL space not so in the final mile space truckload or intermodal drayage space in the <unk>.
<unk> space.
Selling direct to shippers for us with a new skill. Good news is it's not rocket Sky rocket science I've lifted states.
Before so at many of our teammates here.
It's $20 million or so this year to the margin profile.
To be very blunt about this we are still learning, but every time, we do it correctly, we price to the value that we deliver a recap we do see that the margin potentially can be in the type of territory that you saw.
Plus rate company old Dominion to report.
For this quarter.
We are expecting.
Given that there is.
No value added intermediary that the margins would be more in the 70 <unk> territory versus an <unk> territory. So.
We have seen that we can get there we are not consistently there yet but the better.
Right.
<unk> selected small medium sized business clearly is <unk> territory.
Okay. That's extremely helpful. And then I think gross margins in expedited if I just look at revenue less PT. They were again, just very solid this quarter I know, there's a lot of concerns about demand rolling over but you do have this asset light model you mentioned protection from not only the rolling truckload market, but also the shift from internal.
From external to internal models can you talk about the differential.
What it means when you use internal miles versus external financially.
Yes, so the two tallow distillers industry about as well as I do.
If I remember correctly you did as you manage your freight terminal it so important.
So, but roughly speaking the way we look at the math.
A so called internal mile, which is not completely accurate term because until now means that in most cases, an independent contractor who works on our behalf on a consistent basis, but it's still their own business.
They could become a two thirds the cost over the next little while so we think in very rough terms, we've got $3 per mile versus $2 for a while so if we need only 8% and thats, what probably be achievable.
That those types of numbers.
I've been here, but.
But it is only 8% of those miles at a $3 per mile level.
Versus which we also add in the tightest months, 28% that makes a big difference and again, we came down to roughly 12% in the last few weeks tremendous effort by just Lindsay and his team.
And that 12% is down significantly from the first quarter, where we had more than twice that so and again to 12 is a important milestone that is also not the final destination, we have seen and that's a very healthy number we have dfc numbers between 5% to 8%.
Presumably <unk> COO.
Always keep ceding, forcing that.
I think zero is probably not the appropriate answer but being somewhere in the mid single digit range is a very very good and that the strive for so the 12 is not quite the destination, you get lower and better.
Okay. That's great and then just one last one here I think in the release you guys noted higher fuel surcharges of kind of call. It a driver of momentum it seems to indicate.
With higher fuel is let's call. It EBIT dollar accretive so is there any way to help us just.
Understand how it changed and fuel either hertz or helps EBITDA EBIT dollars, let's call it because I think.
At some level the market is just unsure of how much of the $7 is simply from higher fuel versus some other structural changes.
Yes again.
Let's say the first thing first because that's the most important one to us through the $70 plus.
That we said 422 and I want to emphasize the plus.
That is already taking into account that fuel is starting to come down over the next several months not down to where it will be ultimately, but kind of starting to come down. We also modeled <unk> listen to the experts that have perhaps the best finger on the pulse.
Go further down to somewhere in the four to 425 range and Thats, becoming part of our model for next year, we still expect our EPS number of $7 plus for this year. It could go up because of some of those subscribers that we've been talking about in the first part of this call.
So fuel is important let me give you. Another example.
Sure.
We published the revenue per shipment increase versus the same quarter last year.
I've said it.
40% higher.
Last year in the second quarter and.
Fuel from this quarter and the same quarter last year, it's still 26% higher.
If you compare that to some of the best LPL companies in the industry that can significantly higher ex fuel number.
And that 26% truly is earned.
Through a higher quality tonnage.
Who in some cases actually more density more tonnage of assembling and certainly occupied more.
In tune with pricing that higher tonnage correctly. So the best way of new liquidity. This is $7 plus and the higher number in 2023 is taking into account field to go down.
To levels that they were a year or two ago.
And or level set.
Some of the forecast would indicate for next year, we use industry forecasts. So we by every metric you want to look at revenue per shipment weight per shipment overall EPS development by every metric you can look at <unk> will allow us to getting better.
Excellent that is very very helpful. Thanks, Tom.
Thanks Tyler.
Thank you. Our next question will come from Todd Fowler with Keybanc capital markets. Please go ahead.
Hey, great. Good morning, Tom Good morning, Rebecca.
Good morning, Bob.
So Tom I guess I, maybe want to start on pricing and yields when I look at your revenue per hundredweight X fuel, it's up nearly 10% and thats with a higher weight per shipment here in the quarter.
Can you give us some thoughts on kind of how base pricing your contract renewals are trending and then as you look going forward. The team has done just a great job in moving moving pricing up.
What are your expectations for the level of pricing that you can continue to achieve maybe.
Maybe for the back half of this year and maybe even into next.
Yes, I think the first thing that the positive I think it's worthwhile reinforcing.
<unk> when you put them in place first of all they are an annual event that happens on February one.
And that's going to be consistent we do obviously take outside factors into account. So that we can have an honest conversation with our business partners and customers about why youre at Cri at a specific number is happening so.
I do expect in a.
The economy, where the driver supply and demand is less friction than it was at the peak a year ago that our driver cost increase might be may be lower.
Some of the other kind of cost.
Cost increases in prices may be lower for the six 9% <unk> that we had this year when you take all the input factors into account also obviously investing into higher safety technology that might become a lower number that may be $4 nine im not saying at this point, we have a pricing team as stephane doses of arc <unk>.
<unk> Fox variables that will inform us of that.
What are you seeing the number should be but it may be a lower number in <unk> than it was in.
2022 by that with our freight mix and the criticality of the freight to our customers like we handle on behalf of them.
<unk>.
Certainty and again, it's just about a range of the number the best companies in our industry. The best companies in every transportation industry that is airlines railroads.
Parcel companies <unk> are extremely pricing disciplined.
So again, Mike disorder, as you talk to your point would be we expect that <unk> ongoing basis, that's robust.
That's reflective of realities and yes, it could be in a few.
Years like next year, it could be slightly lower than six nine but there will be a significant investment into our customer commitment to our safety technology.
That even in a kind.
In a softer environment when it comes to labor supply.
There will be a significant <unk> does that that discipline is concern.
<unk> holdings, and if I could add sometimes we bought column pressures, obviously customer feeding the choice should I pay more should I pay less for shipment they would most likely up for less.
But we have as long as we keep our commitments we oftentimes.
Hotels and tell each other.
Our customers expect.
Near perfect on time performance and near zero damages from us as long as we keep our commitments for our customers NV select together with our customers to freight that we should be handled correctly.
Our pricing discipline.
It's going to be at the exact.
Hi.
These levels going forward as it has been over the last year or two.
Okay.
Alright.
And then I guess Tom.
When you look back over the past couple of years Theres, obviously been a lot of moving parts within the <unk>.
The macro environment and some things that your team has done specifically.
Around those type of freight that you want in the network.
Yes.
It's kind of removing the macro from the from the conversation, but thinking about the algorithm going forward do you have a view on kind of.
In general over the next several years, what the tonnage growth rates should be I mean is your business now positioned where the tonnage should grow kind of at a multiple of where the market growth rate is should it grow faster than that as some business comes back I am just trying to think about.
Normalized level for tonnage growth given how you position the network and some of the investments that you've made.
Yes, so I'm going to just give you the framework very brief Andrew.
Good.
Please follow up with some of the specifics that we put into our model. So the framework Todd is very simple.
We have our what we call forward 'twenty three effort, which is focused on <unk> 22 in 2023.
With the success with what we internally had coffee owns 19, which was the milestone between late 2018 and 2021 for us to become a double digit margin company fall apparently some model that takes us.
Through this year and through next year, but we do have a five year model.
We expect to be based on what we control and what we can do.
And inside that five year model, obviously, the revenue and growth assumptions growth assumptions, both for the top line and for the margins.
If you can give a little bit more.
Kind of.
Numbers flavor to that that would be helpful.
Yes, I think as we think about going into next year this year with a bit of a.
I'll call it a challenge certainly a challenge.
Strip that we claimed and so when we're thinking about kind of Q1 over Q1, it's not necessarily apples to apples as we move into 2023 Youre looking at more of an apples to apples basis, but we do expect our tonnage to grasp and to your point, we expect it to grow faster than necessarily the market is equal or better than the market.
As we think ahead to that as well as our revenue.
From that standpoint will help us.
Continue to grow.
Okay, Yes.
Yes, no thats very helpful on the apples to apples comparison, and just kind of the comments about market growth rates for 2003, and Thats, probably from a visibility standpoint, maybe maybe where it makes sense to start so.
The last one I wanted to ask maybe this is for Rebecca as well, but.
If I've got my numbers correct I don't think that there were any share repurchases during the quarter and obviously the performance of the business continues to do well.
I'm, just curious kind of your thoughts on it number one I've got that right and number two your finger thoughts on bi.
Buybacks and how youre viewing it if it's opportunistic efforts more formulaic and why there was applause in the quarter.
Yes. So you are right, we didnt give any share repurchases in Q2, and that's definitely more of that formulaic method and as we think about our capital allocation. So and as you remember we did purchase this quarter say some of our cash was used from that from a capital allocation standpoint to do it.
Acquisition as we think ahead to the rest of the year, we don't necessarily give guidance per se on our share repurchases, but as Tom mentioned, we continue to.
We commit to our shareholders to return capital back to them. So.
In our earnings release, we did end up getting our.
Weighted average diluted shares for the end of the year, which was $26 million 800. So it does imply that we will do some share repurchases for the rest of the year.
Yes got it okay.
Thanks for the time this morning.
And as I'd cards and <unk>.
To do those.
Back to.
Having been commenting undergrad and Grad school.
In the release, we actually did say 376.
$76 million.
Share repurchases.
Dividends over the last five years, so if you take.
This year.
We like the <unk> 76 to five.
<unk> idea of the size and clearly we have so much confidence in the <unk>.
This company will be.
That.
Returning capital.
David.
Specially buybacks at the price that we're sitting at right now for us It makes a ton of things.
Yes, understood I, just wanted to kind of get a better understanding of just the cadence and with where the stock was in the quarter. So certainly understand all the comments thanks for the time.
Thank you Todd.
Thank you. Our next question comes from Scott Group with Wolfe Research. Please go ahead.
This is Jake on for Scott Thanks for the time.
Good morning.
On your <unk> guide it looks like you guided earnings a little lower sequentially, despite flattish sequential revenue.
Why is that.
Yeah, so I'm going to start.
Rebecca could give you, but certainly the second half of that.
So if you look at.
Historically Q2 and Q3.
Typically we're somewhat similar in earnings for us.
So if you look at.
204 results that we came in with now we say 194 Q3 to your point that is a step down sequentially quarter over quarter.
We do believe.
We wanted to be realistic and we wanted to hit a point, where we say we have the chance to exceeded and we also have a chance to ship to fall short.
The 190 does include the fact that are around US there is a demand pullback in fuel has started to come down the 190 still is by far the <unk>.
Highest them was that we've had for a third quarter and so I do believe that.
The pullback.
And acknowledgment to the fact that fuels starting to come down.
And the fact that overall demand has gone down, but having said all of that.
We do expect tonnage growth in Q3.
So the things that we control.
Don't expect it to be in place.
When we spoke Raj Linda to to what we see by the way if you look at yourself.
Some of the other covering analysts for us and for the other LPL companies.
I think for the most part you are calling the same thing, we do which is low acuity typically looks pretty much earning slides to cellular.
Q2, I think in many estimates out there have seen a slight acknowledgment.
<unk> to the economy and to the fuel prices. So that's the main backdrop the things that we control for the most part are working beautifully.
Got it that's helpful. And then if I just look at revenue per shipment ex fuel in weight per shipment each declined around 5% to 6% quarter on quarter in <unk>.
What drove that.
Yes. This is a bit of a customer success.
Consequence.
So you're absolutely correct.
What you're referring to is that sequentially the weight per shipment.
Has been going down loads up whats happening is most simple form.
The shipments that we do on behalf of our domestic forwarders, which is the customer base that has been with US we have a very beginning tend to be airport to airport shipments tend.
Tend to be lower right shipments are highly profitable, but lower rates the shipments that we interact with our more recent customer base such as ppl's tend to be higher weighted shipments will go up and go to go interruptions from an airport to airport intrinsically and if you think about airport to airport is phrased that.
In the past and alternatives, we would be in the Valuably airplane. So they are typically high value, but may not be quite as bulky in there as.
And that's kind of multi colored sensitive shipper and that would go from a door to door. So and the reason why the shipment has been of late has been growing dollar we feel in a good way to mainly three successful. It goes back to Jonathan's comments I made earlier growing with some of our legacy domestic forwarders companies that have done a tremendous job.
Themselves going after high value freight and making us a big part of that commercial pursuit. So the math exercise that you're pointing towards is in essence, a consequence of that.
B over proportionately successful selling together with our domestic forwarder customers, while in many cases lower rate airport to airport business.
Got it thanks for your time.
Thank you.
Thank you and our next question comes from <unk> majors with forward Air.
Please go ahead.
Please go ahead.
Yes, I didn't either thanks for taking my questions.
You've been pretty confident and a $7 plus number on the EPS front throughout the call can you talk a little bit about how that comes out on free cash flow based on your guys' modeling not to get too precise, but just wanted to see how roughly that compares to your 262 7 billion in market.
Cap.
Yes.
It was like a yugo.
Sure Doug.
Our free cash flow, we think will continue to be strong throughout.
The rest of the year. If you look through Q2 are free.
Free cash flow was essentially double that year to date from last year was actually three times. So we expect that.
To continue maybe a little less than that for the rest of the year.
And when you say rest of it.
In the first half.
Yes, second half or you mean, the growth rate versus last year, a growth rate right for the rest of the year.
Well essentially be equal to or maybe a little less.
The rest of the year.
The model that out.
Alright, thank you for that.
Been pretty adamant that you expect to at least hit the market and probably grow.
Tonnage and more convincingly earnings into next year, even though you've been.
Admitting that there are some signs of slowing I am just.
We've got a new management team, we've got a new freight mix.
We've got a new strategy for forward air versus last time, we had a quote unquote normal freight recession not counting what happened in 2020 I'm curious if we do enough of an environment, where you have call. It mid single digit broad LTM market tonnage declines what's your playbook, how do you protect the Bottomline Westfield <unk>.
Serving your customers just want to understand how you flex your strategy. So we can think about what that means for your top and bottom lines. Thanks.
Yes.
I mean, they are traditional skill sets that we need to obviously practice consistently.
Cost control and flexing up and down is something that that we need to be doing and we need to be doing extremely well and precisely.
So the nice thing is is obviously our asset light model, we made it look like geniuses into harvest economy ever but.
The asset light model works quite well as we win environment slows down.
The miles that we have.
To give outside to outside providers is basically flat.
Flex space to go to so that's the 28% or so.
Outside broker miles go down to mid <unk>.
Single digit numbers like 5% or 8%.
As I mentioned, 12% in the most recent weeks.
So that's a good flex opportunity on the cost cost thousands of purchase transportation, we need less of it and it's also.
Less costly on a per mile basis overall.
Again, we believe that we are more resilient and robust and began to groups and were putting and I wont achieve every single month every single quarter play out.
The high value freight that we together with our Florida customers and increasingly also the small and medium sized customers directly are going after is more.
We would've said over the last two years more essential than the discretionary if rates that will be pulled back first so there may be pure.
<unk> and <unk>.
And discretionary kind of Homegoods spend.
At the same time, when you talk about automotive and you talked about industrial includes high tech equipment agricultural and forming equipment medical devices and my belief strongly over the next two years, while we all may have to actually be a bit more cautious because of the economy people are thirsting for events.
And they are proposing to fly the first one to take a cruise and go to a concert and so I do believe that a lot of puts.
In my model in <unk> model.
That those puts add up to more upside than EMEA, 5% to use an amendment that come due.
Decline RTL volume would imply on the negative side. So we do the same models that youre doing.
And we're coming out ahead without modeling because it puts outweighing the pigs.
Thank you.
Thank you.
<unk> forward Air's second quarter 2022 earnings conference call.
Please remember that this webcast will be available on the Investor Relations section of forward Air's website at Www Dot forward Air Corp, Dot com shortly after the call.
May now disconnect.
Yeah.