Forward Air’s Earnings Call Contradictions: Customer Transition Timelines and Pricing Strategy Shifts Clash

<<>>

Date of Call: Aug 5, 2026

Financials Results

• Revenue: $673 million, compared to $619 million in the second quarter of 2025
• Operating Margin: EBITDA margin improved by a full percentage point YOY; Intermodal segment margin 16.7%, a 160 basis point improvement vs 15.1% a year ago

Business Commentary:

Record Operating Revenue and EBITDA Improvement:

• Forward Air reported the best operating revenue in company history at $673 million for Q2 2026, up from $619 million in Q2 2025. Consolidated EBITDA improved to $93 million, compared to $79 million a year ago.
• The growth was driven by strong performance in the expedited freight segment and positive momentum in the freight market, alongside a tailwind from higher diesel prices.

Segment Performance and Strategic Actions:

• The Expedited Freight segment achieved its best operating revenue and EBITDA since the beginning of 2024. The Intermodal segment reported its best EBITDA result in five quarters and best margin in six quarters, attributed to strategic rate increases and a strong pipeline.
• Market fundamentals improved with tightening capacity, regulatory enforcement, and carrier exits, contributing to these segment performances.

Non-Core Asset Sales and Customer Retention:

• Forward Air completed the sale of two smaller businesses within the legacy Omni segment for a combined sales price of approximately $27 million. The sale of non-core assets is expected to advance efforts to de-lever the balance sheet.
• The company signed an MOU with one of its largest customers, aiming to retain at least half of the approximately $250 million of revenue attributable to the customer for the fiscal year ending December 31, 2025, with potential for further retention.

Intermodal Segment Recovery:

• The Intermodal segment reported EBITDA of $10 million, marking the best result in five quarters, with a margin improvement to 16.7%.
• The recovery was driven by strategic rate increases, positive market conditions, and the addition of new customers, despite some pricing actions affecting the segment.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'we are beginning to see the fruits of our labor and results at the level I know we are capable of producing' and called it 'one of the best quarters since our team took over.' CFO noted 'this is our best quarter since the transaction' and expressed confidence in 'the resiliency of our operating model' and being at a 'tipping point of our internal operating leverage.'

Q&A:

• Question from Bruce Chan (Stifel): Can you give a sense of core pricing/renewals and the pricing opportunity left and competitive environment?
  Response: Lowering yield on higher weight break shipments was a strategic decision to increase load factor and weight per shipment; the strategy is paying off with improved profitability and KPIs.

• Question from Bruce Chan (Stifel): Where are you in the intermodal repricing process and how are regulatory impacts on truckload affecting intermodal capacity?
  Response: Strategic rate increases in Q1 impacted Q2 results; the process is now settled, and the team is in a good spot addressing underperforming accounts with customer support.

• Question from Bruce Chan (Stifel): What is the timeline for a decision on retaining an additional 25% of the large customer's business?
  Response: A decision could be before the end of the year, but there are many moving pieces; the company is pleased with the MOU progress and will continue conversations.

• Question from Scott Group (Wolfe Research): Where is the $250M customer's business trending in 2026?
  Response: The company declined to provide specific commentary on the customer's 2026 trends, citing service levels remain high and they will benefit from the customer's organic growth.

• Question from Scott Group (Wolfe Research): What is the impact of fuel in the quarter and earnings sensitivity to diesel prices?
  Response: Diesel prices have been elevated, providing a tailwind; the benefit is expected to continue for the foreseeable future as per EIA forecasts, though prices can change rapidly.

• Question from Scott Group (Wolfe Research): How should we think about purchase transportation pricing relative to cost in the tightening truckload market?
  Response: The company is in a good place with controlled costs from its own truckload assets, benefiting from a more favorable cost basis than the open third-party market.

• Question from Harrison Bauer (Susquehanna): What is the mix of the large customer's business and ability to take out costs during transition?
  Response: The business is nearly 100% under contract rates; the company is protected with set rates and will be able to mitigate any cost overhang upon separation, with low exposure.

• Question from Harrison Bauer (Susquehanna): How much revenue should be taken out of the model for the sold non-core businesses?
  Response: The sold businesses were not material; by and large, they were break even on a reported EBITDA basis, so EBITDA impact is minimal.

• Question from Harrison Bauer (Susquehanna): Were there any volume headwinds in intermodal from pricing initiatives?
  Response: No business was lost; volume increased due to sourcing pattern changes and adding new customers, with pricing actions successfully implemented.

• Question from Chris Kuhn (StoneX): What is driving the weight increase and should it continue?
  Response: The increase in weight was a strategic, intentional decision to lower prices on higher weight break shipments in targeted lanes to fill capacity and improve load factors; it is not a one-quarter thing and will continue to be optimized.

• Question from Chris Kuhn (StoneX): Can you continue to grow with the large customer over the next two years if you retain business?
  Response: Absolutely, the company expects to continue growing with the customer.

• Question from Chris Kuhn (StoneX): Are you experiencing truckload back to LTL shipments?
  Response: Believes a good piece of the volume increase is due to customers shifting from trapped full truckload shipments back to LTL as truckload rates per pound become too high.

Contradiction Point 1

Timeline for Customer Transition Cost Impact

Contradiction on when costs from the transitioning customer business will be removed.

"What are your thoughts on the company's Q2 earnings performance?" - Harrison Bauer (Susquehanna)

2026Q2: For the transitioned business, the company states it will be able to remove or mitigate any cost overhang once they separate, indicating it is not a high exposure. - Shawn Stewart(CEO)

Regarding the customer transition, what is the mix of contract vs. forwarding and your ability to take out costs over time, the revenue expectation for the sold non-core businesses, and for Intermodal, how much business was lost due to pricing actions and the forward volume expectations? - Andrew Cox (Stifel)

2026Q1: The company is in active discussions to retain as much business as possible. No material impact is expected in 2026; any transition is anticipated to start in early 2027. - Shawn Stewart(CEO) and Jamie Pierson(CFO)

Contradiction Point 2

Characterization of Customer Transition Risk

Contradiction on whether the customer's decision is a response to service issues.

Scott Group (Wolfe Research) - Scott Group (Wolfe Research)

2026Q2: The company notes the service level with the customer remains incredibly high and they will continue to provide service. - Jamie Pierson(CFO) & Shawn Stewart(CEO)

1) Can you provide any color on how the large customer's $250M (2025) business is trending in 2026? 2) What is the impact of fuel in the quarter and your sensitivity to diesel price changes? 3) How is the tightening truckload market affecting your purchase transportation pricing vs. cost? - Stephanie Moore (Jefferies)

2026Q1: The customer's decision is viewed as a risk management and diversification play due to Forward Air's long-term growth with them. - Shawn Stewart(CEO)

Contradiction Point 3

Financial Outlook for Customer Retention

Contradiction on the materiality of potential lost revenue from the customer transition.

Bruce Chan (Stifel) - Bruce Chan (Stifel)

2026Q2: A decision on the potential to retain an additional ~25% of the ~$250M customer's business could be made before the end of the year. - Shawn Stewart(CEO)

Can you provide a sense of core pricing/renewals and the pricing opportunity left, the status of the Intermodal repricing process and how regulatory impacts on the truckload market are affecting Intermodal capacity, and the timeline for a decision on retaining the additional 25% of the large customer's business? - Christopher Kuhn (StoneX)

2026Q1: The $250M is the 2025 revenue total, but the loss will be less. - Shawn Stewart(CEO) and Jamie Pierson(CFO)

Contradiction Point 4

Strategic Pricing Focus and Volume Priority

Shift from prioritizing volume-driven profitability to implementing strategic price increases.

Bruce Chan (Stifel) - Bruce Chan (Stifel)

2026Q2: Strategic rate increases (on general and fuel rates) initiated in Q1 had a positive impact in Q2. The process is now largely settled. - Jamie Pierson & Shawn Stewart

Could you provide an update on core pricing, renewals, the remaining pricing opportunity, the status of the Intermodal repricing process, regulatory impacts on truckload capacity, and the timeline for a decision on retaining the additional 25% of the large customer's business? - Harrison Bauer (Susquehanna)

20260224-2025 Q4: The trade-off between price and volume is acknowledged, but the current priority is volume-driven profitability. If prices rise, that would be free margin. - Shawn Stewart / Jamie Pierson

Contradiction Point 5

Intermodal Revenue Per Shipment Outlook

Inconsistent explanations for Intermodal revenue per shipment trends between quarters.

Bruce Chan (Stifel) asks about the company's performance in the quarter? - Bruce Chan (Stifel)

2026Q2: Strategic rate increases (on general and fuel rates) initiated in Q1 had a positive impact in Q2. The process is now largely settled. - Jamie Pierson & Shawn Stewart

Can you provide an update on core pricing/renewals, remaining pricing opportunities, the status of the Intermodal repricing process, regulatory impacts on truckload capacity, and the timeline for deciding to retain the additional 25% of the large customer's business? - Harrison Bauer (Susquehanna)

20260224-2025 Q4: The decline in revenue per shipment was driven by supply and demand dynamics—port volumes were down 5-10%, making pricing more elastic. - Shawn Stewart / Jamie Pierson

<<>>