Thank you for joining Forward Air Corporation's First 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.forwardaircorp.com. With us this morning are CEO, Tom Schmitt; and CFO, Rebecca Garbrick. By now, you should have received the press release announcing our first quarter 2022 results, which was furnished to the SEC on Form 8-K and on the wire yesterday after the market closed. 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 expectations, intentions and projections regarding the company's 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, plan, seek, project, expect, may, will, would, could or should and the negative of these terms or other comparable terminology. This conference call and the Company's earnings press release contain forward-looking statements, which include, but are not limited to, statements relating to future operations and results, any statements of plans, strategies and objectives of management for future operations; and any statements about future financial and operational targets and the likelihood of achieving the same. These statements are not a guarantee of 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 these earnings call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. During the call, there may be a discussion of financial metrics that do not conform to U.S. generally accepted accounting principles or GAAP definitions and 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 investors tab of our website. I would now like to turn the conference over to Tom Schmitt. Please go ahead.

Thank you, David, and good morning to all of you joining us on the call this morning. First things first, congratulations to all our drivers, teammates and our business partners for making our best quarter ever happen in Q1 2022 and finishing the quarter with a March that was the best month in the history of our company. In March we also had in our core LTL business three of the highest tonnage weeks in the company's history, so lots of momentum. LTL inside our Expedited Freight segment was actually flirting with a 7 as the first digit of operating ratio, ending up at 80.5. And we believe we will get to an OR in LTL that starts with a 7 later this year. Our freight selection pricing and cleanse network keep providing momentum to us and I want to give you a couple of observation points that show that momentum. The first one has to do with working with our customers and business partners to bring our events business back. Last year I said, I believe in 2021 of the 15% to 20% of our LTL business was at events based conferences, concerts, tours, cruise lines. Last year, we may have had about 20% to 25% of that. Rebecca Garbrick, our CFO and I, we actually took one of our shareholders to our Atlanta terminal a few weeks ago, and I had not seen this much tradeshow business, whether it's Orlando based heading to Las Vegas, this much conference business, tradeshow business, and also concert business. I'm going to get to that in a moment. The other thing that's really encouraging, we introduced a guaranteed service last year and we actually found positioning perspective, positioned those containers close to the doors and we have a blue ribbon around them. I had not seen as many blue ribbons as I saw a few weeks ago. Concerts, I was walking the floor and saw a container by the band Beach House. That was music equipment that just came from Raleigh, North Carolina and for the performance here in Atlanta and then heading to Austin. The beautiful thing is, one, it's a wonderful band; you should check it out. The more important one for us here is, once you actually sell to a band moving their musical equipment; it's high precision execution. It's one selling effort, which is difficult, but once it's done, you will literally have 20 plus opportunities from one leg to the next to create revenue opportunities in one of our most profitable business segments. So, lots of momentum there. Another observation point about momentum is, as we told you, last year, we started selling to small and medium sized businesses direct. While in the past, we typically went to larger companies as customers, through our great intermediary partners, we're going to continue doing that and on top of that, we started selling direct. This is not a huge business yet; it may be $20 million or so in revenue this year, but it's highly profitable. And we expect this to be a $100 million dollar plus business in the next one to three years. That's our intention and we're going to go that route. That precision execution in support of highly sensitive events, businesses, small-medium sized shippers with direct selling effort with no split margins is contributing to our expected 150 to 200 basis points LTL margin improvement, both in 2022 and once again in 2023. And you see that quality also reflected in some of our stats. The revenue per ton mile excluding fuel is up 17% over the same quarter last year, and revenue per hundredweight excluding fuel is up 16% over last year. So that's a lot of quality of freight that has nothing to do with fuel which did help us, but our volumes and our pricing actions helped us more. One interesting stat, even if fuel had been at the level of last year's first quarter, we still would have exceeded the high end of guidance for Q1. So this drive and penetration into our events business bringing it back again, more small-medium sized businesses also means we are building out our footprint because we need to. Over the last couple of years we added terminals in smaller markets. And this year later in the year, Q3 or Q4, two large terminals are coming online, Atlanta number two, and Chicago number three, and we're going to continue building our terminal footprint both in secondary markets and also large terminals in our primary markets such as Atlanta and Chicago in Q3 or Q4. Our supporting businesses Truckload, Final Mile inside Expedited Freight, and Intermodal also are making our LTL business better. Whether it's backhauls, co-locating locally, selling complementary services, as an example, today 94% of our LTL customers also buy truckload from us. Two years ago, that number was 60%. And Final Mile is stepping up in a big way. We already opened three new markets this year: Memphis, Richmond, Philadelphia. That Home Depot award as appliance partner of the year is truly helping us out as a strong sign of approval as the precision execution company in that space also. Intermodal is targeting more BCO customers, meaning also selling more direct, which is the more profitable route to go. Consequently, both Truckload and Final Mile are in the mid-to-high single digit margin territory inside Expedited Freight, and Intermodal is always consistent with double revenue growth, double-digit margin. We will drive this continued momentum into Q2 and throughout the year and into next year. If you remember, in October we announced a $6.30 EPS for 2023, almost 50% more than in 2021. And we have one of our leadership imperatives saying we don't wait. So we actually anticipate pulling that $6.30 EPS forward from next year to make it this year's number. That enhancement of profitability and growth will continue into 2023. The high end of $6.70 EPS that we announced in October, we actually expect to achieve next year even without larger acquisitions. For those of you who are following us on a kind of quarter by quarter basis, you will see that as we put guidance out for the second quarter of this year, as we put a target out for the full year of 2022, pulling forward to $6.30 from next year to this year, we did not build in the typical sequential build-up from Q1 to Q2, or even from the first half to the second half, which in essence means for what we're driving for what we're controlling, there's still upside to what we put out there. The best is still to come. So with that, I want to give it back to you, David, and open it up for questions. Please feel free to go back and forth, because I want to make sure you leave this call with what's most helpful to you. Back to you, David.

Thank you. We'll now go to Bruce Chan with Stifel. Please go ahead.

Hi there. Thank you, David, and good morning, Tom and Rebecca. Great, great to hear about the events business and the direct channel, SMB opportunity, sounds like a lot of good potential there. You reaffirmed that 150 basis points to 200 basis point guide on the LTL improvement this year and next, and I just wanted to think through, maybe what percentage of that opportunity is market dependent and what percentage of that is completely within your own control?

Bruce, we believe that we control our actions, we control our outcomes. Very specifically, I mean, made to, we did this also in a presentation that's on our website when you tend to sell direct to small, medium sized businesses, the margin opportunity goes to us entirely, versus having to split it rightfully so with our partners when you sell to an intermediary. So the profitability of the small-medium sized business is tremendous and the profitability also of the events business is tremendous. So as we make these lines of business $20 million, $50 million, $100 million plus over the next year or two, that will help us drive that 150, 200 basis points. So I do believe we control our destiny here.

Okay, no, that's very helpful. And then maybe just to hone in on that a little bit further, when you think about the risk to the macro conditions here, I mean what sort of assumptions underpin that opportunity? And I guess, more broadly, your guidance for the end of the year and next year?

Yes, so we actually, we're heavily focused on what we believe with our sales machine and sales efforts, the continuous improvement we're driving in terms of reach out to customers and prospects, conversion rates, which are getting better in terms of a lead getting to a close, and close getting to activation, that we actually assumed that we are driving the success of our business in an environment which may or may not pull back. And we actually also believe that we, if I had mentioned this before Bruce, if we can't win what I call a size of pie game, because there's less tailwind, we are determined, and we have the capabilities, and we have the untapped upside opportunity to win a slice of size game. So we actually did assume continued profitable growth based on what we control, because there's a lot of untapped upside in the high-value freight market, even in a high-value freight market that may be flat.

Okay, great. That's very helpful. And then just one final question here, maybe on the Intermodal side and when you think about the potential disruption on the west coast with upcoming labor negotiations, have you been seeing any signs of shippers diverting to East Coast ports or trying to secure kind of capacity there?

Bruce, I'm actually smiling. Yes, we all have. So it's one of those like, squeezing the balloon business or whatever the example of with like the hammer and the head coming out of the board, and then you hit it here, then it pops up somewhere else. That's a bit what's happening with the ocean to land movements. Yes, so there was a shift over the last several months. You can see it in Charleston, you can see it in Savannah. Charleston and Savannah are high performing ports. So actually, we kind of like the idea of them coming where they are going now, which is more East Coast based. We also have a very strong presence in the Southern Carolina and Georgia markets, even in Jacksonville on top of that. So what you're describing Bruce is happening and we like seeing it.

Excellent. Well, congrats on the results, and thank you for the time as always.

Thanks, Bruce.

Thank you.

We'll now go to the line of Jack Atkins with Stephens. Please go ahead.

Okay, great. Good morning. Thanks for taking my questions.

Good morning, Jack.

So, I guess, maybe to start, I'd love to get an update on and I missed the very, very beginning of the call. I was kind of hopping between conference calls, but maybe an update on what you're seeing in April and is there any sense that some customers or maybe some in-market verticals are starting to maybe see a little bit of pressure from the macro, whether it's a consumer shift from goods to services or anything like that? Are you seeing any maybe cracks in terms of what your customers are telling you on the demand side? I know the events business is moving back up, and that's a positive, but would just be curious if you're seeing anything there and then just kind of broadly what you're seeing in April?

Yes, Jack. So my sense is on the appliance side. The kind of hyper growth that you've seen over the last two years has been leveling off. And on the e-commerce side, lightweight e-commerce, you do see a leveling off. Now having said this, and this is exactly why we are so confident in our strategy, those especially lightweight e-commerce, that's less relevant to us today than it was a year ago. Our shift towards palletized, high-value freight, and again any of our metrics point towards that happening successfully. Makes sense to some extent, a little bit less vulnerable to some of those e-commerce shifts or normalizations of, I call it kind of a home based economy back to more of an experience based or event based economy. So the downside of that shift, we see less with our current rate mix than what we used to see, and the upside of that service and experience and events economy kicking back in is fully ours to take.

Okay, all right, got it. And then I guess maybe shifting gears a bit, how are you guys thinking about the latent available capacity in your network today? You know, sequential trends fourth quarter to first quarter in terms of the Expedited LTL business were certainly better than what we would have expected to see with normal seasonality. Do you feel like you're beginning to backfill some of that capacity that you opened up through the network changes in 2021? And I guess, maybe help us think about how much room you have to continue to grow with the capacity in the network today?

Yes, Jack, I mean, you saw us basically getting ready for some of those larger terminals in primary markets, which makes a ton of sense, obviously when you have a primary terminal that's 15 to 20 miles south of Atlanta. But there's a significant northern suburb market, you want to have a second terminal there. But you saw us having to be able to take a little bit of time getting ready for that and that's exactly what the cleanse enabled us to do in a de facto giving us 15% to 20% additional capacity without adding one single dollar of CapEx. So we definitely would have had to add more capacity to our system in the fall of last year already if we hadn't done the cleanse. But we are getting to a point with the sales machine becoming more and more effective, our conversion rates becoming higher to small-medium sized business ramping up, the events business coming back at full force, that we do believe the capacity we're bringing on as we get closer to peak, Atlanta, Chicago are two of the examples that we are committed to, will be necessary. So we've kind of bought ourselves a year possibly having to add capacity fall off this year into peak season versus fall of last year. But we are getting to the point where, again the sales machine and its effectiveness is asking us to add capacity this fall.

Okay, got it. And then I guess maybe for my last question before I turn it over, very encouraged to hear the bottom end of the 2023 guidance getting pulled into 2022 and the outlook for 670 being achievable even without additional M&A. But when I sort of think about the reiteration of the margin target improvement over the course of the next couple of years, it would seem like if you're able to see 150 basis points or more margin improvement this year or next year in Expedited LTL, you should be able to significantly exceed 670. So our guess is the idea behind not taking that number up or walking that number up that we just don't know what the macro is going to give us over the next 12 to 18 months. And I guess, maybe I'm beating around the bush asking the question, do you feel like you can earn 670 regardless of what the macro or what the freight cycle throws at you, because that seems to be what's implied by the line item guidance you're giving?

Yes, in fact, I mean, you're probably about as math inclined as I am and we both can run the same numbers. So we do believe that with what we control, there is significant upside to the numbers that we put out. Now, having said this, we have seen pent-up demand in the first quarter being unleashed, so there was some perhaps amplification that you wouldn't necessarily see in every single first quarter, and there are some supporting tailwind items, fuel is one of them. That has been tremendously helpful to the entire industry. Having said all of that, if you do the same math we do, we tend to be doing better in the second quarter than in the first quarter. We didn't build a lot of that in yet. We tend to do better in the second half than we do in the first half. That's untapped upside we're going to go after. So it's my expectation that these numbers are achievable. It's my expectation that's in our control, to get past those numbers. And frankly, as we get deeper into the year, we might update some of those targets. But I like the momentum and I like the possibility of beating those numbers.

Well, same here. Thanks again for the time, and I'll turn it over.

Thank you, Jack.

We will now go to the line of Tyler Brown with Raymond James. Please go ahead.

Hey, good morning, guys.

Good morning, Tyler.

Hey, you know, just congrats on the momentum, obviously super impressive to see. I want to kind of come back to what we've been talking about here about really about the durability of the results, because I still get the sense when we talk to investors that there's concern that once the market rolls you may have to move backwards on some of these freight characteristic initiatives. So again, I was just kind of hoping if you could talk about the stickiness or the durability around the changes that you've made at Forward, and kind of how your go to market strategy would at all change if things do slow down?

I'm surprised that you would even suggest we move backward on our cleansing efforts. We will maintain our exclusive focus on high-value freight, whether in the appliance business, final mile, or LTL with medical devices, industrial goods, and spare parts, as well as the events business we've previously discussed. This is fundamentally about operational efficiency and safety. When everything is 100% palletized, operations can be handled entirely with a forklift, ensuring health and safety. Forklift operators only leave their machines when taking a break, not to manage loose freight. This is also crucial for attracting and retaining talent during a tough hiring environment. I previously mentioned that Chris Ruble, our COO, and I received a standing ovation from our forklift drivers in California last year after we improved the quality of the freight. They expressed that our workplace is becoming a better place to recruit. Therefore, we are fully committed to deeper penetration into high-value freight, where we occupy a desirable position in LTL with a high single-digit market share. Our directive is to concentrate our efforts on this area rather than revert to previous methods, which we enhanced in collaboration with our customers last year. We will focus on expanding our success, and given the choice between advancing our efforts or stepping back, the decision is clear.

Yes, no, I love it. Thank you for that so much. I do have to ask about the 8-K that came out the other day about Scott Schara leaving the organization now, obviously commercial success has been key. Can you just talk about backfilling that role?

Yes, so first of all, Scott did a tremendous job here over the last two years, tag teaming frankly with me and many of his sales and marketing professionals, making this place kind of more robust and getting more of a sales machine in place. It is in Scott's background and in his DNA, it's in my background and my DNA. We tag teamed here and I will definitely keep working with the sales and marketing professionals the same way he and I did over the last two years. We want to be known as a company that attracts great people, stretches great people mostly internally. And then sometimes we have the high-quality problem, where unfortunately or fortunately, that next great opportunity for someone is external. Scott got a great opportunity where he can combine his two passions of leading a sales force and leading a brokerage business. And, again, I want to be known as a company that stretches the professional franchise of our talent, because that's when people see that people advance inside Forward Air and sometimes they advance to the next opportunity somewhere else, they're going to point to us and say like, that's the place I want to be part of because they're stretching people. And they actually are not putting hurdles in the way of their people that actually are encouraging and cheering people when they actually get a chance to stretch a professional franchise. So the short answer is, I'm happy about people stretching; sometimes it's a high-quality problem that their next stretch happens to be outside and still I want to be known for that. To the specific point that you made about how are we going to succeed here? I'm working directly with sales, marketing, pricing, communication, sales support leaders. We've got a tremendous set of leaders in this place and these spaces. And in those next few weeks we'll get a pretty clear picture of that next Chief Commercial Officer, whether she or he need to have a digital access bent, where we actually go more digital SEO or SEM looking for business, or should have a more data-driven kind of sales machine bent. Working with those leaders, even more directly than I didn't last two years, puts me in a very good position over the next few weeks to really get the specs for that success profile as close to perfect as possible.

Okay, extremely helpful. That's very helpful. But your asset-light model is kind of an interesting part of this cycle. So your expedited gross margins, if I just look at revenue less PT, I think they were the best since 2019 when things were a bit looser. Is it right to think that were the Truckload market to continue to cool, that you might actually see some gross margin expansion from that, that could offset any weakness as well?

Tyler, you made a great point. This is a situation with both advantages and disadvantages. Regarding the purchase transportation aspect, we've seen rates drop from $3.20 or $3.30 a mile to now starting with a $2. Clearly, this is why I am optimistic about the figures we presented and the potential growth beyond those figures. Even in a market that is loosening, we have factors that positively influence our situation, similar to what you just mentioned.

Okay, okay, great. And my last one, Rebecca, can you just refresh us on where you think CapEx will shake out this year, just for modeling purposes?

Sure, Tyler. So I think it's going to shake out around $40 million this year. It's up a little bit. But I think the breakout of that would be about a third would be with equipment, about a third for technology, and a third for kind of our Columbus facility, which we just announced and moved into. So most of the Columbus has already been spent, but the remainder of those other two will come out for the rest of this year.

Okay, perfect. Thank you so much. Great quarter.

Thanks, Tyler.

Our next question will come from the line of Todd Fowler with Keybanc Capital Markets. Please go ahead.

Hey, great, thanks and good morning.

Good morning, Todd.

Good morning, Tom. I want to come back to Jack's question around the guidance. And I guess, you know, I'm a little bit unclear kind of what the messaging is, both about the second quarter and the second half of 2022. Through your prepared remarks, the commentary is very, very positive, certainly what you saw in March and into April, not a lot of movement into the second quarter. So is the message here that you're really just trying to be conservative and you think that there's upside? Is there something else that's holding you back? And I guess, I'm just trying to understand what you're trying to set expectations for both for Q2 and the second half?

Yes, Todd, I see this in a similar way as you do. We are improving our precision execution and focusing on high-value freight. You're absolutely right; the first quarter was outstanding, and everything suggests that our momentum is ongoing. Even if things change, we might reflect on this and realize that our previous numbers were conservative, allowing for an upgrade. If you recall our last call, we mentioned that we may not need to adjust our targets just yet, given the early months of 2022. However, in our recent release and in this discussion, we've indeed updated some of our expectations for 2022. Everything we're doing indicates that the momentum is still strong. We are pleased with our progress, and importantly, we appreciate our teams' efforts, which suggest there is more potential in what we've shared.

So Tom, considering the difference between your initial guidance for the first quarter and the actual results, can you break down how much of that was influenced by a better freight environment and fuel costs?

Yes, so let me give you a couple of numbers. The first one is, if you, in a very rough sense, say the upside that we saw Q1 this year over Q1 of last year, and you put this into three buckets, one is in the widest sense volume related, one is pricing actions, and one is fuel as a percentage of the cost of freight. The first two are larger than the third one in terms of impact. So the majority, not the vast majority, but the majority of our impact is actually earned. It's tonnage and the ability to actually capture the fair value of that opportunity and that value that we create, i.e., pricing. But there's 30% to 40% or so of that upside that comes from fuel. One different way that I think to put it, I put it a half an hour ago, if you said, let's take fuel all the way back to first quarter of last year's levels, and we just assume hypothetically that's the fuel level that we would have had in the first quarter of this year, we still would have exceeded the top end of our Q1 guidance. So we are very, very grateful for the tailwind we're getting and at the same time, the majority of the impact we are actually achieving on the basis of actions that we are taking.

Yes, got it. All of that's helpful. I'm just trying to, you know, I think on one hand it's helpful to have guidance that's realistic, but not overly conservative, and so just trying to get a sense of the things that are different versus your initial expectations, so that helps. Just one last clarification on the margin improvement that you're talking about, the 150 to 200 basis points annually, is that just for the LTL business within Expedited Freight or is that for the entire Expedited Freight segments on a consolidated basis?

That's LTL specific, Todd.

So Tom, do you have a number that you could share for the Expedited Freight segment what you'd expect the margin improvement there to be?

We haven't. I mean, obviously, we do have calculations and we have a Forward 23 model that tells us like how we get all of our businesses to be better. So we haven't itemized the Truckload to Final Mile, Intermodal drayage numbers. All of these margins we expect to go upward. That's for certain. They may not go upward quite as intensely as we expect the LTL to go upward.

Yes, okay. So yes, it's a little bit tough, because we don't see the individual line items, we just see that consolidated piece. So maybe sharing that could be something that would be helpful going forward. Thanks for the time.

Okay, thank you, Todd.

We'll now go to the line of Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Good morning.

Good morning, Scott.

Can you just share the monthly tonnage trends and what you're seeing in April?

We have some initial numbers, obviously, because we're almost through the month. April is up as we had expected it. Now, the one thing you do have to see and I'm going to turn it over to Rebecca here in a moment, last year in April, we still had all the low weight, loose, non-palletized e-commerce freight in our business. So the TAs will be backfilling this with higher value freight. We expect more of that to come as we get into spring even more, but tonnage in April is up year-over-year.

Yes, and then, Scott, just to give you some specific numbers, so January, our tonnage was up daily tons up 5.5%. February was about 16.5% and March was about 5%, and we're seeing the same trend in April that we saw in March.

Okay, so April is up in that mid-single digits?

That's right.

Yep.

Okay, great. You talked about the events business. I apologize if you've given this before, but can you just put some perspective? What percentage of the total revenue is that business today and where was it so we have a sense of where it can get to?

Yes, in my opinion, this may sound strange, but it's just an estimate. The reason it’s an estimate is that we conduct a significant amount of our business through intermediaries. They are required to classify part of the business for us, particularly for hazardous materials, but they aren't obligated to classify most of the other business. When we review the containers, we can generally gauge the situation. I estimate that the events-based business constitutes about 20% of our portfolio. Last year, we had around 20% to 30% of that, and this year we anticipate it will rise to approximately 70%.

And when you say 20%, you're talking about the total revenue or are you talking about a 20% of what?

Of roughly speaking the $1 billion LTL business that we have.

Okay, so 20% of the LTL, okay.

And so that's what it was; that's what it can be; and last year we probably only had 20% plus of that number, so call it $40 million, and these are estimates. And this year we should have 70% off those numbers, call it 140.

Okay, helpful. And then you had a comment that there's puts and takes of spot rates falling, but the net of it should be positive for you. And I just wanted to get your perspective, because clearly, if you look in a really tight market you guys have seen a headwind from PT, but overall been a pretty clear benefit for you. So what gives you the confidence that a loosening market ends up being positive as well? How do you get positive on both sides?

We truly appreciate our independent contractors who play a vital role in supporting our customers. They are familiar with both our company and our customers, which enhances our service quality. Their damage rates decrease because we can depend on them, as they have been with us for a long time. In 2019, our reliance on purchased outside miles was low, but those figures have significantly increased. Our service levels, costs, and damage metrics have all improved in a more relaxed market. Additionally, our recruiting team has been excellent at attracting and retaining drivers. We believe our driver turnover rate is half that of the industry average, and we are on track to expand our fleet this year. Currently, we have more seated drivers and trucks than we did at the start of the year, unlike last year. I am confident in our service and cost efficiencies, with our third-party miles in the high single digits or low teens providing substantial benefits on both fronts.

Okay, and then just last thing, I think you've addressed this talking about like the full year guidance commentary, but your Q2 guidance of margins that may be come down a little bit from Q1 that you would just say that that's conservative and you think you'll do better than that?

That's one person's opinion and that's my opinion, but it's somewhat experience and fact-based, yes.

Okay, great. Thank you, guys. I appreciate it.

Thank you, Scott.

We will now go to the line of Bascome Majors with Susquehanna. Please go ahead.

Yes, thanks, Tom. I wanted to go back to the sales questions from earlier. Can you talk a little bit about where you are in the evolution of your sales incentives? And as far as, you know, how far along you are is giving the profit driven incentives into the system and what's left to go on that? And maybe tie in, what skill sets or any other sort of thing you're looking for in the next leader in that group to kind of take you to the natural evolution of what you've done here? Thank you.

Yes, Bascome, two things. One is on the sales side specifically and this was not externally communicated, but it's worth pointing it out, in sales one of our long-standing 23 years, he corrected me recently, serving for our company, Lance Small, he was our Senior Sales Officer working for and on Scott Schara's team, as did the Head of Marketing or the Head of Communications, or the head of Sales Support. Lance Small just retired. And, but here's the beautiful thing, on sales execution, think of that as kind of getting a salesforce.com based machine in place where we have a book of business, we have call cycles, we track kind of conversion rates, close rates, activation rates. We help each other in peer-to-peer discussions. All of these our sales leaders over the last two or three years, with the sales support team led by Keith Karczewski have done a beautiful way kind of getting better and better at this. So that's what I talk about when I talk about getting the sales machine to be more precise and to be more effective. We have sales leaders that know, after the last two of this we know extremely well how to do that. Lance Small is handing off the baton to our next sales leader, who actually is on our team already. We have tremendous kind of next generation sales leaders. We stretch our people. One of our leadership imperatives is, we enable our teammates to move forward. So we have the sales head on the team already and over the next few weeks, we're getting Lance Small's successor in place. The second question is the one that I think Bascome, you are referring to across all of the commercial dimensions, the Chief Commercial Officer that also has marketing, communications, Sales Support under her or his kind of scope, there is where I'm going to spend a few weeks making very certain that I understand whether it's a heavy digital access bend, so that we can access some of the micro companies or whether it's more of the sales machine so that we have a kind of a Sales Machine expert on top off and tag teaming with the sales leaders. That profile I'm going to be getting a bit more specific about over the next several weeks. So short answer would be, sales, just pure sales leadership. We are in a tremendously good place with first class leaders. Lance Small left this place better than he found it and we're going get a successor from the inside our team, Chief Commercial Officer specific specs being refined over the next several weeks. And again, I have no monopoly to list them here, but it may be worthwhile mentioning my own background is in sales, marketing, pricing, and that's where I spent most of my focus over the last two decades in the transportation industry. It doesn't give me any monopoly to list them, but that's put me in a good position as a mental kind of ping pong partner, trying to figure out exactly what the success formula for the next Chief Commercial Officer looks like. I do believe there's going to be quite a bit of digital access, kind of marketing, getting to micro accounts expertise that's going to be part of that profile.

Extending the sales discussion at the presentation that you referenced a few weeks back, you put out some numbers basically suggesting that you were earning 10%, 15% better margins on this much smaller pie of SMB business that you're growing very quickly compared to your traditional 3PL business, that's the bulk of what you do in LTL. Can you talk a little bit about, I mean I think the number you said was that was only $10 million or so revenue? Can you give some context on how big that pie is and how big it can be, you know, six, 12, 18 months out if you hit the targets you're shooting?

Yes, I mentioned earlier that this is still a very small business at the moment, as we just started working in this area last year. We expect to generate around $20 million in high profitability revenue this year. We see an opportunity for over $10 billion in high-value freight in LTL, and we aim to be the leading provider. We estimate that about 30% of this market will be in the SMB segment, indicating a potential of 2 to 3 billion dollars. The upside is significant. As part of our Forward 23 initiative, we are setting specific multiyear goals to grow from zero last year to $20 million this year and achieve substantial growth thereafter. I expect this to develop into a $100 million plus LTL business within the next one to three years, with even greater potential beyond that. The SMB segment constitutes around 30% of the overall high-value freight market, which implies several billion dollars in opportunity. Our margin expectations align with our reality. For instance, looking at Old Dominion, a top competitor in our field, their first quarter results reflect a strong performance, and we believe that selling directly to customers allows for a 30% margin. When intermediaries are involved, the margin is shared. Our experience indicates that working directly with customers presents a significant opportunity, and we expect the LTL business to reach over $100 million in the near term, with additional growth opportunities available. I am committed to unlocking this potential as quickly as possible with the team.

Thank you for that, Tom. You know, just one last one, I'd be remiss if we didn't ask about opportunities to both grow the part of the portfolio acquisitively that you're leaning into, particularly in LTL. You've talked a little bit about adding to the footprint. And I'm just curious how that process is going and if it's changed as freight market expectations have shifted in the last couple of months. And number two, you may be conversely, is there an opportunity to simplify the story by potentially monetizing some assets that are less a part of the transition that you've made so successfully over the last couple of years?

Yeah, that's completely fair, fair questions obviously, and you know us increasingly well. So the first thing is, we're playing this game for the long haul. So building out the footprint is something that we know for a fact if you're going for a significant leadership share of a $10 billion plus LTL of the high value freight market, we need a bigger footprint. So I said last year, the JMP haul acquisition may be an appetizer, there should be a main course, that's still the case. But we're obviously doing the right thing at the right time, for the right price. And frankly, with the right company, the right partner, but I still expect there to be the possibility of inorganic LTL on top of organic LTL, i.e., Atlanta, Chicago coming up in the next few months. In terms of the flip side of that, we believe at this point, there's a tremendous collaboration on the operational side between Final Mile and LTL. Co-locating we have 20 locations where we actually run both businesses out of the same location. Call routing, there's tremendous collaboration I mentioned 94% of LTL customers are now also buying TL and helps us with backhaul; helps us with recruiting. So we believe that the portfolio we have right now is a good combination. Now, having said this, we're with our Board together consistently reviewing our portfolio, as and if and when we believe that somebody is not core anymore to helping the main show, which is LTL, then it may be graduation time. We had graduation of a great retail support business because frankly, we did not see the pull business to be essential to making our LTL business better. And the main show here is we are the best expedited high value LTL company in the business. We have significant upside here. And it's the main show and LTL needs to get supported by the other business lines. As long as they do that in a way where they actually contribute significantly, they are a good member of our portfolio.

Thank you for the thoughtful answer, Tom.

Thank you, Bascome.

There are no further questions.

Well, David, I think it's time to wrap up. I want to be respectful of everybody's time. Thank you to all of the business partners for playing great mental ping pong with us. As I said, we like our untapped upside and we like our odds of being charged in charge of our control and with the possibility of even beating the numbers that we put out. Thank you, David. I think you can close the call. Rebecca Garbrick, thank you.

Okay, thank you. That concludes Forward Air's first quarter 2022 earnings call. Please remember that this broadcast will be available on the Investor Relations section of Forward Air's website at www.forwardaircorp.com shortly after this call. Thank you again. You may now disconnect.