Thank you for joining Forward Air Corporation's Third Quarter 2023 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 third quarter 2023 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 Legislation 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, including statements regarding our expected fourth quarter 2023 and fiscal year 2023. 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 this earnings call. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise unless required by law. During the call, there may also be a discussion of financial metrics that do not conform to US Generally Accepted Accounting Principles, or GAAP. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. 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 on our website. And now I'd like to turn the conference over to Tom Schmitt, CEO of Forward Air.

Thank you, Rich, and good morning to all of you on the call. Let me start by addressing our performance and our trends first. On our last earnings call, I did say that this freight recession is tricky, and I did talk about intermodal and truckload were lagging the LTL recovery. That was still the case for our third quarter, and also LTL itself, we had a weak July and we were still showing negative year-over-year volume trends in July. That was in LTL turning towards flat in August, and we had positive volume trends in September. August and September both ended up in 85 of our territory. And October is showing further volume improvements. Over the past couple of years and especially in the past few months, you gave us a lot of feedback around our LTL focus and around corporate clarity. We are listening and we are stepping up. Our grow-forward program is all about LTL. It's about rigorous focus on high-value freight priced appropriately with industry-leading service in a cleansed operating environment and accessing a larger customer and revenue base. That strategy of grow-forward remains unchanged, and first results can be seen in our OR trends. When we announced on August 10th, the acquisition of Omni that was all about going after more of that $15 billion high-value freight LTL market, that fourth block of grow-forward, accessing a larger customer revenue base. We will execute that focus organically in three ways. First and foremost, growing with the core, and that's the most important part. Our domestic forwarders have been our core partners since our beginning, and we're growing with them again. In fact, since we announced on August 10th, the acquisition of Omni, we actually have grown with our domestic forwarder customers. We have given them our commitment that we will continue to provide them the service in terms that will make them win more business. We will scorecard track revenue with them, win rates for them, and make sure that we do everything possible to make them win more business with us. We will not confuse efforts with results with them. Secondly, we will sell full steam direct to those customers who do not work with forwarders. With the August announcement, it should have been clear to everyone that we believe in our superior service and we want to make it available to everyone, large, medium, and small. Half the market uses forwarders, and we want to make them win more. The other half does not, and we're going out fully after that other half as well. Building out our direct sales force significantly over the next few months, and also we will be laser sharp on getting the volume and pricing sweet spot right for door-to-door service and for direct service. When you look at our numbers, you see we still have work to do on getting the volume pricing sweet spot right for direct and for door-to-door. The third point, we will live more corporate clarity. Starting in Q1 2024, LTL will be its own reporting segment. And over the next few weeks we are finalizing clear, short and midterm targets action and dashboards for laying out very specifically our increased LTL revenue plans, margin plans, and the percentage of LTL as a revenue of the overall company. Corporate clarity is something we will be living more, portfolio review in an accelerated fashion is a big part of that. Forward focus is LTL and what's essential to make LTL stronger. With that Rich, let's open the lines for comments and for questions.

We'll start with Jack Atkins from Stephens.

Good morning, and thank you for taking my questions. Tom, could you elaborate on the organic strategy related to your LTL business? It seems that part of this involves enhancing your commercial team and organization. Can you discuss the investments you have made or may need to make to effectively expand your direct-to-shipper strategy in the coming years?

Yes, Jack. So, first of all, as you know, over the first 40 years we exclusively dealt with our domestic forwarder and other intermediary partners. And then two years ago we started in a small way selling direct, and we went to small, medium-sized businesses that do not use third parties, that do not use forwarders. That track we have built out very, very slowly and consistently. It's grown over the last few months. It's a commercial team of 20 plus people. We have a very, very strong seasoned leader in place, actually leaders, with Erika Tolar and Jennifer Johnson, hires that we've made in the last year and a half and more recently in one case. Nancee Ronning, our Chief Commercial Officer has developed with her team a very specific plan over the next few weeks to the next year, to two years from now, to tripling or quadrupling this sales force with leaders that are proven in the space of selling direct. We also have very clear, Jack, that we have to not make this an investment year, but in fact cut costs and redirect energy and resources from other places and invest it in that direct sales force. But so what we slowly started two years ago with small- and medium-sized businesses only, now it's full force, fair game. That's the benefit of the August 10th announcement that we became very clear about making sure that we are accessing that other half of the high-value LTL market, small, medium, and large. What you should be expecting is a roadmap with specific resources in that space over the next few weeks. This is going to be a doubling and tripling of that sales force within the next 18 months, and you should also expect us to go with revenue and margin numbers and percentage of overall company revenue that comes both from indirect sales with our partners and direct sales that we're building out.

That will be encouraging to see, I think, as you guys disclose that. And when you think about your network, both whether it's your terminal infrastructure or your first and final mile capabilities. Do you need to make any investments there to execute on the direct-to-shipper strategy, or do you feel like you have the infrastructure in place to be able to execute on that?

Yes, we're going to continue doing terminal expansion. If you think about this year, we actually did in the first 10 months, we did five new locations with the Land Air Express acquisition early in the year, and then we opened up our third Chicago area LTL terminal. So we did six this year already. We said a couple of years ago, we expect at least 30 over the next five years, i.e., about six per year. With the strategy that we're now deploying and more aggressively than just going for SMB direct, that terminal expansion game plan may have to be accelerated also. We are very clear that this is not only about recruiting and deploying world-class sales leaders, but this also obviously needs to have an operating environment, a customer service environment, the pricing environment that goes with it. So that is all part of that overall plan. Again, our strategy has been very consistent. It's accessing as much of the high-value LTL freight market as possible, direct and indirect.

And I guess maybe last question, then I'll turn it over. But it's off in the room, which is Omni and the pending acquisition there. I know you guys are probably pretty limited on what you can say, but I guess what are the next steps here? I mean, what should we be looking for from an investor perspective moving forward? And at what point are we going to maybe see some resolution to this? Just what can you tell us about the next steps related to Omni?

We strongly believe that we are not obligated to close, as the conditions for closing have not been satisfied. This actually allows us to explore options, including termination. In my experience, when situations drag on, they typically do not improve. Therefore, we should aim to shift our focus back to our core business as soon as possible. If we find ourselves discussing this again in our next earnings call, it would mean I haven't achieved my goal. We firmly believe the conditions to close have not been met, and termination is an option we can consider if we decide to pursue it.

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

Can you provide any insights on your discussions with Omni since your update last week and your level of confidence in exiting this transaction and the reasons for that confidence?

Yes, Scott, regarding the first topic, I believe I've shared everything I can at this moment. We are confident that the obligation to close is not present, and we have the option to terminate. Omni has been a valued business partner and customer, and we are looking for ways to ensure that relationship is maintained and improved. However, there's not much more I can add. I've already mentioned that a prolonged process is not beneficial. We are seeking a resolution swiftly, but that’s all we should discuss on this matter. It’s more productive to focus on what we can control, which I outlined when discussing our efforts to build out the direct sales force alongside supporting our exceptional intermediaries. Additionally, our portfolio review process remains the same. Each supporting business line must enhance the LTL business, be essential to it, and meet its own financial expectations.

Okay. And I guess, I understand you're limited in how much more you can say, but can you at least share what conditions have not been met?

In our release from Thursday, we mentioned the importance of accessing material information in a timely manner. We are highlighting two specific paragraphs in the merger agreement, which is a public record that you can look up. The key takeaway is that we focus on what we can control while managing our business. On August 10, we stated our intention to pursue all high-value LTL markets, both directly and indirectly, and we are now accelerating this process organically.

Okay. Now shifting to guidance, could either Tom or Rebecca share if we are accounting for the higher interest expense from the debt transactions this quarter in the guidance? What are the margin assumptions in this forecast? I would like to understand the various components involved.

Yes. So first, Scott, happy to talk through some of that. So we gave an adjusted guidance and we put up a note into our earnings release suggesting that we wouldn't be able to reconcile those adjustments, but we believe that the interest expense that we're putting on is high-yield notes, and then other fees on our term loan B that those would be considered part of our non-GAAP. So it wouldn't be part of the adjusted EPS that we've provided. I think from a margin standpoint, Q4 is looking a bit like Q3. When we think about it, we think there's a bit of a muted peak. For the LTL business, Intermodal gets a bit worse in Q4 just from a seasonality standpoint. So there was a little bit of a comparison, if you will, between Q3 and Q4 as you're thinking about it from a guidance standpoint.

The volumes for LTL are improving, and we anticipate this momentum to continue. Our main focus remains on effectively determining the optimal pricing for our door-to-door and direct business. We have extensive experience with airport-to-airport operations over the last 42 years, allowing us to understand how to price that service for maximum profitability. However, we still need to enhance our pricing strategies for the direct and door-to-door businesses. This is reflected in some of the subdued numbers you see in our Q4 guidance.

We'll now go to the line of Bruce Chan with Stifel Nicolaus.

Thanks, operator, and good morning, Tom. Good morning. Rebecca. I just want to focus a little bit big picture here for a second. Obviously, there are some maybe questions or concerns or uncertainties about the underlying business strategy. I just want to get a sense of when you speak with your core legacy customers, what are they most worried about? And what are you doing to convince them that some of the fundamentals of your value proposition are still sound?

Yes. I mean, the good news is, I mean, obviously, we've known not just the companies, but most importantly, the players who had those business partners and customers extremely well. I mean our sales leadership and frontline people have worked with them for a long time. So there is a strong relationship, and there's also a strong understanding of kind of what makes them win. I'm going to see actually one of them this afternoon, and we have a very open conversations. So what they obviously were concerned about with the acquisition announcement on August 10 is someone else getting preferential treatment. Are we still going to support them and make them win more business? And what do I think, we are very focused on and what we have been successful with is can you measure each other by our actions and by our results much more so than by our words. At the end of the day, my test with our domestic forwarder business partners is when you use Forward Air, are you winning more business than you did without Forward Air? Are you making more margin, and that you can keep score of that, but we can keep score of the revenue. And then when you use us, what's the win rate when you use us? Is that going up or down? And Bruce, what we're doing is we have those very specific scorecards in place with those customers. And if at the end of the month, end of the quarter, and we're actually keeping those scorecards up-to-date on a monthly basis. Those business partners see they're actually winning more business and they're making more money when they use us. And every single time they go to pad their percentage of winning actually looks better than it did three or six months ago, they say, okay, still works for us. And in all fairness, since August 10, it's now been more than 2.5 months. Our domestic forwarder customers are using us 14% more than they did before the announcement. So despite a lot of kind of, I guess, straight talk and some of the emotional conversations, the strength and depth of those relationships is very, very, very profound. And I think we're living that, and we're keeping score together. And as long as we are well intending, competent, and make them win more business and move heaven and earth to do so, they're going to keep growing with us. And that's an and, not an or also accessing the direct sales, the direct market. With a small SMB focus that we've had for the last two years, we got our kind of training gear in place to make sure that we actually ask all the questions up front to make sure that we are not stepping on our partner's toes.

Okay, great. That's really helpful. And maybe just a follow-up. You talked a lot about metrics and KPIs for your customers. Obviously, one of the important ones is service. Can you just talk about how things like damage claims on-time metrics have trended through the quarter from last quarter? And when you think about some of the coming changes to your business and your network, what are the investments that you need to make in order to maintain those levels of service?

Yes, Bruce, it's interesting that when we conducted a third-party study last year with SJ Consulting ShipMatrix, analyzing the entire U.S. LTL market with millions of data points, we found that we ranked highest in speed, on-time performance, and claims ratios compared to world-class companies. Our competitors are actively trying to catch up, which helps us stay sharp as they seek to improve. We have the lowest claims ratio in the U.S. LTL market and the best on-time performance when adjustments for exceptions are considered. Achieving these results requires significant investment, particularly in our terminal network. Our operations team, led by Chris Ruble, is exceptional, but we don't take our position for granted given the strong competition. We are the best in our field. Our investments include ensuring efficient terminal flows and deploying advanced technology. We work collaboratively with our CIO, Jay Tomasello, and his team to maintain direct flows between inbound and outbound areas, enabling us to always locate the freight. Additionally, we have a guaranteed service policy with a last in first out rule. We are committed to making significant safety and operational investments, which is essential for providing top-tier service in the industry. Our best service is the result of technological investments focused on safety and operational efficiency.

Okay, great. And then just directionally, with the changes in the mix and the changes in the business, have those metrics been flat, up, or down?

So with the increased focus on door-to-door and also direct, especially going forward, the investment itself, I think, is still as a percentage of overall revenue going to be somewhat stable. What we do have to do, Bruce, is we do have to get more into making sure that the customer service aspects, the pricing aspects are going to be equally sharp as they were in Airport-to-airport. So there may be a small uptick there for a short period of time. But again, this is why I said before, we have to find the money in other spaces. This cannot be an investment year coming up. But yes, we do have to build out that door-to-door in the direct service, not just on the sales side, as I said before, but also on the supporting team side. So you will see an investment there that has to come from other resources and expenses inside the company. Cost management is certainly going to be a top priority to make sure that we can funnel those types of energy and resources into the direct space.

We'll now move along to the line of Stephanie Moore with Jefferies Group.

Hi, good morning. I wanted to follow up on a point you just made, Tom, regarding how domestic forwarders have been increasingly using your service in recent months. It seems that the overall freight and forwarding environment remains quite weak. What do you think is encouraging this increased engagement?

Yes. Looking at the entire industry, we did experience some temporary disruptions, including the loss of yellow capacity, which accounted for 9% of shipments. Those shipments still need to be moved and have gone to other providers. Some first-class rate companies, like Siah, likely picked up a significant amount of what would have been yellow business. We had some of that as well, but less than others because the overlap between yellow and our freight mix is not as established as it is with some other first-class freight companies. Additionally, we dealt with a cyber-attack in 2020, which also temporarily affected volume. That said, if I focus on September and look at October, it appears that there is increased momentum in demand, particularly in the high-value LTL freight sector, which is more industrial rather than consumer discretionary. When we talk with our business partners, yes, imports from Asia are still muted, but the LTL environment clearly is better than it was towards the end of Q4 last year, Q1 this year, Q2 this year. So there's a bit of a spring in the step for the Forward industry from the yellow and the situations temporary dislocation, but the trends overall are more sound right now. I still am not high-fiving myself here for a huge peak, but this is a better LTL environment right now than it was three months ago or six months ago.

So maybe just following up on that. Would it be reasonable to say that with the dislocation from Yellow that maybe some of this high-value freight that six months ago, the likes of your public LTL players maybe they would have moved some of this high-value freight. But now given the tighter capacity environment, they kind of were giving some of that freight back to you guys? Is that a fair assessment or no?

I wish they were that generous, but I think they know better than that. So, I mentioned earlier that the Yellow dislocation improved pricing discipline across the industry and helped some players gain new volumes. We did receive some volumes through our intermediaries for long-haul yellow business and events business. However, from a pure volume perspective, we benefited less than some of the class rate companies. I do not believe there was a ripple effect where yellow business went to Old Dominion and their high-end business came to us. Domestic forwarders are simply gaining more business and when they compete with us, their win rates are increasing. Therefore, I see an improved LTL environment going into the fourth quarter. The reason the numbers may appear somewhat muted or conservative is that we are very aware of the need to determine the right pricing and volume balance for door-to-door and direct services, similar to what we have worked on for many years on the airport-to-airport side.

Okay, got it. And then just following up there, can you talk a little bit about your plans for a GRI or general rate increase in here going into the fourth quarter or so into 2024? I know some of the other LTL players have kind of announced where they stay kind of looking out for the next 12 months. So any update on the timing?

Yes. We are very consistent when it comes to the process here. So Stefan and Katie Fox and their pricing team towards November, we announced for the following year. We work with our customers directly so that there's predictability and they can actually build those increases into their budgets. They are driven obviously by investments. We talked about terminal investments. We talked about safety investments. And also, obviously, in some cases, there's wage adjustments that we have to make sure we finance and fund. So there's always going to be a GRI. It's always the first Monday in February. So that gives predictability to our business partners for their budgeting season themselves. And I think the ranges that you saw in the last couple of years, 2021 was the high end with 7.9%. Some of the lower numbers you have seen are 5.9%, somewhere in between those two numbers is probably going to be the GRI for 2024.

Perfect. And then lastly for me, and just taking kind of a big picture view, and I appreciate your commentary about kind of building out that direct sales network and going after that incremental TAM in the premium LTL space. So as you're kind of building out organically, the direct sales team, what do you need to do to kind of make sure you're preserving your existing relationships with the domestic forwarders? I think we talked about what you kind of had in place if the Omni transaction went through. But if it is all kind of done internally, organically, what would be the strategy to kind of preserve your existing relationships while also going after some of the MetroPac business?

Yes, Stephanie, it's a major priority for all of us to get this right. Just as a reminder, the estimated $15 billion high-value LTL market, which primarily focuses on no damages, high-speed delivery, and strict time windows, is based on data that is about six years old and might be quite conservative. Approximately half of this $15 billion is transacted directly between shippers and companies like us, while the other half involves intermediaries. Therefore, when targeting the portion not dealing with intermediaries, we must be very clear and proactive in our inquiries about whether they use forwarders, if they frequently work with forwarders, or if they plan to use forwarders. If they do involve forwarders, we will do everything we can to support that forwarder and ensure that business stays with them, as they likely have established relationships for good reasons. Those companies may not have an advanced transportation or supply chain department because they rely on forwarders to fulfill that role. However, the team, led by Melissa Fisher and her colleagues over the last two years, and now increasingly by Jennifer and Erica, has excelled in ensuring we ask the right questions from the start and that we base our actions on facts. In two years, there were only a few instances of issues, just a few out of thousands of interactions. We have the necessary training and know how to ask those probing questions and properly qualify the situation. We will only succeed if we maintain and rebuild the trust of our domestic forwarders by ensuring we get this right, emphasizing that it is an inclusive approach rather than an either-or scenario, and it is complementary and not overlapping. There’s a gray area at the end that needs clarity; it must be distinctly identified. Half of the market is engaged directly between shippers and transportation providers, and we need to accurately recognize that portion of the market.

We'll now go to the line of Bascome Majors with Susquehanna.

Rebecca, I think to help us reconcile the guidance without necessarily guiding non-GAAP things that you can't guide. Is there any way that you could give us some bookends on what operating income for the expedited freight or intermodal segments are underlying that guide?

Certainly. I'm happy to share some insights. Regarding expedited freight, we anticipate some margin expansion from Q3 to Q4, although it will be modest. Additionally, when we consider the intermodal business, historically, Q3 tends to be stronger than Q4 due to seasonal trends, and this pattern is expected to continue as we project for the upcoming quarter.

And are you talking specifically margins or operating profit on both of those signals?

Operating margins.

Tom, this is a legal question. I'm not sure if you have access to someone from internal or external counsel who can provide insight or if you can share any general comments. However, the shareholder plaintiffs did appeal the ruling in your favor late last week. Any update on the timeframe for when we might know if that appeal will be heard would be appreciated.

Yes. You're correct about this situation. I’m not sure if everyone is aware, but it involves a temporary restraining order that was issued by the Chancery Court concerning three plaintiffs who are former employees and shareholders in Greeneville. The temporary restraining order has since been lifted, which we appreciate because it indicates that we are conducting our operations properly. It's important for us to ensure that we execute things correctly. As you mentioned, there has been some discussion regarding whether the term appeal is accurate, but the plaintiff is requesting the judge to reconsider and reinstate a temporary restraining order. A hearing or ruling is expected this afternoon in Greeneville, and more news is anticipated shortly. I believe there's a meeting scheduled for 4:00 PM, so we should have updates in about six or seven hours. Our primary focus remains on the elements that we can manage. Our team, especially Rebecca and myself, as well as Michael Hance, our Chief Legal Officer, are focused on navigating these ongoing litigation matters, while the rest of our team is dedicated to finishing the year on a strong note. I believe our guidance is conservative. We need to continue pushing to finish the year successfully, as we have a clear strategy and significant untapped potential. We announced on August 10 that we're pursuing this untapped potential organically because that's within our control at this time.

Two big picture questions to close. The direct sales strategy was always part of your attempt to Grow Forward. In August, we found out that you thought doing that acquisitively might be a better path to achieving that and now we're pivoting back to really doubling down on the organic direct sales strategy. Can you talk a little bit about what drove the change of heart and what didn't work as fast as you hoped it would in the first year or two of that and why it can work now?

Yes. First of all, Bascome, you captured our perspective perfectly. Our strategy has been clear. The tactics over recent months seemed to fluctuate between two different approaches. The positive aspect is that these approaches can work together rather than being mutually exclusive. I believe we can fully commit to direct selling for a couple of reasons. First, we have two years of experience in direct selling on a smaller scale targeting small- and medium-sized businesses that don’t use forwarders. We understand how to ask the right qualifying questions and identify high-value freight, and we have improved our pricing strategies for it. There is still untapped potential, as I've mentioned. Secondly, since we announced on August 10 that we are going after the entire direct market, we now feel empowered to proceed. In the past, we felt somewhat limited because for four decades we primarily worked with domestic forwarders. We began to engage with small- and medium-sized businesses, and the announcement on August 10 gave us the confidence to pursue the entire direct market that does not utilize forwarders. This has allowed us to have the difficult conversations with customers, which in turn gives us the freedom to pursue opportunities we previously felt we couldn't. So I think that's a mind share and mentality issue. The last thing I do want to mention, I mentioned before, the somewhat nerdy analytic old German mind. We do have a very, very strong Chief Commercial Officer with Nancee Ronning, who has the type of analytical structured thinking and approach that goes together in her case also with a great way of leading teams, developing teams and also having a great relationship-building mentality with customers. So I think between having started to doing the SMB, secondly, announcing we're going to do it now for the entire direct market. And third, having the right leadership in place, we've got the ingredients now, Bascome, that we didn't have three or four years ago.

Thank you for that overview, Tom. I have one more broad question before I hand it off. It's been challenging for investors to stay informed since early August as the situation has evolved on multiple fronts, including your acquisition target last week. I understand you can't discuss the specific way forward due to various legal issues, but if we were to wake up in February following your 4Q release and initial outlook for '24 with everything having gone as planned over the past four months, what should your customers, employees, and investors expect regarding the company's structure, strategy, and future direction?

Yes, I genuinely appreciate our team and our business partners for their support and patience over the last several months. We have been focused on our Grow Forward strategy, which we've discussed previously. I understand that exploring different tactics to reach a larger customer base and revenue has caused some emotional challenges, and I apologize for that as it was never our intention. We are committed to providing world-class service in the high-value freight space and are actively working through our Grow Forward strategy to expand our reach. The journey has been a bit challenging in recent months as we find the best way to move forward. Come February, when we release our Q4 results and outlook for 2024, I will strive to ensure we have stability in place to clearly outline our organic growth strategy. Secondly, I would expect us to be extremely mathematical with a multi-year scorecard of LTL revenue, LTL margins, and LTL as a percentage of overall company revenue. And third, I would expect that, that corporate clarity with our portfolio review will have yielded consequences by then.

We'll now go to the line of Christopher Kuhn with The Benchmark Company.

Tom, maybe just to the extent if you did take on some Yellow and SD's volume, your sort of thought process around keeping that line. Do you think some of that then kind of settles somewhere else? Or do you feel confident you can keep some of that?

Yes. So again, Chris, the one thing, and I think we even talked about this before, I strongly believe based on data sets that we saw from one week to the next like over the last two or three months, we were a volume beneficiary from those two dislocations but we were much less a volume beneficiary than some of the great class rate companies. So we're talking literally a couple or three percentage points, not eight or ten. But the business that we were going after was long-haul business that fits us well, and it also was some events business. So my sense is what came here for a reason. It wasn't a hell of a lot, but what came here should have come here and is going to be here to stay. So those volume trends that we're seeing right now, I expect to continue seeing them.

Okay. And then just as you go after sort of the larger customers for your direct sales, I know you're going after customers that don't use forwarders, but do forwarders market to them? And will you be stepping on some of your customers' toes as you try to grow the large businesses?

Yes, Chris, we need to clarify this as clearly as possible. Ambiguity is not helpful. Fundamentally, in the automotive and industrial sectors, some companies see transportation and supply chain as a core strength, while others do not and prefer to rely on a top-tier company for that support. The distinction is crucial. We've developed specific questions to ascertain whether a company employs forwarders as their transportation department or if they have an in-house team with significant capabilities. Those with in-house teams typically do not use forwarders. During my time at DB Schenker from 2015 to 2018, I observed similar dynamics in the industry, where some customers embraced our services while others opted to manage transportation directly. I'm familiar with this dual approach, and as demonstrated by our sales team's success over the past two years in the SMB sector, it’s quite manageable to identify which type of company we are dealing with. Therefore, Chris, I do not anticipate that we will be infringing on our partners' interests at all.

Our final questioner for today will be Scott Group with Wolfe Research.

Follow-up. I just want to, again, follow up on a few things I heard today. So Tom, when you talked about a mid-80s OR in the last couple of months, is that the whole expedited segment or just a piece of that?

That's just LTL, and that's the type of OR view and mindset that you're going to be seeing next year starting Q1 systemically.

Within LTL, can you provide insight into whether it's at a mid-80s operating ratio and how the airport-to-airport operating ratio compares to the door-to-door operating ratio currently?

We have not made that public yet, but it may be something we want to incorporate into the dashboards we are developing. We are tracking both segments separately. Historically, our Airport-to-airport business has been the most profitable. If you consider one segment to be in the high teens and the other in the low teens, that gives you a general idea. However, we need to improve our performance in direct and Door-to-door services. Some companies are proving that achieving operating ratios in the mid-80s and below is attainable when selling Door-to-door. Therefore, while we still have room to improve, getting there is not overly complicated.

I understand that you're expressing some confusion. You have mentioned several times your strong desire to expand the LTL and Door-to-door business, yet it seems we haven't entirely nailed down the optimal balance between volume and price in this area. From a strategic perspective, it raises questions about why there’s such eagerness to pursue growth in a business that remains somewhat unclear.

Yes, let me clear up any confusion. We entered the door-to-door business six or seven years ago primarily because the total addressable market is at least ten times larger than airport-to-airport. This means we have a much bigger opportunity to capture customers. Additionally, selling directly to those who do not use forwarders allows us to achieve higher margins since there are no intermediaries taking a cut. We also have specific verticals and customers in the direct market that yield great margins. The market is extensive and offers significant margin potential. We are already experiencing strong margins in certain areas, and our main focus should be to expand this approach comprehensively.

And then just one last thing, if I may. If you're able to exit the Omni transaction and save a significant amount of capital, have you considered deploying that capital? There are many Yellow terminals set to enter the market, and if you intend to become an LTL, we might need some of those terminals. What are your thoughts on that?

Yes. We have clearly established our priority for capital, with organic growth as our primary focus. It can be argued that building out our direct sales business and accelerating terminal expansion would complement each other well. We will definitely prioritize organic growth, ensuring we have the necessary network in place as an excellent use of our capital. Scott, you mentioned a specific application, which is the Yellow terminals, and that will be our top priority. Following that, we have our standard priorities, which include M&A, typically involving smaller tuck-in acquisitions, possibly in the LTL space. We also remain committed to dividends and buybacks. Overall, I believe there is substantial flexibility with the termination opportunity of the Omni transaction.

And that concludes Forward Air's third quarter 2023 earnings conference call. Please remember that this webcast will be available on the Investor Relations section of Forward Air's website at www.forwardaircorp.com shortly after this call. You may now disconnect.