Earnings Call Transcript - FWRD Q4 2024

Operator, Operator

Welcome to the Forward Air Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants are currently in a listen-only mode, and there will be an opportunity for questions after the presentation. I would now like to hand the call over to Tony Carreno, Senior Vice President of Treasury and Investor Relations. Please proceed.

Tony Carreno, Senior Vice President of Treasury and Investor Relations

Thank you, operator, and good afternoon, everyone. Welcome to Forward Air's fourth quarter and year end 2024 earnings conference call. With us this afternoon are Shawn Stewart, Chief Executive Officer; and Jamie Pierson, Chief Financial Officer. By now, you should have received a press release announcing Forward Air's fourth quarter 2024 results, which was also furnished to the SEC on Form 8-K. We have also filed a slide presentation outlining fourth quarter 2024 earnings highlights and a business update. Both the press release and slide presentation for this call are accessible on the Investor Relations section of Forward Air's website at forwardair.com. Please be aware that certain statements in the company's earnings release announcement and on this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes 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 fiscal year 2025. 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 slide presentation relating to this earnings call. Listeners 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 U.S. 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 today's press release and slide presentation. I will now turn the call over to Shawn.

Shawn Stewart, CEO

Good afternoon, everyone, and thanks for joining the call today. I appreciate your interest in Forward Air and the transformational journey we are on. As is always the case with turnarounds of this size, scale and complexity, there are usually bumps along the way, and this quarter was no exception, but we remain resolute and excited about our future. Today, there are three main topics that I want to cover. First, I will review some of the key achievements in 2024. Second, I will share some thoughts on our 2025 priorities; and I will close with an overview of the fourth quarter performance. For the full year 2024, we reported consolidated EBITDA of $308 million, which is near the top of our guidance range of $300 million to $310 million. We successfully closed out a very busy and noisy year that began with the closing of the Omni transaction last January, just 13 months ago. I joined the company three months after the transaction closed and quickly centered our efforts on stabilizing the company, integrating the networks, and I am pleased with the pace and rigor at which we moved. Over the course of the year, we've built out our leadership team that has both the experience and industry know-how to not only lead these two legacy companies into the future, but also unite them to get the most out of their individual and combined value propositions. Above the team, most importantly, in our first year as a combined company, we put the customer first and focused on providing best-in-class solutions, leveraging the known capabilities of both Forward Air and Omni's global footprint. We are building on their individual strengths and leveraging the global freight forwarding capabilities of the legacy Omni entities while continuing our domestic expedited LTL truckload and intermodal offerings. We remain committed to providing our customers, including and especially our legacy freight forwarders and 3PL customers with the same award-winning service they have relied on for years to grow their businesses. We view ourselves as moving more than just our customer shipments. With an undisputed dedication, we take ownership of their supply chain challenges, solving them with unique solutions that deliver possibilities for growth, innovation and, most importantly, peace of mind. We delivered on the targeted $75 million of integration synergies and cost savings that were outlined at the onset of the transaction. We are on pace to exceed the initial target and remain on schedule to be at a full run rate of savings and complete the network integration at the end of the first quarter of 2025. These initiatives reduced our operating expenses, real estate footprint, and employee headcount and serve as a springboard for the transformational phase we are entering. In the second and fourth quarters of 2024, we took additional steps to reduce operating expenses by approximately $40 million per annum, including reductions in our workforce, direct operating expenses, and the use of third-party vendors. To date, we have executed on more than $100 million in annualized savings from synergies and cost-out actions, contributing to a more financially efficient company while maintaining our high level of customer satisfaction. During the year, we made several key additions to our leadership team, including Jamie Pierson as Chief Financial Officer, Jessica Herren as Supply Chain Solutions and Customer Experience Officer; Doug Smith as Chief People Officer; and most recently, Eric Brandt as Chief Commercial Officer. In addition, Tim Osborne assumed the responsibility for all North America ground operations. With our management team largely complete, I could not be more excited about the talent and industry experience they all bring. As we look ahead, the foundational changes and investments made in 2024 are expected to benefit 2025 and beyond. Our priorities include driving profitable long-term growth by expanding synergistic service offerings for our customers, which will, in turn, lead to higher and more profitable revenue. In parallel, operationally, we are officially turning our efforts from completing the integration to a much broader transformation strategy focused on rationalizing our IT systems, improving the quality of our data and decision-making. We are also establishing a global shared services organization to assist us in integrating and managing our back-office operations. With Eric joining the company in January and leading our worldwide sales team, we are excited to grow revenue across our newly aligned global business. He is a seasoned leader with a deep understanding of global logistics and supply chain management. Given his tenure and experience in the space, he has firsthand knowledge and relationships with our existing customer base and has already set the path for our future growth. Regarding transformation, it is being led by our transformation management office and will impact legacy Forward Air plus the 12 companies that constitute Omni that were previously not integrated. During 2025 and with some work continuing into 2026, we plan to move away from multiple TMS, ERP and HRIS systems to a rationalized IT network that is more appropriate for a unified singular company. We expect these changes to reduce redundancies and enhance efficiencies across the organization. Working with 6,600 professionals that delivered on the targeted integration synergies gives me confidence that we will be just as successful in executing the transformation. I will wrap up with a few comments on the fourth quarter and then turn the call over to Jamie. Our results for the quarter were driven by consistent performance in the Intermodal segment and yet another solid quarter at the Omni Logistics segment, achieving its best quarterly reported EBITDA result since the transaction. Those results were further enhanced with an additional round of cost reduction actions previously announced that equate to approximately $20 million on an annualized basis. The Expedited Freight segment, on the other hand, did not meet our expectations and income from operations declined compared to a year ago, primarily due to the decrease in volume, in line with the market at large and a pricing strategy put in place prior to the transaction that focused more on growth than profitability. As noted, the decrease in volume is generally in line with the LTL market, which continues to be impacted by the prolonged slowdown in the freight environment. The Expedited Freight segment fundamentals remain intact. We continue to be one of the best providers of expedited service in all of North America, in both on-time service and claims ratio performance. We believe the service we provide will be the ultimate driver of customer retention and growth going forward. The single largest issue was the pricing strategy that we discussed last quarter. What may not be as understood is the change in the mix of freight and how long it takes to remedy historical pricing actions. The change in mix was a shift from our most profitable dense freight and subsequent growth in our class-based customers. As you know, class-rated tariffs are less profitable than our traditional density-rated tariffs. And as everyone knows, it takes months to rectify a single poor pricing decision. As covered on our previous earnings calls, the good news is we started implementing corrective pricing actions during the fourth quarter and are seeing improvement that aligns with our expectations. We expect to see the full impact of the corrective actions by the end of February and expect to shed some poorly priced freight from our system as a result. All else being equal, we also expect to see commensurate yield improvement in the second quarter and beyond. Our pricing strategy, whether class-based or density-based, will reflect the quality of our service we provide. I want to reiterate and ensure you that the value and integrity of our network remain intact. Going forward, we expect to closely monitor how our volume is impacted and take appropriate cost actions to profitably run our network. With that, I will now turn the call over to Jamie to go through the results from the quarter.

Jamie Pierson, CFO

Thanks, Shawn, and good afternoon, everyone. Getting right to it and beginning with the fourth quarter results. Revenue for the quarter was $633 million and on a required GAAP reporting basis, it was an 87% or $294 million increase as compared to the fourth quarter of the prior year. The increase over the prior year was largely driven by the Omni transaction. Since we did not own Omni in the fourth quarter of 2023, it is difficult to make a meaningful year-over-year comparison. So I will focus our comparisons with the Omni segment on a sequential basis. To that point, on a sequential and more comparative basis, consolidated revenue remained relatively flat, decreasing 3.5% or $23 million from $656 million last quarter to $633 million this quarter. Looking at our three reporting segments, Expedited Freight, Intermodal and Omni Logistics. Revenue at Expedited Freight decreased $13 million or 4.7% to $266 million from the previous year's comparable quarter of $279 million. The decrease was primarily driven by a 5.8% decline in revenue per hundredweight, including fuel surcharge and a 4.3% decrease in tonnage per day. At the Intermodal segment, revenue of $60 million was flat compared to the fourth quarter of 2023. An increase in revenue per shipment of 3.2% was offset by a decrease in the number of trade shipments of 2.8%. The revenue increase from Omni Logistics, which was not included in the previous year's comparable quarter, was the full $326 million. On a sequential basis, fourth quarter revenue at the Omni segment decreased $9 million or 2.7% compared to the $335 million reported in the third quarter of 2024. For the fourth quarter, we reported consolidated income from continuing operations at $76 million. This includes a goodwill impairment adjustment of $79 million related to the Omni Logistics segment that favorably impacted the quarter. Accounting rules require goodwill impairments to be retrospectively adjusted as purchase accounting adjustments made in the one year period following an acquisition. We do not expect to record any further adjustments in 2025 as our one year window is now closed. Consolidated EBITDA, as defined in our credit agreement, was $69 million for the fourth quarter or an 11% margin. As you heard from Shawn, for the full year 2024, we reported $308 million near the top end of our guidance range. The margin for the full year was approximately 12%. Regarding consolidated EBITDA for the prior three quarters, we have adjusted the previously reported amounts by the actions we took in December to improve our cost structure. The credit agreement allows for the inclusion of the unrealized and pro forma savings from these actions to be included in our historical consolidated EBITDA and requires that they be spread back in time to the period in which the expense would have occurred. As such, we adjusted prior quarters to reflect the amounts of the cost savings. If you would, please reference Page 5 of the slide presentation issued today, and you will be able to see what we reported in the past and updated for the most recent cost out and pro forma actions. Given the transaction expenses incurred in the first quarter of 2024 and the ensuing noise in the second to the fourth quarters, we anticipate that the quality of earnings will demonstrably improve in 2025. On a year-over-year basis, the first quarter of '25 will be much cleaner than the first quarter of 2024 and so on. Again, in transparency, we have detailed the information used to build up the consolidated EBITDA results on Page 16 of the presentation. Turning to cash and liquidity. Cash used from operations in the fourth quarter was $31 million. As covered in the second quarter earnings call, we discussed inflecting to cash flow positive in the back half of 2024. And to that point, in the third quarter, we reported cash provided by operations of $51 million. Combined with the fourth quarter, net cash provided by operating activities was $20 million compared to the $97 million of cash used in operations in the first half of the year. Definitionally, that is absolutely inflecting positive. As for liquidity, we ended the fourth quarter with $382 million, $105 million in cash and $277 million in availability under the revolver for a total of $382 million. The $78 million sequential decrease in the third quarter was a result of a $40 million reduction to the credit facility size in conjunction with the amendment and a $38 million use of cash, which was predominantly impacted by $60 million in interest expense payments made during the fourth quarter. And as usual, in commensurate with my past practice, I would like to leave you with a few points of light for the quarter. The first of which is the amendment. While it may feel like a long time ago, it was literally less than two months ago that we amended our credit facility. The great news is the two months of preparation and negotiations should benefit us for years to come. As a refresher, we traded a one-time $40 million reduction in the facility size for four years of additional financial flexibility with significant covenant headroom. Most of you who know me know I do not take a reduction in liquidity lightly. But all things considered, this was a very good trade for us as it should alleviate covenant concerns over the immediate future as we ended the year with $59 million in cushion, which in turn will allow us to focus on executing our transformation. We are incredibly fortunate to have the support of our lenders, for which I owe a debt of gratitude and appreciation to all of those involved. Point two is our continued focus on cash conversion, liquidity and, more importantly, the results we are seeing. In the first half of '24, much of our cash was consumed by transaction costs, integration expenses, debt principal paydown, and other legacy calls on cash, none of which benefited the company. In the second half of the year, we saw a significant reduction in these items, which contributed to an increase in our cash and cash equivalents balance by $20 million. And again, we ended the year with a little less than $400 million in liquidity. Ultimately, as Shawn noted, turnarounds of this size, magnitude and complexity are not linear. Some quarters are better than others, and that was certainly the case for us in the fourth quarter. While we could have performed better financially in the fourth quarter, we absolutely excelled in the transformational changes we made to the business that should serve as the foundation of stability in 2025 and growth in '25 and beyond. As everyone knows, there is always a lag from the time that cultural changes are injected into a company's DNA and the time that they bear fruit. And '24 was that pivotal period, and I'm very much looking forward to what we can deliver as a combined company. Finally, regarding the strategic alternatives review that we announced last month, as we indicated in that press release, we do not intend to disclose developments related to this process until the Board determines that further disclosure is both appropriate and/or necessary other than to say that it is progressing as expected. As such, we respectfully ask that you keep your questions focused on our earnings as we will not be sharing any information about the process. I will now pass the mic back over to Shawn for closing comments before Q&A.

Shawn Stewart, CEO

Thank you, Jamie. I am proud of what our team accomplished in 2024. We know we have more work to do to achieve the results we know we are capable of delivering. We started 2024 playing a lot of defense and transitioned to play more offense by the end of the year, serving as a springboard for 2025 and beyond. Our associates around the world came together as one, and I am confident in our ability to execute our strategy, grow the company and enhance shareholder value. We will remain focused on meeting our customers' needs and are making the necessary investments that will allow us to benefit from any rebound in the freight environment when it occurs. I will now turn the call over to the operator to take questions.

Operator, Operator

The floor is now open for questions. Our first question is coming from Bruce Chan with Stifel. Please go ahead. Your line is open.

Andrew Cox, Analyst

Hi. Good afternoon, Shawn and Jamie. This is Andrew Cox on for Bruce. I just wanted to touch on the tariff and trade disruptions potentially at Omni. I mean, being cognizant that it's kind of hard to keep up with the tariff trade news these days, but I would like to just get your perspective on the changes and how you are preparing for any changes that you may be anticipating. Any color on customer discussions or planning here would be helpful. Thank you.

Shawn Stewart, CEO

Hey, Andrew. It's Shawn. Thanks for the question. As you said, it's really difficult to project how freight volumes and the revenue might be impacted by these tariffs. I think I've said in the previous quarters we are pretty vast in many of the Asian countries, not just China, so we're a lower-single digit today ex-China into the U.S., so that trade may continue and the tariffs will have to be absorbed or those customers reposition out of other countries. So we don't see a major impact there. Probably closer to home, though, regarding Mexico and Canada, we've got that 30-day kind of timeout period, if you will. But at the same time, the commodities that were mentioned such as fuel, energy, alcohol, and food are not the commodities in our business network. So we don't see a major impact there as well. So we feel pretty good, always subject to change. We're staying as close as everybody else is to the potential of other commodities. But as we see it right now, it's not a major risk to our business.

Andrew Cox, Analyst

Okay, Shawn. Thank you. That's helpful. And as a follow-up, we've heard some, whether it be rumors or rumblings of peers standing up potential A2A networks and competition with you all. So we want to get your perspective on whether you see this happening, whether it's impacting the market to date and how could you be planning or changing processes to compete in a market that's potentially becoming more competitive over time? Thank you.

Shawn Stewart, CEO

Yeah. Sure. I love this question. We like competitors. It's what keeps you sharp in life. At the same time, people that are trying to stand up a real network, I wish them the best. There's a difference in people playing in consolidation and heavy haul lanes, and truly setting up a true network. Our strategy here is while there are competitors, many of whom we've worked with for years and respect a lot, we have to stay focused on ourselves and differentiate ourselves through the technology and the service that we offer, which is unmatched, especially with our visibility tools. Our value isn't just offering low rates and doing what tactics they're putting in place because that only lasts so long, but truly more meaningful is what we do, what we offer, what we service, and our best-in-class people in the industry, and we're going to stay steadfast, continuing to improve day by day and offer best-in-class service.

Operator, Operator

We'll take our next question from Bascome Majors with Susquehanna. Please go ahead. Your line is open.

Bascome Majors, Analyst

Yeah. Thanks for taking my questions. Jamie, do you want to talk on the balance sheet a little bit in cash flow? Do you think the business can be cash flow positive this quarter without the bond payment? And any other thoughts on cash flow seasonality as we look forward in the next three to six months?

Jamie Pierson, CFO

Yeah, Bascome. I love the way you guys always like to get me into trying to give guidance, which I will politely and respectfully pass. Other than to say, we have about $170 million a year in interest payments between the term loan and the senior secured notes and whatever the undrawn portion of the RCF. So it really doesn't take a lot. Once we get through all the transaction expenses from the Omni deal plus all the legacy earnouts, plus the working capital true-ups, plus all the consultants that we had to pay. If we can just get back to running the basics of our business, it doesn't take a lot to be free cash flow positive. We actually demonstrated that in the third quarter of this year, and if you think about it, in the second or third quarter, much in the last call that I said we'll be inflecting cash flow positive in the second half of this year. Combining the third and fourth quarters, it's exactly what we did. So we just need to keep executing is what it amounts to be. Since it's an asset-light business model, CapEx isn't that much. The biggest fixed cost we have is interest. And again, it's only about $170 million a year.

Bascome Majors, Analyst

And as we think about the business and what it could be worth on a some of the parts basis, is there anything particularly different in the unlevered cash generating potential of your different segments relative to their EBITDA? I just wanted to think through the free cash flow and if EBITDA is representative across the segments. Thank you.

Shawn Stewart, CEO

I'm so sorry, Bascome. Though I heard every word you said, can you say that again?

Bascome Majors, Analyst

Yeah. Understood. So from some of the parts basis, if we're looking at your segments and their cash flow generating potential, is the EBITDA of those businesses representative of their free cash flow generating potential on an unlevered basis? Just want to understand if there's anything unique as we think about where the business generates the cash to support the debt payment? Thank you.

Shawn Stewart, CEO

Yeah. Got you. Yeah. So a little bit different between the forwarding aspect and the warehouse and VAS pieces of our business relative to the LTL, expedited, pickup, and delivery. I'd say the good news is it's not that different overall, and EBITDA is almost in tandem with unlevered free cash flow. On the latter, given the fact that we are asset-light and given the fact that we're very independent contractor centric, we don't even have that much on CapEx. In any given year, on the $1 billion plus in revenue that we have from the Expedited segment, we spend around $30 million a year in CapEx. The only CapEx we really have on the forwarding side would be more along the lines of technology. So the good news is, it's not that different between the two, a little bit lower on the expedited piece, given the tractors, trailers, and forklifts, and what we do for the terminals, but pretty solid cash conversion, which we're going to start focusing on that, Bascome, next quarter and beyond, pretty strong cash flow conversion when stood up and operated appropriately.

Bascome Majors, Analyst

Thank you, Jamie.

Operator, Operator

And we can take our next question from Stephanie Moore with Jefferies. Please go ahead. Your line is open.

Joe Hafling, Analyst

Great. Good afternoon, everybody. This is Joe Hafling at Jefferies on for Stephanie Moore. I maybe wanted to drill in on the Expedited Freight shipments per day. You mentioned fairly consistent with what we've seen in the broader space on LTL, both, I guess, sequentially and year-over-year on a volume perspective. Shawn, when you started, you had talked to a lot of your customers and quite a lot of fears about customers leaving Forward with the transaction. I wanted to maybe come back to that thought. I don't know if you've had any conversations with customers lately, what have they been telling you? And if we can maybe just unpack that down 9% shipments per day, how much of that is all just macro? Is there any movement with the changes in yields? Is there any movement in customers? I just really wanted to unpack that.

Shawn Stewart, CEO

Sure, Joe. So, yeah, obviously, I talk to them daily and not much has changed. Our legacy freight forwarder customers are entrepreneurs and where they need and have the ability to build density lanes, they're going to continue to do that. On the onset of me coming to Forward, I said, you got to run your business. I want to be that continual trusted player for you and your Expedited Freight segment on what you can't build out on your own. And so we still see that. In our conversations with them, they pretty much tell us our business is down, just like everyone else in the market. So it's not that we're losing confidence with them, maybe some of them, but they haven't told me that to my face. Ultimately, across the board, I think we're in a very good place with those legacy customers, and we continue to service them extremely well. Overall, where the volume is down is because everyone's volume is down.

Joe Hafling, Analyst

Got it. And then from a 3Q to 4Q, I guess, Expedited Freight operating margin perspective, it deteriorated a lot. Could you guys maybe talk about, with the focus on cost controls and the focus on pricing, what drove what was essentially 400 basis points of sequential margin degradation?

Jamie Pierson, CFO

Yeah. So Joe, in that aspect, we talked a little bit, I think in Q3, started in Q2, but the mix. And when I say the mix, the difference between class-based tariff and density-based tariff really started to shift in mid-2024. That's when we called out the actions in the pricing. So what was happening is the class-based tariff customers, mainly our 3PLs, and let me be clear, 3PLs are extremely important to us. It was something that we did wrong, nothing that they did wrong. We had reduced our class-based tariffs astronomically, and it's not what we should have done in this type of network. So what was happening is that's a true door-to-door service. So when you look at door-to-door with our 97% open ZIP codes in the U.S., it was not a good situation. So we had to enact and put the first, I will say, roughly 50% of the tariffs adjusted at the end of November with not a lot of trade to impact December. The remaining majority of them went into effect early February of 2025. As we stated, we will start to see some impact in Q1 and a full impact in Q2. We feel extremely strong in the actions that we've taken to keep as much of that volume in our network with those traditional 3PLs on a class-based tariff. But at the same time, we can't continue to, as I'd like to say, do business for practice. We have to make our margins. And so that's really it. We have not seen a degradation from our traditional density-based freight forwarder customers at all.

Joe Hafling, Analyst

All right. Understood. That's really helpful. And sorry, I want to squeeze in one more question. Maybe with this change, is there any change in thinking on what that margin can kind of look like for that segment in the past and under prior leadership, kind of a double-digit type bogey? Was this change in how you guys are looking at the business? Does that kind of fundamentally change maybe what margin you guys are looking to achieve in this segment or is there any way of how you guys are thinking about that?

Jamie Pierson, CFO

Yes, Joe. We appreciate the hints towards providing guidance. If you reflect on the last three quarters of 2024, our figures were nearly double what they are currently. Looking back at 2023, we were in the mid-teens. A key piece of information to note is that in the fourth quarter, we finished at 6.6%. When comparing to our peers, they are achieving EBITDA margins in the mid-teens to almost 20%. With all due respect, based on my extensive experience at a lower service-provided LTL carrier, I believe our network, service quality, and claims ratio surpass those of the peers I mentioned. As for what we aspire to achieve, I won’t speculate on what it should look like, but I will reiterate what it has been and how we compare to our peers, and I believe we are in a stronger position.

Operator, Operator

And we'll take our last question today from Christopher Kuhn with the Benchmark Company. Please go ahead. Your line is open.

Christopher Kuhn, Analyst

Yeah. Good afternoon, guys. Thanks for the question. Can you maybe talk about some of the drivers of the Omni business in the quarter? Did it benefit at all from the surge in import volumes that we saw, and how should we think about it for next year?

Jamie Pierson, CFO

Yeah. Hey, I'll jump in there, Chris, and then let Shawn clean up. So I'd say three things. One, we did see an increase in air volume and did see an increase in ocean volume, offset by, candidly, a pretty soft pricing environment in both those verticals. But you add to that, what's also in Omni is a very strong warehouse and VAS operation that has a pretty good exposure to some tech clients and customers that are just literally knocking the cover off of the ball. It's a great portfolio investment, Chris, in terms of if you want to invest in the transportation space. This is a pretty good one if you want exposure across the spectrum of different services. But I'd say it's a little bit of air, a little bit of ocean, offset by a slightly softer rating environment, but also supported by strong warehouse and VAS operations.

Shawn Stewart, CEO

Yeah. And Chris, I would add that as we've integrated the networks, our legacy Omni teammates have a better understanding of the forward capabilities than they did before. There are many different ways to optimally use Forward in both truckload and LTL. In terms of solutions and engaging customers regarding solution selling, we've noticed some improvement there as well. Jamie is correct; we have very large contract logistics operations in the high-tech sector that performed exceptionally well in their Omni segment, and we've observed an increase in both our Air and Ocean segments as well.

Jamie Pierson, CFO

Yeah. And Chris, I'd actually point you to Slide 18 of the material and just kind of follow the progression of Omni's performance since the acquisition. It's improved by a couple of hundred basis points every single quarter. I think there's, in my opinion, at least, the market checks that I've heard, and they're unsolicited, by the way, there's a misperception in the market on Omni. If you look at this page, it is performing very well, within a couple of hundred basis points of some of the best competitors in the space. Operationally, it's performing very well. The only thing that we're really spending a fair amount of time on is just the integration of the back office operations. Operationally, it's finding its stride.

Christopher Kuhn, Analyst

Okay, great. And then I know you don't want to talk too much about guidance, but as we think about the Expedited Freight and the pricing strategy, should we think about limited volume growth and more pricing? And if that's the case, can you get margins in that business if the volumes are pretty weak?

Jamie Pierson, CFO

If we focus specifically on expedited services, we expect to see improvements in pricing or yield as the year progresses, especially when making comparisons. Shawn mentioned in his opening remarks that we are eliminating some unprofitable volume, which I fully support. We aim to maintain our network effectively and do not want to carry freight that results in negative margins. Historically, when we push for better pricing and yields, we might expect a drop in volume, but it can also go the other way. We're already seeing positive effects on yield, although it's still early since this change will be fully implemented soon. We must prioritize adjusting the network for better profitability, but I agree that higher yields might accompany lower volumes.

Shawn Stewart, CEO

But that doesn't mean, Chris, that I don't have a high expectation of growth from our team. Whether it's maintaining the volume or replacing it, that's what we plan to do in 2025. We have that capability. While I would prefer not to, if we don't have the volumes, we can definitely reduce costs in the network. However, that's not what I want to be obliged to do. We need to grow, and that's our focus.

Christopher Kuhn, Analyst

Okay, got it. Thank you, guys. Talk to you later. Appreciate it.

Shawn Stewart, CEO

Thank you.

Operator, Operator

And we'll take a follow-up question on the line from Bascome Majors with Susquehanna. Please go ahead. Your line is open.

Bascome Majors, Analyst

Thanks for letting me back in. Just to your earlier comments on some of the different businesses within Omni, now that we're almost a year into ownership, can you talk really high level about some of the exposures and how it generates profits between transactional air, transactional ocean, and some of the warehousing value-added services and customs brokerage?

Jamie Pierson, CFO

Yeah. I'll jump in there and then again, let Shawn correct me where I'm wrong. As we've said, and we're going to stop saying this pretty soon, Bascome, it is a collection of 12 companies that have very strong positions in their individual verticals. In terms of generating profits, you've got the air forwarding, you've got the ocean forwarding, you've got warehouse, you've got customs and brokerage, and value-added services. It is a, like I said earlier, a great portfolio of exposure to the space. I think the real value that's going to come out of this is once we integrate the networks in the first quarter of 2024, you saw how the performance stepped up, I mean, exponentially went from negative 5 to positive 5 literally in one quarter. Shawn is very astute in terms of correct me when I said, 'Hey, I would expect some softer volumes,' I mean that in the very immediate future. On a longer-term basis, by the end of '25, as you go through '25, I would expect the volumes to start to actually recover and more to come. '24 was an investment year. '25, we have the foundation in place. We'll do that for the first six to nine months, and then at the end of the second half of '25, going into '26, that's when I really expect the growth to start kicking in.

Shawn Stewart, CEO

So, Bascome, I'll say it this way, and Jamie did a good job. Those 12 companies have a multitude of those offerings in them. We spent most of 2024 moving segments, closing entities, and rolling them into certain entities. Then in 2025, we can start coming to you guys at a later date, I won't speak for Jamie and his team, but at a later date because I really want to report out to you guys in that ground, air, ocean contract logistics, and customs brokerage segments. So you guys really have an understanding of what's doing well and what's maybe not doing so well and is that in line with the market, etc. So more to come Bascome on that.

Bascome Majors, Analyst

No. That's helpful and we look forward to that. To your last point about integration driving volume, I don't know if Eric is on the call, your Chief Commercial Officer. I think he's been there for 2.5 months, but would love to hear any early thoughts from him on what he sees as opportunities to really move to offense, like you've said a few times today.

Shawn Stewart, CEO

Well, Bascome, he is not in the room, but surely happy to have him come on at a later date if that's warranted. But he's actually in the room here in our headquarters with his top leadership and the top sales reps from around North America doing a strategy session on the new go-to-market strategy. So that's exactly where all of us want them to be, and that's where they are. So yeah, happy to share more as he gets really going here in his early stages.

Jamie Pierson, CFO

Bascome, we would never expose someone that new to you guys in this process.

Bascome Majors, Analyst

Thank you for the time, guys. Appreciate it.

Shawn Stewart, CEO

I appreciate you.

Operator, Operator

And there are no further questions on the line at this time. I'll turn the program back to Mr. Stewart for any final remarks.

Shawn Stewart, CEO

Alright. Listen, I want to thank you guys so much for joining today. I'm really looking forward to 2025, and I look forward to connecting with each of you soon. If you have any follow-up questions, please reach out to Tony. Have a great one. Take care.

Operator, Operator

This does conclude today's Forward Air fourth quarter and full year 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.