FORWARD AIR CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview We are a leading asset-light freight and logistics company providing less-than-truckload (“LTL ” ), truckload, final mile and intermodal drayage services across the United States and in Canada. We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling. We utilize an asset-light strategy to minimize our investments in equipment and facilities and to reduce our capital expenditures. Our services are classified into two reportable segments: Expedited Freight and Intermodal. Our Expedited Freight segment provides expedited regional, inter-regional and national LTL services. Expedited Freight also offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions. Our Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and Container Freight Station (“CFS ” ) warehouse and handling services, and in select locations, linehaul and LTL services. We plan to grow our Intermodal geographic footprint through acquisitions as well as greenfield start-ups where no suitable acquisition is available. Our operations, particularly our network of hubs and terminals, represent substantial fixed costs. Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound or shipment for the freight shipped or moved through our network. Additionally, our earnings depend on the growth of other services, such as LTL pickup and delivery, which will allow us to maintain revenue growth in a challenging freight environment. We continue to execute synergies across our services, particularly with services offered in the Expedited Freight segment. Synergistic opportunities include the ability to share resources, particularly our fleet resources. We monitor and analyze a number of key operating statistics in order to manage our business and evaluate our financial and operating performance. These key operating statistics are defined below and are referred to throughout the discussion of the financial results of our Expedited Freight and Intermodal reportable segments. Our key operating statistics should not be interpreted as better measurements of our results than income from operations as determined under U.S. generally accepted accounting principles. Within our Expedited Freight reportable segment, our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing LTL network. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour and door pounds handled per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology. Revenue per hundredweight is also a commonly-used indicator for general pricing trends in the LTL industry and can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul. Therefore, changes in revenue per hundredweight may not necessarily indicate actual changes in underlying base rates. We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges. The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S. Department of Energy. We believe our yield management process focused on account level profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to grow profitably. The key operating statistics necessary to understand the operating results of our Expedited Fright reportable segment are described below in more detail: Tonnage - Total weight of shipments in pounds. The level of freight tonnage is affected by economic cycles and conditions, customers’ business cycles, changes in customers’ business practices and capacity in the truckload market. Weight Per Shipment - Total pounds divided by the number of shipments. Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of 23 transportation, such as truckload, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight. Revenue Per Hundredweight - Network revenue per every 100 pounds of shipment weight. Our LTL transportation services are generally priced based on weight, commodity, and distance. Our pricing policies are reflective of the services we provide, and can be influenced by competitive market conditions. Changes in the freight profile factors such as average shipment size, average length of haul, freight density, and customer and geographic mix can impact the revenue per hundredweight. Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement. Revenue Per Shipment - Network revenue divided by the number of shipments. Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement. Average Length of Haul - Total miles between origin and destination service centers for all shipments, with miles based on the size of shipments. Length of haul is used to analyze our tonnage and pricing trends for shipments with similar characteristics. Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight. Within our Intermodal reportable segment, our primary revenue focus is to increase the number of shipments. The key operating statistic necessary to understand the operating results of our Intermodal reportable segment is described below in more detail: Drayage Revenue Per Shipment - Intermodal revenue divided by the number of drayage shipments. Revenue derived from container freight station warehouse and handling, and linehaul and LTL services is excluded from this measurement. Fuel surcharges and accessorial charges are included in this measurement. On April 23, 2020, our Board of Directors (the “Board ”) approved a strategy to divest of the Pool Distribution business (“Pool ” ), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for the prior period. Unless otherwise noted, amounts, percentages and discussion for the prior period reflect the results of operations, financial condition and cash flows from our continuing operations. Refer to Note 3, Discontinued Operation , to our Condensed Consolidated Financial Statements for further discussion. Trends and Developments COVID-19 Our business is highly susceptible to changes in the economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to the financial markets. Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide. As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services. Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of a vaccine and vaccination rates. The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition in 2022 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. In addition, although we believe we have sufficient capital and liquidity to manage our business over the short- and long-term, our liquidity may be materially affected if conditions in the credit and financial markets deteriorate as a result of COVID-19 including failure by us or our customers to secure any necessary financing in a timely manner. 24 Labor Shortages Like many other businesses affected by current macroeconomic conditions, we are experiencing a labor shortage relating to our employee drivers, terminal and dock workers and otherwise throughout our business and operations. We are also operating in an environment where competition is intense for independent fleet owner-operators, creating shortages in the marketplace. These factors have adversely affected our operations, by increasing our operational costs for labor and purchased transportation. The steps we have taken to address these shortages include paying sign-on bonuses, and offering enhanced wages in select competitive markets. These measures have increased costs in certain areas of our business. We will continue to mitigate the effects of the labor shortages and other inflationary conditions through similar actions. Fuel We depend heavily upon the availability of adequate diesel fuel supplies, and recently, fuel availability and prices have fluctuated significantly. Fuel availability and prices can be impacted by factors beyond our control, such as natural or man-made disasters, adverse weather conditions, political events, economic sanctions imposed against oil-producing countries or specific industry participants, disruptions or failure of technology or information systems, price and supply decisions by oil producing countries and cartels, terrorist activities, armed conflict, tariffs, sanctions, other changes to trade agreements and world supply and demand imbalance. Through our fuel surcharge programs, we have been able to mitigate the impact of fluctuations in fuel prices. Our fuel surcharge rates are set weekly based on the national average for fuel prices as published by the U.S. Department of Energy and our fuel surcharge table. In periods of changing fuel prices, our fuel surcharges vary by different degrees and may not fully offset fuel price fluctuations. Fuel shortages, changes in fuel prices, and the potential volatility in fuel surcharge revenue may impact our results of operations and overall profitability. Environmental Protection and Community Support We embrace a comprehensive definition of sustainability that addresses Environmental, Social, and Governance factors (“ESG”). To our employees, our communities, our customers, our suppliers, and our investors, each impact area matters. The following are the ten ESG topic priority areas we identified relevant to our business and the foundation for our sustainability approach: • Roadway Health and Safety; Workplace Health and Safety; Independent Contractor Practices; Diversity and Inclusion Practices; Community Impact and Partnerships; Measure and Disclose; Information Security; Responsible Supplier Practices; Green House Gas (“GHG”) Emissions Reduction Practices; and Air Quality Practices We are committed to supporting and giving back to the communities where we live and work, particularly through the support of our employee Veterans, and to the community of Veterans in North America. We continue to support our Veterans through our charitable organization, Operation: Forward Freedom, a manifestation of our ongoing commitment to Veteran-related causes. Operation Forward Freedom’s largest fundraising event is intended to be The Inaugural Drive for Hope Golf tournament. In 2020 and 2021, the Inaugural Drive For Hope Golf Tournament was postponed due to COVID-19. The Drive For Hope Golf Tournament is scheduled to take place in May 2022. In addition, we partner with non-profit organizations that positively impact our communities and our industry. Through our partnership with Truckers Against Trafficking, we have conducted training for over-the-road drivers to educate and equip them with the tools needed to combat human trafficking. We also partner with Women in Trucking to encourage and promote the employment of women within our industry. Our team of drivers is currently comprised of 15% women, roughly twice the U.S. industry average, and we continue to seek opportunities to improve upon that percentage. We are committed to promoting a healthier natural environment by striving for continuous environmental improvements in all aspects of our business. We are currently reducing emissions and energy consumption through several ongoing programs and are committed to tracking and reducing our GHG emissions and improving energy efficiency. We are also aligning with industry certifications, continuing to be a SmartWay certified company. SmartWay is a certification from the U.S. Environmental Protection Agency (“EPA”) verifying company compliance with EPA regulations, including fuel efficiency ranges and emission standards. In 2021, we published our first ESG Report outlining our commitments and associated focus areas. Since publication, we have been focused on data aggregation. In our future reporting, we will incorporate data requirements identified by widely accepted sustainability frameworks and set measurable targets and goals for our priority areas. We are committed to making our results count across the country and will continue to update our future disclosures accordingly. 25 Table of Contents Results from Operations The following table sets forth our consolidated financial data for the three months ended March 31, 2022 and 2021 (unaudited and in thousands): Three Months Ended March 31, 2022 March 31, 2021 Change Percent Change Operating revenues: Expedited Freight $ 376,591 $ 304,186 $ 72,405 23.8 % Intermodal 90,440 58,514 31,926 54.6 Eliminations and other operations (70) (498) 428 (85.9) Operating revenues 466,961 362,202 104,759 28.9 Operating expenses: Purchased transportation 224,832 184,608 40,224 21.8 Salaries, wages, and employee benefits 86,081 74,897 11,184 14.9 Operating leases 22,673 19,167 3,506 18.3 Depreciation and amortization 11,130 9,237 1,893 20.5 Insurance and claims 11,968 9,741 2,227 22.9 Fuel expense 5,865 3,702 2,163 58.4 Other operating expenses 47,061 38,126 8,935 23.4 Total operating expenses 409,610 339,478 70,132 20.7 Income (loss) from continuing operations: Expedited Freight 47,680 24,530 23,150 94.4 Intermodal 11,146 4,509 6,637 147.2 Other Operations (1,475) (6,315) 4,840 (76.6) Income from continuing operations 57,351 22,724 34,627 152.4 Other expense: Interest expense (784) (1,165) 381 (32.7) Total other expense (784) (1,165) 381 (32.7) Income from continuing operations before income taxes 56,567 21,559 35,008 162.4 Income tax expense 13,881 4,845 9,036 186.5 Net income from continuing operations 42,686 16,714 25,972 155.4 Loss from discontinued operation, net of tax — (5,533) 5,533 (100.0) Net income and comprehensive income $ 42,686 $ 11,181 $ 31,505 281.8 % 26 Table of Contents Revenues Operating revenues increased $104,759, or 28.9%, to $466,961 for the three months ended March 31, 2022 compared to $362,202 for the three months ended March 31, 2021. The increase was driven by an increase in our Expedited Freight segment of $72,405 due to increased Network, Truckload and Final Mile revenue and in our Intermodal segment of $31,926 due to increased drayage and accessorial revenues. Operating Expenses Operating expenses increased $70,132, or 20.7%, to $409,610 for the three months ended March 31, 2022 compared to $339,478 for the three months ended March 31, 2021. The increase was primarily driven by an increase in purchased transportation expense of $40,224, salaries, wages and employee benefits of $11,184 and other operating expenses of $8,935 in both our Expedited Freight and Intermodal segments. Purchased transportation expense includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carrier (“Leased Capacity Providers ”) and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. Purchased transportation expense increased due to the utilization of more third party carriers over the prior year and higher third party carrier costs. Salaries, wages and employee benefits increased primarily due to the additional employees hired in response to the increase in volumes for the first quarter of 2022, and an increased reserve for incentive compensation. Other operating expenses increased due to higher bad debt expense, travel expenses, recruiting costs, and terminal and office expenses, offset by lower legal and professional fees. Other operating expenses also increased due to additional expenses incurred to support the increased accessorial revenues as noted above for the Intermodal segment. Income from Continuing Operations and Segment Operations Income from continuing operations increased $34,627, or 152.4%, to $57,351 for the three months ended March 31, 2022 compared to $22,724 for the three months ended March 31, 2021. The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $23,150 and $6,637, respectively. The results of our two reportable segments are discussed below in more detail. Interest Expense Interest expense was $784 for the three months ended March 31, 2022 compared to $1,165 for the three months ended March 31, 2021. The decrease in interest expense was due to a lower variable interest rate during the first quarter of 2022, partially offset by higher borrowings outstanding under our credit facility during the first quarter of 2022. The interest rate on the outstanding borrowings under our credit facility was 1.44% and 3.25% during the three months ended March 31, 2022 and 2021, respectively. Income Taxes on a Continuing Basis The effective tax rate on a continuing basis for the three months ended March 31, 2022 was 24.5% compared to 22.5% for the three months ended March 31, 2021. The higher effective tax rate for the three months ended March 31, 2022 was primarily due to decreased excess tax benefits realized on share-based awards in 2022 compared to the same period in 2021. Loss from Discontinued Operation, net of tax Loss from discontinued operation, net of tax was $— for the three months ended March 31, 2022 compared to a loss from discontinued operation, net of tax of $5,533 for the three months ended March 31, 2021. Loss from discontinued operation includes our Pool business and, as discussed above, the Pool business was sold on February 12, 2021. Net Income As a result of the foregoing factors, net income increased $31,505, or 281.8%, to $42,686 for the three months ended March 31, 2022 compared to $11,181 for the three months ended March 31, 2021. 27 Table of Contents Expedited Freight - Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021 The following table sets forth the financial data of our Expedited Freight segment for the three months ended March 31, 2022 and 2021 (unaudited and in thousands): Three Months Ended March 31, 2022 Percent of Revenue March 31, 2021 Percent of Revenue Change Percent Change Operating revenues: Network 1 $ 243,414 64.6 % $ 178,627 58.7 % $ 64,787 36.3 % Truckload 55,908 14.8 52,380 17.2 3,528 6.7 Final Mile 65,758 17.5 62,256 20.5 3,502 5.6 Other 11,511 3.1 10,923 3.6 588 5.4 Total operating revenues 376,591 100.0 304,186 100.0 72,405 23.8 Operating expenses: Purchased transportation 200,034 53.1 164,364 54.0 35,670 21.7 Salaries, wages and employee benefits 68,220 18.1 61,687 20.3 6,533 10.6 Operating leases 15,731 4.2 14,218 4.7 1,513 10.6 Depreciation and amortization 7,481 2.0 6,798 2.2 683 10.0 Insurance and claims 8,751 2.3 7,611 2.5 1,140 15.0 Fuel expense 2,650 0.7 1,993 0.7 657 33.0 Other operating expenses 26,044 6.9 22,985 7.6 3,059 13.3 Total operating expenses 328,911 87.3 279,656 91.9 49,255 17.6 Income from operations $ 47,680 12.7 % $ 24,530 8.1 % $ 23,150 94.4 % 1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue. 28 Table of Contents Expedited Freight Operating Statistics Three Months Ended March 31, 2022 March 31, 2021 Percent Change Business days 64 63 1.6 % Tonnage 1,2 Total pounds 717,611 651,339 10.2 Pounds per day 11,213 10,339 8.5 Shipments 1,2 Total shipments 892 1,026 (13.1) Shipments per day 13.9 16.3 (14.7) Weight per shipment 804 635 26.6 Revenue per hundredweight 3 $ 32.67 $ 27.56 18.5 Revenue per hundredweight, ex fuel 3 $ 26.74 $ 23.86 12.1 Revenue per shipment 3 $ 265.23 $ 174.30 52.2 Revenue per shipment, ex fuel 3 $ 217.53 $ 150.82 44.2 1 In thousands 2 Excludes accessorial, Truckload and Final Mile products 3 Includes intercompany revenue between the Network and Truckload revenue streams 29 Table of Contents Operating Revenues Expedited Freight operating revenues increased $72,405, or 23.8%, to $376,591 for the three months ended March 31, 2022 from $304,186 for the three months ended March 31, 2021. The increase was attributable to increased Network, Truckload and Final Mile revenue. Network revenue increased due to a 10.2% increase in tonnage and an 18.5% increase in revenue per hundredweight as compared to the prior year. The increase in tonnage reflects an increase in weight per shipment of 26.6% on 13.1% fewer number of shipments. The increase in the weight per shipment was the result of more dense freight in our network driven by our freight rationalization actions to capture higher quality freight. The increase in the revenue per hundredweight was driven by the execution of our revenue growth strategies, pricing initiatives, including our general rate increase, and continued strong demand for our services. Fuel surcharge revenue increased $22,119, or 80.5% as a result of the rise in diesel fuel prices and an increase in tonnage. Truckload and Final Mile revenue increased $3,528 and $3,502, respectively, primarily due to continued strong demand for our services. Other revenue, which includes warehousing and terminal handling, increased $588 due to higher linehaul tonnage. Purchased Transportation Expedited Freight purchased transportation increased $35,670, or 21.7%, to $200,034 for the three months ended March 31, 2022 from $164,364 for the three months ended March 31, 2021. Purchased transportation was 53.1% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 54.0% for the same period in 2021. Expedited Freight purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation was due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services, and higher third party carrier costs. In the first quarter of 2022, we purchased 62.5%, 34.0% and 3.5% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 68.5%, 27.6% and 3.9% in the same period in 2021. Salaries, Wages and Employee Benefits Expedited Freight salaries, wages and employee benefits increased $6,533, or 10.6%, to $68,220 for the three months ended March 31, 2022 from $61,687 for the three months ended March 31, 2021. Salaries, wages and employee benefits were 18.1% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 20.3% for the same period in 2021. The increase in salaries, wages and employee benefits expense was due to the additional employees hired in response to the increased volumes in the first quarter of 2022 and an increased reserve for incentive compensation as compared to the same period in 2021. Operating Leases Expedited Freight operating leases increased $1,513, or 10.6%, to $15,731 for the three months ended March 31, 2022 from $14,218 for the three months ended March 31, 2021. Operating leases were 4.2% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 4.7% for the same period in 2021. The increase in operating leases expense was primarily due to higher facility expense in the first quarter of 2022 as compared to the same period in 2021 . Depreciation and Amortization Expedited Freight depreciation and amortization increased $683, or 10.0%, to $7,481 for the three months ended March 31, 2022 from $6,798 for the three months ended March 31, 2021. Depreciation and amortization was 2.0% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 2.2% for the same period in 2021. The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation in the first quarter of 2022 as compared to the same period in 2021 . Insurance and Claims Expedited Freight insurance and claims increased $1,140, or 15.0%, to $8,751 for the three months ended March 31, 2022 from $7,611 for the three months ended March 31, 2021. Insurance and claims was 2.3% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 2.5% for the same period in 2021. The increase in insurance and claims expense was primarily due to an increase in vehicle repairs and cargo claims in the first quarter of 2022 as compared to the same period in 2021 . See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below. 30 Table of Contents Fuel Expense Expedited Freight fuel expense increased $657, or 33.0%, to $2,650 for the three months ended March 31, 2022 from $1,993 for the three months ended March 31, 2021. Fuel expense was 0.7% of Expedited Freight operating revenues for both the three months ended March 31, 2022 and 2021. Expedited Freight fuel expense increased due to a rise in the average price of fuel in the first quarter of 2022 as compared to the same period in 2021. Other Operating Expenses Expedited Freight other operating expenses increased $3,059, or 13.3%, to $26,044 for the three months ended March 31, 2022 from $22,985 for the three months ended March 31, 2021. Other operating expenses were 6.9% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 7.6% for the same period in 2021. Other operating expenses include equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs. The increase in other operating expenses was driven by an increase in equipment maintenance costs, terminal and office expenses, recruiting costs, legal and professional fees and travel expenses in the first quarter of 2022 as compared to the same period in 2021. Income from Operations Expedited Freight income from operations increased $23,150, or 94.4%, to $47,680 for the three months ended March 31, 2022 compared to $24,530 for the three months ended March 31, 2021. Income from operations was 12.7% of Expedited Freight operating revenues for the three months ended March 31, 2022 compared to 8.1% for the same period in 2021. The increase in income from operations as a percentage of operating revenues was driven by increased tonnage and revenue per hundredweight combined with higher fuel surcharge revenue, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers and higher third party carrier costs. 31 Table of Contents Intermodal - Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021 The following table sets forth the financial data of our Intermodal segment for the three months ended March 31, 2022 and 2021 (unaudited and in thousands): Three Months Ended March 31, 2022 Percent of Revenue March 31, 2021 Percent of Revenue Change Percent Change Operating revenues $ 90,440 100.0 % $ 58,514 100.0 % $ 31,926 54.6 % Operating expenses: Purchased transportation 24,868 27.5 20,603 35.2 4,265 20.7 Salaries, wages and employee benefits 17,935 19.8 14,063 24.0 3,872 27.5 Operating leases 6,941 7.7 4,837 8.3 2,104 43.5 Depreciation and amortization 3,610 4.0 2,436 4.2 1,174 48.2 Insurance and claims 2,060 2.3 2,402 4.1 (342) (14.2) Fuel expense 3,215 3.6 1,710 2.9 1,505 88.0 Other operating expenses 20,665 22.8 7,954 13.6 12,711 159.8 Total operating expenses 79,294 87.7 54,005 92.3 25,289 46.8 Income from operations $ 11,146 12.3 % $ 4,509 7.7 % $ 6,637 147.2 % Intermodal Operating Statistics Three Months Ended March 31, 2022 March 31, 2021 Percent Change Drayage shipments 88,312 89,909 (1.8) % Drayage revenue per shipment 1 $ 890 $ 553 60.9 % 1 Excludes revenue derived from container freight station warehouse and handling, and linehaul and LTL services. 32 Table of Contents Revenues Intermodal operating revenues increased $31,926, or 54.6%, to $90,440 for the three months ended March 31, 2022 from $58,514 for the three months ended March 31, 2021. The increase in operating revenues was primarily attributable to a 60.9% increase in drayage revenue per shipment over the same period in 2021. The increase in drayage per shipment was driven by execution of our growth strategies, pricing initiatives, the acquisition of BarOle Trucking, Inc. in November 2021, higher accessorial revenue to support our customers and continued strong demand for our services. Purchased Transportation Intermodal purchased transportation increased $4,265, or 20.7%, to $24,868 for the three months ended March 31, 2022 from $20,603 for the three months ended March 31, 2021. Purchased transportation was 27.5% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 35.2% for the same period in 2021. Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation costs was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers, and higher third party carrier costs. Salaries, Wages and Employee Benefits Intermodal salaries, wages and employee benefits increased $3,872, or 27.5%, to $17,935 for the three months ended March 31, 2022 compared to $14,063 for the three months ended March 31, 2021. Salaries, wages and employee benefits were 19.8% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 24.0% for the same period in 2021. The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in drayage shipments in the first quarter of 2022 and an increased reserve for incentive compensation as compared to the same period in 2021. Operating Leases Intermodal operating leases increased $2,104, or 43.5%, to $6,941 for the three months ended March 31, 2022 compared to $4,837 for the three months ended March 31, 2021. Operating leases were 7.7% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 8.3% for the same period in 2021. The increase in operating leases expense was primarily due to new equipment leases in the first quarter of 2022 as compared to the same period in 2021. Depreciation and Amortization Intermodal depreciation and amortization increased $1,174, or 48.2%, to $3,610 for the three months ended March 31, 2022 from $2,436 for the three months ended March 31, 2021. Depreciation and amortization was 4.0% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 4.2% for the same period in 2021 . The increase in depreciation and amortization expense was primarily due to the additional depreciation and amortization expense as result of the equipment and intangible assets acquired in connection with the acquisitions completed in 2021. Insurance and Claims Intermodal insurance and claims decreased $342, or 14.2%, to $2,060 for the three months ended March 31, 2022 from $2,402 for the three months ended March 31, 2021. Insurance and claims were 2.3% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 4.1% for the same period in 2021. The decrease in insurance and claims expense was primarily due to a decrease in insurance premiums and vehicle liability claims during the first quarter of 2022 as compared to the same period in 2021. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below. Fuel Expense Intermodal fuel expense increased $1,505, or 88.0%, to $3,215 for the three months ended March 31, 2022 from $1,710 for the three months ended March 31, 2021. Fuel expense was 3.6% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 2.9% for the same period in 2021. Intermodal fuel expense increased due to the rise in the average price of fuel in the first quarter of 2022 as compared to the same period in 2021. 33 Table of Contents Other Operating Expenses Intermodal other operating expenses increased $12,711, or 159.8%, to $20,665 for the three months ended March 31, 2022 from $7,954 for the three months ended March 31, 2021. Other operating expenses were 22.8% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 13.6% for the same period in 2021. The increase in Intermodal other operating expenses was driven by additional expenses incurred to support the increased accessorial revenues, increased bad debt expense and higher travel expenses in the first quarter of 2022 as compared to the same period in 2021. Income from Operations Intermodal income from operations increased $6,637, or 147.2%, to $11,146 for the three months ended March 31, 2022 compared to $4,509 for the three months ended March 31, 2021. Income from operations was 12.3% of Intermodal operating revenues for the three months ended March 31, 2022 compared to 7.7% for the same period in 2021. The increase in income from operations as a percentage of operating revenues was driven by increased drayage revenue per shipment, partially offset by partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers and higher third party carrier costs. Other Operations - Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021 Other operations included an $1,475 operating loss during the three months ended March 31, 2022 compared to an $6,315 operating loss during the three months ended March 31, 2021. The change in the operating loss was driven by decreased professional fees related to cybersecurity and shareholder engagement activities, partially offset by an increased reserve for an incentive program established for employees in 2021 and higher self-insurance reserves for vehicle liability claims. The change in self-insurance reserves for vehicle liability claims was due to the unfavorable loss development factor of historical claims. 34 Table of Contents Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP ” ). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and expenses during the reporting period. On an ongoing basis, management evaluates estimates, including those related to allowance for doubtful accounts and revenue adjustments, deferred income taxes and uncertain tax positions, goodwill, other intangible and long-lived assets, and self-insurance loss reserves. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions. A description of critical accounting policies and related judgments and estimates that affect the preparation of the Condensed Consolidated Financial Statements is set forth in the Annual Report on Form 10-K for the year-ended December 31, 2021. Liquidity and Capital Resources We have historically financed our working capital needs, including capital expenditures, with available cash, cash flows from operations and borrowings under our credit facility. We believe that borrowings under our credit facility, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. To further support liquidity and cash reserves, in December 2021, we entered into a third amendment to our credit facility, which increased the amount available for borrowing to $450,000, consisting of $300,000 revolving line of credit and a term loan of $150,000. The amendment establishes annual mandatory repayment of the principal amount of the term loan of: 1.0% per annum in 2022 and 2023; 2.5% per annum in 2024 and 2025; 5.0% per annum in 2026; with the remaining unpaid principal being due on July 20, 2026. As of March 31, 2022, we were in compliance with our financial convents contained in the credit facility and expect to maintain such compliance. In the event that we encounter difficulties, our historical relationships with our lenders has been strong and we anticipate their continued long-term support of our business. Refer to Note 7, Indebtedness, to our Condensed Consolidated Financial Statements for additional information regarding our credit facility. Cash Flows Continuing Operations Net cash provided by operating activities of continuing operations was $62,486 for the three months ended March 31, 2022 compared to $16,913 for the three months ended March 31, 2021. The increase in net cash provided by operating activities of continuing operations was primarily due to the increase in net income from continuing operations after consideration of non-cash items, and accounts payable and accrued expenses, partially offset by an increase in accounts receivable. The accounts payable and accrued expenses changed primarily due to an increase in estimated taxes payables, and the accounts receivable balance changed due to the increase in operating revenues. Net cash used in investing activities of continuing operations was $9,397 for the three months ended March 31, 2022 compared to $17,030 for the three months ended March 31, 2021. Capital expenditures for the first three months of 2022 were $9,908, which primarily related to the organic investment in the expansion of our national hub in Columbus, Ohio and for the purchase of technology equipment. Capital expenditures for the first three months of 2021 were $2,695, which primarily related to the organic investment in the expansion of our national hub in Columbus, Ohio. Investing activities of continuing operations for the first three months of 2021 included the acquisition of Proficient Transport for a preliminary purchase price of $15,000. Net cash used in financing activities of continuing operations was $28,775 for the three months ended March 31, 2022 compared to $15,741 for the three months ended March 31, 2021. The change in the net cash used in financing activities of continuing operations was primarily due to increased repurchases and retirement of common stock for the first three months of 2022 as compared to the same period in 2021. 35 Table of Contents Discontinued Operation Net cash used in operating activities of discontinued operation was $— for the three months ended March 31, 2022 compared to $6,902 for the three months ended March 31, 2021. The change in net cash used in operating activities of discontinued operation was primarily related to a decrease in net income of discontinued operation after consideration of non-cash items. The sale of Pool was completed on February 12, 2021. Net cash provided by investing activities of discontinued operation was $— for the three months ended March 31, 2022 compared to $8,020 for the three months ended March 31, 2021. The change in the net cash provided by investing activities of discontinued operation was due to the proceeds received from the sale of the Pool business during the first three months of 2021 . The sale of Pool was completed on February 12, 2021. Net cash used in financing activities of discontinued operation was $— for the three months ended March 31, 2022 compared to $1,118 for the three months ended March 31, 2021. The change in the net cash used in financing activities of discontinued operation was due to decreased contributions to the parent. The sale of Pool was completed on February 12, 2021. Share Repurchase Program During the three months ended March 31, 2022 and 2021, we repurchased 176 and 114 shares of our common stock, respectively, for approximately $17,780 and $9,997, respectively, through open market transactions. All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Retained Earnings” in our Condensed Consolidated Balance Sheets. 36 Table of Contents Forward-Looking Statements This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition, our pursuit of new revenue opportunities and steps to bolster our liquidity; any projections of earnings, revenues, dividends, or other financial items or methods of interpretation or measurement; plans, strategies, and objectives of management for future operations; future performance, including our ability to grow profitability; future insurance, claims and litigation and any associated estimates or projections; proposed or intended new services or developments and related integration costs; intended expansion, future economic conditions or performance based on our business strategy, including acquisitions; future macroeconomic conditions, including but not limited to, labor shortages and our ability to successfully address such conditions; the sufficiency of our credit facility; our ESG and sustainability initiatives and operations; certain tax and accounting matters, including the impact on our financial statements; and any belief and any assumptions underlying any of the foregoing. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the impact of the COVID-19 pandemic on our business, results of operations and financial condition, the creditworthiness of our customers and their ability to pay for services rendered, more limited liquidity than expected which limits our ability to make key investments, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2021. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 37 Table of Contents