Forward Air Corp: Form 10-Q for the period ended Jun 30, 2025

Overview

We are a leading asset-light freight provider of transportation services, including LTL, truckload and intermodal drayage services across the United States and in Canada and Mexico. 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. Globally, we provide customized asset-light, high-touch logistics and supply chain management solutions with deep customer relationships in high-growth end markets.

Our services are classified into three reportable segments: Expedited Freight, Omni Logistics 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 truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

Our Omni Logistics segment provides a full suite of global logistics services. Services include air and ocean freight consolidation and forwarding, customs brokerage, warehousing and distribution, time-definite transportation services and other supply chain solutions.

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 CFS warehouse and handling services, and in select locations, linehaul and LTL services.

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 focus on creating synergies across our services, particularly with services offered in our Expedited Freight reportable segment. Synergistic opportunities include the ability to share resources, in particular our fleet resources.

With respect to our Expedited Freight and Intermodal reportable segments, in addition to our financial results, we monitor and analyze a number of key operating statistics in order to manage these businesses and evaluate the operating performance of these reportable segments. 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 GAAP. As we continue to integrate the legacy Omni business, we measure and manage the performance of the Omni Logistics segment based on its revenue and income. We have not identified, nor do we utilize, any key operating statistics necessary to understand the operating results of our Omni Logistics reportable segment.

As we continue to integrate the Omni and Forward businesses, we are also developing how we organize and manage our product offerings. While we continue to manage the business by our disclosed segments below, we have information available to estimate revenue for key product groups for the period ended December 31, 2024. Estimated revenue for ground transportation, air & ocean forwarding, intermodal drayage, and warehousing/value-added service approximated 70%, 12%, 9%

and 9% of operating revenue, respectively during 2024.

Key Operating Statistics

Within our Expedited Freight reportable segment, our primary revenue focus is to optimize density, which is to obtain appropriate pricing of our services that allows for profitable shipments 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 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 the petroleum-based products used in our operations by passing changes in such costs on to customers and is indexed to diesel fuel prices published by the U.S. Department of Energy on a weekly basis. The impact of fuel on our results of operations depends on the relationship between the applicable surcharge, the fuel efficiency of our Company drivers, and the load factor achieved by our operation. Fluctuations in fuel prices in either direction could have a positive or negative impact on our margins, particularly in our LTL business where the weight of a shipment subject to the fuel surcharge on a given trailer can vary materially. 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 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.

Trends and Developments

Economy

Our business is highly susceptible to changes in economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the global economy. Participants in the transportation industry have historically experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of customers, volatility in the prices charged by third-party carriers, interest rate fluctuations and other U.S. and global macroeconomic developments. During economic downturns, reductions in overall demand for transportation services will likely reduce demand for our services and exert downward pressure on our rates and margins. In periods of strong economic growth, overall demand may exceed the available supply of transportation resources. While this may present an opportunity to increase economies of scale in our network and enhanced pricing and margins, these benefits may be lessened by increased network congestion and operating inefficiencies.

Like other providers of freight transportation services, our business has been impacted by the macroeconomic conditions of the past year. Industry freight volumes, as measured by the Cass Freight Index, decreased in first and second quarters of 2025 compared to the comparable periods in 2024. Recent global disruptions, including proposed changes and implemented changes to tariff rates, as described below, have had an impact on freight demand, which has led to an overall continued decrease in total number of shipments. Such disruptions are expected to continue with a resolution timeline remaining unclear. Intermodal volumes, heavily influenced by United States imports, have increased due to a number of factors that impact import levels. For Truckload, capacity levels relative to demand has created a sustained market of depressed spot market truckload rates.

Amid broader volatility in the global economy, the U.S. government has recently proposed and imposed significant widespread baseline and country-specific tariffs on imported goods from China, Canada, and other countries. While the implementation of certain country-specific tariffs with most countries has been delayed as negotiations progress, the extent of the risk of tariffs remains uncertain. While the ultimate impact of tariff policy changes is unclear, the Company is actively monitoring these developments and remains committed to taking appropriate measures to maintain its competitiveness and adapt to changing economic conditions.

Strategic Review

In January 2025, the Board announced that it had initiated a comprehensive review of strategic alternatives to maximize shareholder value. The Board will consider a range of options, including a potential sale, merger or other strategic or financial transaction relative to the long-term value potential of the Company on a standalone basis. The Board has retained Goldman Sachs & Co. LLC to serve as its financial advisor. The Board has not set a timetable for the conclusion of this review, nor has it made any decisions related to any further actions or potential strategic alternatives at this time. There can be no assurance that any transaction or other strategic outcome will be approved by the Board or otherwise consummated. The Company does not intend to disclose developments relating to this process until it determines that further disclosure is appropriate or necessary.

Omni Integration

On January 25, 2024, the Company completed the acquisition (the “Closing”) of Omni Newco, LLC ("Omni" and the acquisition of Omni, the "Omni Acquisition"), after which, we disclosed certain expectations regarding potential synergies from the acquisition and highlighted issues that would have to be addressed as we execute on the Omni integration, which issues are described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, “Risk Factors” - under the title “The Omni Acquisition may not achieve its intended benefits, and certain difficulties, costs or expenses may outweigh such intended benefits.” Since that time, we have made significant progress on our integration plans and exceeded our initial expectations regarding cost synergies. However, there are continued uncertainties that may affect our ability to successfully complete the full integration of the Omni business or realize its anticipated long-term benefits including revenue synergies. Specifically, we are continuing to integrate operational and administrative technology platforms and systems which are critical to our operational processes and administrative functions, as well as customer service and experience. In addition, as previously disclosed, we are implementing a strategic review of the combined business which includes evaluating and integrating the solutions and service offerings available to our customers in order to maximize revenues and efficiencies. Finally, we continue to execute on strategies to retain existing customers and vendors as we finalize our strategic review and implement any resulting changes to our business and operations.

Factors Affecting Comparability

Omni Acquisition

See Note 2, Acquisitions and Umbrella Partnership C Structure, to our condensed consolidated financial statements for more information about our acquisitions.

Omni Logistics revenues and segment income from January 25, 2024 through June 30, 2024 are included in our condensed consolidated statements of operations for the six months ended June 30, 2024. The changes in our results of operations for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 are primarily driven by fewer days of ownership of Omni in the prior year period as compared to the current year period.

Results from Operations

The following table sets forth our consolidated financial data for the three months ended June 30, 2025 and 2024 (unaudited and in thousands):

Operating Revenues

Operating revenues decreased $24,822, or 3.9%, to $618,844 for the three months ended June 30, 2025 compared to $643,666 for the three months ended June 30, 2024. The decrease was primarily due to a decrease in our Expedited Freight segment of $33,586 due to decreased Network revenue. The results for our reportable segments are discussed in detail in the following sections.

Operating Expenses

Operating expenses decreased $1,140,099, or 65.5%, to $599,322 for the three months ended June 30, 2025 compared to $1,739,421 for the three months ended June 30, 2024. The decrease was primarily due to a goodwill impairment charge of $1,092,714 incurred in the prior year period.

Income (Loss) from Continuing Operations

Income (loss) from operations increased $1,115,277, or 101.8%, to income of $19,522 for the three months ended June 30, 2025 compared to a $1,095,755 loss for the three months ended June 30, 2024. The increase was primarily due to no goodwill impairment charge in the current year period relative to the $1,092,714 goodwill impairment charge in the prior year period.

Total Other Expense

Total other expense increased $10,977, or 24.0%, to expense of $56,635 for the three months ended June 30, 2025 compared to an expense of $45,658 for the three months ended June 30, 2024. The increase was due to the $6,863 charge related to the increase in the liabilities under the tax receivable agreement and the $6,220 negative impact from foreign currency exchange (loss) gain.

Income Taxes

The effective tax rate for the three months ended June 30, 2025 was 55.4% compared to 15.3% for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2025 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of interest expense disallowances under IRC Section 163(j) for which a full valuation allowance is recorded on the deferred tax asset, noncontrolling interest, and state and local income taxes. The effective tax rate for the three months ended June 30, 2024 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of the tax impact of the goodwill impairment charge, noncontrolling interest, non-deductible executive compensation, excess tax benefits realized on share-based awards, partially offset by state income taxes, net of the federal benefit, and foreign taxes.

(Loss) Income from Discontinued Operations, net of Tax

Loss from discontinued operations, net of tax of $4,876 for the three months ended June 30, 2024 was related to the final net working capital settlement following the sale of our Final Mile business in December 2023.

Net Loss

As a result of the foregoing factors, net loss decreased by $950,983, to a $20,364 for the three months ended June 30, 2025 compared to $971,347 net loss for the three months ended June 30, 2024.

Net Loss Attributable to Noncontrolling Interest

Noncontrolling interest in the three months ended June 30, 2025 and 2024 has been allocated based on the requirements of the umbrella partnership C corporation Clue Opco LLC where only foreign taxes are attributable to the noncontrolling interest when distributing the net losses among the partnership interests. The decrease in net loss attributable to noncontrolling interest for the three months ended June 30, 2025 compared to three months ended June 30, 2024 is being driven by the decrease in net loss and the decreasing number of noncontrolling units outstanding for the respective periods.

Expedited Freight - Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

The following table sets forth the financial data of our Expedited Freight segment for the three months ended June 30, 2025 and 2024 (unaudited and in thousands):

29

Expedited Freight Operating Statistics

30

Operating Revenues

Operating revenues decreased $33,586, or 11.5%, to $257,696 for the three months ended June 30, 2025 from $291,282 for the three months ended June 30, 2024. The decrease was primarily due to decreased Network revenue. Network revenue decreased due to a 12.7% decrease in pounds per day, partially offset by a 1.8% increase in revenue per hundredweight excluding fuel as compared to the same period in 2024. The decrease in tonnage reflects an increase in weight per shipment of 2.7% on 15.4% fewer shipments per day. The decrease in shipments is due to softer demand for our services while the increase in weight per shipment was the result of more dense freight in our network driven by a change in the mix of goods moved for our customers.

Purchased Transportation

Purchased transportation decreased $18,064, or 12.7%, to $124,448 for the three months ended June 30, 2025 from $142,512 for the three months ended June 30, 2024. Purchased transportation was 48.3% of Expedited Freight operating revenues for the three months ended June 30, 2025 compared to 48.9% for the same period in 2024. Expedited Freight purchased transportation includes Leased Capacity Providers and third-party motor carriers and transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits. The decrease in purchased transportation was primarily due to decreased shipments for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

Salaries, Wages and Employee Benefits

Salaries, wages and employee benefits decreased $9,907, or 15.5%, to $53,938 for the three months ended June 30, 2025 from $63,845 for the three months ended June 30, 2024. Salaries, wages and employee benefits were 20.9% of Expedited Freight operating revenues for the three months ended June 30, 2025 compared to 21.9% for the same period in 2024. The decrease in salaries, wages and employee benefits expense was primarily due to a decrease in Company-employed drivers and dock workers in response to fewer shipments for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, as well as headcount reductions as a result of acquisition integration synergies.

Other Operating Expenses

Other operating expenses decreased $5,262, or 21.8%, to $18,892 for the three months ended June 30, 2025 from $24,154 for the three months ended June 30, 2024. Other operating expenses were 7.4% of operating revenues for the three months ended June 30, 2024 compared to 8.3% for the same period in 2024. Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs. The decrease in other operating expenses was primarily due to acquisition integration synergies as well as reduction in shipments for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

Income from Operations

Income from operations decreased $2,451, or 11.2%, to $19,495 for the three months ended June 30, 2025 compared to $21,946 for the three months ended June 30, 2024. Income from operations was 7.6% of Expedited Freight operating revenues for the three months ended June 30, 2025 compared to 7.5% for the same period in 2024. The decrease in income from operations was driven by lower freight volumes which were not fully offset by cost decreases for the three months ended June 30, 2025, as compared to three months ended June 30, 2024.

Omni Logistics - Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

The following table sets forth the financial data of our Omni Logistics for the three months ended June 30, 2025 and 2024 (unaudited and in thousands):

Operating Revenues

Operating revenues increased $16,460, or 5.3%, to $328,316 for the three months ended June 30, 2025 from $311,856 for same period in 2024. This increase is mainly due to the increased demand for contract logistics and value-added services.

Purchased Transportation

Purchased transportation increased $6,366, or 3.6%, to $185,040 for the three months ended June 30, 2025 from $178,674 for the three months ended June 30, 2024. Purchased transportation was 56.4% of operating revenues for the three months ended June 30, 2025 compared to 57.3% for the same period in 2024. Purchased transportation increased primarily due to the increase in revenue, but decreased as a percentage of revenue due to a shift in product mix, which shift in product mix consisted of an increase in contract logistics and value-added services that require lower purchase transportation levels as compared to ground, air and ocean services.

Salaries, Wages and Employee Benefits

Salaries, wages and employee benefits increased $4,048 or 7.0%, to $61,584 for the three months ended June 30, 2025 from $57,536 for the three months ended June 30, 2024. Salaries, wages and employee benefits were 18.8% of operating revenues for the three months ended June 30, 2025 compared to 18.4% for the same period in 2024. Salaries, wages and employee benefits increased primarily due to the increase in operating revenues during the current year period.

Depreciation and Amortization

Depreciation and amortization decreased $10,816, or 32.5%, to $22,419 for the three months ended June 30, 2025 from $33,235 for the three months ended June 30, 2024. Depreciation and amortization decreased as a result of intangible amortization changes from measurement adjustments of the Omni Acquisition that occurred subsequent to three months ended June 30, 2024.

Other Operating Expenses

Other operating expenses decreased $525, or 2.1%, to $24,265 for the three months ended June 30, 2025 from $24,790 for the three months ended June 30, 2024. Other operating expenses were 7.4% of operating revenues for the three months ended June 30, 2024 compared to 7.9% for the same period in 2024. Other operating expenses decreased due to acquisition integration synergies.

Income from Operations

Income from operations increased $1,113,057 or 100.6%, to 7,186 for the three months ended June 30, 2025 compared to $1,105,871 of loss for the three months ended June 30, 2024. The increase was primarily due to no goodwill impairment charge in the current year period relative to the $1,092,714 goodwill impairment charge in the prior year period.

Intermodal - Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

The following table sets forth the financial data of our Intermodal segment for the three months ended June 30, 2025 and 2024 (unaudited and in thousands):

Intermodal Operating Statistics

33

Operating Revenues

Operating revenues decreased $153, or 0.3%, to $59,146 for the three months ended June 30, 2025 from $59,299 for the three months ended June 30, 2024. The decrease in operating revenues was primarily due to a 4.0% decrease in drayage shipments, offset by an increase in drayage revenue per shipment of 4.4% as compared to the same period in 2024.

Operating Leases

Operating leases increased $560, or 11.7%, to $5,336 for the three months ended June 30, 2025 compared to $4,776 for the three months ended June 30, 2024. Operating leases were 9.0% of Intermodal operating revenues for the three months ended June 30, 2025 compared to 8.1% for the same period in 2024. The increase in operating leases expense was primarily due to higher real estate lease costs for the second quarter of 2025 as compared to the same period in 2024.

Insurance and Claims

Insurance and claims increased $528, or 20.2%, to $3,147 for the three months ended June 30, 2025 from 2,619 for the three months ended June 30, 2024. The increase in insurance and claims was due to increased losses from property damage.

Other Operating Expenses

Other operating expenses decreased $1,105, or 19.9%, to $4,455 for the three months ended June 30, 2025 from $5,560 for the three months ended June 30, 2024. Other operating expenses were 7.6% of Intermodal operating revenues for the three months ended June 30, 2025 compared to 9.4% for the same period in 2024. The decrease in other operating expenses as a percentage of revenue was primarily driven by continued cost reduction efforts that began in the second half of 2024.

Income from Operations

Income from operations decreased $902, or 17.0%, to $4,415 for the three months ended June 30, 2025 compared to $5,317 for the three months ended June 30, 2024. Income from operations was 7.5% of Intermodal operating revenues for the three months ended June 30, 2025 compared to 9.0% for the same period in 2024. The decreased income from operations as a percentage of operating revenues was primarily due to increases in operating expenses with flat revenues.

Corporate - Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

Corporate included $11,574 of operating loss during the three months ended June 30, 2024 compared to $17,147 of operating loss during the three months ended June 30, 2024. The decrease in operating loss in Corporate was primarily due to the $4,070 decrease in transaction and integration costs in connection with the Omni Acquisition.

Results from Operations

The following table sets forth our consolidated financial data for the six months ended June 30, 2025 and 2024 (unaudited and in thousands):

35

Operating Revenues

Operating revenues increased $46,646, or 3.9% to $1,232,125 for the six months ended June 30, 2025 compared to $1,185,479 for the six months ended June 30, 2024. This increase was primarily due to the Omni Logistics segment having an extra twenty-four days included in 2025 as compared to 2024 given that the Omni Acquisition closed in January 2024. The increase in operating revenues was partially offset by a decrease in our Expedited Freight segment revenue of $57,500 due to decreased Network revenue. The results for our reportable segments are discussed in detail in the following sections.

Operating Expenses

Operating expenses decreased $1,139,126, or 48.5%, to $1,207,840 for the six months ended June 30, 2025 compared to $2,346,966 for the six months ended June 30, 2024. The decrease was primarily due to a goodwill impairment charge of $1,092,714 incurred in the prior year period and decreases in acquisition and integration costs associated with the Omni Acquisition. Such decreases were partially offset by the increase in operating expenses from the Omni Logistics segment having an extra twenty-four days included in the six months ended June 30, 2025 as compared to the same period in 2024.

Income (Loss) from Continuing Operations

Income (loss) from operations increased $1,185,772, or 102.1%, to $24,285 for the six months ended June 30, 2025 compared to the $1,161,487 loss for the six months ended June 30, 2024. The increase was primarily driven by the goodwill impairment charge from 2024 noted above, which did not occur in 2025.

Total Other Expense

Total other expense increased $15,930, or 18.3%, to expense of $103,000 for the three months ended June 30, 2025 compared to an expense of $87,070 for the three months ended June 30, 2024. The increase was due to the $6,863 charge related to the change in the liabilities under the tax receivable agreement and the impact of foreign currency exchange.

Income Taxes

The effective tax rate for the six months ended June 30, 2025 was (3.6)% compared to a rate of 15.6% for the six months ended June 30, 2024. The effective tax rate for the six months ended June 30, 2025 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of interest expense disallowances under IRC Section 163(j) for which a full valuation allowance is recorded on the deferred tax asset, noncontrolling interest, and state and local income taxes. The effective tax rate for the six months ended June 30, 2024 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect the tax impact of the goodwill impairment charge, noncontrolling interest, non-deductible executive compensation, excess tax benefits realized on share-based awards, partially offset by state income taxes, net of the federal benefit, and foreign taxes.

(Loss) Income from Discontinued Operations, net of Tax

Loss from discontinued operations, net of tax of $4,876 for the six months ended June 30, 2025 was related to the final net working capital settlement following the sale of our Final Mile business in December 2023.

Net Loss

As a result of the foregoing factors, net loss decreased $978,586, or 92.3%, to a net loss of $81,555 for the six months ended June 30, 2025 compared to a $1,060,141 net loss for the six months ended June 30, 2024.

Net Loss Attributable to Noncontrolling Interest

Noncontrolling interest in the six months ended June 30, 2025 and 2024 has been allocated based on the requirements of the umbrella partnership C corporation Clue Opco LLC where only foreign taxes are attributable to the noncontrolling interest when distributing the net losses among the partnership interests. The decrease in net loss attributable to noncontrolling interest for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, is being driven by the decrease in net loss and the decreasing number of noncontrolling units outstanding for the respective periods. Activity during the six months ended June 30, 2024 prior to the Omni transaction did not impact net loss attributable to noncontrolling interest.

Expedited Freight - Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

The following table sets forth the financial data of our Expedited Freight segment for the six months ended June 30, 2025 and 2024 (unaudited and in thousands):

37

Expedited Freight Operating Statistics

38

Operating Revenues

Operating revenues decreased $57,500, or 10.2%, to $507,077 for the six months ended June 30, 2025 from $564,577 for the six months ended June 30, 2024. The decrease was driven by decreased Network revenue. Network revenue decreased due to a 11.8% decrease in tonnage, partially offset by a 2.1% increase in revenue per hundredweight ex fuel as compared to the same period in the prior year. The decrease in tonnage reflects an increase in weight per shipment of 2.2% on 13.7% fewer shipments. The decrease in shipments is due to softer demand for our services while the increase in weight per shipment was the result of more dense freight in our network driven by a change in the mix of goods moved for our customers.

Purchased Transportation

Purchased transportation decreased $25,144, or 9.3%, to $245,128 for the six months ended June 30, 2025 from $270,272 for the six months ended June 30, 2024. Purchased transportation was 48.3% of Expedited Freight operating revenue for the six months ended June 30, 2025 compared to 47.9% for the same period in 2024. Purchased transportation includes Leased Capacity Providers, third-party motor carriers, and transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits. The decrease in purchased transportation was primarily due to decreased shipments for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

Salaries, Wages, and Employee Benefits

Salaries, wages and employee benefits decreased $19,883, or 15.7%, to $106,515 for the six months ended June 30, 2025 from $126,398 for the six months ended June 30, 2024. Salaries, wages and employee benefits were 21.0% of operating revenues for the six months ended June 30, 2025 compared to 22.4% for the same period in 2024. The decrease in salaries, wages and employee benefits expense was primarily due to the lower volumes for the six months ended June 30, 2025 as compared to the same period in 2024.

Other Operating Expenses

Other operating expenses decreased $8,342, or 17.0%, to $40,791 for the six months ended June 30, 2025 from $49,133 for the six months ended June 30, 2024. Other operating expenses were 8.1% of operating revenues for the six months ended June 30, 2025 compared to 8.7% for the same period in 2024. Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs. The decrease in other operating expenses was primarily due to acquisition integration synergies as well as reduction in shipments for six months ended June 30, 2025 as compared to the same period in 2024.

Income from Operations

Income from operations decreased $6,315, or 15.2%, to $35,129 for the six months ended June 30, 2025 compared to $41,444 for the six months ended June 30, 2024. Income from operations was 6.9% of operating revenues for the six months ended June 30, 2025 compared to 7.3% for the same period in 2024. The decrease in income from operations as a percentage of operating revenues was driven by lower freight volumes which were not fully offset by cost decreases for six months ended June 30, 2025 as compared to the same period in 2024.

Omni Logistics - Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

The following table sets forth the financial data of our Omni Logistics for the six months ended June 30, 2025 and 2024 (unaudited and in thousands):

Operating Revenues

Operating revenues increased $115,092, or 21.4%, to $651,786 for the six months ended June 30, 2025 from $536,694 for the six months ended June 30, 2024 partially due to the increase in ownership days during the current year period, as well as an increase in revenue per day during 2025 due to increased demand for contract logistics and value-added services.

Purchased Transportation

Purchased transportation increased $47,676, or 14.8%, to $370,774 for the six months ended June 30, 2025 from $323,098 for the six months ended June 30, 2024. Purchased transportation was 56.9% of operating revenues for the three months ended June 30, 2025 compared to 60.2% for the same period in 2024. Purchased transportation increased primarily due to the increase in ownership days and demand for our services during the current year period, but decreased as a percentage of revenue due to a shift in product mix, which shift in product mix consisted of an increase in contract logistics and value-added services that require lower purchase transportation levels as compared to ground, air and ocean services.

Salaries, Wages and Employee Benefits

Salaries, wages and employee benefits increased $12,056 or 11.3%, to $118,367 for the six months ended June 30, 2025 from $106,311 for the six months ended June 30, 2024. Salaries, wages and employee benefits were 18.2% of operating revenues for the six months ended June 30, 2025 compared to 19.8% for the same period in 2024. While salaries, wages and employee benefits increased mainly due to the increase in ownership days and demand for our services during the current year period, the rate of increase was lower than the revenue increases at Omni Logistics.

Depreciation and Amortization

Depreciation and amortization decreased $5,455 or 10.9%, to $44,649 for the six months ended June 30, 2025 from $50,104 for the six months ended June 30, 2024. Depreciation and amortization decreased as a result of intangible amortization changes from measurement adjustments of the Omni Acquisition that occurred subsequent to the six months ended June 30, 2024.

Other Operating Expenses

Other operating expenses increased $2,230, or 4.8%, to $48,891 for the six months ended June 30, 2025 from $46,661 for the six months ended June 30, 2024. Other operating expenses were 7.5% of operating revenues for the six months ended June 30, 2025 compared to 8.7% for the same period in 2024. While other operating expenses increased partially due to the increase in ownership days and demand for our services during the current year period, the rate of increase was lower than the revenue increases at Omni Logistics due to acquisition integration synergies.

Income from Operations

Income from operations increased $1,145,017 or 100.9%, to income of $10,561 for the six months ended June 30, 2025 compared to a $1,134,456 loss for the six months ended June 30, 2024. The increase was primarily due to no goodwill impairment charge in the current year period relative to the $1,092,714 goodwill impairment charge in the prior year period.

Intermodal - Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

The following table sets forth the financial data of our Intermodal segment for the six months ended June 30, 2025 and 2024 (unaudited and in thousands):

Intermodal Operating Statistics

41

Operating Revenues

Operating revenues increased $6,047, or 5.2%, to $121,638 for the six months ended June 30, 2025 from $115,591 for the six months ended June 30, 2024. The increase in operating revenues was primarily due to a 5.8% increase in drayage revenue per shipment as compared to the same period in 2024.

Purchased Transportation

Purchased transportation increased $3,609, or 9.9%, to $40,225 for the six months ended June 30, 2025 from $36,616 for the six months ended June 30, 2024. Purchased transportation was 33.1% of Intermodal operating revenues for the six months ended June 30, 2025 compared to 31.7% for the same period in 2024. Purchased transportation includes Leased Capacity Providers and third-party motor carriers, while Company-employed drivers are included in salaries, wages and employee benefits. Purchased transportation has increased based on several factors including changes in mix of internal vs external capacity utilization, length of haul, lane density, and mix of service providers.

Salaries, Wages, and Employee Benefits

Salaries, wages and employee benefits increased $1,335, or 4.5%, to $31,316 for the six months ended June 30, 2025 compared to $29,981 for the six months ended June 30, 2024. Salaries, wages and employee benefits were 25.7% of Intermodal operating revenues for the six months ended June 30, 2025 compared to 25.9% for the same period in 2024. Salaries, wages and employee benefits as increased due to similar variables as purchased transportation including mix of freight and other variable characteristics that impact labor utilization.

Operating Leases

Operating leases increased $1,646, or 17.4%, to $11,114 for the six months ended June 30, 2025 from $9,468 for the six months ended June 30, 2024. Operating leases were 9.1% of Intermodal operating revenues for the six months ended June 30, 2025 compared to 8.2% for the same period in 2024. The increase in operating leases expense was primarily due to higher real estate lease costs for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

Other Operating Expenses

Other operating expenses decreased $1,601, or 14.0%, to $9,854 for the six months ended June 30, 2025 compared to $11,455 for the six months ended June 30, 2024. Other operating expenses were 8.1% of Intermodal operating revenues for the six months ended June 30, 2025 compared to 9.9% for the same period in 2024. Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and accessorial storage costs. The decrease in other operating expenses was primarily driven by continued cost reduction efforts that began in the second half of 2024.

Income from Operations

Income from operations increased by $1,054, or 11.8%, to $9,957 for the six months ended June 30, 2025 compared to $8,903 for the six months ended June 30, 2024. Income from operations was 8.2% of Intermodal operating revenue for the six months ended June 30, 2025 compared to 7.7% for the same period in 2024. The increase in income from operations as a percentage of operating revenues was primarily due to higher revenue per shipment for the six months ended June 30, 2025 as compared to six months ended June 30, 2024.

Corporate - Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

Corporate included a $31,362 operating loss during the six months ended June 30, 2025 compared to a $77,378 operating loss during the six months ended June 30, 2024. The change in the operating loss was primarily driven by $19,913 of professional fees incurred in 2025 for transaction and integration costs in connection with the Omni Acquisition as compared to $71,942 in 2024.

Application of Critical Accounting Policies

Goodwill

We test goodwill at the reporting unit level for impairment annually as of June 30 and on an interim basis when events occur or circumstances exist that carrying value may not be recoverable. We estimate the fair value of a reporting unit using a discounted cash flow (DCF), or as appropriate, a combination of the DCF and market approach known as the guideline public company approach. Under the DCF model, we calculate the fair value of a reporting unit under the present value of estimated cash flows. The significant assumptions in the DCF model primarily include, but are not limited to, forecast of annual revenue growth rates, annual operating income margin, and the terminal growth rate and the discount rate used to present value the cash flow projections. When determining these assumptions and preparing these estimates, we consider historical performance trends, and the reporting units underlying business and other market trends that may affect the reporting unit. The discount rate is based on the estimated weighted average cost of capital as of the test date of market participants in the industry in which the reporting unit operates. Under the guideline public company method, we estimate the fair value based upon market multiples of revenue and earnings derived from publicly traded companies with similar operating and investment characteristics as the reporting unit.

Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs, capital expenditures, industry economic factors and future business strategy. Changes in projected revenue growth rates, projected operating income margins or estimated discount rates due to uncertain market conditions, loss of one or more key customers, changes in our strategy, changes in technology or other factors could negatively affect the fair value in one or more of our reporting units and result in a material impairment charge in the future.

To assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium.

2025 Annual Goodwill Analysis

The annual test of goodwill was performed for each of the reporting units with goodwill balances as of June 30, 2025. As a result of the annual test, none of the reporting units were determined to be impaired, however the Omni reporting unit fair value was not substantially in excess of its carrying value. The fair value of the Omni reporting unit was estimated to be approximately 10.0% higher than the carrying value. To complete the goodwill test of our reporting units, we determined the fair value of the reporting unit using the DCF model and a guideline public company approach with 50% of the value determined using the DCF and 50% of the value using the market approach. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors, as a result there can be no assurance that there will not be a potential impairment in the future.

Finite-Lived Intangible Assets and Other Long-Lived Assets

The Company reviews its long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. The analysis differs from our goodwill impairment test in that an impairment of an intangible or other long-lived asset is only deemed to have occurred if the sum of the forecasted undiscounted cash flows related to the assets being evaluated is less than the carrying value of the assets. If the forecasted net cash flows are less than the carrying value, then the assets are written down to estimated value. We did not identify any triggering events of definite-lived assets in the three and six months ended June 30, 2025, and we did not identify any impairments of definite-lived assets in the three and six months ended June 30, 2024. Changes in the estimates of forecasted net cash flows may result in future asset impairments that could be material to our results of operations.

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 $300,000 revolving credit facility pursuant to our Credit Agreement. We believe that availability of borrowings under our Credit Agreement together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements over the next twelve months. As previously disclosed and more fully described above and in Note 2, Acquisitions and Umbrella Partnership C Structure, to the Condensed Consolidated Financial Statements, we incurred significant indebtedness in connection with the Omni Acquisition. This substantial level of debt could have important consequences to our business, including, but not limited to the factors as more fully discussed in the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2024, Item 1A, “Risk Factors” - “Risks Relating to our Indebtedness.”

Cash Flows

Net cash provided by in operating activities was $14,398 for the six months ended June 30, 2025 compared to net cash used in by operating activities of $96,924 for the six months ended June 30, 2024. The increase in net cash used in operating activities was primarily due to the change in net income from operations after consideration of non-cash items and the increase in accounts receivable and other current and noncurrent assets, partially offset by the change in accounts payable and accrued expenses.

Net cash used in investing activities was $15,124 for the six months ended June 30, 2025 compared to $1,583,406 for the six months ended June 30, 2024. Capital expenditures for the first six months of 2025 were $16,650, which primarily related to the purchase of technology and operating equipment. Capital expenditures for the first six months of 2024 were $19,396, which primarily related to the purchase of technology and operating equipment. Investing activities for the first six months of 2024 included the Omni Acquisition for a preliminary purchase price of $2,313,653, which includes a cash outflow of $1,565,242.

Net cash used in financing activities was $9,943 for the six months ended June 30, 2025 compared to $162,957 for the six months ended June 30, 2024. The change in the net cash used in financing activities was primarily due to the payment of debt issuance costs, payments on the long-term debt, and payment of an earn-out liability, all of which did not reoccur in the current year period.

Forward-Looking Statements

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding: (i) any projections of earnings, revenues, other financial items or related accounting treatment, or cost reduction measures, including any impact of the Omni Acquisition on our financial statements; (ii) future performance, including any expectations about our ability to increase shipments; (iii) our ability to maintain compliance with the covenants of our indebtedness instruments; (iv) our yield management process, any improvements in operating efficiencies and our ability to create synergies across our services and in connection with the continued integration of Omni; (v) fuel shortages, changes in fuel prices and volatility in fuel surcharge revenue, and the impact on our business; (vi) consumer demand and inventory levels, and the impact on freight volumes; (vii) future insurance, claims and litigation and any associated estimates or projections; (viii) our ability to accelerate the expansion of the Company’s terminal footprint; (ix) certain tax and accounting matters, including the impact on our financial statements and our ability realize remaining net deferred tax assets; (x) intended expansion through acquisitions or greenfield startups, and the impact of any such acquisition on our business; (xi) our ability to use key performance metrics and key operating statistics to gauge growth strategies; (xii) future business, economic conditions or performance, as well as industry projections; (xiii) competition, including our specific advantages, the capabilities of our segments, including the integration of services and our geographic location; (xiv) expectations regarding plans, strategies, and objectives of management for future operations; (xv) our beliefs regarding the effect on our condensed consolidated financial statements resulting from the resolution of claims and pending litigation; (xvi) our beliefs regarding our ability to support our working capital, capital expenditures and debt service requirements over the next twelve months; (xvii) our beliefs regarding internal control over financial reporting and the implementation of our remediation plan to address material weaknesses; (xviii) our beliefs regarding the potential impact of tariffs on our financial position, results of operations and/or cash flows and our reliance on any the regions that are subject to the recent tariff; (xix) our beliefs regarding the ongoing review of strategic alternatives, the expected benefits of the Reincorporation and the expected results of the Company's ongoing transformation strategy; and (xx) any belief and any statements of assumptions underlying any of the foregoing.

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 recently imposed tariffs and potential escalation from trading partners, the risk associated with trade policy, including the extent to which tariffs will affect the Company's operations and strategic plan, risks associated with the Company's limited visibility to the impact of tariffs on third-party shipments, the timing of its review of any strategic alternatives, whether the company will be able to identify and develop any strategic alternatives to its strategic plan as a standalone company, the Company's ability to execute on material aspects of any strategic alternatives that are identified and pursued, whether the company can achieve the potential benefits of any strategic alternatives or its strategic plan as a standalone company, recessions, inflation, higher interest rates and downturns in customer business cycles, the outcome and related impact of the Omni Acquisition, continued weakening of the freight environment, future debt and financing levels, the outcome of any legal proceedings related to the Omni Acquisition, our substantial indebtedness, our ability to manage our growth and ability to grow, in part, through acquisitions while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, 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, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party motor carriers needed to serve our customers’ transportation needs, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws, the cost of new equipment, the impact and efficacy of our disclosure controls and procedures, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2024. 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.

For quantitative and qualitative disclosures about market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024 and any applicable subsequent related filings with the Securities and Exchange Commission for further discussion.

With respect to our disclosures regarding the effects of changes in the price and availability of fuel, we believe that our exposure to fuel price and availability fluctuations does not materially impact our results of operations, cash flows or financial position. Changes in the price of fuel are generally passed on to our customers through a fuel surcharge program, with surcharge rates set on a weekly basis.

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2025, the Company’s disclosure controls and procedures are not effective due to the material weakness in internal control over financial reporting disclosed in Part II – Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Changes in Internal Control

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended June 30, 2025, other than the implementation of internal control over financial reporting at Omni Logistics, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Ongoing Remediation Plan

As previously described in Part II – Item 9A – Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2024, we continue to implement a remediation plan to address the material weaknesses mentioned therein. The deficiencies will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company continues to make progress in its remediation of the material weaknesses described in our Annual Report on Form 10-K for the year ended December 31, 2024.

On September 26, 2023, Rodney Bell, Michael A. Roberts and Theresa Woods (collectively, the "Plaintiffs"), three of our shareholders, filed a complaint against the Company and certain of its directors and officers in the Third District Chancery Court sitting in Greeneville, Tennessee (the "Shareholder Complaint"). The Shareholder Complaint alleges, among other things, that the Company’s shareholders had the right to vote on certain transactions contemplated by the Merger Agreement and sought an injunction against the consummation of the transaction until a shareholder vote was held. The court initially granted a temporary restraining order enjoining the transactions contemplated by the Merger Agreement but later dissolved it on October 25, 2023. Thereafter, the parties to the Amended Merger Agreement completed the Omni Acquisition. On May 2, 2024, Plaintiff Michael Roberts, together with the Cambria County Employees Retirement System filed a stipulation and proposed order seeking leave of court to file an amended class action complaint seeking damages, among other forms of relief. Upon receiving leave of the court, on May 15, 2024, the Plaintiffs filed the amended complaint (“Second Amended Complaint”). Like the earlier complaints, the Second Amended Complaint challenges the directors’ determination not to subject the Omni Acquisition to a shareholder vote and alleges that, in so doing, the Company and certain of its current and former directors violated Tennessee corporate law. The Second Amended Complaint further alleges that certain of the Company’s current and former directors breached their fiduciary duties to shareholders by depriving them of the right to vote on the Omni Acquisition. Thereafter, on June 14, 2024, defendants removed the case to the United States District Court for the Eastern District of Tennessee, Greeneville Division. Plaintiffs filed a motion to remand the case to the Third District Chancery Court, and on March 31, 2025, the federal court granted the motion and remanded the case back to the Third District Chancery Court. Defendants contest the merits of the Second Amended Complaint and are in the process of defending the matter.

From time to time, we are also a party to other litigation incidental to and arising in the normal course of our business, most of which involves claims for personal injury and property damage related to the transportation and handling of freight, or workers’ compensation. We accrue for the estimated losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Based on the knowledge of the facts, we believe the resolution of such incidental claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our business, financial condition or results of operations. However, the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and related events unfold. For information regarding our legal proceedings, see Note 7, Contingencies in the Notes to our Condensed Consolidated Financial Statements (unaudited) set forth in Part I of this report.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition and/or operating results. The risks discussed in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Other than the following risk factors, which update and replace in their entirety the risk factors titled “Overall economic conditions that reduce freight volumes could have a material adverse impact on our operating results and ability to achieve growth” and “We will be required to pay Omni Holders for certain tax savings we may realize, and we expect that the payments we will be required to make may be substantial,” there have been no material changes to the risk factors identified in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10‑K for the year ended December 31, 2024.

Overall economic conditions that reduce freight volumes could have a material adverse impact on our operating results and ability to achieve growth.

We are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand and industry truck capacity. The transportation and supply chain industries have historically experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of customers, interest and currency rate fluctuations, inflation, supply chain disruptions, labor shortages and other economic factors beyond our control. Changes in U.S. or international trade policy could lead to “trade wars” impacting the volume of economic activity domestically and internationally, and as a result, trucking freight volumes may be materially reduced. Such reductions may materially and adversely affect our business.

The imposition of tariffs and other trade barriers by the U.S. government, including widespread baseline and country-specific tariffs on imported goods from countries such as China and Canada, has heightened global trade tensions, resulting in China, among other countries, imposing reciprocal tariffs in response. Although negotiations with certain countries have resulted in temporary delays or adjustments to some tariffs, significant uncertainty remains regarding U.S. trade policies, treaties, and tariff enforcement. These developments and the evolving circumstances surrounding international trade negotiations may materially impact global economic conditions, disrupt the stability of international financial markets, and reduce global trade activity with U.S. trade relationships––particularly with China––being particularly vulnerable. If the impacts from the current tariff landscape on the Company’s business are more severe than expected as a result of shipments originating from tariff-impacted countries or the geopolitical or trade relationships between the U.S. and other countries, particularly China, deteriorate further, such impact could have a material adverse effect on the Company’s financial position, results of operations and/or cash flows.

Additionally, deterioration in the economic environment subjects our business to various risks, including the following that may have a material and adverse impact on our operating results and cause us not to maintain previously achieved or projected levels of profitability or achieve growth:

• A reduction in overall freight volumes reduces our revenues and opportunities for growth. In addition, a decline in the volume of freight shipped due to a downturn in customers’ business cycles or other factors (including our ability to assess dimensional and weight-based charges) generally results in decreases in freight pricing and decreases in revenue derived from various surcharges and accessorial charges. In our LTL business, these decreases typically reduce the average revenue per pound of freight, as carriers use price concession to compete for loads to maintain truck productivity.
• Our base transportation rates are determined based on numerous factors such as length of haul, weight per shipment and freight class. During economic downturns and periods of low freight volume, we may also have to lower our base transportation rates based on competitive pricing pressures and market factors.
• Some of our customers may face economic difficulties that affect their ability to pay us, and some may go out of business. In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.
• A significant number of our transportation providers may go out of business, and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers.
• We may not be able to appropriately adjust our expenses to changing market demands as we have certain fixed expenses that we may not be able to adjust in a period of rapid change in market demand. In order to maintain high degree of cost variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing levels to our business needs.
• If the domestic freight forwarder, Expedited Freight’s primary customer type, is disintermediated, and we are not able to transition effectively into servicing other customers, like third-party logistics companies and beneficial cargo owners, our business and financial results could be materially adversely affected.

We will be required to pay Omni Holders for certain tax savings we may realize, and we expect that the payments we will be required to make may be substantial.

In connection with the closing of the Omni Acquisition, the Company, Opco, Omni Holders and certain other parties entered into the Tax Receivable Agreement, which sets forth the agreement among the parties regarding the sharing of certain tax benefits realized by the Company as a result of the transactions. Pursuant to the Tax Receivable Agreement, we will be generally obligated to pay certain Omni Holders 83.5% of (a) the total tax benefit that we realize as a result of increases in tax basis in Opco’s assets resulting from certain actual or deemed distributions and the future exchange of units of Opco for shares of securities of the Company (or cash) pursuant to the Opco’s limited liability company agreement, (b) certain pre-existing tax attributes of certain Omni Holders that are corporate entities for tax purposes, (c) the tax benefits that we realize from certain tax allocations that correspond to items of income or gain required to be recognized by certain Omni Holders, and (d) other tax benefits attributable to payments under the tax receivable agreement. Payment obligations under the Tax Receivable Agreement will rank pari passu with all unsecured obligations of the Company but senior to any future tax receivable or similar agreement entered into by the Company. These increases in existing tax basis and tax basis adjustments generated over time may reduce the amount of tax that the combined company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such a challenge. Actual tax benefits realized by the combined company may differ from tax benefits calculated under the Tax Receivable Agreement as a result of the use of certain assumptions therein, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits.

The payment obligation under the Tax Receivable Agreement is an obligation of the Company and not of Opco. While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges of Opco units for securities of the Company, the applicable tax rate, the price of the applicable securities of the Company at the time of exchanges, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that the payments that we will be required to make under the Tax Receivable Agreement may be substantial. The payments under the Tax Receivable Agreement are not conditioned on the exchanging holders of Opco units or other Omni Holders continuing to hold ownership interests in us.

Moreover, in the case of a change of control, amounts payable under the Tax Receivable Agreement may be accelerated and may significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement. In particular, amounts payable under the Tax Receivable Agreement in the case of a change control may be substantially in excess of the net present value of the payments that the Company estimated would be required to be made to fulfill all Tax Receivable Agreement payment obligations with respect to equity issuances to the Omni Holders at and as of the date of the Omni Acquisition due to, among other things, contractual provisions that require the calculation to assume that all available tax benefits are used by the Company in each tax year. We expect that the payments that we may make under the Tax Receivable Agreement in the event of a change of control will be substantial. As a result, our accelerated payment obligations and/or the assumptions adopted under the Tax Receivable Agreement in the case of a change of control may impair our ability to consummate change of control transactions or negatively impact the value received by stockholders in a change of control transaction.