Thank you for joining Forward Air Corporation's second quarter 2022 earnings release conference call. Before we begin, I'd like to point out that both the press release and webcast presentation for this call are accessible on the investor relations section of Forward Air's website at www.forwardaircorp.com. With us this morning, our CEO, Tom Schmitt, and CFO, Rebecca Garbrick. By now, you should have received the press release announcing our second quarter 2022 results, which was furnished to the SEC on Form 8-K and on the wire yesterday after the market closed.
Please be aware that certain statements in the company's earnings press release announcement and on this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements which are based on expectations, intentions, and projections regarding the company's future performance, anticipated events or trends, and other matters that are not historical facts. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project," "expect," "may," "will," "would," "could," or "should," and the negative of these terms or other comparable terminology.
This conference call and the company's earnings press release contain forward-looking statements which include, but are not limited to, statements relating to future operations and results, any statements of plans, strategies, and objectives of management for future operations, and any statements about future financial or operational targets and the likelihood of achieving the same. These statements are not a guarantee for future performance and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the Securities and Exchange Commission and the press release and webcast presentation relating to this earnings call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
During the call, there may also be a discussion of financial metrics that do not conform to U.S. generally accepted accounting principles, or GAAP. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued, which is available in the Investor tab on our website. Now I'll turn the call over to Tom Schmitt, CEO of Forward Air.
Thank you so much, Connie, and good morning to all of you on the call. First, I want to just say we keep getting better. When I say we, I mean our teammates and our business partners, and those business partners certainly include our drivers and our customers. It's a true team sport. Remember, on our last earnings call, we celebrated our first quarter of this year as our best quarter ever, finishing with a March that had a record 80.5% LTL OR. Well, in this call, we're doing an encore. We are celebrating our best quarter ever, ending with June, with a record 80.3% LTL OR. We talked about the goodness behind those numbers on the last call too. That goodness is still here, only a bit more of it.
The best example is visibly when you walk through our LTL terminals, visibly more events business. We guesstimated that about $200 million of our LTL revenue before COVID is events related, and it's ramping up to that again. It may not get to 100%. I previously had estimated this year would be 70%, 75%, but it's looking pretty darn impressive. It is high-value freight. Oftentimes when we sell events business, it actually is generating several revenue events. We sell to a host event company once, and then we have up to 20 trips with 20 revenue events associated with it. National trade shows, concert tours are good examples. Sometimes these shipments come with the guaranteed fee written around it, which means extra premium freight on top of the high-value freight to begin with.
Our growth forward strategy, higher value freight priced correctly and operated in an efficient, clean operating environment, which we started three years ago, is clearly working. On our last call a few months ago, we said that the $6.30 EPS we targeted for 2023, we will already achieve this year in 2022. Remember we said we don't wait. Now, with 6 months under our belts for 2022, we feel confident that shooting for at least $7 EPS this year is realistic. While we have not reset a 2023 guidance yet, we expect us to continue to get better. Now, when you step back, what gives us that confidence? We do see the slowdown in the economy, and fuel has started very slightly, but has started to come down. Still, as a company, we have become more resilient and better.
A good example is when you look at our revenue per shipment this quarter versus same quarter last year, up by 40%. Even when you strip fuel out of it is still up 26%, this quarter versus same quarter last year. I would say if there is a recession, bring it on. Oftentimes it feels like waiting for something is more scary than the event itself. Back to that confidence. We have a specific Forward 2023 initiative in place. Inside that Forward 2023, we manage our key revenue and margin initiatives very tightly. At this point, we still believe for this year and for next year that what we call the puts outweigh the takes. Specifically, let me mention six large positive factors. The first one I mentioned before, more events.
The second one, more events this year and probably even more next year, because we're selling now not just to the domestic forwarders that have beautiful events divisions, we also go to some small events companies directly. Secondly, selling more direct overall in all of our lines of business. Third, deeper penetration into our core traditional customers. We have done a great job, and my hats off to our customers. They have done a great job tag teaming with some of our legacy traditional customers that know us well and we know them well to go after more high-value freight together with them. Fourth, fewer outside brokered miles. I always said we love working with our independent contractors who know us and our customers well.
Right now, about 12% of our total miles line haul in LTL, we skipped outside carriers that we don't know so well. They do a great job, but that's not our regular roster. That number of 12% is less than half of what it was in the first quarter, and I expect, thanks to our operations and HR teams, for that number, the 12%, to go down, not up. That's the fourth positive point. Number five, our three supporting business lines, intermodal, truckload, and final mile, have become more and more effective, making our LTL main show better. For instance, now in final mile even, we have local synergies which we've always had, and on top of that, we are driving line haul business for our LTL business.
Sixth, and finally, those supporting business lines are getting better and better pound for pound themselves. We published our quarterly results. Just check out our intermodal division and their results for the quarter. It's spectacular. That's why we believe when we run our Forward 2023 model for this year and for next year, that $7 is the minimum for this year. There's a cushion on top of that, and we expect to get better in FY 2023 because we believe what we control, these puts, are outweighing those takes. I also mentioned that we have a ton of confidence, pun intended, in our company and into our business. Our good practice of returning capital to our shareholders, we are continuing in 2022 also, and that includes significant buybacks and also a dividend which we recently raised.
We are, as a team, living our 10 leadership imperatives. One of those 10 is called We Remove the Ceiling. We are removing the ceiling on getting better and better every single day, and we strive to keep getting better. With that, back to you, [Connie]. We're going to open it up to questions, right away.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press one then zero on your telephone keypad. You may withdraw your question at any time by repeating the one zero command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question today, please press one then zero at this time. Our first question will come from the line of Bruce Chan with Stifel. Please go ahead.
Thanks, operator. Good morning, Tom. Good morning, Rebecca. Just, Tom, want to follow up on some of your comments there on, you know, final mile and I guess that sixth positive factor or sixth pillar. You know, wondering if you can talk about some of the big initiatives that you've got going on to improve the final mile operation and maybe get your sense of how you think about that business in the context of the higher quality freight mandate at LTL. Because, you know, I guess it seems like fridges and Pelotons and, you know, washer dryers are maybe not that consistent with that, you know, high-quality freight mandate, and especially if you start to share line haul and share P&D.
First of all, thank you, Bruce, and good morning. Thanks for the question. Our final mile business, just for the whole audience, it actually is the delivery and installation of high-value appliances for some of the best, most demanding retailers on Earth. Bruce, what we're doing to make sure that final mile by itself is in the high single-digit margin space and has visible and quantifiable synergies for our LTL business. We are making sure that we're dealing with high-value appliances. This is not dropping off wicker furniture on the patios because frankly, that's, to your point, not in line with our high-value freight proposition.
What we are doing specifically is we're going to make sure that we're always on the top one, two, or three ranks, ideally number one, on our customer scorecards. You may remember we actually won The Home Depot appliance provider or carrier of the year award this past year. What are we doing to get better and better? First of all, it has to be the same value proposition, almost zero damages, looking to be the best in the industry in final mile the same way as we are in LTL. We actually are copying and pasting and cross-fertilizing some of those sensitive handling principles and policies and that DNA that we actually have lived for 40 years in our LTL business. We are looking for premium appliances.
We're looking for premiums for delivering and installing them, and we're obtaining those. Secondly, on the efficiency side, we did talk about two years ago that we are expanding co-locations. If you remember, we actually opened up eight terminals for LTL, initially out of our final mile locations. We are co-routing locally on a light installation day. The installer is actually picking up LTL pallets. Now we've had, through tremendous collaboration between our sales leaders, under Melissa Friesz on the LTL side and Jeff Potter on the final mile side, more and more examples where the line haul that's associated with getting those appliances into specific cities is actually going with Forward Air, LTL or TL.
In my mind, final mile is a good example of the same high-value Freight DNA, lots of synergies that make the two businesses better, the main show, which is LTL, as well as the supporting business, which is final mile. We strive to be operationally, and from a damage, from an on-time performance perspective, to be the best provider in the industry, bar none. That is true for final mile. That's true for LTL. I do see this, cross-fertilization happen, Bruce, and I also see actually the DNA to be truly a Forward Air DNA that's consistent across those lines of businesses.
Okay. That's really helpful.
Okay.
Yes. No, that's really helpful, color. Just, you know, as a quick follow-up here, you know, as we've been hearing a lot about AB5 and the Supreme Court, you know, denying cert, any operational risk there, whether with regard to final mile or the LTL IC footprint or drayage?
Yeah. We have. AB5 is obviously the rule for California to implement a law that makes it in essence harder for independent contractors to prove and live their status as their own businesses. Bruce, I think we, as well as the rest of the best players in our industry, we have been prepared for this for the last two years. We know what the independent contractors have to do to maintain their independent contractor status, as do they. We actually are helping them to make sure that they understand what they need to do. The outcome ultimately will be some of them may choose to actually exit the business. That actually would make a driver situation even tougher.
This is really a responsibility for those business owners to do what they have to do to keep their status. We're doing everything possible to always make sure we get the best roster of drivers to drive for Forward Air in final mile and LTL. Our recruiting team has been getting better and better. Kyle Mitchin and Ryan Gillian, that entire team has done a tremendous job of making sure we live best practices in the recruiting space. We have a driver school. We have a driver board I talked about many times before. In this case, Bruce, very specifically, the owners, the burden is on the independent contractors. There may be additional costs that comes with them keeping their status.
If and when that happens, we have no choice other than forwarding that cost to our customers. Business in and out of California might get even more expensive from a Forward Air perspective. I oftentimes say luck is when preparedness meets opportunity. I'm not sure I can call AB5 luck or not, but we certainly were prepared for it.
Terrific. Well, thank you for that and, congrats again on the result this quarter.
Thank you, Bruce.
Thank you. Our next question will come from Jack Atkins with Stephens. Please go ahead.
Okay, great. Good morning, Tom. Good morning, Rebecca. Thanks for taking my questions.
Morning, Jack.
I guess maybe to start, would love to get an update on what you're seeing in July. If you could maybe kind of give us a sense for, you know, tonnage trends in the core LTL business and any sort of sense for, you know, revenue ex fuel, that'd be helpful.
I think we did put in the release that we see continued positive trends in our business in July.
Okay.
Very specifically, the first 20 business days or so, actually, now we are further in, the first 25 or so business days, we actually tonnage wise versus the same number of days last year are up by 3% in tonnage actually for July. From a revenue per tonnage perspective, we clearly see similar or exactly the same type of events that we saw over the last several months. If tonnage is positive, those stats that we showed before with the revenue per shipment clearly holds because all of our pricing discipline and our surcharge discipline has been very consistent and still is very consistent. July, actually, if anything, pound for pound looks better than June for us, and June was pretty phenomenal with 80.3 OR.
I always looked at 80 as an OR for LTL as a milestone, certainly not a final destination.
Okay.
Go ahead.
No. That's great to hear. I'm glad to hear you've got some positive tonnage. You know, I guess as you sort of think about you know backfilling some of the latent capacity that you have in the LTL network that you know you've achieved through you know this cleansing process over the last 12 months, you know where do you think you are in that process from a sales perspective? You know, I know the macro getting a little bit more challenging probably makes that a little more challenging, but could you update us on that?
You know, I would think as you kind of go into 2023, as you sort of think about your six sort of buckets of opportunity, that's got to be, you know, near or at the top of the list.
Oh, definitely. It's and a couple things here, right? If I look at the six that I mentioned, the first three are all about more organic LTL business of super high quality. Remember, again, I said more events first. Every single time Rebecca and I walk through a terminal with a shareholder or a customer, and our operations leaders, we see the efficiency that Chris Ruble and his team are putting in place, managing our terminals, which is so much advanced from even a few years ago, and they were good at the time. But also I see the events business way up. Again, our guesstimate is it was about 20% pre-COVID of our total shipments. It definitely will get back to that again, is my expectation, and more.
The second thing is selling more direct to some small or medium-sized businesses that do not use our customer base of forwarders. There is actually an and, not an or. We can be tremendous business partners to our legacy customers and sell a ton of high-value freight direct to other customers that do not use forwarders. Obviously the deeper penetration into our existing forwarder customers themselves. I've been so impressed with our domestic forwarder customers over the last year, how after we worked with them, and this was not their choice, this was our choice. After we worked with them, cleansing all the unpalletized, inefficient freight out of our system, and they had to find other outlets for those shipments that they couldn't upgrade to palletization.
They've done a tremendous job, those customers, getting us on their teams, on their selling teams and saying, "Okay, why don't we go after the business together that we actually should be owning?" Because Forward Air are truly a sales value proposition for them, for all the freight that is the most sensitive freight to handle. When I look at those trends, some of our largest domestic forwarders customers today have actually more tonnage with us today than a year ago when they still had the inefficient freight with us on top of the high-value freight, and they're growing tremendously. Jack, that's in sum, we have several levers to increase tonnage. We do see the slowdown.
I think if you remember, we always committed our team to if there's no size of pie game to be won, we are winning a slice of pie game. Right now, this team is winning a slice of pie game. That 3%, year-over-year, in July that we see so far in growth, again, this is my expectation. As Tony said at the beginning of his call, I'm making forward-looking statements. They are not guarantees. My expectation is that over the quarter, our tonnage volume growth over last year's same quarter is going to increase past that 3% and not get smaller. The puts that we have that we can control exceeds the takes. That's our current estimation.
Okay. No, that's great. I really appreciate that additional insight. I guess maybe shifting to the full- year outlook and then sort of the longer-term outlook for a moment. I guess maybe a two-part question, and then I'll turn it over. The $7+ in EPS, you know, when I kind of take that in context with the 3Q outlook, that would imply something, if it's just $7 at about a $1.50 in earnings for the fourth quarter, which is a pretty, you know, meaningful step down sequentially. I'm guessing that's just you guys erring on the conservative side there, but I would love to kind of get you to maybe flesh that out a bit if you could.
when you say, Tom, that, you know, you expect to continue to get better in 2023, is that code for you're expecting further earnings growth in 2023? I guess just some clarification there because we've been getting some questions on that during the call.
Okay. Let me address both of them very succinctly, and then Rebecca, if you want to add to that, obviously always do. The first part, absolutely correct. Let me just be very blunt about this. We said at least $7. I mean, we don't know exactly how fast fuel is coming down or how much overall demand pullback will counter all the positives that we put forth. To be very clear, our model gets us way past $7 for 2022. That's on the first point. Then you, Jack, are running the same math that we are running. The number that you said for Q4, there's got to be a lot of economic headwinds for us to not get past that number comfortably.
Yeah. Okay.
The second thing is about growth and continuing to get better for 2023. I do expect again from where we're sitting right now outlooks are outweighing those takes, which is no matter exactly where we end up this year on the positive side of $7. I expect that we will continue to get better. Margin expansion we talked six months ago was not a 2022 exercise exclusively. We expect the same in 2023. Again we are very, very aware of the slowdown in the economy, and we are modeling fuel to come down in line with the forecasts that are out there.
Our model still says in 2023, from an EPS perspective, we continue to get better on top of wherever we ended up in 2022. That's our math. I did have a long time ago, but still works. I have had a finance and accounting major in undergrad and grad school, so the math actually, I think, adds up quite nicely.
Well, you're talking to a history major here, so you're in a better position than I am. I'll hand it back over to the queue. Thanks so much, Tom, Rebecca, for your insights. Really appreciate it.
Thank you.
Thanks, Jack.
Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Please go ahead.
Hey, good morning.
Morning, Tyler.
Hey, obviously fantastic results. We got a few questions here, but just to start, can you kind of give us an update on that direct selling effort, how that's proceeding? Are you on pace? I know that you talked about it having a better margin profile, but you've got more freight in the system to maybe sample from. Can you talk about how much better the margins are there?
Yeah. Tyler, we are on pace. We also said that this is a significant untapped upside. It's hard for us to estimate of that $10 billion plus. It could be as much as $17 billion of what we call high value freight. How much of that is basically being run by small, medium-sized businesses, but it's several billion dollars. We said this first year of our effort in that space is a growth and learning year. We expect about $20 million or so in revenue. We're on track to make or beat that. We expect, if you remember, we talked about this for that trajectory to be a significant steep incline. The $20 million will not grow by from $20 million to $40 million to $60 million.
It will grow more from $20 million to $50 million to $100 million over the next couple of years. That's our expectation at this point. Our sales leader, Melissa Friesz, has completely bought into this. In fact, she's probably going for more aggressive numbers than I'm going for, and I'm pretty constructively impatient. It's going as we said, as expected. To be very clear, for us in the LTL space, not so in the final mile space, truckload or in the drayage space. In the LTL space, selling direct to shippers for us is a new skill. Good news is it's not rocket science. I mean, I've lived this stage before, so have many of our teammates here, but it's $20 million or so this year.
To the margin profile, to be very blunt about this, we are still learning. Every time we do it correctly, we price to the value that we deliver. We do see that the margin potential can be in the type of territory that you saw the best-in-class freight company or Old Dominion report for this quarter. We're expecting, clearly, given that there is no value-added intermediary, that the margin should be more in the 70 OR territory versus an 80 OR territory. We have seen that we can get there. We are not consistently there yet, but the better priced and better selected small, medium-sized business clearly is in that 70 OR territory.
Okay. That's extremely helpful. Then I think gross margins and expedited, if I just look at revenue less PT, they were again, just very solid this quarter. I know there's a lot of concerns about demand rolling over, but you do have this asset-light model. You mentioned protection from not only the rolling truckload market, but also the shift from external to internal miles. Can you talk about the differential and what it means when you use internal miles versus external financially?
Yes. And the two towers, you know this industry about as well as I do, if I remember correctly, you did actually manage a freight terminal at some point. Roughly speaking, the way we look at the math, so-called internal mile, which is not a completely accurate term because an internal mile means that in most cases an independent contractor who works on our behalf on a consistent basis, but it's still their own business. They typically come at 2/3 the cost of an external mile. If you think in very rough terms, you've got $3 per mile versus $2 per mile. If we meet only 8%, and that's what probably achievable in a, we've had that, those types of numbers since I've been here.
If you need only 8% of those miles at a $3 per mile level and versus which we also had in the tightest months, 28%, that makes a big difference. Again, we came down to roughly 12% in the last few weeks. Tremendous effort by Justin Lindsay and his team. That 12% is down significantly from the first quarter where we had more than twice that. That's and again, the 12 is an important milestone. That is also not the final destination. We have seen and that's a very healthy number.
We have seen numbers between 5% and 8%, and Chris Ruble, our COO, always keeps reinforcing that having zero is probably not the perfect answer, but being somewhere in the mid-single digit range is a very, very good answer to strive for. The 12% is not quite the destination yet. We can get lower and better.
Okay, that's great. Just kind of one last one here. I think in the release you guys noted higher fuel surcharges as a kind of call it a driver of momentum. It seems to indicate that higher fuel is let's call it EBIT dollar accretive. Is there any way to help us just understand how a change in fuel either hurts or helps EBITDA or EBIT dollars, let's call it? Because I think at some level, the market's just unsure of how much of the $7 is simply from higher fuel versus some other structural changes.
Yeah. Again, Tyler, let me say the first thing first, because that's the most important one to us. The $7+, that we said for 2022, and I want to emphasize the plus, that is already taking into account that fuel is starting to come down over the next several months. Not down to where it will be ultimately, but starting to come down. We also modeled, and we actually are listening to the experts that have perhaps the best finger on the pulse.
If you go further down to somewhere in the four to 4.25 range, and that's becoming part of our model for next year, we still expect our EPS number of $7+ for this year to go up because of some of those six drivers that we've been talking about in the first part of this call. Fuel is important. Let me give you another example. If we have published the revenue per shipment increase versus the same quarter last year, and I said it's 40% higher than last year in the second quarter. If you strip fuel from this quarter and the same quarter last year, it's still 26% higher.
If you compare that to some of the best LTL companies in the industry, that is a significantly higher ex-fuel number. That 26% truly is earned through a higher quality tonnage, through in some cases, actually more density, i.e. more tonnage on some lanes, and certainly also by being more in tune with pricing that higher tonnage correctly. The best way for me to put it is the $7 plus and the higher number in 2023 is taking into account fuel to go down, to levels that they were a year or two ago, and or levels that some of the forecasts would indicate for next year. We use industry forecasts.
We, by every metric you want to look at, revenue per shipment, weight per shipment, overall EPS, development by every metric, even if you strip fuel out, we're getting better.
Excellent. That is very, very helpful. Thanks, Tom.
Thanks, Tyler.
Thank you. Our next question will come from Todd Fowler with KeyBanc Capital Markets. Please go ahead.
Hey. Great. Good morning, Tom. Good morning, Rebecca.
Morning, Todd.
Tom, I guess I maybe want to start on pricing and yields. You know, when I look at your revenue per hundredweight ex-fuel, you know, it's up nearly 10%. That's with a higher weight per shipment here in the quarter. You know, can you give us some thoughts on, you know, kind of how base pricing, you know, contract renewals are trending? As you look, you know, going forward, the team's done just a great job in moving pricing up. You know, what are your expectations for, you know, the level of pricing that you can continue to achieve on, you know, maybe for the back half of this year or maybe even into next?
Yeah. I think the first thing, Todd, that I think is worthwhile reinforcing GRIs. When you put them in place, first of all, they are an annual event that happens on February first and that's going to be consistent. We do obviously take outside factors into account so that we can have an honest conversation with our business partners and customers about why their GRI at a specific number is happening. I do expect in a economy where the driver supply and demand is less of a friction than it was at the peak a year ago that our driver cost increase may be lower. Some of the other kind of cost increases and pressures may be lower.
The 6.9% GRI that we had this year, when you take all the input factors into account, also obviously investing into higher safety technology, that might become a lower number. That may be 4.9%. I'm not saying at this point we have a pricing team with Stefan, Benjamin, and Katie Fox. They will certainly inform us of what they think the number should be. It may be a lower number in 2023 than it was in 2022. With our freight mix and the criticality of the freight to our customers that we handle on behalf of them, their GRIs are a certainty. Again, it's just about a range of the number.
The best companies in our industry, the best companies in every transportation industry, whether it's airlines, railroads, parcel companies or LTLs, are extremely pricing disciplined. Again, the short answer, Todd, to your point would be we expect a GRI on ongoing basis that's robust. That's reflective of realities. Yes, it could be in a few, in some years like next year, it could be slightly lower than 6.9%. There will be a significant investment into our customer commitment, into our safety technology, that even in a kind of softer environment when it comes to labor supply, there will be a significant GRI. That discipline is consistent, is holding.
If I get asked sometimes about current pressures, obviously a customer given the choice, should I pay more or should I pay less for a shipment, they would most likely opt for less. We have, as long as we keep our commitments, we oftentimes tell each other, our customers expect near-perfect on-time performance and near-zero damages from us. As long as we keep our commitments for our customers and we select together with our customers the freight that we should be handling correctly, our pricing discipline with them is gonna be at the exact high consistent level going forward as it had been over the last year or two.
Okay. All right. I guess, Tom, you know, when look back over the past, you know, couple of years, there's obviously been a lot of moving parts within the, you know, the macro environment and some things that you know, your team's done specifically around, you know, the type of freight that you want in the network. You know, I guess not to kind of removing the macro from the conversation, but thinking about the algorithm going forward, do you have a view on kind of, you know, in general over the next several years, what the tonnage growth rate should be? I mean, is your business now positioned where the tonnage should grow, you know, kind of at a multiple of where the market growth rate is? Should it grow faster than that as some business comes back?
I'm just trying to think about, you know, a normalized level for tonnage growth given how you position the network and some of the investments that you've made.
Yeah. I'm going to just give you the framework very briefly. Rebecca, could you please follow up with some of the specifics that we put into our model. The framework, Todd, is very simple. We have our, what we call Forward 2023 efforts, which is focused on 2022 and 2023. That's kind of the successor to what we internally had called Beyond 2019, which was the milestone between late 2018 and 2021 for us to become a double-digit margin company. Forward 2023 is the model that takes us through this year and through next year. We do have a five-year model that we expect to be based on what we control and what we can do.
Inside that five-year model are obviously the revenue and growth assumptions both for the top line and for the margins. Rebecca, if you can give a little bit more kind of numbers flavor to that would be helpful.
Yeah, I think Todd, as we think about, you know, going into next year, this year was a bit of a, I'll call it a challenge, or not necessarily a challenge, but, you know, we stripped it, we cleansed.
Right.
When you're thinking about kind of Q1 over Q1, it's not necessarily apples to apples. As we move into 2023, you're looking at more of an apples to apples basis. We do expect our tonnage to grow. And to your point, we expect it to grow faster than necessarily the market is, equal or better than the market, as we think ahead to that, as well as our revenue from that standpoint will help us continue to grow. I think that's it.
Okay. Yeah, no, that's very helpful on the apples to apples comparison, just kind of the comments about, you know, market growth rates for 2023, and that's probably from a visibility standpoint, maybe where it makes sense to start. The last one I wanted to ask, and maybe this is for Rebecca as well. You know-
Sure.
If I've got my numbers correct, I don't think that there were any share repurchases during the quarter. You know, obviously the performance of the business continues to do well. I guess I'm just curious kind of your thoughts on, number one, if I've got that right. And number two, you know, kind of your thoughts on buybacks and how you're viewing it, if it's opportunistic, if it's more formulaic, and why there was a pause in the quarter.
Yeah. You're right. We didn't do any share repurchases in Q2. That's definitely more of a formulaic method as we think about our capital allocation. As you remember, we did purchase Edgmont this quarter, so some of our cash was used from a capital allocation standpoint to do, you know, an acquisition. As we think ahead to the rest of the year, we don't necessarily give guidance per se on our share repurchases. As Tom mentioned, we continue to commit to our shareholders to return capital back to them. In our earnings release, we did end up giving our weighted average diluted shares for the end of the year, which was 26.8 million. It does imply that we will do some share repurchases for the rest of the year.
Yep, got it. Okay. Thanks for the time this morning.
Sorry, Todd. I'm just gonna go back to having done finance and accounting in undergrad and grad school. In the release, we actually did say $376 million in share repurchases and dividends over the last five years. If you take this year and divide that 376 by 5, it gives you an idea of the size. Clearly, we have so much confidence in the power of what this company will be that returning capital via dividends, and especially buybacks at the price that it's sitting at right now, for us makes a ton of sense.
Yep, understood. Yeah, I just wanted to kind of get a better understanding of just the cadence and with where the stock was in the quarter. Certainly understand all the comments. Thanks for the time.
Thank you, Todd.
Thank you. Our next question comes from Scott Group with Wolfe Research. Please go ahead.
This is Jake on for Scott. Thanks for the time.
Good morning.
On your 3Q guide, it looks like you guided earnings a little lower sequentially despite flattish sequential revenue. Why is that?
I'm going to start, and then Rebecca could give you certainly a second half to that. If you look at historically Q2 and Q3 typically were somewhat similar in earnings for us. If you look at the $204 results that we came in with, now we're saying $190 for Q3. To your point, that is a step down sequentially quarter-over-quarter. We do believe that. I mean, we want to be realistic, and we want to hit a point where we say we have a chance to exceed it, and we also have a chance to fall short. The $190 does include the fact that around us there's a demand pullback and fuel has started to come down.
The $190 still is by far the highest number that we've had for a third quarter. I do believe that the pullback is an acknowledgment to the fact that fuel's starting to come down and the fact that overall demand has gone down. Having said all of that, we do expect tonnage growth in Q3. The things that we control, we still expect it to be in place. Again, it's acknowledgment to what we see.
By the way, if you look at yourselves and some of the other covering analysts for us and for some of the other LTL companies, I think for the most part you're calling the same thing we do, which is while a Q3 typically looks pretty much earnings-wise the same as a Q2, I think in many estimates I also have seen a slight acknowledgment adjustment to the economy and to the fuel prices. That's the main backdrop. The things that we control for the most part are working beautifully.
Got it. That, that's helpful. If I just look at revs per shipment ex-fuel and weight per shipment, each declined around 5%-6%, quarter-over-quarter in 2Q. What drove that?
Yeah. This is a bit of a customer success consequence. You're absolutely correct. What you're referring to is that sequentially, the weight per shipment has been going down, not up. What's happening in its most simple form, the shipments that we do on behalf of our domestic forwarders, which is the customer base that has been with us from the very beginning, tend to be airport-to-airport shipments and tend to be lower rate shipments. Highly profitable but lower rate. The shipments that we tend to have with our more recent customer base, such as 3PLs, tend to be higher rate shipments. We go from door to door, not just from an airport to an airport.
Intrinsically, when you think about airport to airport, is freight that in the past and alternatively would be in the belly of an airplane. They are typically high value, but they may not be quite as bulky and as kind of multi pallets as a shipment that would go from a door to a door. The reason why the weight has been going down, we've been in a good way tremendously successful. That goes back to some of the comments I made earlier, growing with some of our legacy domestic forwarders, companies that have done a tremendous job themselves going after high value freight and making us a big part of that commercial pursuit.
The math exercise that you're pointing towards is in essence a consequence of us being over proportionately successful selling together with our domestic forwarder customers what, in many cases, is lower rate airport-to-airport business.
Got it. Thanks for your time.
Thank you.
Thank you. Our next question comes from Bascome Majors with Forward Air. Please go ahead.
[crosstalk] Yeah, I didn't either. Thanks for taking my questions. You've been pretty confident in a $7+ number on the EPS front throughout the call. Can you talk a little bit about how that comes out on free cash flow based on you guys modeling? You know, not to get too precise, but just wanna see how roughly that compares to your $2.6 billion-$2.7 billion market cap
Yeah. Rebecca, you go.
Sure. Back to our free cash flow, we think will continue to be strong throughout the rest of the year. If you look through Q2, our free cash flow was essentially double that year-to-date from last year. It was actually three times. We expect that to continue maybe a little less than that for the rest of the year.
When you say rest, you mean the first half versus the second half?
Yeah.
You mean the growth rate versus last year?
The growth rate, right. For the rest of the year will essentially be, you know, equal to or maybe a little less for the rest of the year when we model that out.
Right. Thank you for that. You've been pretty adamant that you expect to at least hit the market and probably grow tonnage and more convincingly earnings into next year, even though you've been, you know, admitting that there are some signs of slowing. We've got a new management team. We've got a new freight mix. We've got a new strategy for Forward Air versus the last time we had a, quote-unquote, "normal freight recession," not counting what happened in 2020. I'm curious, if we do end up in an environment where you have, call it mid-single digit broad LTL market tonnage declines, what's your playbook? How do you protect the bottom line while still serving your customers? Just wanna understand how you flex your strategy so we can think about what that means for your top and bottom lines. Thanks.
I mean, there are traditional skill sets that we need to obviously practice consistently. Cost control and flexing up and down is something that we need to be doing, and we need to be doing extremely well and precisely. The nice thing is obviously our asset-light model, we may not look like geniuses in the hottest economy ever, but the asset-light model works quite well as and when the environment slows down. The miles that we have to give outside to outside providers is basically our first flex space to go to. That's what the 28% or so of outside broker miles go down to mid single-digit numbers like 5% or 8%. As I mentioned, it's 12% in the most recent weeks.
That's a good flex opportunity on the cost down to purchase transportation. We need less of it, and it's also less costly on a per mile basis. Overall, again, we believe that we are more resilient and robust. Again, the proof's in the pudding, and I wanna see it every single month, every single quarter play out. The high value freight that we together with our forwarder customers and increasingly also the small and medium-sized customers directly are going after is more, we would've said over the last two years, more essential than the discretionary freight that will be pulled back first. There may be fewer appliances and discretionary kind of home goods spent.
At the same time, when you talk about automotive and you talk about industrial goods, high tech equipment, agricultural and farm equipment, medical devices, and my belief strongly is over the next two years, while we all may have to actually be a bit more cautious because of the economy, people are thirsting for events. They're thirsting to fly, they're thirsting to take a cruise and to go to a concert. I do believe there's a lot of puts that in my model and Rebecca's model, that those puts add up to more upside than in a 5%, to use your number, Bascome, decline in LTL volume, would imply on the negative side. We're doing the same models that you're doing, and we're coming out ahead, with our modeling with the puts outweighing the takes.
Thank you.
Thank you. That concludes Forward Air's second quarter 2022 earnings conference call. Please remember that this webcast will be available on the investor relations section of Forward Air's website at www.forwardaircorp.com shortly after the call. You may now disconnect.