Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter Earnings Call 2020. [Operator Instructions] As a reminder, this conference is being recorded. Thank you for joining Forward Air Corporation's first quarter 2020 earnings release conference call. Before we begin, I'd like to point out that both the press release and webcast presentation for this call are accessible on the Investor Relations section of Forward Air's website at www.forwardaircorp.com. With us this morning are CEO, Tom Schmitt; and CFO, Mike Morris. By now, you should have received the press release announcing our first quarter 2020 results, which was furnished to the SEC on Form 8-K and on the Wire yesterday after the market closed. Please be aware that during the conference call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, about the effects of our business efforts in response to COVID-19, including the impacts of each of our businesses, the suspension of our expected 2020 guidance, the future plans of our pool business, steps to bolster our liquidity, the company's outlook for the second quarter and fiscal year of 2020, including expectations for revenues, tonnage and free cash flows, the expected impact of growth and strategic initiatives and those other forward-looking statements identified in the presentation. These statements are based on current information and our current expectations, and as such, they are subject to risks and other factors that may cause actual operations and results to differ materially from the results discussed in the 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. And now I'll turn the call over to Tom Schmitt, CEO of Forward Air. Please go ahead, sir.

Thank you, Roxanne, and good morning to all of you on the call. First things first, I do thank all of our teammates and our independent contractors. I've never been proud of you. Whether you're in operations buildings, on the road, working from home, you are moving America forward, and you're keeping lives and livelihoods going. So thank you for that. And especially, thank you for doing this with our own brand of Precision Execution at the same time. We are operating this kind of CDC-plus standard across all of our operations, and we are supported - you are supported by 1,000 of us who, within a few weeks, moved to productively working from home. So that's what I call Precision Execution in these times. And another first, Mike and I, we typically sit across from each other in our Atlanta support office for a call like this one. Well, we do sit across from each other on our virtual table now. We're both safely working from our Atlanta homes, just a couple of miles safely distancing from each other. From the health of our people, which always comes first, let me talk to the health of our business. As you can imagine, late 2019, early 2020, we've been preparing for a slowing economy months before you or I could even spell COVID-19. As imports were going down, there were signs of a freight recession. The price of fuel was going down. So we were getting ready for a slower economy. And then COVID-19 showed up, this black swan which impacts so many teams, and it impacts our Forward Air team tremendously. As you know, we have heavy ties to airfreight from Asia, heavy ties to ocean freight from Asia. Typically, those things work tremendously well for us; well, not…

Thanks Tom. As a result of our strategic intent to divest pool, we will begin reporting pool as a discontinued operation, starting with our second quarter earnings release and 10-Q filings. For those on the call who are not familiar with a discontinued operation, it is an accounting term that describes how we will report pool's financial results because of our commitment to a divestiture. In the real world, it does not mean that we are stopping or discontinuing Pool Distribution activities. We will continue to serve our current and additional pool customers as demand improves, and we will make investments to enhance pool's profitability and ready it for an efficient separation. As discussed in our earnings release, we have suspended guidance in light of the significant uncertainty created by COVID-19. But let me offer our perspective on the months to come. We expect that April will be the most challenging month. Reduced U.S. demand for nonessential freight and its flow-through effects to air and ocean freight volumes will adversely impact Expedited Freight and Intermodal revenues. Within Expedited Freight, network revenue will likely be further pressured by lower fuel surcharges and the diesel prices that are down over 20% year-on-year. This would be partially offset by increased Final Mile revenue driven by our FSA and Linn Star acquisitions. In total, we could see Expedited Freight and Intermodal revenues down 10% to 15% in April. Pool will be hit much harder. Temporary retail closures and stay-at-home orders have nearly wiped out pool's April revenue, driving it down roughly 95%. At these low sales levels, pool cannot cover its fixed costs and operates at a loss. As we enter May, we are cautiously optimistic that we're turning a corner. Weekly LTL tonnage, which was down roughly 30% by mid-April, is now down…

[Operator Instructions] That question comes from the line of Jack Atkins with Stephens. Please go ahead.

Well, first off, thank you for the additional color and insight in the business trends. I think that's all very helpful. And obviously, I think we all know things can change pretty rapidly. So I guess if we could kind of dig in to the current business trends just for a moment, get a little bit more detail, specifically around the improvement that you've seen over the last week or 2 in the expedited business from a tonnage perspective. Mike, are there any specific end markets that that's tied to? Any specific geographies that that's tied to? Just some additional color there so that - that's pretty encouraging that you've seen a recovery.

So Jack, as you can tell from my accent, this is not Mike responding, but I'm going to go first, and then Mike will follow up and correct me. No, seriously. So I did - over the last 2, 3 weeks, I mean, this is, to some extent, the beauty of refocusing and reshifting the type and the way you work. I did talk to all of our largest 20 customers one on one directly. So I got our own insights, our own numbers, but I also got their perspective, which is equally or more important. So the first thing, Jack, over the last couple of weeks, and Mike, you talked about it a bit earlier, the LTL volumes are much better this week and much better last week than they were the first two weeks of April. The way I would look at this - and I'm not a letter expert in terms of shapes here. But if we are moving along in April, the bottom of a U, the first part of April was probably the left-hand side of that bottom, getting to that midpoint low. We're definitely on the right-hand side of that bottom, moving slowly up of that - at that bottom of that yield. In percentage terms, Jack, LTL volumes with any type of benchmark last year, week over week, right now, probably 15 percentage points better than 2 weeks ago. The second thing that's hugely encouraging, and you talked about customers or geographies, West Coast, Northeast were both super hard-hit, both coming back, especially West Coast. I'm so thrilled. I was there just in early March when we still traveled, and it was beginning to slow down in a big, big, big way. It's starting to come back, very encouraging. The other thing that I would tell you, Jack, talking with our large customers, we are producing right now record LTL service. The on-time service numbers have never been better. And our customers are seeing that. They actually are down themselves, too. But my sense is, if you're talking about a slice of pie game, Jack, we're winning. These customers right now are making decisions towards us. And that may not show in the numbers in the month of April, but I love what that's going to play out as in a 3 or 6 months down the road as we are winning with those customers by giving them industry best service. So I'm hearing good things. Talking with them one on one, I'm seeing good things, especially in the hard-hit West Coast, and then looking at the numbers coming out being 15 percentage points better than they were 2 weeks ago. Mike, do you want to add or correct?

No, that was pretty good, Tom. Jack, the only thing that I would just add is, against that backdrop, we are continuing to make progress in organic growth on door-to-door. Last quarter, our 3PL daily tonnage was up over 85%. So that initiative is still smaller in the big picture, but that initiative continues to make progress amid this larger backdrop of decline.

Okay. Got it. That's all very helpful color. So I guess kind of along those same lines, how are you guys thinking about managing costs, given how dynamic the underlying environment is? Could you kind of talk about some of the cost-containment actions that you're taking broadly? And then, yes, within that, how are you managing capacity? Because I know once you lose an owner operator, it's really hard to get them back. And I'm sure you're hesitant to sort of cut some of those guys loose. So how are you managing capacity in a tonnage environment that's falling off so significantly like this?

Well, I'll answer in reverse. So on the capacity side, the fleet is in a very, very good place. I think we said in the 8-K, it's the best it's ever been, and we had to run that comment by legal. So you can take that one to the bank. One of the things that's been helpful on the capacity side that I've noticed has been the integration of the Truckload and the LTL fleets together. That's opened up a new kind of degrees of opportunity that didn't exist before. And these are one fleet now. It's basically done, but the next wave of this, which is starting to kick in, is the growth of our Truckload brokerage operation. And I spent some time talking to the team that Tim Parker and Dennis White who run that. And you start to get a understanding that we haven't had before of how the brokerage operation can help reposition drivers who are out of place running an LTL network, but then also go find opportunities for owner operators who may be idle. So not a repositioning, but hey, you know what, I want to run. So can you help me? And we're doing a good job in growing our overall brokerage capability, leveraging our asset, our access to assets, and that's a strength that we bring to the marketplace. So we feel pretty good about where the fleet is in terms of our ability to operate efficiently now, but also to recover as demand starts to pick up. In terms of the overall cost, I'll do it quickly, Jack, and we can double-click where you want. But I'll break it into 2 buckets, and I'll kind of talk numbers that are year-over-year on a quarterly run rate basis, just to give you…

Yes. Just one I'll add, which conceptually, Jack, may be helpful on the power and the strength of our driver pool right now. So we've, obviously, been contracting volumes. We do need to make sure that our ICs, our independent contractors get their runs. So we pulled 2 levers. One is we stopped recruiting classes, which wasn't hard to do because it's hard to actually test and do driving simulation tests upfront. So we pulled that lever. The second thing, as Mike, you talked about, we took PT way down. So our independent contractor force still has their runs because we took those other two levers. So we actually have our best drivers who know us best, delivering that record service. Our retention rates right now are also at a record high. So I feel very, very good about flexing the hours of that core driver pool up again as we are getting back into more LTL and TL, looking at this week versus 2 weeks ago. So again, we pulled 2 levers. But we kept our independent contractors for us at record retention levels, and that's going to serve us tremendously well.

Our next question comes from the line of Todd Fowler with KeyBanc Capital Markets. I'm sorry, I think he dropped from the question here. We'll go to the next question. That comes from the line of Ben Hartford with Robert W. Baird & Co. Please go ahead.

Just to kind of clean up the discussion around the owner-operator base. Have you made any changes to the compensation package with the existing owner-operator base? Have you had to make any changes?

So the answer is no. I mean we have a fundamental principle, Ben, that we applied across the board. We rightsized and downsized and flexed down our workforce in lots of places. And Mike, you just gave us some details kind of 5 business units. We do pay the independent contractors and the teams that we have their fair base pay or their fair pay per mile. So no adjustments there. They're doing an awesome job in tremendous tough times, and they earn every single penny that they get.

When - Tom, you talked a little bit about the extension now of the business into kind of B2C and essential goods. We know the strategy on the expansion of the addressable market into broader 3PLs, but I know it's difficult to get visibility into that freight as well. So when you kind of concertedly push into essential goods, B2C, is that above and beyond what you had talked about from a product line or customer base expansion perspective? Are you able to specifically target verticals? Is this something that's been accelerated here to start the year amid COVID?

Yes. So actually, it's a good point, Ben. We put in place a year ago an initiative that we called grow forward, and it's basically about keeping and expanding our customer base with very surgical tools, which are used in the past also to profitably grow businesses. To your point, Ben, we actually, 2 months ago, added kind of an extra lever of intensity, and we called it grow forward intense. In those - in that area, we are getting more, not only into additional verticals, you mentioned 3 PLs. We talked about it in the past, also airlines, which is difficult right now, but it's an important one, International Forwarders. But we also are leveraging our CRM tool, Dun & Bradstreet, Hoover in local markets to specifically go after small-, medium-sized enterprises, which typically in the past would have been below our radar screen. So the framework of grow forward that we established a year ago, and this goes back to this notion of calmly, firmly moving forward, we're executing our game plan. We just double-click on a few dimensions. One dimension, in addition to the ones that you're familiar with, would be the size of potential customer. We've been down into SME. That's something we did not go to in the past as much.

Okay. Any thoughts on rebasing the fuel surcharge in Expedited Freight LTL, given what fuel - what crew has done here?

It's actually interesting that you would ask that. Probably one of the topics to that, personally spent a ton of time on over the last several weeks, not completely surprisingly, but again, also nothing new. This is kind of how first-class companies operate within surgical kind of grow forward buckets. We had a surcharges in assessorial bucket, fuel obviously being a big one. We are relooking at - if that's the same table, makes sense for all of our customers or to be at different tables by different customer. Even like as the price goes up and down, do we have the right kind of steps and the size of steps in place? So this is a bit of sausage making in the progress. The one thing I can tell you is there's a lot of grow forward intensity around making sure we're using that lever fuel precisely and also somewhat surgically. Right now, we got necessary same paper for everybody that may or may not be the same in the future.

Okay. And then just back on pool. You mentioned that you were exploring this prior to something at the start of the year. Things were put on pause, and you're resuming now that process. Any sense as to how close you were to consummating any sort of transaction prior to this outbreak here late January into February and March? And as you resume the process and given how drastically things have changed, is there any sort of idea as to the time frame in mind as it relates to the disposal of pool?

Yes. The answer to the first question, Ben, was very close. I mean, as I said before, we started the process after our strategic review in New York last summer. And so - and we had, obviously, very, very detailed specific conversations, so we were very close. In terms of timetable, definitely hard to say. What I can say is we have active interest by parties even now. They may not want to execute right now, and we don't either because we do need a track record of numbers going up first. But we have the pipeline. We have Raymond James working with us. We have active participants that are interested. Matt Jewell, Michael Hance, Kyle Ricketts, their team stayed on this process throughout the entire period over the last two months. So it's not like we have to start from scratch. We basically just had to pause button, and now we need to push that pause button again back on to start. It's hard to say a time line. But if Q3 is a big step-up again, I would see us being in a very, very positive position with lots of options that we can execute upon by the end of this year or before.

Okay. And then last one, I'll turn it over. I know this is hard to assess amid the first quarter and what took place. But the growth in the 3PL customer base that Mike had highlighted, the expansion of the door-to-door type penetration within Expedited Freight, is there any way to assess how that changing profile freight in that network is functioning relative to your longer-term plans and ideas of being able to rebuild density in that network, having it be positive from an operating leverage standpoint and kind of accretive, whether it's from a margin or a broader growth return standpoint? Is there any way to faithfully assess that amid the business declines that we're seeing at the moment?

I'll give you a headline, and then Mike will sort it out a bit more. So the focus that we have, Ben, always has been on quality of our LTL revenue and secondarily, quantity of LTL revenue. So clearly, the door-to-door, from a profitability perspective, needs to still step up to get closer to the airport-to-airport profitability. So job number 1 is to be the best possible partner we can be to those customers, primarily domestic forwarders who use us for their airport-to-airport business. I've never talked more collaboratively, supportively in tandem tag-teaming with our domestic forwarder core customer base than I have recently. And there's a very, very close collaboration. So that is a base we always have to have and we have to strengthen. The door-to-door comes on top of that. And again, I cannot overemphasize the value that we draw from having those tools like the total costing tools to make sure we can go lane specific, zip code specific to get to profitability and the attractiveness of that business to be closer to the airport-to-airport business. Also, Mike and I both talked about the operational synergies, pickup and delivery, locally and final mile helped tremendously on the cost to serve locally, meaning our door-to-door business becomes more profitable as LTL pickup and delivery and Final Mile collaborate even more closely in the buildings and picking up and delivering. So this is a process. It's - my benchmark is very simple. Are we getting significantly better period-over-period in the profitability of that business? And it's a process, but I like what I see. Mike, do you want to add to this?

Yes. Ben, the only thing I would add, and you know this, I mean, all the freight and the network works with all the other freight in the network. So if you're in a situation where a certain type of freight is in decline because of the circumstance that we're in, it is very nice to see that on another initiative and the organic growth in the door to door, and that you're continuing to see progress there. So that when we get out of this temporary dip and we start getting back to freight levels that we're more accustomed to, it's good to know that this is continuing to march forward. Optically, one thing I will say, and we really don't have a lot of visibility here, but as you know, there's different yield characteristics between the airport to airport and the door to door. So depending on the rate of resumption of the airport-to-airport tonnage, you're going to see some mix effects that could potentially be flowing through our stated yield. They're not price actions per se, but based upon how this freight washes back and forth over the next couple of months when we get to the next quarter, it could be overall net dilutive to yield, but that's more of just a mix issue in terms of where we are in the recovery process.

Our next question then comes from the line of Todd Fowler, KeyBanc Capital Markets. Please go ahead.

A virtual hello, I guess, a little bit of technical difficulty earlier. Mike, I really appreciate the color on what you're seeing intra-quarter on the network side. Can you just give us what the tonnage level you think will look like during April when you put it all together? And then can you also just give us the quarterly - or excuse me, the monthly trends during the first quarter, so we have that progression?

Yes. I would say that when you put it all together for April, if you were down 30% at the low point and you kind of finished the month down 15%, then you're probably in the 20% range, 22% range when all said and done. In terms of the progression of the first quarter, you can really see this COVID kick in. So in January, our daily tonnage was up 1.2%. February was down 2.5%, and we really saw it start to kick in, in the back half of February. And then March was down 15.8% as we kind of started the slide into the COVID effect here. So at a 15% type of week-over-week exiting the month, we may be kind of back to where we were as we entered in March to Tom's U analogy. We're all going to be eagerly watching the tonnage report tomorrow morning. Friday is our biggest day. And so hopefully, we'll start to continue to see goodness emerge.

And Mike, as you saw, yesterday was the best day we had in 6 weeks.

Yes, we were down 3% yesterday year-on-year.

Okay. So yes, definitely some noticeable improvement there. Tom, when you think about this environment and you think about the initiatives that you've put in place strategically, I understand that there's got to be a lot of focus on kind of protecting the near term. But how do you think about selling the business in this environment? Does this create more opportunities to reach out to customers that you hadn't been doing business with before? Or is that something that is put on pause, and it's really just servicing the existing account base, and then once things normalize, going out and kind of extending the footprint?

So in all fairness, on the commercial front, I believe we've been as expansive as you possibly can be. And this goes back to what I said before. We put a program in place called grow forward, which is keeping what we currently have. It's expanding both penetration to existing customer base, and it's also getting to new customer territory. So let me just highlight perhaps a few examples. So on the - first of all, we're talking - it's I think important, Todd, this is talking about the organic part of our growth story, right? So let's always remember, the M&A part is the second part that's equally important. Last year, we had 3 acquisitions. And I kept saying, hey, there's no limit to that. And we have a team that we actually invested more into, making sure we have a healthy pipeline that we have more of those good acquisitions. So that's one hot part. And you could actually possibly even expect that with the multiples being suppressed right now, that as we get through this horrible episode and people kind of get back to the table again, we might actually see deals that we like more than we would have liked them a year ago. So that's the first one on the M&A side. On the organic side, the one thing we are doing very, very clearly is cross-selling across our portfolio. When we had an LTL conversation in the past, the word intermodal did not show up. In the past, the word truckload did not show up. Well, it is now. I'm going to many, many sales calls and customer calls, and it's beautiful how they're XXL in cross-selling in a good way. So we actually are making the portfolio accessible to those customers. So if you think about selling more of our existing portfolio to our current customer base, clearly, one big trend. Another big trend is what I mentioned before, when Ben and I talked just 5 minutes ago, that notion of also going deeper from large- to medium-sized accounts also into SME. That's again a benefit from us becoming more surgical, more scientific, adding the science to the sales process, to the art of the sales process we always had. So I'm not sure, Todd, if this answers your question. But think about it, we have a portfolio that we are providing more holistic and broad access to for our customer base. And we are also adding to our customers, both industry verticals, we talked about that before for large customers, as well as going down in the size of customers into SME territory.

Tom, no, that is helpful. And it puts into context, I know a lot of this has been in place, but it sounds like that you're still continuing to move forward even with the disruption in the current environment. So just two last quick ones that I have. It sounds like that Final Mile is relatively unaffected by some of the disruption that's happening right now. Is that an accurate way to think about it? Or would you expect to see some pressure on the Final Mile business, but just not as great as what you're seeing in some of the other segments?

So the first step - and it's absolutely correct. So Final Mile, if you and I lived in a complete vacuum and we didn't know what's going on around us, me looking at the results of Final Mile, I wouldn't notice that anything unusual is happening around us, meaning they're on track. Fortunately, and I know it feels weird perhaps from a human perspective, fortunately, the service that they are providing people have time for people need right now because they're all at home, and we need those high-value appliances that they're bringing, and most jurisdictions are actually open to that. So that's why Final Mile is on track. And what frankly also helps is we're not just any final mile company. We were growing a good core that came out of the Towne acquisition. And then with this double whammy, this 1-2 punch of FSA and Linn Star, we got two of the finest teams into our portfolio. Most importantly, the customers, the ones that I've mentioned before, I'm talking to right now, a hell of a lot, they are mentioning to me that we are amongst the top, if not the best service provider. So not only are we benefiting from a trend, we're also inside that trend. Our customers look at us as a top choice. Mike, if you want to add to that?

Yes. The other thing I would point out, Todd, as we talk about the integration of Final Mile into the LTL network, and Tom made some comments in his opening remarks, we are now overlapping PUD in 6 markets. And the ICOAs, the independent contractor operating agreements with the owner operators were harmonized in a way that it makes it easier for LTL to contract with a Final Mile owner-operator for PUD during down points in the week. So those 6 markets should continue now to grow in terms of the overlap, providing a synergy to the LTL network. I think we are actually co-mingling two terminals right now in Charleston and in Raleigh. And I think we have another terminal coming in July and another terminal coming in September. And so we're starting to see dock integration where it makes sense. We've talked a lot about expanding our footprint outside of pure airport to airport. COVID interrupted a plan there, but we were actually pretty close to opening up a new terminal, and Final Mile was part of that strategy of going into a new geography working together with LTL to try to help work as one to penetrate a market. So the integration in terms of Final Mile is really, really working well in addition to the organic growth comments that you guys just discussed.

I think just overall, Mike, and Todd, let me just add to that, it may have looked a bit like a paper pushing exercise when we created this Expedited Freight segment, which combines LTL, Truckload and Final Mile under one umbrella. I hope that some of the color that Mike shared and that I'm shedding on this makes this come more alive. This is a reality. Expedited Freight is actually how LTL, TL over-the-road and LTL and Final Mile more locally are truly working together as one team, which is why they're one segment.

Yes. No, it makes sense. So we can definitely hear that in the comments, and I'm sure they'll be more apparent once we get to kind of a more consistent or normal freight environment. Just the last one I wanted to ask quickly. Mike, on the discontinued operations, that means you'll be pulling out pool revenue and expenses on a consolidated basis when you report, and it'll just be lumped into kind of one line item altogether. So is that the right way the reporting will look going forward?

Yes. So starting in the second quarter, the continuing result will be the consolidation of Expedited Freight, Intermodal and the unallocated part of our corporate. The revenue, the costs, all the way down to net income, and then you'll have net income, say, continuing operations, beneath that, there'll be one line, which is net income discontinued operations, and that will be the net result of all of pool's activity. On the balance sheet - so you'll have a continuing EPS and a discontinued EPS to get to your total EPS. On the balance sheet, all of pool's assets will collapse into one line, and all of pool's liabilities will collapse into one line. That's how the accounting works.

Our next question comes from the line of Scott Group, Wolfe Research. Please go ahead.

Just wanted to follow up on some of the April commentary. And sorry, if there's an echo there. Are you seeing that improvement at any of the other businesses? Has pool gone from down 90% to something less than down 90%? I don't know if you gave any Intermodal update, but I just want to see if this is broad-based improvement.

So if we go through the modes, we talked about Intermodal - we talked about LTL, we just talked about Final Mile. Intermodal will likely not start to improve until we get to the third quarter. Right now, the DCs are largely full, awaiting for the economy to reopen. We are picking up some storage opportunities to help our customers manage freight that they did decide to pull inland and don't have storage for. So we expect that as economy slowly reopens, you're going to need to let those DCs bleed down a little bit before you start seeing new sailings out of Asia and a pickup in the drayage and other activities for Intermodal. So not so much at Intermodal, but we're getting inklings that by the June, July time frame, it should start to pick up. Pool is, like I said in the cost comments, is in hibernation mode. Georgia opens today. That's where I am right now, Scott. And I think you may have seen an article that the largest mall owner indicated they were going to open 49 malls. 40 of those are in our footprint...

46.

46, sorry. 46 are in our footprint. So we are starting to get some communications from our retail customers that they are preparing. It's likely going to slowly grow over the balance of the quarter as people start getting used to going back to the mall.

So why do you think the LTL is the only place you're seeing not done yet? Is there something that's unique about the - that's being driven by temporary pickup in ocean import or something? Or - I don't know. I'm not sure why we're seeing it in your business and other parts of your business and necessarily other parts of freight, at least based on what we've heard from other companies so far.

Well, my guess is you have - the modes are going to have different responses to the recovery. And we still do have large e-com customers that - whose goods are moving in an essential sense. We do have throttling between distribution centers. We do have other freight movements that benefit LTL, benefit Truckload who's finding opportunities amidst some of the supply chain disruption. We've had to bend and flex to meet some of our airline customers who are hauling empty passenger flights with belly space. So LTL and I think Truckload are in a different modal position. Intermodal, I think, would look to a lag and then pull up to a lag. So I think that's how it maps out across the modal nature of our footprint. Tom, did you want to comment on that?

Yes. Scott, one piece to add. I mean, if you look at why on the LTL side did you see such a steep decline, and if you look around transportation spectrum across the U.S., and we say, hey, truck is actually working well right now, what's going on? It is exactly, Scott, what you're talking about. We do have super-heavy exposure, nonessential goods and many of them air freight, also ocean freight from Asia that go into our network. If you talk to our largest customer industry vertical, which is still domestic forwarders, which makes up more than half of our LTL revenue, they were down more than Newburgh. In fact, we were winning with them as we had the best service in support of them. So yes, there is something short term, very short-term systemic about the nature of business that's driving our core airport-to-airport LTL network, which is heavy Asia origin, heavy airfreight, and our own customers that are relying on those moves were suffering actually even more than we were. On the flip side, back to Mike, to your point, you also, I think, will see a recovery in LTL at a faster pace than you would probably see in Intermodal, as an example.

And this is just a random thought. Do you know if you're more tied on the airfreight side to belly capacity or in terms of stuff coming from Asia belly capacity or cargo, meaning as some of the airlines have added back some sort of running passenger planes, but with cargo only, do you think that could be part of this? I don't know.

Yes. So it's actually interesting. So I haven't dissected it formally this way. But if you just do this real time for a second, many of our large airline customers are companies that actually operate passenger aircraft, first and foremost. We do have a couple of cargo-only customers, but it's mostly passenger airlines. So yes, as they are going through this temporary process of turning passenger airlines into freighters, that actually will help us also get the capacity back up again if that's what you're getting to. So again, I expect what I saw the last week or 2 on the LTL, picking up some of that huge gap that we had in late March and first part of April and closing the gap. I expect that to continue as both passenger airlines and integrators are getting extremely creative to throttling capacity back up again. Is that, Scott, getting at what you're talking about?

Yes, I guess that's right. And so you think that that's one of the factors here is you're seeing a pickup with some of those historical passenger airlines?

Yes. They're getting creative, and we're benefiting from it.

Okay. Makes sense. And then, Mike, I just want to make sure I understand your points about second quarter from a profitability standpoint. In aggregate, you think you'll lose money, but that's really driven by pool, which will be in discontinued ops. Continued ops, you still expect to make money, is that right?

Yes.

And then any sort of directional thoughts on how to think about the LTL profitability right now?

Low. Here's what's going on. I mean, look, we described the great lengths we went to take out variable cost, which is essentially preserving the contribution margin percentage. If revenue levels drop really low, you operate well and you preserve the contribution margin percentage, but you just have less contribution margin dollars to attend to the fixed component of your cost structure. And unless you make significant cuts to the fixed cost, you're necessarily going to come under EBIT margin pressure. We're viewing this primarily as a temporary dip, and we've cut into some of the semi-fixed costs, but we're not yet ready to cut into bone. We want to be in a position to respond and to remain and grow as a competitor when we get to the other side of this. So we're going to see some EBIT margin pressure, not just at LTL, we're going to see it at Intermodal while revenue levels stay low. As revenue levels start to pick up, then that EBIT pressure gets restored. But if we're in a different place a month from now, then we will start getting deeper into the fixed cost. But that's kind of what's happening in the math in terms of putting pressure on margins at these low revenue levels.

And at this time, there are no other questions in queue.

Well, thank you, Roxanne.

All right. Thanks, everyone. We're going to sign off.

Thank you.

That concludes Forward Air's First Quarter 2020 Earnings Conference Call. Please remember that this webcast will be available on the Investor Relations section of Forward Air's website at www.forwardaircorp.com shortly after this call. You may now disconnect.