Forward Air has also secured a two-year agreement to keep much of the business it currently handles for a large customer, which reduces the risk of losing a large portion of its revenue.
The logistics company had previously warned that it could lose the customer, which is in the contract logistics business and accounts for about 10% of Forward Air’s annual revenue. The account generates about $250 million a year, a key piece of the company’s financial picture to retain.
The newly finalised agreement, announced in a press release Wednesday, allows the customer to continue using Forward Air (NASDAQ: FWRD) for select services through 2028. The arrangement also allows the customer to shift part of its business to other providers between November and March.
Expected to exceed 2025 revenue of retained business
Forward Air said revenue from the portion of the account it has kept also grew this year and is expected to improve further in 2027. The company believes the retained business will generate more revenue in each of the remaining contract years in 2026 to 2028 than the total revenue contribution of the account in 2025.
Forward Air did not, however, provide the expected margin profile on the retained business, leaving some question as to its exact contribution to profitability.
The deal ends several months of uncertainty about the customer relationship. Forward Air had stated earlier that the customer was looking to broaden its supplier base and emphasised that the possible loss was not related to the quality of services it delivered.
Forward Air said in its August earnings call for the second quarter that it had a non-binding agreement to keep at least 50% of the business, and perhaps as much as 75% of the account. The latest announcement confirms that a significant part of the relationship will continue under the new finalised arrangement.
Management wants more financial visibility
“We are pleased to reach an agreement with FedEx that emphasises our longstanding relationship and the service provided by our teams,” said Shawn Stewart, president and CEO of Forward Air.
“We are delighted to conclude this Agreement and we believe it represents the strength of our long-standing 20-year partnership and the outstanding service our team continues to provide,” said Stewart.
He added that the deal should provide better visibility and predictability across the business, including its profitability and resulting cash flow.
Investors also reacted positively to the announcement. Forward Air shares rose 8.7% in premarket trading Wednesday on news of the settlement.
Why this deal is important
Forward Air’s revenue is roughly $250 million annually and the company holds a significant portion of an account that should alleviate a major revenue uncertainty. The expected performance of the remaining business through 2028 could also help stabilise the company’s financial outlook, although the absence of margin guidance makes the precise profitability impact uncertain.
The development demonstrates the impact a key customer can have on a logistics company’s operations, revenue base and financial performance. For Forward Air, maintaining the relationship gives more continuity and allows the customer to spread some of its logistics spend.
