HUBG - Earnings call transcript Q3 2017

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Operator

Hello and welcome to the Hub Group Third Quarter 2017 Earnings Conference Call. Dave Yeager, Hub's CEO; Don Maltby, Hub's President and Chief Operating Officer, and Terri Pizzuto, Hub's CFO are joining me on the call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquires to one primary and one follow-up question. happen during release of good represent as what made contained call faith statements to the future. in the may forward-looking the the course or judgment Any the in company's best that such believe, of words these forward-looking use and and as be by expect, identified Statements the are of words. project, anticipate variations can review cautionary statements the in Please the release.

differ to filings materially company's Form actual other SEC regarding In these that the results those forward-looking addition, XX-K from in to you projected in the disclosures should cause factors refer could statements. and

conference a reminder, over being As Yeager. now is my host, your to this call is the recorded. It turn Dave pleasure to

You now may begin.

Dave Yeager

today Operating Officer. you Pizzuto, you, participating earnings Group's Financial in are Good Officer, our our Chief Hub me quarter Don and President and and Thank Maltby, Allie. Terri Chief thank for third With afternoon call.

revenue quarter, Mode reflected in XX.X% third growth Hub the X%. For of around had segment Hub XX%. a at with The revenue, growth growing

reality, the pricing much X intermodal that the six peak market lags to and of capacity this of mandate, business opportunities road signs tightening are truckload volume impact by over All and pricing for intermodal XXXX. tightness rates to pricing goal will capacity months term flat across particularly the actions margin the the weeks, XXXX the time tight increasing in with in contract that remains reflect revenue our quickly bid to labor in and advantage is stronger the resulted was are not pricing call believe for repricing process from in a with earnings to I'll operating the With result At we declined. to in into lines does up ELD severe our take over and constraints, various quarter bottomed. environment even over These increases we intend business segments. was increase the growth. income X% that and expect third in the Despite be offset These pricing our to XXXX past as Volume signs to of substantial of that significantly, believe prior business now customers, to accelerating. that the cycle low and of our few will depth we've go the pricing will historically price, strong more It's to intermodal, experienced showing months. date cycle through and ELDs, of Don likely turn normalized demand, per second with we near our up shortage, quarter, growth and stages strong will October. an their past and had focus extend introduction have the that, We return. whose are in a believed increasing levels. and month XXXX. network. in it business. growth. expediently, our in of the adequate third that positive contributed release, of quarter this XXXX about revenue Hub's those the unit this year-over-year freight reviewing over mandated Disappointingly, the we to of Due capacity contractual specifics pricing on in margin our We're We clients below still current although margins Historically, levels, transactional have

Don Maltby

you, Thank David.

the support targeted current increasing we We on low continue us with our customers, course that price on presented as to increasing service believe approach cycle. have pressure, continued throughout the customers with us our service levels mentioned, markets customer price are numerous our the business with recognizing with unnoticed, margins not to shift XXXX network has in our and intend on With cost will yield. gone needs. right from awards our disciplined with as focusing We provider. combined Dave by emphasis said, we increased on improving focused leading the a to the bid As of market focus their

we for underlying costs our transit to competitive fleet Unfortunately, not to the position overall improvement Both quarter anticipate and to that are versus over reduces adds also being customers. but not an only option, the our utilization. on-time our we was service our term. rail the Although harms in our do This road are commitments, operations the substandard. in point near recognized we service expectations partners' deteriorated of rail our changing performance unnecessary

volatile the the in quarter, quarter let's top growth, came of the about severe our Now at end this experienced we related with talk market the businesses. brokerage XX% very line impressive consecutive back an of In weather truck making where fifth growth. disruptions a

emergency to it Hub the as tight on cost the market, us in positioned our December, quarter to logistics customer is the compression along growth strong belief costs and same the challenging Our peak of providing focus supporting concentration this will to country. the marketplace. extremely increase margin the challenging well capacity highest tight throughout and quality nature base on-boardings, continued retail services due a quarter through this we to the constrained with by line mix. quarter, continue market startup In throughout the value-added strategic relief with mandate on-boardings that on delivering changing With challenged the and remain top regions. to year, for the to is now effective to our providing with continue the focus We with across Logistics customers team believe capacity we we XX% capacity for XX% the that the truckload Multiple and continued third due a higher the its marketplace. fourth anticipate affected year. higher time of ELD while at upon and service our in maintain customer will structure

our a to new the until to As line. business network, anticipate not our the leading in also expansion on-boarded reduction mature for while logistics our first working XXXX. cost structure dedicated take offering Hub organic new more Dedicated, become these growth margin a this will well. the branded occur From of do customers will is of We in along quarter we Group positioned with Estenson well as We advantage see to perspective, integration, business is opportunities. extremely believe start now

are sales small new several program, a We wins few have opportunities. for and incentive large a competing days, date first full XX the to in a we pipeline, new

momentum of enthusiastic quarter, of back service, platform had X% management Mode leverage and cultural We transportation towards two safety, Mode organizations the customer focus of in top built the on the are included the profitability. to growth of about days as record which with team's alignment the continues management of some lines, wins and half solutions. to managed recent implementations drive revenue. product and their railcar new technology line

quarter, customers, of awards for from Year Carrier for well award Quality the received two the the as During as Quest Mode intermodal service.

to the I Terri turn review to will Now, over numbers. it

Terri Pizzuto

I'd and highlight three like Don, hello to Thanks, points. everyone.

First, increase improved compared the as progressed, quarter in intermodal year. price pricing resulting a last quarter for to the slight

the up prices XXXX. about second being of talked quarter since haven't We

spot X% truck to growth in value-added tough business. and providing margins Second, primarily increased brokerage market, in due a services

in benefit network domestic Third, $X.XX a the our caused deduction study. a share a the impacting is and share. hurricanes results for benefit activity. tax and One-time of and by tax a networks both to include rail of costs $X.XX costs to consulting for earnings negatively costs claim dray one-time a optimization inefficiencies related production The

Dedicated, segment include share that the Here to Hub separate $X.XX reporting $X,XXX,XXX,XXX. the Hub All service last are which revenue we Dedicated for XX% X. a in per July compared was as Hub numbers $X.XX the numbers on line. I'm is the year. Group's key earnings increased today third Hub purchased on diluted quarter. to Group's included

a increase. Hub increased increases decline in The with and $XX.X as XXX costs margin was details in segment services contractual decline customer impact factors million, to as in margins sales sales. basis by the percentage Dedicated gross to approximately margin of Dedicated was hurricane-driven an Hub in truck freight addition business Now, revenue up transportation segment. Local factors has margin business. as offset XX%. sales. more XXX and basis about to fuel lower decline in of quarter, the as to for growth revenue percentage compared customer startup miles were were for resulted equipment higher quarter. and of growth value-added partially and sales decreased rates. the yields logistics in quarter, margin changes new intermodal increased XX%. or because cost due brokerage margin a by the growth The logistics lines, a tighter Truck XXX partially a loaded higher I'll yields higher was segment third brokerage starting X% financial is primary and XX of a is costs, million was a and with quarter, Hub look contributed of a last business. of due X%. intermodal intermodal Truck mix point due basis Logistics down sales is of increase was Logistics increase spot our gross same of up revenue percentage $XXX These Hub this that the X%, decline XX% margin points gross or reason basis was slightly for to point XX.X% XXX unfavorable. employees. Truck and to to points. These margin improving and the XX customers performance volume a percentage transportation related longer margin. basis decreased this Sequentially XXX in fuel truck basis Costs offset more local was was intermodal costs Dedicated million higher handled and of gross because in transcon gross a purchased Gross XXX to increase margin for margin Hub yields gross in cost gross increasing gross combined combination increased and the The mix by margin, on-boarded increased a talk X% and was of brokerage X%, to $XX down generated closer due points disruptions primary $X.X X.X%, revenue the million, loads, last rail up a up than Hub's basis mix up costs, as mix. capacity who Hub Taking Dedicated, Logistics truck revenue was compared XX.X%, the transit. on-boarded and expenses of year. rail changes increased Hub and portion network revenue second the Hub increase. and Dedicated $XXX,XXX. to from We $XX.X points, percentage a points. margin decreased reason business declined purchased a brokerage price price XX brokerage drove The West year. due which of resulting lease brokerage year. and flat volume same the at Intermodal basis Truck because of points of Volume million.

transportation offsetting bonus these increases In for of addition, for increased costs costs had optimization system, our a is we lower $XXX,XXX consulting Partly management network expense. IT and study.

Finally, last segment which year. was basis than operating the for margin points XXX Hub was X.X%, lower

declined million due brokerage, in to I'll $XXX an which million million, costs. compared was offset a last down percentage from intermodal, in and to basis truck logistics as margin down XX down in up XXX Gross X% million X.X% Mode's XX%; logistics Mode in revenue to yields; X.X% to which in brokerage and and intermodal Mode Mode's yields; up $XX as cost X%. truck year XX.X% XX.X% point in lower year, was went brokerage decline point X%; point of $XX decrease for margin expenses by to year. XXX gross increase decreased basis to logistics, our in partially was a due decline intermodal decline a year-over-year was Operating compared last due bonus Now, compared year. and $X.X margin last in for margin. yield. truck basis Mode's was This up a gross which discuss last revenue margin, million sales was $XXX,XXX results $XXX breaks segment. a which primarily

compared headcount of people end the X,XXX primarily to to had quarter. Dedicated. drivers, up Hub related the Group, at XXX excluding of Turning we employees, That's the June, need to for Hub

revenue quarter to growth production Mode fourth domestic quarter. diluted share believe estimate the low double to for expect revenue claim Hub and benefit of we earnings at quarter what the discuss $X.XX I'll share digit We Now that at per a growth fourth activities. a deduction for digit XXXX. We $X.XX, fourth for range mid-single includes projected per will from of which tax our $X.XX

our driven an fourth percentage to will that for gross million, consolidated from growth margin to believe We the dollar will XX.X%. by is that We similar higher from the quarter to range be rate quarter for to quarter, of effective in million We intermodal expect of percentage consolidated meaning costs estimate in will $XX quarter the which to growth effective XX.X% from as that from fourth and XX%, as range project XX%. We the quarter will from rate X% the for to quarter. and fourth in We gross to expenses X% quarter. XX% sales compares that the range rate to range a increase. projected to consolidated volume estimate increase big prices This the our margin tax will Mode believe quarter fourth the fourth box compared XX% will year for to X%, third continue intermodal a slightly segment third X% the margin commissions. third our Hub to We XX.X%. gross of tax than range sales $XX range quarter from normalized the fourth will agent

expenditures our revolver. million now and the quarter, the brings $XX related and on quarter to capital $XXX with ended year-to-date million containers. $XX Capital capitalized until $XX expenditures and year, X,XXX capital to X,XXX $X.X this sheet we to on That We remaining up over X,XXX Dave, in to of balance including leases in expected XXXX. the from debt, $XX.X containers total mostly how you. $XX.X financials. million technology, wraps cash, million. this and That range spent Turning of containers million delivery in used tractors, the the borrowings quarter. We trailers. million to cash are expenditures taking delaying we're ordered of million and delivery We're we the fourth to

Dave Yeager

you, up open great. Okay, to we up the don't that, the With we questions, to Terri. lines why could please? Allie, lines Thank open Allie, questions?

Operator

our ahead. Scott And Research. Please first from go question Instructions] Wolfe Group [Operator from comes

Scott Group

about the ask quarter to wanted I So fourth guidance.

improvement Is I getting there tax see help So understand if what's XQ, don't environment fourth from items, better to such is be just the a I to really so the just of maybe frame that I you're XQ kind or think change $X.XX take third the out $X.XX pricing so or typically quarter We much only better. than expecting quarter. getting better. here, is something else? big

Terri Pizzuto

puts there's couple Yes, a different and takes.

You're that we the the go expect which intermodal to it in A main did driver pricing, as up to right, is Scott. quarter. of third continue

that. we was utilization our third expecting to slower the of are manage as the with even quarter in containers also stay it transits. to the rail And We about we same can think

other The the driving logistics. be item would improvement in

And see - quarter. quarter difficult We a brokerage, fourth had we to probably a where business comp. the is to sequential we the logistics margin and then - comp, peak significant have that new, same saw in hoping growth are last then a to because of is it's course. year third truck have season we we're from we anticipating tough smallest And which Dedicated, such of magnitude

Scott Group

as What quarter? what did the the Right. peak have next and look pricing rails? intermodal get year, Can for you you intermodal that in And a pricing? get, expectation to if fourth? you might So to are to third anything, talk pricing in expecting what you your what's in the about then reasonable you out pay you then

Dave Yeager

we negative in think seen strong one my a career a more when particular the this lot look in environment from I've there's is we one were we're very month in strengthening a we in is season. - pricing. This Scott. seeing demand very of sequentially, turnarounds less lot quickest a in capacity. I at Dave. have to in which It's candor, this pricing And and seen all Yes, peak it If

very So positive. all

additional stages. in as still for It's as we'll have some able XXXX the quarter early we'll think call. the be have we fourth far I to when what do insights

We what to have aggressively in which those a been small require reinvest. we percentage under which order talking are clients that's thus far. to margins had But out

We pretty process, the are is now that XX% some have we right for to hefty in price again upcoming bid another the believe clients of reflect which going increases year.

in beginning So we'll like a lot is of season be which what XXXX now. effect able to you right flavor end just give bid better the be of we as will the

Scott Group

X% that is But guys saying you if be truckload much? plus, do think are too X% you or plus, can

Dave Yeager

of in think the reasonable expectation. opening I if a XX would historically, - be that that have over kind but we down way trucking. market said expectation. the would remarks, prices that see that I'd months my certainly a We'll been that the I beaten I certainly reasonable the cooperates, lag that last as believe is

Scott Group

And do cost to you rail increases visibility yet? have your

Dave Yeager

We a focused And do - rail targeted. got very our in fact sure on that to degree. we We're we've are again, our we exceed make costs. to

Our unacceptable, our exceed cost increases. to just current are and gross have we margins rail

driver addition the not to digits. pay we're at but of are have trucker to turnover it be driver think range. plus, in but in year. an I occur. mid-single going believe other require the that is that still may our in XX%, in we're X% I XX% road has XXX% going increases the that, the over And In to probably higher the variable that the we'll don't the upcoming type is have to We we

well. we we not sure what rail drivers with paying the but our make that to So carriers, need just as there we're again, our exceed combination

Scott Group

if you versus sequential? number, get the they brokerage quarter, that I'll can then give third gross us truck margin you back the in talk and one Terri, last Were about quarter then can And percents? second Okay. queue.

Terri Pizzuto

- down compared was increased up the was it quarter. Truck second brokerage points. basis yields It sequentially to XX actually

Operator

Securities. question And Kevin comes our from go next from Seaport Global ahead. Sterling Please

Unidentified Analyst

Will for afternoon Kevin. actually good It's on everybody. Hey,

Just start wanted to out with Estenson.

fold, others? I revenue little mostly third than kind to that or of Now there? help with were was bit quarter there you going in targets in us was cadence got Is sticks little revenues it that I anticipating. be hoping kind think the quarter on stronger related, there. there hurricane else give it was able a And you out the particular, the lower then as than you've of on the something any that a might Is

Terri Pizzuto

quarter were dedicated third for that And the we'd compare million. quarter was about our revenue be Yes, $XX to X.X%. up revenue, if dedicated about you of to XXXX

have a acquisition So get. the the you expected, little our to cross little robust selling get still management diverted light, a we're compared great that Honestly, really a as and some and to we'll with bit so And and sale, but that we say, we think we that opportunities. pipeline a we with delighted pretty expect what bit. sales the synergies hindered

Don Maltby

This Yes, Will. Don. is

Our out market also sales very are tightening everyone. new folks incentive excited. helps. The program a rolled We for

you got we we've but approaches, be tried very a in I So good think we've very not for and our know, dedicated. did conservative - is the outlook to as strong pipeline very

Unidentified Analyst

here, market on go utilization with to using equipment All having to remaining parties as third open go into QX flat intermodal, quarter-over-quarter the are And right. we the all? at into out find guess you I

Dave Yeager

E&P fleet any our adequate. than but normal, fair more boxes, using of do We use so is No. not we're a amount

of XX%. by attempted Of get course, to But I equipment and that we're clients, our usage. to normal we or think so our XX% always additional commitments could not it keeping increase E&P in have outside have our peak you

Terri Pizzuto

new are of X,XXX Yes, rest shortly the of come boxes November. and supposed got to and as we our in today,

boxes. be another that'll XXX of own our So

Operator

go Company. Ben Hartford Robert And from Baird & from our comes next W. ahead. question Please

Ben Hartford

what we go think term. Hey, the I back volume just you you improve? good in rail And specifically, a is in had there near service? to the it Don, during reasonable expect for maybe said evening to was it term, is Is with function expect earlier you lingering rail peak, the comment near service it or you everyone. a can to had don't made to didn't of to something improve timeframe that - it if about but regard else improve

Don Maltby

other Yes, the during obviously as we think CSX service. Obviously, across railroads. East impacting with the an challenges impact impacts on the service also Coast peak is is volume

So we levels it the don't expect to back of retain anytime to XXXX soon.

Ben Hartford

to at is - any Okay. in there you time? this expect 'XX can that that's - reasonable Do of you sort cadence expect point to in

Dave Yeager

the has suggest Yes, bit. Ben. we're Dave. This to what has It's a transit. that's not I have the It's may extend in that clients Again, that's in having East nothing now is right case slowed we extreme rail day more conversations in as we case. the than would our down where with our other any It's understand such manageable. a of nothing experienced. not transit

really are because then know. to and interdependent so So cold, a catch networks, others interchange has And are the they seem quickly as one they much. it other if you so very each on

really don't that's in see going further down us that's either. the see near we anything drag we term but us, going to really So anything to don't help

Ben Hartford

Dave, Okay, the next at expecting - prepared the made you about and a of growth growth fair. comment appreciate margin in margin both environment that's the remarks pricing present. pricing We magnitude year. growth had

called intermodal had you current to in be unacceptable. think I margins

you to improvement? Because you more growing are willing Are obviously margin willing what has been recently extent growth? on market. the the or go above and drive forsake to So at focus volume to

expect relates a if Hub environment both wondering margins unacceptable in intermodal just also there's from as change given and in healthy presumably view side any to an So as the truck you but well. rail how 'XX, your to fast point it from over a of grow road attitude gross pricing

Dave Yeager

already and lot the ELDs. will with a market going or off - we've a with XXXX, conversion. truck only industrial of year, seen amount price We have strong, have we it get fair tight fact a though this which increase great economies tighter it's to very a the in appears really burned year is inventory, that Yes, gain capacity Ben. also I and that as to consumer be and demand think that of is both

both not So never believe do I trend, gross margin. year. or there's think not this that really can in the you it for opportunities but rapidly I've normal change and seen upside strongly career. actually And accomplish both again, tremendous That's always - this my I've volume this I certainly

Ben Hartford

guess think a be it the going what venture when intermodal for will you to volume was it you domestic industry from in the Is to upper look enjoyed closer up environment Would well what to like into growth 'XX 'XX XXXX? we single digits?

Dave Yeager

I would be I quite high. the will surprised up would know It low digits. GDP, up believe, it that if it single I digits. mid-single make outgrow gets I more don't that to it's high think but we'll

Ben Hartford

well, I think - you'd somebody Okay. about a made did. Terri, comment

made Somebody core your of what versus to be contractual both in is addressing volume the customers. Hub What would contractual you customers business and comment or transactional contractual a about volume? split deem transactional

Don Maltby

Yes.

able to those business So XX% the as why on fact, quickly reprice either the or take not where And I contracted that price now And and or secondary does side, it's we're that's a as where provider On uptick every is lanes, some intermodal business in time in - to year. right? David we've mentioned. roughly we're up XX% seen our contracted is that. Terri on spent XX%

now, along we're got So as and said the these XX% we've up it. and we bids in challenging in taking price come XXXX,

Ben Hartford

it expect expect transactional? Don, do in split, that or to you more relatively toward to skew Do remain you consistent XXXX,

Don Maltby

think be it's the same. to I expected

Operator

you. Thank

go from Justin question next Long Stephens. from Please ahead. comes Our

Justin Long

suggested truck relatively ask comment fourth to like should fourth segment back quarter the be about quarter. year-over-year revenue wanted truck sounded in call in and your Terri, I it Hub brokerage. that the the the So to flat in earlier guidance circle brokerage

are interpret So margins all, secondly, percentage brokerage that basis for truck quarter? what on progression you fourth first expecting the I did correctly? And of of sequential a in

Terri Pizzuto

Yes.

growth compared the projection quarter it quarter, between revenue, you're accelerated right. in year third to the last It quarter in and last the be just would be compared may up the For fourth revenue quarter. is is X% the fourth year And slightly. But then revenue as X%. to was the our fourth

Don Maltby

are are that And And XXXX our the price jumped for being able diversified ones point, see year. where the the been contracted business what transactional Right. because mountain we've that is is, are in the truck to value-added the this pretty we've significantly product, is to very And Justin, take the in attractive prices to under revenue services quarter, up. the fourth now brokerage high as so able pressure. we're

Terri Pizzuto

have and more last as did well. this we Yes, spot a bit we business year year than

whereas truck brokerage spot, maybe more year year last So our business of like this was in it's XX%. XX%

Justin Long

And brokerage truck fourth What maybe you question about from margins up the the follow a quarter? quarter. on Terri, for third in are progression sequential assuming the

Terri Pizzuto

gross improved a as percent We're assuming more improved dollar margin both. margin sales and growth; of -

Justin Long

fourth quarter be to a earlier are and If step sequential basis? margins flat segment taking the high a is Well, truck implying Okay. should intermodal better, comment at your which sequentially, think was a sequentially. what and margin that pretty is that's quarter, kind getting pricing flat similar guess gross as I back to looking Hub is in so on the the the of increasing what offsets hold Hub that is margins negative segment guidance brokerage third a whole, I business,

Terri Pizzuto

similar On a - I sequential it or press, would to believe to similar be I to And basis, you up. could it would quarter. slightly be guess if I said I say the similar third

Don Maltby

have traditional get To back we contracted to customers, with intermodal agreements customers. our our

obviously commitments. have to honor So we our

Dave Yeager

the certainly thus point today. same reviewing the has. doing We've We prices We're our have time opportunity to in increase of we all our are intact that. those reviewed with business clients. At XX% of

the business. accepted have of been customer before either overall are or about that increases have We our X%

will that in quarter. first and be bid, currently the is early XX% Another resolved in

it. we we're the But to do again, had what So made. commitments we to that advantage have live Don up taking our - of full said,

forward we on that made have keeping aggressively, commitments. moving those but be mind this in we'll so And also

Justin Long

Could And last of now look that some on that cross the you business EPS has plus about quick your think I to assuming one opportunity selling comment visibility maybe just selling. accretion, you one integrated on and to know been cross you to to assumptions your are Estenson. get that $X.XX year When into next extent? some

Terri Pizzuto

revenue about still comfortable we $XX Sure, not for given selling with and We feel pipeline. assumed had yeah. we have million, the XXXX a what in cross synergies of lot number. that That's

Dave Yeager

would be end we up No, disappointed at. very that's what I if

Don Maltby

Yes. Yes.

Terri Pizzuto

want And we don't that.

Dave Yeager

No, way. at don't either we want all,

think forecast yes, - very been it's our So we've in I conservative there.

Terri Pizzuto

Right.

Operator

Thank you.

question ahead. from comes next go Wadewitz UBS. from Our Tom Please

Tom Wadewitz

to if the service. comment rail on wanted I could the of see kind of you impact

realized, been maybe deterioration sense some So with you, you Was you that opportunity some happening things create on were I talked run really picking you as changes I saw in that was But the some don't like there seem because about partners, it network. mean, are didn't know up August CSX think realized on their that a Norfolk. to forward, your some of for had that do CSX in of as terminal looking quarter. obviously, think but were you some they might if - probably I volumes makes

that might at bit meaningful And is little so necessarily is look disruption, opportunity the right or see way it? more not that a you a to

Dave Yeager

the was. in appears that past the disruption lanes, This lot a week is service hi on Tom. XXX is cancelling part in, saw they're it Yeah, there the in plus see I only I it network though on of Dave. management quarter. network, of It's some the as believe that team really focusing third this fact We CSX didn't their in intermodal

to additional now we're little able if fact It's that to we're be to to a going see see business. in beginning so some yet early And secure disruption.

well I that think caution our is the currently that fleet pretty might deployed. is be only to

carrier amounts And difficult. so additional our business Eastern of could issues be to service rail significant non-partner of because on on take

Tom Wadewitz

What truck? more ability more bring in strengthening - do because of might relative have some insignificant that's that you on that think grow volume XXXX a and strengthening right, in is Would kind containers you'll indicate opportunity, the terms of to or and presumably in market say to broader factor, just volume. you significant that

Dave Yeager

that know some CSX it'll there. and broader I that the But environment Certainly the important does at think I could we market or that are disrupted, the it's strengthening of in components. if most currently fact see point get pricing network become don't changes. very the the

Don Maltby

business the to as truck lease still truck gets we the over going tight. to local go capacity that or intermodal, has from see opportunity The opportunity intermodal

Tom Wadewitz

sense short to if too kind cancelling lanes be or those you attracting they're a interesting? have are Do of the haul are lanes,

Dave Yeager

lot a and out like Marion, money are which into Southwest; Valleyfield, interchange West the lines Coast. terminal out a Quebec, they Coast to the of of West actually to put Well, them lot Ohio of that

that they had was it of lot issue of a which look just seemed is Montreal. too it they we and haul seems it and like a hearsay. But have enough with volume the trains my predominantly took have haul, at that's CSX and understood service or profitable. outside volume. don't so I But that's the quick being all guess. deal don't that's And getting a volume but the Valleyfield, in where longer enough is it areas cancelled, of to have just make So don't out I'd they maybe short again, of like

Tom Wadewitz

gross and your to support lot that that gross to market or comments for optimistic consider that, margin there get percent, that and for you improvement seems when shippers? much like Would there's price very of from improvement go pricing margin some pricing relative is in it lag some a together, pretty in expect Hub we evidence view. all to - margin I they're on lag gross in As stronger and lockstep overall outlook and segment truck

Don Maltby

your prices The and question? up that mean showing you Is lag between going us? with

Tom Wadewitz

you any Are or directly through, much translate coming to would factors soon flow yeah. - price that directly, will margin Yeah, your gross as pretty through there percent? that as just get that it

Don Maltby

come to we'll opportunity the price that's What bids when up. in, we'll get these is, as do

bid right in with that we're goes XX% that And is the season getting So opportunity. of as in quarter now, the aggressive be next year, we'll which first in, approach.

Terri Pizzuto

in in happen the have that will we increase to it on X which from an answer and of January question another happen would that the then to in have driver in goes wages, bottom year. UP would June. June line, And near anticipate goes increases - probably rails, first your for we And increase increase and the we NS. it absent for that about to going goes any So then that our we won't increase NS, Tom, the until have

Dave Yeager

throughout happens the year It almost probably…

Terri Pizzuto

It depends on…

Dave Yeager

Certainly.

Terri Pizzuto

Some.

Dave Yeager

Yes.

Tom Wadewitz

of above strong it's to kind that you It inflation. sounds be like able a price your enough should environment get that

it. all anyways, Thank time. So you I right. appreciate the for

Operator

from question go next Please our comes And KeyBanc. ahead. from Todd Fowler

Todd Fowler

peak season into the that of visibility sense have from on you're that and the to a December. about again I comment that's the to expectations, think I guess X%. outlook from was volume you you'd month of duration is what that just Dave, run talking the the something a fourth and quarter standpoint into but the curious X% expecting peak date, get I'm And up the X% should October to be

monthly the X% is you there quarter? the from to something lower to whole anything going maybe that's that's comparisons, for guessing I'm possibly So attributing but

Dave Yeager

question, good this run no, at we rate are… Very

Todd Fowler

nervous me little making a You're bit.

Dave Yeager

in I'll years. And would strongest try probably one this very or that the say off we've conservatism. - October more It's is four few I of least a Yes, strong. general had the five. started peaks at

which anything I strong as extent last. hurdle. think of sure and December to else, basis. we're November this bit conservative a at the have as that peak And We last looking a a of is a how it do end not year, will We're which much so mid from

those run more to why I the if anything as primary to at little So the think this the a X% current rate. versus point, with being X% it's we're are drivers cautionary

Don Maltby

- very quarter quarter, you last last started fourth And recall Todd late, right? if peak

Todd Fowler

Yes.

Don Maltby

was start, intense. when were started wondering This it to in, very going People earlier kicked it's intense. and and it was been it

Terri Pizzuto

And the in were last in year, quarter. fourth X.X% we up QX

Todd Fowler

do them do have offline have for volume and then if fourth these handy. don't have year? them quarter, quarter But the you the get comps you the for last you can third I monthly

Terri Pizzuto

have Monthly? for year. those I No, handy last don't

in year third asking For the this quarter, are you for?

Todd Fowler

So how if the third you have progressed. quarter

Terri Pizzuto

was September that's was a that's bit. just with was down August July month. - the And X.X%, flat, up

X%. basis, been on day it a up have did you If September per would

Todd Fowler

Okay, it. got

talked know markets then to on worse. like we the deteriorating little we've do the a getting hand there's, carries commentary, just pricing you pricing. bit of the about and for service standpoint But and service rail book? pricing that cover a Dave, truck already day intermodal that sounds And So a the going thinking that's a versus how But shift. kind tightening some provide tight counter yes, maybe think about about on rail this issues from one a from that it in call. environment truck environment what are the your intermodal lot

Dave Yeager

continue And that market truck this going of I that tighten. the in believe I first manage. time. truck all, point it's overall. rail while the we've can't nothing nothing to at becoming is that, still service, deterioration competitive would say severe to some We're do seen It's we is again, that

pricing doing continue these to and was all all reinvest is in be upside XX that what increases we pricing who's believe I a with cycle that And we terrible I our mind last carriers. to brought which back margin in to the really that the just we was down. It perspective, intermodal And has opportunity a to normalized getting have think from keep more not transportation. can So been with truckload business. going have past months, and pricing that we're of because the lot it's us a a this within year,

Todd Fowler

accounting Estenson in we the that do either have standpoint EBITDA the on or quarter? can And number And you - then here finalized an contribution then an Is rates point quarter, we the the have third numbers? things adjustments EBIT just at from in you about run for the a all here and going of all forward? this of depreciation reflected point at quarter that and think as those this sorts amortization

Terri Pizzuto

few and And be purchase course just of included the with sheet the our issued allocation, in when but finalized there's well open Q it, still we in it's it's holes, substantially pretty balance price that a today. We're completed. that'll we file

the and of our We depreciation for for are related have year Dedicated, to that of don't be the finalizing and we million. think 'XX the about still half we will terms $XX it In amortization beyond second numbers. that. And 'XX

Todd Fowler

half $XX the second this for D&A year million? The of is

Terri Pizzuto

Correct.

Todd Fowler

Terri, EBITDA you quarter? for an And then, number have the do third

Terri Pizzuto

We're that. not disclosing

Todd Fowler

X.XX, or the did the last self-explanatory. is probably most to just thought that's that for But ask. you fourth the that tax the $X.XX recent quarter then quarter, have had the Okay, of I'm and this would I and one I this the guidance in assuming the think benefits I And had guidance, original $X.XX the fine. out, that. not I just X.XX

Terri Pizzuto

Todd. correct, That's

Operator

And JP our Brian question comes go Please next from from Ossenbeck Morgan. ahead.

Brian Ossenbeck

ones here. Dave, you smaller So talk it. about can just Maybe, a of couple

that fast were market as a you - how things the You that tighter turned has getting really mentioned did as couple seen quarter. quite some you've last in Is and time. now times mention

So a expect here, it into things was be demand still are point? inflection of taper this little And supply? really weather a strong to from on you sounds and hurricane was bit an hit that disruption the and think you normalization kind weather correction, October. shouldn't that the we like related and really off a that or tipping Do we've of expecting

Dave Yeager

the of point. that a you're cliff. up. already believe do teetering, it a was is seemed do excess burned hit right where picking that and lot I appears to certainly tipping pushed think over push - the we an to off hurricanes the That I edge. they be over inflection demand and It were the we've that inventory had, we it just

hitting further at and of have the driving back country look beyond Houston, impact you mandate an is fourth going capacity Katrina, impacted the legal absolutely it figure had of in you months, And that Florida, drivers nine hit appears and at much who for go it the are or probably the capacity ELDs, city when are is tighten are - also year speak If hit to and least which though the productivity certainly if you as Orleans. New it largest those ELDs was you have And probably it this not of that will has impact. with you who going an in, productivity on to limits. then

we'll we is believe but all see it in So season next something an XXXX. bid strongly not and aberration, likely year that through this into very that of

Brian Ossenbeck

fleets smaller perhaps your the pick before, you adopt fleets? they as than side see of on become or some the carrier of you changes start And compliant on especially the up in the are devices, were brokerage base, seeing ELD perhaps anything some any the to maybe topic, more capacity smaller

Dave Yeager

number. got as I'll that, know let I Terri she get just that

Terri Pizzuto

is our X,XXX they top volume about carriers, and compliant. which our surveyed about XX% XX% We've of in mid-September were

Dave Yeager

our using. within are and very not the we'll this to And carriers complying just cease carriers. monitoring obviously So ELD seriously compliant which have have and are those - we to be taking we law,

Brian Ossenbeck

the -. for Thanks great. Okay,

Dave Yeager

the I type that, is envision. that interesting are Brian, about process undergoing guess of clients the our would same thing obviously though I

point so this XX%. at And again, only we're at

Terri Pizzuto

Yes.

Dave Yeager

And pretty the in we're late ballgame. getting

impact something have it's capacity. market trucking an going trucking to So and that's on the definitely

Brian Ossenbeck

might seeing back in guess legal, give I it. little bit the already from to can you're rush get is probably here more we the some a compliance little and a what kind go but you bit call hurricanes, So the to of

Don Maltby

Right.

Brian Ossenbeck

for that's ones CapEx. is spend as small had looks of the going you as year-to-date or to much timing the on $XX within there Imagine anything couple just in a containers, quarter million? else you're to fourth payments Just that million like in XQ. It $XX spent the

Terri Pizzuto

some and containers. technology. some It's $XX as that's about million, then tractors combination. a There's well the Dedicated, and Right,

Brian Ossenbeck

some shifted and of purchased Any we you number thought on year, - CapEx early this on trend up year. you're are expect the pick - next do the a next the we $XXX you bit, year year. made early indication you a north should XXXX? going for to But or has back could containers Sounds of you're obviously does towards deal like? get that going read think million what And you've like to into look originally this what

Terri Pizzuto

would and that which and is a for million of with third containers. best for and a Dedicated, tractors guess about third a for Our include technology, intermodal, of between million third that XXX XXX

Brian Ossenbeck

you some of network the when the what just benefits. is to little background, see one quick it optimization was a study. what accomplish, give was, you. and might Maybe us Last Thank that intended

Dave Yeager

we're come as an have the outside assumptions, wanted our network And impact. compression to with We things, immediate how pricing of have at months, been - how in, undertook as validate severe last study optimization it'll party we some over some look costing. we're the specifically pricing the think XX had I

certainly they more that I proper some than think were itself offered. been directionally will for it and we've path, benefits insights the the - on pay with but

Operator

question next Majors Susquehanna Bascome from our from Please comes And go ahead. Group. Financial

Bascome Majors

bit or the sort costs little more Was about thing, to that network really that that maybe a move follow what wanted question. to or how study and last balance, in any with of knowing particular particular on line up any is price it about I into I'm more as design, more practice? you just historic some be should next you trying in leverage you to your this opposed means as how think a had haven't we some go-to-market what strategy costs anything where a way get time. those have season to that year in what for of Thanks. if bid

Dave Yeager

was at was we at our some existing in network, we if It looking flows, dray our of at we meetings. at of that the you all internal. when some things. our some of even it's were practices look costs they're how those have looking our how and imbalances and Bascome, sitting It our looking cost as

upcoming the of that was an fully there nothing will and on It make. would many the gains be those very it that I we'll for think of those all the was things. study. turn but was think on to there and incremental it a lot So again, we've be - was already of suddenly season. And able turn we light, was And started implementation ready worthwhile. bid And extensive sunshine

Bascome Majors

and like level of they things on high et business margin heading look compared what the steady gross basis, it into even to X% next cost if just as it running Group kind pretty years post-recession kind certainly curious. I from cetera. a sort and decade go last in But a call year be XXXX? a kind and year play your before let's you your margin this will next X.X% Hub could at a from of recession. And for the sounds operating done I'm peaking lot If kind of over or you expect as cycle level, into know you revenues, well, inflation, a as just at expectations in pricing, year, high of in of of we've - were high more, operating for questions X%,

Terri Pizzuto

Yeah, good question. Bascome, it's a

it's We that are that on year, environment, more - to as fourth because it still certainly in information budgeting it needs so be. we process goal can. And our to our earnings of I'll in we get of have the quarter high release has But where it our is for doing not pricing it when February. realize, next as

not so focused our price it. business need in that's getting but so we getting all intermodal, why And just price where in of we're lines on

Don Maltby

up. got to get we've Yes, price the

investing environment. XX, been seen it's investing you've months, equipment. last investing If XX a We're technology. we're and We're our the tractors. in very drivers difficult in in And

that be down price profitability has the the to up continue So as but we're largest lever. path, going is path to

Bascome Majors

And push great we understand question drive maybe there. you that just you that have was seek really could the led don't on what are the my higher? imagine partners Earlier I visibility to on Because visibility help degree and a have last those. what I that us will into certainly from used you you levers they think Can pricing words our rail to degree.

Dave Yeager

if needless We as contracts partners. prices see discuss not But really well. market would to say, our increases to up do like with our are going they rail additional

unacceptable the gross their be to and price our drayage to to point. obviously our which cost increases, general margin, this is cost add goal increases our is just able at So cover increases,

Operator

Our go Cowen. next Jason Please from ahead. question comes from Seidl

Jason Seidl

was guys, answered. you Hey, and Well, much. thank you, Thank very it asked operator.

Operator

Shanker Stanley. question Morgan next ahead. comes from go Our Please Ravi from

Ravi Shanker

XX% costs, what's and When and of repriced be to big your you multiyear potentially said XXXX, year contracted, volumes pricing even can want what's you exercise? next maybe with or to end. questions you to you contracts the level that's expected here think going or few think at XX% think of happen that picture you in do the going get those do A a you you have when to

Don Maltby

can up prices get We our think in we XXXX.

Ravi Shanker

Enough side your see marketplace the inflation trucking of - cost in to we kind well? what of kind the cover as will on and the

Don Maltby

and inflation, of to increases, cover expand margin. cover to our cost the Correct,

Ravi Shanker

from need do of shift can the that from think another? to kind and of growth when fact of the Point and B think on you kind have continue play what things Do you can that maybe think get DC Shifting XXX competitive a quicker chain? in fulfilling intermodal we role to to kind Point that in ever play and of boxes the gears, a when intermodal putting you e-commerce to A supply is role than Amazon before, omni-channel

Don Maltby

Absolutely.

expansion right? If you picking at the example, they're from and use look Amazon an as fulfillment suppliers. up vendors They're and centers,

in participating a So and intermodal very that. big we for see runway Hub

In that, addition offer cross whether And part e-commerce in to operation. that plays other dock dock be visibility, services, services. value-added cross intermodal also or it customers a we

Ravi Shanker

in finally, intermodal just if electric have heavy drayage. trucks then of from truck a number been thought X, or And maybe in of trucks seeing the Class launching even Class we've I'm potentially some X years, OEMs announcements those couple duty evaluated of you next using of wondering sooner.

Dave Yeager

trying doing, of process is very the as very, in well new the including what technology, are to as we to keep Peloton Yeah, of such as others. things close some

such that about is think it, as night you average most company would to recharge. home about length be If every miles an - of for truck ourselves where useful and our an a haul electric XXX can so it electronic get

applications. So there are some real

to they if you of freight certainly keeping can the these that enjoyed a it amount does I yet applications, fact determined it articles about think has as in has it And we're But as so it that weight haul some make your I've of uncompetitive you've written and be could battery to it. changes. of close not far make truck. the in very a lot really some

Operator

Matthew Research. Please from go comes Our next ahead. question Buckingham from Brooklier

Matthew Brooklier

been I'll call. long a be quick It's here.

cost Did some in third hurricanes. hurricanes quarter incurred about talked You given during the the volume your XQ? impact

Terri Pizzuto

intermodal yes. Our volume,

Matthew Brooklier

yes. Intermodal,

Terri Pizzuto

intermodal truck our hurt volume. helped It It volume. our probably brokerage

Don Maltby

right. that's Yes,

Dave Yeager

realistically. Yes,

Matthew Brooklier

of intermodal volume, completely was lost the shifted on then And did of October? volume some get into that side or that maybe things,

Don Maltby

if into shifted about got probably it. you think October, It

of is… it Some

Terri Pizzuto

Some went though. it truck of

Don Maltby

Some it truck. of went

Dave Yeager

went it truck. definitely Yeah, some of I think

if As with where pretty for down. ramps time. into example, intermodal The fuel diesel negatively Houston tight And was were well the very even very Florida, could the you is Florida ramps some quite get impacted. same true were shut an

some the So went have there generators, shipments, been the water, the but that more critical waited, truck. certainly may they

Matthew Brooklier

it should big September to into just volume to in maybe shift some was delayed your… got moved like a October, I'm September that moved have of or trying see from factor that - if volume if and contributing

Terri Pizzuto

us. to Not

Dave Yeager

I really no. case, don't that the think that's

Terri Pizzuto

more No. that volume. We didn't cost lot was of assume lost in $XXX,XXX related. we our a It

Matthew Brooklier

And regarding is then dedicated pay give for there. you a for mentioned Maybe for driver drivers? the It Is your increase. that little color bit just your a drivers? more potential earlier drayage

Dave Yeager

Yes, Matt. think think It going time has this to And as trucking effectively. both. most in them it's business grapple that where. for But how the in would very well be as actually with I pay at you as to and turnover driver driven be as geographically far got retain everyone I point driver that's

Matthew Brooklier

board it not, across sounds wage it's mean increase. an versus it's the like like I strategic more

Dave Yeager

how to had wage done are. Yes, a study absolutely. we We compare just

of the limit have. go to just the So always limit so drivers, can we compensation upper accidents, issues attract all potential you try the level to best we

need study we'll the term. process it, done. good pretty just the and the may done examining of had We're so what And to of be idea in near we a in have

Matthew Brooklier

And the event P&L, to hit quarter those potential costs potentially? what that be incremental for a would first the

Terri Pizzuto

it's would first hit Dave it in earlier. the mentioned the of But quarter, really throughout Some year. as

Don Maltby

it'll be phased in. Yes,

Matthew Brooklier

Thank all That's out. spread very you I Okay, much. got.

Operator

from next Hartford And from Company. Please our Ben go Baird Robert ahead. comes W. question &

Ben Hartford

the I Terri, real for tax are about get thinking XXXX? a parameters you quick, few How rate for XXXX? could

Terri Pizzuto

February. specifics give Probably I more you can between XX%, come XX.X%, but

Ben Hartford

And then XXXX? another placeholder, for CapEx

Terri Pizzuto

XXX our is guess. best XXX million Between million and

Ben Hartford

XX sense months? what the to leverage comfortable any ratio be, you're And say, on let's to over a regard next with with,

Terri Pizzuto

be still at right times going now acquisition. was X if about up comfortable to would We it X.X. we're Right the

Ben Hartford

acquisition, would ratio fall? leverage expect to or you And rise without that an

Terri Pizzuto

Fall.

Ben Hartford

you. Thank Fall, okay. Great.

Operator

it we Yeager like And for Dave no further turn back I have would remarks. as over to questions, to closing

Dave Yeager

call. third everyone thank quarter participating Thank in earnings And Allie. Hub's you you, for

As would clarifications. always, questions I any Terri, us. for and Don, joining there's you if or additional Thank be available again

Operator

today's for participating. Thank Thank you, conference. concludes This ladies you and gentlemen.

may disconnect. You now

Hub (HUBG) 27 Oct 172017 Q3 Earnings call transcript