HUBG - Earnings call transcript Q4 2017

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Operator

Hello and welcome to the Hub Group Fourth 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 inquiries 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 you call is the recorded. now begin. It turn may Dave pleasure to

David P. Yeager

segment. are and in Group and Hub X% for participating in President thank XX% benefits finish Terri Quarter in Chief Hub Operating of nearly afternoon, and Officer; Earnings our price a to strong XX% while you Mode volume Hub revenue Maltby, growth network me Officer. adhering XXXX customer Don segment Chief and Financial and to to prioritizing Intermodal our commitments. the Fourth was with the Good today Pizzuto, had due Group's Call. With up

turn third in due pricing tightness call, the nonetheless our the to equipment in gained tight quarter in and in did to market available capacity market. was high-demand was part minimize due growing restocking tightening addition, working has large the peak, we're disruptions. Despite Rail capacity strong market slower of longer truck in rail during tightest the customers. with is and of one for tight indicated service inventories, peak and demand, our commitments being a to we through of shrinking largely extremely the that in our in depleted decades. in uptick rail rail far, The was our As service to I've that but effectively Intermodal was economy, seen service our conditions deteriorated, These service time resulting equipment the strengthening. issues. impact customers Thus Hub a resulted earnings momentum peak an capacity capacity. year-over-year thereby markets meet

XXXX fact, of other is In service. our our exceptional any awards in year a in carrier more That in history. testament the than year Hub to won customer

In we that other targeted limited their without been contracted by provided addition, carriers. also capacity customers to equipment have left

will and created believe margins. share Now foothold gain and which in convinced into accounts, we'll prices be with that strong a these there the we're We that be first a XXXX, XXXX able carry reasonable through pricing trends that of will we've several environment. to Intermodal is

level. expressed, focused unacceptable XXXX, of network. we price previously increases in year our and an downward rates. decrease we pressure direct in result yields a optimization a on experienced margins and on XXXX to of most Intermodal increasing this of our was pressure of As tremendous we're through The This combination

prices to in order our inflation price go increasing to driver Although confident and reasonable the rail we we'll outpace a realize will margins of to to the driver resulting us revenue costs, be allow are committed rail but and increase, mid-single-digit secure to that in Intermodal we're much will reinvest higher able product. to wage

to Dedicated exceeded thesis that desire customer focus In businesses customers a focus to on on to very recover pleased its forward profit create acquisitions And remains our safety, acquire instances, with focused services strong with business value all Hub, but cultural existing area fourth will Hub And that Dedicated made quarter agreements to of process lines. We're The remain offerings according past margin. committed our diversify accretive. of Brokerage between to is acquisition have plan. Hub's culturally accessorial to enhancing we is of that in their in on and is of in closed steal of year not a is platform. continues X the management continues to July XXXX excellent. focus to on our Don's technology stellar service alignment both of thunder, the customers has expectations. is aligned unsustainable was have Another not and immediately did as while a renegotiating complete accessorial Oracle our in overall and and last to costs. existing service, the our We're organizations team, cross-selling new a with customers move lastly, fixer-upper migration Unyson

in landmark with a our reached over call go of about billion specifics to business segments. the Don that, Lastly, I'll revenue $X depth With into exceeding major XXXX. Hub to turn the more

Donald G. Maltby

Thank you, David.

this process and Dave and end key mentioned, earlier peak, This than than to planning capacity manage and the open started help prepare solutions. and anticipated with customers this continued through customers. process peak year. our the To establish each allowed peak us As we of our plans multi-modal dialogue volatile to our earlier of through for us period started normal provide better

servicing established by commitments. demand flows customers Throughout continual and quarter and network demand were with to real-time having our our the we our addition communication the plan, customer clients, needs. our of In the standing we focused constantly establishing managing on

business demand. price we that across not service lines for all so, was spiked able that volume also contracted on committed improve beyond doing of and were While to our anticipated

quarter. service demand we a customers the solutions, As This same improvement fourth the the pricing. for customers offer our by were from best continued, despite market and performing pivoted capacity rail was while service recognized by in XXXX our Hub's to yield the service, Throughout quickly peak at far in deteriorating teams and providing both time customer perspective. our history

utilization. times on As our truck, only fleet our our harms also to however, service but operation competitive and costs adds these we this been communicating position customers stated we accordingly; call, our last transit to have and increasing our reduces unnecessary challenges not versus

tax with a market, mandate along results, truck and XXXX tight positioned well believe As the are we the very with success. laws new economy enter should we we our in for improve place, ELD that

let's Now the about talk businesses.

impressive fourth the the great quarter of consecutive This Truck coming straight growth quarter As Brokerage volume year. for an for sixth with quarter in a growth. is XX% and its XX% Dave had of mentioned,

Our a strategy the multi-modal solutions of and our many, will provide contract, to believe and remain services expand been has value-add. be include breadth like We, and market. XXXX transactional will challenging capacity to

align the driven base value-added provide strategic further XX% We to demonstrated throughout the Logistics with markets onboarded we work top-line to new support new secured and In and to our and well with from and will bringing strong are This ELD expect creating XXXX, our was existing overall strong carrier customers. reduce about enforcement in our quarter mandate throughout to the opportunities base. customers and where XXXX as volatility year. extreme continue well-positioned we capacity, and year customers carrier with accounts by our for key the growth XX% services. of growth as impending

revenue. the our up XX%, Mode capacity the had enhance which growth, XX%. strong customers across XXXX, process with XX% service growth led first logistics In pipeline customers. Mode focusing multi-modal annual During lines all existing top-line opportunities. and enhancing future billion and up and operational we for creating experienced for to investing TMS on our our was in continue supported margin with time quarter, and revenue of savings by reached technology, $X and will while efficiencies in improvements, working we our operational growth truckload,

the challenges the This Mode of rose and is to revenue to the X%. for network the allowed attributed For strong which year, meet a position growth company Mode market XXXX. platform growth IBO a in technology and

Terri over the it turn Now I results. to will to review

Terri A. Pizzuto

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

First, grew income XX% quarter. fourth operating in the

solid margin is in growth accelerated pricing that the for Intermodal we're as encouraged foundation progressed Second, and quarter XXXX. this a

Brokerage with gross a quarter up had tough a comp. Truck Third, XX% very margin on strong

Group's includes fourth XX, Now, let's reduction in-depth in at our a at a tax and Act. decrease earnings the recently was $X.XX to our XX% an excluding look last caused The take performance. share December to $XX.X compared to Tax taxes That's or $X.X Today, year. federal the focus of diluted Hub billion. XX% I'll is XXXX Cuts per share rate, Group's change quarter increased more impressive impact the by enacted which reform. income $X.XX, year. fourth Hub from part the quarter results, of $X.XX adjusted tax liability estimate tax of of our deferred increase quarter million a the Jobs resulting last the on fourth revenue over

costs in an more lower customers and of increased margin decline segment. margin, onboarded Dedicated using was Brokerage XX was a compared percentage the in volume. million. gross of Hub margins. to XX basis and improvement of XX% Hub last Truck our to in mix Logistics Spot in loads and up safety, factors compared Local Brokerage decline margin point price loaded of business this quarter, the The increases of $X.X Hub because The volume including costs. our Group a in lines, than Intermodal business revenue million and this year. drayage a from XX% the of XX.X% costs because in increased all the of of $XX.X in closer Group up cameras Logistics margin revenue in were in were XX% increase points our mix Fuel, basis the of handled Local Taking more of gross margin third due percentage due sales spot by was last and year. increase Transcon slower primary technology about I'll last contributed and These is the XXX revenue to of of and higher was a box down Trucking comes sales. and Hub of in higher reason because factors gross at X% in increased purchased at favorable. margins Truck gross Now which as Brokerage quarter are Truck fourth on down Gross segment percentage expenses transportation Dedicated. quarter as in-cab about financial growth volume combined gross due revenue X% Drayage increases three as of Hub and organic X% Truck growth claims was starting Logistics performance a up Hub of Dedicated $XX.X or to year costs customer mix. repositioning details and because X% year for X%, to in a decline a increased freight new margin revenue offsetting generated XX% and gross Group fourth year. basis X%. higher customer last look on in year million $XXX West the quarter. quarter. trucks. or transactional year. point total increase price Group with because margin lower XX Partially rates. Logistics increased Hub's Trucking a up The addition in insurance decreased primarily a Group percentage gross XX% same churn. after being loads due the is margin Intermodal as increase was was Mix in to up these up loads revenue talk in Intermodal business. of Intermodal a was XX% increased sales to and sales. margin XX% points XX%. and business. costs was These in changes Truck by fuel primarily East basis lines Costs quarter. due fourth XX% lower a of changes growth drove Hub to Brokerage of Hub XX% the loads $XX.X million, for last million top and fourth in service increase focus increases, offset continued to XX% miles Brokerage partially the the Dedicated Group

decrease consulting In Offsetting is about in million about and million bonus $X a addition, $X million, $XXX,XXX. medical claims were costs about salaries increases expense. and up increased IT these are up $X.X

Hub than year the last segment year. basis which the that higher highest for XX all points margin was operating Finally, was X.X%, it's and been

all offset was $XXX as million which in Intermodal, million in up was over $XX discuss I'll revenue results was in up transportation margin margin in compared in revenue up year as Mode's was basis XXX to partially which XX.X% down XX.X% increase a of in margin, increased because yields to resulting for up Truck $XXX,XXX Intermodal breaks last $XX mostly XX%; Mode due margin year. was purchased point by Operating Mode three costs million X%; lines. a higher Now percentage margin. of declined segment. last X.X% to Gross went service up XX% for Mode's an $XXX,XXX and the increase year X.X% decline Revenue Logistics from our In gross which agency Brokerage, which to due last Brokerage from year in to higher and slightly $XXX due sales million, to year fourth compared gross expenses Mode's quarter in and costs. commissions. compared Truck Truck last year was Brokerage to a Logistics, an XX%. decline

excluding Turning Group, compared of at Hub September. of the down the to to year. the had head end end That's for five drivers count X,XXX employees we people

borrowings debt of including ended on $XX.X the revolver. the leases Turning quarter in with and $XX in $XXX cash the and now to balance cash. million million capitalized million our and sheet We

Cash leverage or this than to XX% capital to operating $XX.X That was Our X. tractors, was capital spent the from containers, $XX.X $XXX X.X XXXX. million to higher related million activity expenditures XXXX expenditures technology total quarter, generated year mostly for trailers. million. brings ratio and on We full

X% for believe We we Dedicated $XXX high to A the $X.X one-time would XX% low and $X.XX. our range Truck million factors XX% in the share will in expect double-digit We per comparable adjusted that earnings decline of $X.XX Hub digits a XXXX. diluted costs X% Logistics for Intermodal. estimate in Now share back revenue, growth per Brokerage and be to adding what growth service we to discuss XXXX revenue and project a which growth rate. will for million. the in By revenue single line X% revenue. using I'll to X% earnings to We between X% for year. $X.XX effective segment, tax be $XXX at year million from expect revenue

Capital to $XXX quarterly from estimate first pay a We don't federal XX% to income will quarter. capital of as XX% quarter of $XXX the in several expenses the to range that We project to our about fourth sales between XXXX. reported in taxes compared million We We to state that expenditures. From million, pay from increase expect our are in from due immediate the and range $XXX expensing will of eligible will expect margin $XX.X to XX%. million expenditures that costs perspective, highest consolidated estimate will be year. tax to believe rate percentage for million our income gross lowest any full to expected and operating $XXX be income and effective in operating dollars We XX.X% we taxes. cash income we income will range XX.X% the million million and XXXX. in a

related spend for equipment customer to and million new Dave, to will wins. to equipment between closing the is million strategy, for customer Dedicated $XX We approximately million this our remarks. million execute up wraps $XXX renewals Group for you for financials. $XX on million $XX $XX $XXX and over and million investing That Hub Included between and in technology. contract

David P. Yeager

on the for open upcoming for bid not positive capacity shippers has Terri. to which in focusing fourth strong We with XXXX. Thank environment the very any fourth executed prices transition are that a are product and capacity does we'll Hub's Great. up was capacity very the positive to pricing questions. demand solid tight, with but of a quarter get the commitment exceptionally into And level. that, a cheap quarter results tight high all Not line believe our their market. as reminded that only operating created at solely units without you, season note

Operator

Group. we Research have Scott Thank you, sir. Wolfe go ahead. Please From

Scott H. Group

Hey. Thanks. guys. Afternoon,

Donald G. Maltby

Scott. Hi,

Scott H. Group

on of guiding plus, so than look and you take seasonality, and rate earnings fourth rate that lower wanted just a kind to and the tax implies a look lot So, obviously the XXXX. at at guidance, for the are we $X of if ask now at quarter sort of of it guys look normal run right a of sort

is help getting quarter, little and understand get to So you guidance fourth if or to your changing help think bit? unsustainable worse was something us what the maybe a there just in us

Terri A. Pizzuto

A Yeah. of couple things Sure, really. Scott.

was robust went season our very for customers all, for quarter of opportunities us, we and holiday surcharges with First over a their pricing capitalized who fourth season season peak strong on peak those and volume allotment. very

we bonus So and lot Truck similarly though margin, in quarter which even a of a did that helps the on such Brokerage have we fourth side, no spot fantastic had we job. business, the and the

Our year-over-year. bonus down expense was $X.X million

of that's have all-in, for look bonus. doesn't next for it at costs a in So strong quarter, really a lot if – so there and you year,

Donald G. Maltby

Right.

Terri A. Pizzuto

If next plan what year will bonus having you you say well, happen, and on year. look at we next

why would were in the of costs the for That's salaries XXXX the So we benefits. increase you well, a from have one, a different first and quarter be until up expenses of increases say, couple dollars. people. of reasons. are quarter if to XXXX, Number couple fourth your and million for That's reason of an biggest

G&A We also on of $X expense this QX, bonus of QX the we're cost QX have million That's IT $X about earning for we million. – we're a restricted costs, then additional bit well. planning stock in and year, in does a ramp planning And additional for quarter. little our because And our up IT about investments. million, because then doing have $X.X on

Donald G. Maltby

Yeah.

first Scott, quarter. XX% Intermodal of those don't the regards that, quarter, second to with pricing the XX% bids. thing forget are bids other The the in is to

take going bid as So we our as price goes on reprice throughout we're the business. it year, to

Terri A. Pizzuto

drivers to want and attract We've Right. enhanced to And we costs efforts. a out there also the driver recruiting our – the we couple best that first we put in quarter, of other attract we brightest more drivers. and the and retain increase did is then, have

we think but And a a additional will rail that Then, go a during we first in the cost. did part and have so of quarter. benefit, it's rail be increase

Scott H. Group

I good can then, what year? is your to what of going couple very Can – to earnings are Don, to you can percent up to help you percentage-wise you your look quick that. color. just for quarter Terri, think frame year how the or follow-ups way be That's Intermodal rail from costs is Okay. up and maybe And going you of this is there just think year? think pricing any you, an perspective maybe you say first this be going either

Donald G. Maltby

our and increases our looking visibility on Yeah. the have digits rail customers as We're to remainder at mid-single now year. of for price into the increases cost we increases

we the So with Dave are to will our and price – to in as spread the costs going mentioned we of increased business our call, price customer.

Terri A. Pizzuto

some earnings of we we about year. QX XX% will Scott, year, QX you versus of not reprices in as And benefit a last our until cadence, mentioned, a be business the that that to in terms at last the EPS increasing year the could get day going of maybe growth lot from than time think of on. higher the asked could we're February, be last during Meaning quarter. be March, very of price goes first Don so But it about, the

progresses of margin sales the the And is the gross in for Intermodal, expect increases percentage fact margin as gross year so in last year. quarters that year a last percentage particular, we three of than in and higher that as

Donald G. Maltby

Right. Yes.

Scott H. Group

with or that without Or rate? be is would growth tax earnings that the And just?

Terri A. Pizzuto

That's tax Yes. rate. the with

Scott H. Group

it. guys. you, Appreciate All Okay. Thank right.

Donald G. Maltby

Thanks, Scott.

Operator

have Long. Please ahead. we From Justin go Stephens,

Justin Long

Thank congrats you quarter. on and the

assumptions the guidance So guidance? you and for Intermodal segment's volumes just in within about up I'm mentioned digit the could percent XXXX a talk change you're you for but I you're business using pricing, the the mid-single Hub curious as on what assuming well. follow start, bit maybe the to little Intermodal just margin for know that to

Terri A. Pizzuto

price quarter, as might can we're second the XX% between increases goes sure. the quarter, than fourth we that and We're higher in volume X% assuming and growth. it Yeah. the Don in mid-single not and digit only first and quarter. that. grow third for XX% said, And in, X% the volume XX% X% price We We're building quarter, year. be think And the even

Donald G. Maltby

We're year. volume Yeah, take in ability our confident and price yeah. to this

Justin Long

That's helpful.

So I'm much terms you that Intermodal are share guessing means XXXX? of anticipating basis in but how all of just could in an you're that improvement points margins improving,

Terri A. Pizzuto

year, XX between it's between, Yeah, for know, don't up basis whole the and about I XX points.

Justin Long

know around you hit are the And earnings comments made I some secondly, wanted is prepared service? much was XXXX, assuming in helpful. numbers any then the an in how I from XXXX? we service. of ask go into in of about Okay. as rail rail to And about to impact way That's you that terms there remarks, what year-over-year that but put

David P. Yeager

number stance a does it That's measure. little our against Justin, this put an on trucks. exact difficult bit Dave. it certainly, is to is That because hard competitive to A, hurt

certain inconsistent, In addition, operating fact appointments. lot a degree us, the a when add of there's in because particularly be to it service of cost does may rescheduling of

operating of have You are necessary pull aren't lot There's a additional and to them. just then really when costs efficiently. rails the store loads the very which

So just talked it's very difficult, numbers, able to put be it and soft to about but it's it. actual an we quantify to very the

Terri A. Pizzuto

our days you the I would was Yes. too XX.X. XX.X year, utilization year whereas last was about whole tell it for

than and us utilization for $X that, a million so, a day bit $X more day and million. little is of And a different, half basically between anywhere

David P. Yeager

one But of component it. that's just

Terri A. Pizzuto

component, piece. accessorial one just the That's not

David P. Yeager

Right.

Terri A. Pizzuto

Right. Yes.

Justin Long

That's it. at leave in Thank helpful. line. Got you. I'll get that back and it

David P. Yeager

Justin. Thanks,

Operator

From UBS we have Tom Wadewitz. ahead. Please go

Michael Triano

on Triano rail for Tom. the this comment there Hi. timing throughout of year? the of how of This the the Mike year, is that and at rest Could the increases any progresses year? you Were cost beginning on the

David P. Yeager

Yeah.

increases, which visibility We good have say, a X rails relatively have do we and on also we XX have on. increase May would January on I with both then we'll

Michael Triano

another Okay. And maybe one.

on secure been some attractive Or intermodal freight is not CSX just you domestic the additional the able to On business? from service take business the capacity to service Have the enough changes? changes. to deploy

David P. Yeager

that with, that in not markets It we're may the service. Southern, competitive lot seems necessarily where of Norfolk changes like service not made have awful they were CSX an

big So our that, is business surge would a seen a certainly business say I East we as of have result although Local not of up.

Southern If appears possibly weekly released suggest to has what in be you some case. has versus just intermodal. their you if numbers Norfolk look that are business seen look, transfer of seen CSX the the at certainly amount I that of It would

Donald G. Maltby

It's of kind on seen We've identify. we to side have hard CSX the more Right. conversion some truck on side. the than

David P. Yeager

Right.

Michael Triano

Okay. Thanks the for time.

Operator

From Markets Please Todd ahead. KeyBanc Capital we Fowler. have go

Todd C. Fowler

see, side Thanks, why than like to digit is Great. and is why I'm Intermodal stronger of the Dave, could something than pricing that thinking pressure that there comments, digits what years, pricing seen reason the that. pricing kind Intermodal about to mid-single is right Intermodal Intermodal high-single what couple is and that gross now? range, market that is the using a be be evening. what Or to mid-single probably good in it on I the right then I you really you're we're that But and your couldn't happened more something materializes the going what's feels a digits where guess be past seeing understand up this placeholder And discount the over truck on is in expecting? XXXX? margins, the at to of has

David P. Yeager

fourth And with was quarter a though of perfect to just my Todd, in lot customers We a the No, this of being certainly upside bit not of we're said as as storm, pricing think procurement-focused, tightness, of there's created longer over them lot was that realize I a year demand. a that a the as going I always, lot for final that feel comments. Really Intermodal it kind work conservative. term. capacity that's

certain much are striving and clients increase. as get XX% we're we price at be very yes, low-priced to which we'll looking So, can. as candidly There's certainly

Donald G. Maltby

Right.

David P. Yeager

certainly which than is goals but others say good have mid-single-digits that us can there's number, But yeah, with would And be that. we than that. have I been conservative bit which and that and a higher a less be targets working more would –

Donald G. Maltby

to right? out. markets the those also we're repositioning our we're we're make Dave's then these at we're point, So and to to it to looking right bids market, boxes not pricing sure And that network in pricing the

in can. But we every envelope. time balance, bid it's and early season, the testing waters a So It's it right? the that price but pushing we pushing we're are

Todd C. Fowler

And to increases. that That your sense. the Okay. sounds recruit ELDs helps, coming visibility enforcement have with into like both with second there's your is Can efforts then cost with in right and capacity own comments drivers then of it think especially what constraints about on dray cost now to at third-party might And on you capacity? experience what ELDs had some structure? get you quarter? given to I your just your capacity, makes you availability dray And some the some do rail talk least of or early the

David P. Yeager

as for at least Right. years. point, company all And to well as that we've had in ELDs XX of our owner-operators tractors, drivers

may a operating. to going booming, of function very drivers a you of to levels. drivers select in for Construction drivers be a the not is result or industry. the potential right It's at have it. any construction to certainly our It's lot low. used unemployment But changes scarce are very that we're now. as of They're very, So look and

both I effective We're dramatically that making increase a we a as and year, recruiting So concerted just we our Dedicated are effort. expand groups Intermodal take why combining base well believe became last as wage did the to this our week. of that's driver coming

Terri A. Pizzuto

Yes.

David P. Yeager

most as So went turnover our know you it's key. XX% very a competitive We actually for below on drivers. a is recently. Retention market

constraint of it's going and Intermodal really focus, right a on It's and for yeah. the to it an have factor they as tractors ongoing now, idle I – be but So, a think obviously as constraining is the lot that that. well trucks,

that that, with to and we've our past to there it, numbers. So got we premium at focus though handle in we we're associated need will that driver those a inflation but issue, and be get rail able that it's priced said will to fact the in be a we've as the as cost execute. a manage very we and costs focused two and But good the on costs on feel

Todd C. Fowler

Good. here. That nice time. Very the quarter Okay. for Thanks helps.

David P. Yeager

Thanks, Todd.

Operator

we ahead. Brian have JPMorgan Please Ossenbeck. go From

Brian P. Ossenbeck

for Hey. Good my question. Thanks taking evening.

So back just digit would that what about Does separate core I recovery just accessorials? that and pricing? a about after item pricing come Intermodal, the clarification mid-single for does of in to wanted include going a to the really. just Or be talking talking were you're about earlier you

Terri A. Pizzuto

that. That be would actually of top on

our So our price increase. planned mid-single is digits

with plan it the got increase pretty price, also a recovery the accessorial costs, be than increase traction get of up customer, we'll more could and we If mid-single and that. to don't We our good there we've doing digits. particular then

David P. Yeager

most We're fair, really very which are have accessorial fact that customers accessorials the really aren't finding control. may their that in of that under our agreements,

taking that instead of their finding is are and within increase reasonable an accessorials have from agreement. we're it So accessorial willing of again, the Because to us, a they take an control control. increase plus

Brian P. Ossenbeck

Okay. Got it.

recovery baked So some that, optimization it would your your but which customers are of the of expectations, the accessorials some utilization have able you speed or your of into assets. on sounds of like assume mitigate to rather you I help

David P. Yeager

helps on It equipment. certainly returning us

Donald G. Maltby

Absolutely.

Terri A. Pizzuto

work together of not as much the us like Yeah, the costs, says. because bring and to it Dave price, try and might them customers down. be and It's reduction

Donald G. Maltby

meetings of what take or it's in the lot a down to going had agreement. the cost and of the about price to in how either with We've accessorial Right. customers we're bake

Brian P. Ossenbeck

like I chassis I containers you. don't that. gave information you anything Terri, Thank on or on think anything CapEx us heard Okay. or already.

If the might to give how the of us it be big a you planning what add at and end year the to you this year? could was fleet of sense

Terri A. Pizzuto

Sure.

fleet X,XXX, We and net about increase. be are about about to our X,XXX gross will X% and that's so container add up a XX,XXX adding containers will our be

Brian P. Ossenbeck

those throughout basis? are of the year weighted a Okay. ratable on And kind

Terri A. Pizzuto

They in year before Yes. peak. the come but during

David P. Yeager

peak, them the We of or from lot to in get Right. try Angeles they a right of do course around in because disembark Los Seattle. vessels

Brian P. Ossenbeck

Got it.

Thanks Okay. the for time.

David P. Yeager

Thank you.

Operator

we Majors. From ahead. Financial have Bascome Please Susquehanna go

Bascome Majors

Yes.

maintaining budget. out would how different were just of break broke You out kind of a growth number, and to of your that components it maintenance label If million? $XXX-ish CapEx you we lot a

Terri A. Pizzuto

replacement. million growth $XX $XX tell you can I million for $XX that's Well, for for million Yes. containers. that of and is is

$XX that's about for Dedicated $XX and growth. mostly XX% about are HGT the And That's at million. growth. million tractors for for trailers, tractors Our

Bascome Majors

you. Thank

Terri A. Pizzuto

going technology million. ongoing. then Those to be investments are And have technology $XX investments. to about continue will We're

Bascome Majors

over where appreciate this I clearly last guiding back the of some questioning, if what last growth I decade. corporate the versus mean, tax then, an since and reduction, U.S. mean, kind a could we've you it's pricing guided environment of step earnings end that. the you few less. rate actually But acquisition, taking XXXX And tailwind the you're you initially a year. February, you seen to be surface made to compare best up cents got I a what from Well, earlier outlook a transportation you

really Just missing? more a is just more And we issue, high something maybe why timing it that or business? seeing leverage level, the in aren't structural investors

David P. Yeager

timing believe is issue. I a it Well,

Terri A. Pizzuto

Right.

David P. Yeager

were We not it the do look very is during as if rate you surcharges we will the fourth on gradually the that's positive based quarter, it, you If there, said, QX, – XX% improve. first XX% the is that quarter. in QX, you – at again first way look peak environment, in believe quarter a bids, where nor so capacity, they in but and the this case the at second quarter to realize the fall and XX% able

and, we clients, a so both live again, be his commit And our our and to we from capacity commitments do Don's in by point it'll perspective a we price. prepared – what to – to earlier remarks,

a window wide well could do very it window gradual, but reach will that very So XXXX. be think be and into this we may

Bascome Majors

I appreciate color. that

taking is of better kind it you fair and assume the increases about said a on that in to mean, as year-over-year leverage you XXXX timing I earlier what roll about it So the XXXX incentive a as pricing what be business headwind comp being actually doesn't there the could basis, in over? in fairly large is of the – said pricing than long

David P. Yeager

Yes. Yes.

good think assumption. that's I a

Bascome Majors

Thank you.

David P. Yeager

Yes.

Operator

From Please Barclays, we Oglenski. ahead. have go Brandon

Van Kegel

Hi. my This is for Van Kegel Thanks taking in questions. for Brandon.

could at what guess, it's I than to focus of forecast you little about of and how with expectation growing Just X%? given partners productivity count by X% gone wanted to conversations talk service. industry, have a to kind on with to service regard go the the your volume of head faster rail and volume many in back some the rail

David P. Yeager

they the improve both more us some as calls our though historic updating operational and deficiencies with to for are fact, of have in Well, we they partners what do overcome how, feel existing weekly can of rail looking service and back levels.

places In don't the see the addition, this I overall we're though with levels at immediate in normal view It that we service levels, coupled XXXX. few the levels. just that at going the the throughout do back as XXXX candor, as rail not do believe don't think believe meet top that of coupled all the seems way certain of – to we're and house having but year, surges with be an with combination in to shift I the weather, too I well volume that, winter going improve we in will regarding to assets point, service and

Donald G. Maltby

I agree.

Terri A. Pizzuto

we would we budget. planned in that And haven't be our

David P. Yeager

any we Yes, improvement. for didn't Yes. Right. assume

Terri A. Pizzuto

Right.

Van Kegel

fourth Understood. you. Thank of you kind rest with of strength the what And during additional the some baked market from the of guess I in are of guidance then about year? the throughout transactional quarter. just into expectations that Brokerage, Can talk tailwinds terms on

David P. Yeager

in the quarter really year, Well, than XXXX, transactional. always fourth fourth contract the the XXXX our has been we've and traditionally risen. transactional of more business of for quarter And

because a for We expect to higher need our business service. transactional in more XXXX there's be percentage that simply

Terri A. Pizzuto

and like for we're Don at fact, says, market and is good so so a in that January and it's us. capacity it good was tight, And in really

David P. Yeager

good very market a that. It's for

Van Kegel

Appreciate it.

Operator

line From Buckingham Matt is ahead. open. Brooklier. go Research Matt, we Please your have

Matthew Brooklier

Yes.

Mute. Sorry.

Brokerage coming and it of a likely a question if growth guess I good XXXX. guidance, at price? revenue in having particular of mix had more why like may you difficult for the – Follow-up to year but we're curious, trucking. versus XXXX your in volume your side the have on just tightness growth look just there's granted you a Truck feels things. talked when moving evening. of a low revenue So off lot guidance comp, side And such that I at just volume most I'm market given I back, transactional and

Donald G. Maltby

bid that in selective who Brokerage we be business a the tight Two Yes. to selective obviously Truck going grow where market. side on being also heavy season One in on with, and things. is we manage be can a we're

to we've have well, As around strategy. ago you where went might years market a known, and certain with markets stayed three we we very would service that

conservative on we've we're comfortable know, what but of think I in you you guidance Brokerage. with So, given we're the nature,

Terri A. Pizzuto

was update the we of best we didn't Truck reason that year the shot to Yes. fourth we this as is, took and need we'll in it Brokerage, And all anticipate the guess the to throughout what beat year. quarter so part we just I that mean, business got. on our we

Donald G. Maltby

the you're earlier Truck end Yes. was the Throughout especially peak the although also seeing Christmas. up started it side, was of anticipated too year, mean Brokerage very and intense, this season on on side, the and I through strong, and Intermodal Truck than

Matthew Brooklier

also Hub then in some that drayage Dedicated? And Okay. just the that Is you first driver through mentioned putting wage is on for quarter. Or increases side?

David P. Yeager

both. on That's

Matthew Brooklier

magnitude? give a Can little That's on of you both terms sides. the in color

Terri A. Pizzuto

but market. It's single by digits, it varies

Matthew Brooklier

the about that longer of just reprice about price a I business contracts, given of think going contract do Hub can you Hub maybe talk I kind likely reprices. And how the business. When in guess to dedicated what all in Okay. year. of the strong be business to repricing most model, Dedicated's new book through you us potentially Dedicated's trucking, think is not dynamics a total And year? Maybe what walk percentage that of really then business term just you given could

Terri A. Pizzuto

to on our to Dedicated all contracts. the reprice, Yes, we're able when of we market driver especially have

the do while for built contracts three are So in driver the them years, they escalators have wage increases.

David P. Yeager

yes. They do,

Terri A. Pizzuto

Yes.

our wage our recover increases to able from we're customers. driver So

Donald G. Maltby

at it drivers. with price been priced new with we've going increases that And pipeline, then place business for obviously pricing the in the our we've

Matthew Brooklier

Okay.

driver So to thoughts up margins this you're what pricing it and kind up it are but your question, the Dedicated there? gets reset this where then the ability headed I'm market sounds on contracts Do to guess your I you expand Everything combined, business things, do we that of currently. with my, like side Like assume moving wages take in pricing they're in some at of should think flat? newer more of business?

Terri A. Pizzuto

the margin margin terms should with efforts. as up of We've very go themselves In of been successful cross-selling our significantly. some – gross dollars the

for guess percentage of margin stays best sales this was as months the what it a of past fairly is year. gross Our six similar to

Matthew Brooklier

That's Okay. helpful. I the appreciate time.

Donald G. Maltby

you. Thank

Terri A. Pizzuto

Yes.

Operator

Please Paterson. Rick have ahead. we go Markets, Capital Loop From

Rick Paterson

question quarter on and for Nice you. Thank service. Dave another railroad

challenges last volumes seen it have the the to service we've regard seems over and excessive degradation faced relative to the in weather. be to six the routers Now months, with

are vantage might you railroads over time from in changes have that how fundamental the businesses point, running explain So your noticed their any this?

David P. Yeager

we've seen don't I changes. that any think really fundamental

in And carriers, Of course, they operational been had frequently we railroads, some very has of publicized. of have one has Eastern widely issues, course, the which fact are in U.S. the does everybody awful takes individual we've cold, else. interline in place. networks, gets one so but an seen And of past, the a and business there's that usually rail lot if fact

have and at than little close does hit Southeast So may every changes the agree. surprise. Chicago. make XXXX we at be nonetheless the It I relatively of have a would progress shouldn't severely to I been from year although CSX, – the think to Winter it more the of were get we but think that. and to able have that's exacerbated in Northeast I made some And a back that has may hopeful this do but have get recover as are that partially it and normal, towards be quickly. levels not tendency least they'll a in service,

Rick Paterson

now to for of five they're say Do crews versus trying ago, you leaner run in years example? think terms parent

David P. Yeager

the I and can't another, know. One That's that's a a of rails. way that. I good or don't for question management comment senior better really to the question

Rick Paterson

you. helpful. Thank Okay. Very

David P. Yeager

Thanks.

Operator

follow-up a from Please go have We ahead. Scott Group.

Scott H. Group

Thanks, Hey. guys.

here. follow-ups couple a just So

had in growth you the think I good quarter. Logistics So

just you're guiding revenue Can year. think I explain to the you for down that? Logistics

Terri A. Pizzuto

Yeah. Sure.

year. on We our We carefully. and lower-margin and so of of concentrate migrating our get rid we won't our are to going did But do do go want down to we margin new revenue business, some customers our be up transformation year-over-year. technology our the Logistics we to it over In it is being really that existing right connection and will base. think with other in component technology revenue to want this

Donald G. Maltby

Right.

Terri A. Pizzuto

our though Even is revenue down.

Donald G. Maltby

Right.

So big have still year, very to on a really onboarding but focus a right? pipeline Logistics customers on strong we had the we've are margin and we decided for So, to Scott, the enhancing piece, margin. such we the improve focusing

Scott H. Group

sense. makes Okay,

margin, is with So, comment, I I if flat, got you margin gross XXXX guess, worse, look guess think a versus full XXXX? do Dedicated. I improving. gross a benefit you've gross percent you the for mix margin better, year there's overall guidance Intermodal I Maybe mean, Logistics can at of

Terri A. Pizzuto

Yes.

our think it is points earlier, maybe XX basis be better. and XX guess would that commented better to I we

Donald G. Maltby

the before, Hey, Scott. Back as to second up the what on. we the throughout build goes So said year right? come throughout year, first, these we'll momentum quarter, bids as

Scott H. Group

the operating much growth expense maybe it's take message the mean, I just on guidance side. got not we've something price, know, missing question. I back guess Okay. Or and little. guess I'll conservative? to you Dedicated we've here. EPS the first really Is being excluding got tax there's my we're deal, go underlying if we and Like that we're I got we've a volume, margin, just the the

Terri A. Pizzuto

our competitive do IT standpoint, freight we up, that better I standpoint, visibility think, what to operating multi-modal to going allow over give XXXX a we a is and well, be like us about million then know job $X.X talked the taking was. about efficiency I in And to going advantage. from we a the selection. mentioned, you think investment to an bonus a a that have side, going right the It's expense No, quarter as earlier, little is us

guidance, didn't as have we of in cost that then. our that much is So too and

Donald G. Maltby

Right.

than to seen at higher Hub. move year, this going see that we and ever towards the next, for the year you're expense implementing as So would across network, be you've probably IT and our OTM after

Scott H. Group

then Okay. And real last just quick. one

drayage? in seeing talked, differently playing about that you Other what was think quarter. see you're in just are a XXXX. And I net how positive drayage. that Dave, in talk complaining you out about drayage fourth Maybe guys

David P. Yeager

few going Well, to that I I drivers. attract is don't more to think a think been do be to continue that differentiator. able I a drayage we've know.

processes on it for than to in going fourth going looked we've know, But our continuing of being do that any are at I week this are that And drivers week building probably we're current better pipeline, more quarter. got it's that you to be, I highest it's think the than in January months. we're this six actually focus probably through – we see it. so think number this our trained at point the in last time the time I

some due impact the to partially took. we're seeing that driver then and So be may wage we positive increase that

beginning be switch to I tendency think could partially a it they're of just year people do going jobs the then. the that have and if to it

Donald G. Maltby

commit we like certain year. carriers those the One markets, actually other and third-party we the a point too that with third-party act throughout in training use shipper Dave is to

we up, we ask for them flex So for as help.

Scott H. Group

internal But sounds here? your basically a on dray. what's that Is it going own you're like mix seeing towards

David P. Yeager

year was relatively last Actually flat.

Donald G. Maltby

Yes.

David P. Yeager

company we're still – is owner-operators we and are seen we're seeing in but we've what So drivers. growth the fewer seeing

internal model the watching the basis drayage same that's change we're actually see continue. couple if in it's – within a no, closely But to was So as points, that going very to XXXX. hundred

Terri A. Pizzuto

Yes.

Scott H. Group

Okay. for guys, time. Thank you, the

David P. Yeager

Thank you.

Scott H. Group

it. Appreciate

Operator

Please a And we have ahead. from Long. go follow-up Justin

Justin Long

follow-up. the taking for Thanks

couple a quick on model. the had questions Just

year. XX.X% get that well? for year to expectation So, as interest And the cadence are margins expense Terri, should provide I wanted the XX.X% color to any on your we be think there for I expected throughout you to mentioned expecting? Is can consolidated you then quarterly secondly, full gross be the

Terri A. Pizzuto

Sure. first, business know, expense gross one around of cadence for and probably you up. go sales be of will second in growth, $XX mentioned, reprices, margin our this a year. the million as terms the interest I'll total will the Steve take of percent as that And as

with progresses strongest our margin really a percentage gross of as So in it quarter of year we XX% as sales business fourth the will reprices. think increase after the the

Justin Long

point, high be to get you XX.X%? think range, the you the And when end that above of do you'll that

Terri A. Pizzuto

Yes.

Justin Long

much. Perfect. you so that. Great. Okay. Well, I'll leave Thank at it

Terri A. Pizzuto

Yes.

Operator

Todd And we from follow-up have Please Fowler. ahead. go a

Todd C. Fowler

Great. Thanks.

Donald G. Maltby

Todd. Hey,

what question, traded the whole to you the you happened Before team today. ask –

Todd C. Fowler

all I've a bits caught been had and of think in with get the weeks and that Cleveland today that's Don, tough perspective. here results think I it it's earnings you ear that unfortunately, GMs from but couple I only but a basketball these LeBron pieces that the

Donald G. Maltby

you. hear I Yes,

Todd C. Fowler

Once I about last models be you're the acquisition billion got and Hey, CAGR target that. a these some I'm I'll you've give to ideas I get here. us how you and caught that I a billion about of get Can thinking what of that about how standpoint revenue then $X release guess, with Dave, one you ask from conceptual high-level through in wanted just think component so. question. up up to an to kind single-digit thinking run high on $X getting there, what to organic rate coming feather into about from should get be you'd that the

David P. Yeager

and operations. great of bring full acquisition, companies types that well. doing a very job we is management could us IMC. come though that we're technology transportation very Right. DeMartino you would but now feel might that such continue in we be or manage No, can going companies the has the as think to outside could to feed, obviously a the other we've could be to It of Estenson And be decent but on pace, I certainly a businesses lines And of get at. question additionally, $X business is at that there acquisitions. we some We outside existing focus where our billion, acquisitions. to but we accurate there's are there again, Geoff cross-stocking pipeline Dedicated It able grow that lines. market. be would existing lot it things to do non-asset-based it right that acquisitions? is another it It business a active that could no from as broker look to truck is of fact been logistics of order believe a and it in can in to be our

opportunities and lot we come of success there. to would that we in thesis see we've a fact a excellent of has bear expect had lot and Our cross-selling

to looked – the from I to probably acquisitions, how get up it growth. XX% remainder new or XX% $X the basis, is at organic from percentage from to a if the billion, So going on come

Todd C. Fowler

there Okay. acquisition you And want to? can you but I then mean, you this, pipeline that I in is close have know do to feel on anything don't you're if the relatively comment – around helpful. just is purposes would but versus something comments planning later? sooner just of any I there know timing it be lumpy expect from be can Or our we kind

David P. Yeager

this there's right looking Yes, continue our nothing earnings we'll imminent multiple update mean, in I nothing to I but now that's calls. point with obviously we're that that's but imminent. would at there's at say time, businesses

Todd C. Fowler

And to Okay. have to this Isaiah at we'll if Don, Thomas follows see LeBron LA point. just

Donald G. Maltby

it's trades. – the amazing wait Yeah, until you see

amazed. be You'll

Todd C. Fowler

All Thanks a right, guys. lot.

Donald G. Maltby

you. Thank

David P. Yeager

Thanks, Todd.

Operator

go the for more a one on have stand do line. MS have from just by We line. And moment. on Huang question Diane Please we the Please ahead.

Diane Huang

is I question. modeling first question My posted but I the a market? fourth know quarter your one in. strong questions, in seeing carrier behavior the competitive on one quarter, and me squeezing you Intermodal comment very any the for standout a two a Thanks is OR TL environment? models, if second have can environment Intermodal you're competitors on different have wondering the in so business

David P. Yeager

lot XX so Intermodal where the product. after I looking that of call we've get – think they people very on that in downward returns competitive months what a to are environment a reinvest I better seen a would all pressure of can pricing, normalized

is it's certainly increases. It – pricing. rational been for that we've to So price us appears looking market very the

it Our to own a as to customers rail need up our inflation do are and our expecting as get them, and wages offset driver margins we in all reasonable costs, well candor, level. to we and

prices. it's I very it's much environment, from looking a to So think market increase

Diane Huang

hear. long you. Do guidance XXXX That's the grow And question you the XXXX gave? And much Thank off Estenson? expect how are Terri. second a to it. XX% good that Got you EPS is my expecting you to to in from accretion CAGR revenue at Estenson's over term

Terri A. Pizzuto

close to this of the very Yeah, their and for we expect I years, about were cross-selling, $X.XX CAGR think what that's fourth the in, year. we in quarter. out getting terms talked of we in opportunities in And successful for accretion about had

Some done of those this are at point. deals

year how we So we've there's lot growth update for bringing But been haven't how in But we're the first excited We of maybe for goes that. business new a mid-teens. very think room really it'll then year, be this far this already out. on certainly in there. see quantified about and We think quarter. We'll CAGR. successful the

Diane Huang

you. Thank Okay.

Terri A. Pizzuto

Sure.

Operator

Thank you.

closing We to will Dave turn for it remarks. Yeager back now

David P. Yeager

Great. Well, thank joining for us everyone, you again, today.

thanks Don I be and have would us. always, available But again if joining As Terri, questions. for you additional

Operator

Thank gentlemen, this you. concludes conference. Ladies tonight's for Thank and you joining.

You disconnect. may now

Hub (HUBG) 9 Feb 182017 Q4 Earnings call transcript