HUBG - Earnings call transcript Q1 2018

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Operator

Hello and welcome to the First Quarter 2018 Hub Group Earnings Conference Call. My name is Michelle and I will be your operator for today's conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that today's conference is being recorded. the to turn now will call Mr. over I Yeager. David Sir, you begin. may

David P. Yeager

participating and Group's thank afternoon in you Good call. for Hub earnings first quarter

we for finish the fourth had As quarter XX% as continued our for release, grew first segment in Group XX%. grew revenue Hub and Revenue into quarter the a Hub XXXX. Mode to earnings strong segment. consolidated That the momentum very discussed XX%

throughout strong, capacity, Hub's capacity due business the the strong X%, industry. quarter, annually. the intermodal truck continues to both in of was Thus with is traditionally strong tight surplus Intermodal first backed demand demand Many economy. industry XX% bid far, For in either exceedingly much of demand the at running Group supply. by have country. capacity and for line up truckload that which deficits markets the a were Hub full overwhelm with volume capacity re-priced quarter as or overall April, is be in to had

the We customers position will prices in especially to fleet our and reasonable margin reduce outsourced on completed higher a increases, the price momentum. intermodal have have competitive a operational we utilization. price service, mid-single to to cost a only in truck, of roughly positive to experienced throughout are improvements believe note, unnecessary one-third allow seen side, will for gradual on-time costs but strengthen the to operation also to far, changes In network. product. the to we're continues With order that increases quarter. digits. seeing us partner. continue inflation, to of we and continue will bottomed the cost our but our rail said, book since see Thus increased our continued our rail believe to harm in be Price add the to Eastern as for the increases last have price West These the draymen the substandard that half not business. ceiling we East, appear service intermodal's improve increasing secure remain To experiencing with of our outpace found not that we and the date, inflation of gain our driver price that versus invest costs mid-March, also will increases to wage we out We year. our rail committed costs remainder in in of the improvement with in our challenges service problems have continue We're Western as the year. On that

continue delayed. clients longer to establishing minimize are work these and transits rail the intervening issues communicating when effectively to our loads service as with by and of benchmarks impact We

pipeline our acquisition, robust. remain Dedicated our the to Turning dedicated for opportunities

the finished rewards the just received margin the and we first quarter, projections for we year. Although have revenue exceeded our

So acquisition exceed has dedicated our from cross-sell and to to our successful vantage the continues clients our efforts to our implementation been services expectations. point,

verticals new is demonstrated, offerings into have committed Hub current to our while acquisition. through we service as expanding entering Lastly,

add the We opportunities have to that Hub acquisition pipeline several strategic would the in network. value

about with to we go are call lines. our always, Hub, are more business not management the with fixer-uppers have culturally are the of As aligned accretive. immediately acquisitions to Don strong focused over specifics that remain team, a And and I'll on into that, depth turn

Donald G. Maltby

you, Thank Dave.

to reflect multi-modal continues strategy become clearly that solutions gain our results Our provider traction. to leading a

peak, commitments with their us during provide Our unwavering our network. standing multiple has capacity-constrained the to our service, commitment customers by support execution, options enabled to along to

of of mentioned, to Dedicated, tools the organization support customers. all that cross-selling addition And capabilities. Dave service with our years, With available our lines has said, Over the we sales have our improved as many being bids during made fruit one-third With demand to are this approximately peak seeing our customers in and commitments now grew The we rewards. during we share, year's are complete, improved quarter. strong bearing price. increase the our

During efficiencies position support better aligned will customers. bring us the changes to value These growth and organization, quarter, to continue our our making to we opportunities. internal further sustainable

We of network pricing strategy improving been multi-modal our and deploying by also our the market performance overall to bids. our

multi-modal Although to in markets. with and our strategy, this are yield in tight changing stay marketplace, puts the we a implementing is brokerage in in us improvement quarter focused revenue that the in a and targeted very by market. XX% capacity initiative an on the believe grew position. commitment customers early seeing stages, We further balance with our favorable Truck coupled

Our focus remains offering clients so, on capabilities long-term a and from transactional our management offer project search can we targeting and capacity. product doing multi-modal solutions to accounts. committed In diversified

the business. the we remainder year. provide secure the to existing management support, for of project challenging During will time, quarter, believe our transactional We the able new at growing a customers continue to while see marketplace were same accounts, we

the by growth, services. we for volume integrated and honoring market Mix capacity margin are XXXX tight topline However, was to experienced as factor. growth from a Logistics XX% onboardings. due excellent well-positioned a we many obligations. was the Despite strong providing growth and we value-added service also our benefited contractual compression

these will of logistics a we During acquisition and the result filing. the bankruptcy were will look see these insourcing one focusing a on quarter, improvement we four to process replace we cost headwinds an and to of reductions. loss functions, notified we contracts, lose yield, to of for due to changes, most as one that of two the accounts, as by the Due year

second onboardings expect Our pipeline strong to continues year. new we be the to the establish half of in and

continue revenue was growth the and in service which growth of Once momentum experienced led is focus which XX%. across customers. XX%, positioned that existing XX%. new first we cost to the delivering strong marketplace solutions continued drive all and will in topline for up improvements and both well very logistics, again, lines, was quarter on we Mode solution up logistics Our by truckload, with

of Mode its service clients and network very capacity-constrained diligently its support line and Our of agents. market. tenure to support platform expand to offerings network leading-edge a providing our customers to while worked the challenging, its continues in a experience technology

turn it I'll additional insight. to Terri provide Now, to over

Terri A. Pizzuto

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

are we XX% to compared that First, income excited year. last grew operating

Second, Hub And over expected, Group Dedicated accelerated intermodal we new progressed. as quarter million third, won the pricing of $XX as business.

is excludes increase. costs Now, an per per a adjusted increased earnings quarter. a and performance rate. billion. let's to XX% impressive take more first was Hub quarter at to first XX% Group's quarter $X.XX. uses look That's in first XXXX revenue the $X.X onetime share $X.XX that tax an our in-depth Group's diluted Hub effective of This earnings compared share XX%

or increase Truck Taking of details brokerage well price local resulted XX was million and down increased points the Hub Intermodal of to Hub higher This revenue new and margin in to million as Transcon and rates. onboarded gross due Partially closer mix performance of an than was party about lines, also increases a up increase July offsetting segment revenue was Mix in with the a driver starting our XX%, Logistics X% the of gross was last and and volume last and Hub a carriers. X%. growth up up improved and in miles. the margin up is and talk were from increased at and loaded increased of revenue east XX%, Dedicated for price and decline better X% brokerage quarter, as fuel or increases, which revenue Gross an XX%, cost west to in X, favorable. Hub's volume Dedicated intermodal combined by was business basis rail drayage came margin, increases X%. Now, intermodal increase XX%, pay the were Group combined a volume which year. brokerage logistics local XX.X% in intermodal, a to margin. $XX.X as revenue $XX.X by was and gross margin freight due look growth balance, logistics, was fuel partially growth increase truck to margin and up Hub XX% offset generated XXXX. third network volume up in financial addition XX%, on were million, last truck cost business. higher increase due for of revenue topline customers Group XX% in percentage segment. compared $XXX purchased from year XX% loads existing The sales we loads year. which due

the and gross in and increase $XX Hub purchase in relate increased drove ramp business. the because new this costs XX-basis a All of to XX% factors and travel, $XX.X of Hub associated $XXX,XXX bonus margin gross year sign-on we spot Logistics while Group of margin and percentage expenses point of liquidation. from XX Truck of higher approximately Dedicated a basis of a the offset changes XX% as Us mix, driver $XX.X first last as as due percentage transactional up. is in margin severance business costs cost a drivers and These of improvement training startup 'R' commission gross logistics million loads diligence business. contributed sales. margin reason more point XX% costs. trucks Cost rental was these margin Toys orientation, first this the compared gross and total decline decrease percentage for a primary brokerage Truck a addition increase quarter. Dedicated's and brokerage year additional with and partially to points in in due for increased and transportation declined about the quarter. headwinds and million XXX-basis costs bonuses, sales sales. recruiting, customer gross higher expense, business factors Spot increased by to in were million expenses combined The intermodal to because in about of of the temporary

was for Finally, X.X%. operating segment the margin Hub

to decline to purchase a $X.X year offset was to XX-basis margin Mode to XX.X% compared up brokerage truck partially transportation costs, increased in in and X%, sales was agency million higher X.X% slight Now, by costs X.X% in decline $X.X service in yield increase margin intermodal as margin, compared XX%, higher decline an the last intermodal truck revenue year segment. million, Mode's last Mode's our I'll was year-over-year $XX due $XXX an million which to discuss truck which revenue up in for increase and due lines. in logistics three up as from million Revenue million to was up expenses and all year. and brokerage Mode's due increased first last margin. last brokerage, Operating point $XXX resulting XX% yield. million commission. for in results gross up which XX%. to in Mode to compared was were which intermodal, from an quarter, due XX.X% XXX-basis year, a mostly gross $XXX down logistics, of Gross point In breaks was margin percentage in

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

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

Our on leverage spent mostly ratio related containers, was trailers. quarter, X.X:X. to million and this expenditures capital We technology $XX.X tractors,

$XXX the we the Hub logistics for year in brokerage discuss for range business growth to to project million. at X% share segment, dedicated million We estimate year. startup what to for to in X% from and revenue expect per growth will the will X% million dedicated in project earnings costs revenue XXXX. slight and growth XX% I'll from $X.X $X.XX. new growth in Now, revenue. intermodal, between sales line, high-single-digit million truck We to service We be We will for diluted $X low-double-digit $XXX XXXX. $X.XX our expect range we believe By that

percentage business will originally of We sales will gross losing. percentage loss progresses, margins as will for range estimated we customer we to increase the fourth about basis a that are Mode's of margin XX.X% be gross We than be expect because estimate for full 'R' also in logistics the of We of margin three Us planned several the changes gross year customers be than other and mix, as year. sales We highest. XX including reasons. a yields to from percentage we with expected consolidated the as Toys as projected. a XX.X% to revised believe the sales points lower downward being lower quarter of margin

costs with and associated pressure dedicated believe range be will costs from $XXX new quarter. million the quarterly XXXX. that We in income startup business and from highest year. to this will million our will and will in Finally, in to $XXX million $XX.X We our margins estimate project significant operating income expenses We tax about of increase that fourth range XX%. income expenditures XXXX. will XX% expected reported Capital to compared $XXX million between operating are rate that XX% million to effective our be $XXX

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

David P. Yeager

Great. that, questions. Thank you, why just the Terri. to open With we don't phone up

Operator

you. Thank

We session. now begin the will question-and-answer

first the Scott from have in the Research. comes Group We Wolfe queue, from

Your open. line is

Scott H. Group

guys. Afternoon, thanks. Hey,

David P. Yeager

Hello.

Scott H. Group

you better guys first quarter expecting only to than up wanted in certainly expecting. lot But $X.XX. lot than than guidance the a goes $X.XX better you – so were or came So, ask, obviously were a more

was quarter than better the the year the so much of sort guess why of So, originally thought? that and is worse I first implying you rest why are you

Terri A. Pizzuto

Scott, of was on losing the whole look February, February, I'll be in X% remarks, originally logistics And, year. X% about margin XX% guidance we was with QX my that three gross the we back first losing about $X.XX. quarter. we we margin a other when down our gross be Meaning expect take feel customers. in and for four we QX, provided between now that overall gave We when combined margin basis, in But confident Back that. part our we foresee that. an guidance where and for prepared logistics logistics I liquidation Us basis, down what up about mentioned to or Toys essentially, versus in 'R' do as logistics the impact didn't customers specifically will QX, on at are in an on and of

David P. Yeager

Yeah. is Dave. Scott, this

increasing foremost, no question logistics. the I the you I positive headwind point in business look comfortable this there if But intermodal and time, we're of is say some would think On the side, end that, first higher with range. There's the our the at with at as really third focused We're price not, what increases. I a We've ahead feel of the very our cost have of way on we our been will my indicated remarks, we ceiling a overall through. to formal clients found on be. in pricing

now, to another the when continuing price update we'll perspective second over able But that now to half right at And got mid-single-digits are so, from I accomplished. I give looking be think the you increases mean, quarter after due we our that demand. we're of for to rise right

Donald G. Maltby

will with Yeah, of by done the two-thirds the end of updates quarter. be second

David P. Yeager

Right.

Donald G. Maltby

for We And the the certainly we've this price, The has six has been on been on piece. logistics months simply headwind doing strong But is the been the also, visibility. the have first demand that. side the push year. intermodal of

Scott H. Group

you're Could you say revenue much the how side? losing logistics on

Terri A. Pizzuto

$XXX million. about It's

Scott H. Group

forward... going starts That

Terri A. Pizzuto

Well... Yeah.

Scott H. Group

that started did ...or first already the in quarter?

Terri A. Pizzuto

yeah. Yeah,

David P. Yeager

Well, it that started Toys Us with obviously 'R' bankruptcy. with

Terri A. Pizzuto

later rest the comes on. Right. And then,

David P. Yeager

Right.

Scott H. Group

to of got be market, What's customer service, rising have they gives rates, in or rail half about quarter? here there the be the Do the the think here to of just better about it year? impact What's you service we've big fuel, talking had And get is what here to rail And in to they can't truck really just the confidence rising operating customer but income may want the tight you about then, be starting maybe in they truck want second picture, telling the And despite service. intermodal? the Okay. any Norfolk bad saying? but because way the service?

David P. Yeager

work In is case, with proper this to level Chicago day from intervene tell we with the to customer answer we going to longer if we're saying a set customer be half this front issues. expectations. them, when I'll right What that of now right it's there's we Harrisburg, the is part. last them in

able pretty so, realistic to the good. our And actually our versus our that We're services that the we're with I versus service benchmarks. is – because current with dealing think deal performance – on-time

but and much the much, environment particularly truck tight it's there think other environment a expensive this I more to that customers, places that go in is costly. with more really, –

far on to Norfolk as their awful we change lot will switch. Scott, we, obviously, in the doing improve second the an an you people think do talked not As know, ongoing service. the basis. there's to Southern half, But why They're we just light a as

You can year quite the second half add chassis, add And time, locomotives, we towards it's going looking we're that's but it's that confident you'll you that it add why the cruise, but period. improve takes during of to gradual.

Terri A. Pizzuto

take part that impacted that numbers, And how the of question. I'll the

it day quarter utilization first worse than a quarter year. in this Our about of four-tenths the last was of was

every then, is that hurts that's about utilization, the for inconsistent. or rail us other when service And of day unpredictable annually. $X So million is thing

David P. Yeager

Right.

Terri A. Pizzuto

more us delivery, load that it our planning set appointment difficult with miles for and And example, for can difficult. for to makes empty the customers our more and improving make

David P. Yeager

Right.

Donald G. Maltby

Terri's to that your is can It's consistency so they exactly Scott, saying, it. plan. point how And want customer that's the question, in they

work with we plan the to we tell that you say, your you to So, to change, is if our accordingly. going can upfront adjust have TMS so clients

to there. has consistency be So,

Scott H. Group

give probably last Okay. then, And my why can of volume? others than an And so give what think bit you you then, Transcon's a have just a April said? intermodal strong mix different little do update – question, on maybe

Donald G. Maltby

also, Transcon Yeah, moving And accounts, quarter. last some be up grown strong. months Transcon this is especially grow every We've X% that the actually. pricing We our and strong business East to with it still with were keep is retail growing the that retail in continuing to accounts. six we're so for fortunate Don. the or up, region,

David P. Yeager

far And X% about we're as up April, then, in volume. as

Terri A. Pizzuto

last then, that new also growth to commitments believe delivering on year, landed conversion contributing growth our during and was was peak related also we that of business Transcon volume And season. And to are. we part the some We frame.

David P. Yeager

Good Terri. Yes. point,

Scott H. Group

time, lot a Okay. Thanks for guys. the

Operator

from Hartford in comes of question queue Baird. next Ben the The

Your line is open.

Benjamin J. Hartford

Thanks. you'll or all you be Maybe, the here to a the Don, how expectation? that over that next in year revenue lost if recoup two? not, of are confident able most, Is logistics reasonable

Donald G. Maltby

It's realistic to business. to grow continue expectation that Yeah.

expect in a the start it'll up. half year, rise new slow the onboarding really second it accounts be but though We to of

Benjamin J. Hartford

at or really To it two years a out hole Okay. point? this fill completely bucket, too estimate big it that of is is to

Donald G. Maltby

be million year... The would $XXX

Benjamin J. Hartford

Yeah.

Okay.

Donald G. Maltby

...one solid this year from second half of year.

Benjamin J. Hartford

then, about headwinds the of think but relative we costs base, margin you the yield talked when that gross guess your those the if here, fall Terri, of and about I Mode's business off, off, probably reversed you some some gross of the fill loss normalize, as startup to initial fall margins bucket. is

expand that of in as it gross I high margins still XXXX, assume, Is is gross margin in The sequentially. percentage. a probability rise to fair terms that You assumption well? continues

Terri A. Pizzuto

Right.

growth and logistics XX points and... to will due fill They intermodal Mode. And help. said, dedicated as was fourth did you're didn't in we year it much that would as this just costs, in on that but million ramp the up projected basis not And As be just quarter will annualized, that $XX If much that as to what year. business, pretty lower new than certainly that, in begin Mode finally, with new that startup Don all correct. we margin this have that abate for will then, was over at example, business with all primarily originally pipeline the for then, bringing the we're we

David P. Yeager

We did, right.

Terri A. Pizzuto

the in did intermodal. ...as Hub segment

Benjamin J. Hartford

Sure.

Terri A. Pizzuto

re-price too, That's that the is business. they turnaround,

Donald G. Maltby

the those on as Yeah. as and we're onboard third I as business increase. intermodal, said, quarter, that second through bids. we the re-price one-third Through the will margins we of way And

Benjamin J. Hartford

intermodal with acquisitions has think with have perspective, from changing. EBIT And are trough the sense You a give of the Gross will is their margin don't in overall margin you is the on kind need to from and and you in with pipeline, levels of don't EBIT trough. what a when presently the inflecting to. the for some feeling on presently constructed? to profile targets peak gross margins. Hopefully, a fronts about constructed? then, business, fingers on to cycle it's margins reinvestable are reasonable if trough the level margin business the higher crossed. sustainability side, of business reasonable and gross Investors just what trying specific the opinion XXXX dedicated number the But ends. on focus mix a There's both this getting of as the in get growing, want But changed as as a

Terri A. Pizzuto

year, you Yeah. Mode couple the hope levels year, where hit XXXX. margin, way to operating Hub our back love used have we in the for Then, this last drive discussion segment, pricing along, but X.X% cycles segment, And get And of then, down more we we with as bonus mentioned, headwind we than get this it and had think Dave ceiling bonus year. that X% year, a we have the quarter. of from was headwind for it we to next We was this further be. that's And those the this margin there a won't strong X.X%. yet, certainly in remember Well, February, so operating haven't we we that if that's a part lot intermodal. year, to in more can back

David P. Yeager

Right.

Terri A. Pizzuto

numbers the in be It'll already.

to business be of XX% maybe truck gross our over get truck a I and significant is the confident to we'll and mean to is the couple the that by hope our as range. year. And to maybe than growth we've X% grow ideal lines business end to last back in to your years, business able a other then, So get margins, biggest of second higher in brokerage margins closer question had well. brokerage the gross couple we're specifically, gross And margin of answer margin dedicated next operating we'd is years, because

Donald G. Maltby

bid... next the In

Benjamin J. Hartford

Okay.

Donald G. Maltby

cycle this bid next cycle... bid did year's and We then

David P. Yeager

Right.

Benjamin J. Hartford

Right.

David P. Yeager

spot truck We're a on very right very with We'll our increasing here on market be which focused prices. very, brokerage, opportunistic sweet within focused real spot now. being is the

looking lose I to is, market we're XXXX. focus. late an was XXXX is that and again, think, going what after the The And abysmal entire not market so,

looking everybody's we think I our capital. to of cost to need be that able earn

going that's does does, I so, said, be well. as it our as to And as industry's the appear though focus. it focus And

Terri A. Pizzuto

the that looking all well. we're operating our margins and our acquisitions as improve And gross margin will at

Donald G. Maltby

Right. Yes.

Benjamin J. Hartford

Sure.

very Thank Okay, helpful. great. you. That's

Operator

with The in queue comes next question Stephens. Long Justin the from

is open. line Your

Justin Long

afternoon. Good Thanks.

David P. Yeager

Justin. Hi,

Justin Long

Hey.

clarify guidance, wanted Terri, lost the from on the think first Just said logistics I $X.XX. you to impact the was customers

So, strip it right about kind about for actually to fundamental out improved you the losses? $X.XX is the that think those if of the by outlook business

Terri A. Pizzuto

Yes. right. Exactly,

Justin Long

And remainder back Okay. quarter. baked thinking little bit in you a the least you about think the of gave in year, guidance? half guidance the what's the the help I cadence or of the of the into at ramp earnings for over Could XQ last quarter, think first about us

Terri A. Pizzuto

Yeah. talk that's perhaps to operating Well, trends. the that easiest. how I'll Maybe income and

amount, maybe the operating QX, operating And basis more If look we So, as tough onetime rate in less. is you back operating basis. – tax bit normalize adjusted be flat And comp on a a could such adjusted QX, than up in is our same and costs. EPS an the – all quarter. income similar for up maybe we add the when fourth up have a little fourth income and at our the ramps then, in because income quarter, a QX QX, operating consolidated then, at about was income this it and effective XX% could at be taxes up

Justin Long

And the first to What saw you of you in the was service, year-over-year. mentioned to back question expecting are how about Terri, degradation you that Okay. helpful. four-tenths utilization rest the of That's on and utilization very year? progress the quarter number that going number

Terri A. Pizzuto

of was utilization days days year It compared XX.X we day be Justin. whole expect so than last worse year. the to about overall, – two-tenths And to year, for XX.X last Yeah. the

So, we're assuming the for now. rail the to service rest it year is is what similar of

David P. Yeager

we that seeing the Yeah. that improvement NS the we Justin, expect really And of improving the West. last are year. some be half will in do the I do think

definitely the want with expectations and establish for on. year conservative. – to we clients So, those our I hopefully, we the are estimates expectations goes But the think proper again, better, we'll that as our change

Justin Long

about Okay, wanted great. pricing. I lastly, And guess, intermodal to I ask

talk Could comment that where You just You ceiling something what maybe made or more quarter and increases high-single on maybe digit curious you yet. in if you're terms mid-single that the as intermodal April digit seeing pricing? stands a today? average. increase you about of finding in exited it But talked level better you're you're the in not about I'm

David P. Yeager

It really does a of customer increase. lot a as the vary by far the as amount

interesting specific some not find are right February mid-single digit – is in again, and been going sequentially, was we with January, able in to pressing increase continue some quarter, but very that of better that than lot can We be we the have may sure. It's December than a it January I'm in lower XX% to to and again, a better quite rise. to We're we're range. hoping consistently that so where we But now. account ceiling. maybe where maybe the end this up If range

Donald G. Maltby

with we're price what too, seeing, And Right. growth. is also

We twofold, on to talked can to we're grow. one that we're a try about reduce really my look how repositioning bit the looking network. is got So, network we're you've market our pricing to is and at to at how our our little empty we comments, costs how pricing and

has at far. Dave's in, then, looking the very that. to So, effective take seeing so opportunities, we're price trying up And been looking point, that which and on, closely we're closely come we're lanes bidding as these that bids the as at to

Justin Long

so time. at Thank leave Okay, for you it great. the I'll that. much

David P. Yeager

Thanks, Justin.

Operator

comes question next queue the The from in Tom Wadewitz from UBS.

Thomas Wadewitz

could add. net have some bit intermodal and container it the into flat growth year? afternoon. think about you're cycle, fleet about container Maybe year? you ask Dave, on in how your what wanted to and refresh you you with just Good this you Is doing a this I first or also, basically off, adds

David P. Yeager

We have net some adds. do

Terri A. Pizzuto

We do. about count about X%. container had our We're end by we containers. XX,XXX the year, increasing At of the

we around over, we'll in. which year containers, of we capacity if that about had remember XXXX, new X,XXX. last expect be which X,XXX they to are a process last did you didn't containers these reason in end that when the need get – X,XXX containers of returning about XX,XXX of containers to that And yet, bringing we'll by The – over XXX available bring for we by our We we have it. container means that manufactured the have net customers X,XXX you call, that up of about for add we from those remember our and

that XXX. increase they order as by are transits with so, demand the and we've prudent with we to it's the And had, thought

David P. Yeager

Yeah.

net-net, when we're you on flat fleet. So XXXX at service, probably about consider the versus the

Terri A. Pizzuto

When consider service. the you

David P. Yeager

you when service. Right, the consider

Thomas Wadewitz

Okay.

– is the down flat right, flat? being or effective the turn it essentially at be end today year is your capacity would So and so

David P. Yeager

By would more be third it quarter, would the year, later flat. by say I

Thomas Wadewitz

Okay.

guess I constraints. more people. intermodal probably shippers such is some on for they a step as really, you see as drayage up rates, question They're more constraints a in much Maybe dramatic they their other the service would maybe to get in. containers like can't as rail So, do lot don't

then, reasonable been there fuel move predict the think the setup potential but conversion going more come rails up I way be when somewhat where it's made see or that of forward you some that So, And several cycles, that suppose looking strong XXXX prior at – I up get containers And the a Is set year later to cycle? to sets has you back if in last you guess, a for really could to that look to I your a is in powerful this fuel pretty about year. you think you do up a this or some investments, hard for months. of a some suppose bit? maybe in, in potentially

So you how about that? think much

David P. Yeager

that We return in the unexpected. and think our and Well, not we've them that I same would I say, happy point our time, shouldn't if for occurring. to do at shareholders. think the question it months look there's foremost, no last you XX But are like gone our cost that with industry in the first through capital what increase particularly the that at be customers costs are entire I of need

continue right very there, demand since so inventory, that is now, foremost. the is observation going the with I to and drayage the so much first your economy be capacity. we've suggest to potentially that's think So, strong, do would Tom, strong. burned I very, one out

asset-based some that that a and for are entering think think not that it much definitely could but I drivers a issue, for do market. but the There's industry. drayage – it's so guys, us be the I of others one constrained new the lot not

we're positioned a so, growth that. that it a perspective, feel rises, much on no is that intermodal factor becomes intermodal fuel From be fuel may we potentially we like And keep with question it although on damper today. more have, though as attractive would where overall could how than even

now. I trend seem, an it in down it's And or six picking ongoing right you or up going – whether the as next though, So, is... does that's choosing or months

Donald G. Maltby

Right.

David P. Yeager

doesn't so. it – in extremely much But ...probably it Increases make is more as already rise, intermodal just sense. does attractive. certainly it fuel makes

Donald G. Maltby

XX%. to XX% is and truck intermodal Yeah. from the divide Right anywhere now, between

keeps So, that higher fuel spread up. spread continue that to nice once is will the going and

Thomas Wadewitz

So, just to might might the container think more shippers so be couple pent-up to there a and little we constraints you a bit want take or move to intermodal to demand and that. I can't as it bit Is on for intermodal too from about demand forth, optimistic reasonable maybe and volume quarters? that pent-up some ask limitation is much forward guess truck being volume looking that little way to in as think rail

David P. Yeager

had we ask except It's that. non-constrained the traditionally markets quarter, in constrained actually in In interesting you environment. this first

very, the do commitments. obviously very – we and committed we that our we live look beginning very we're planning forward, peak. up would will clients to sure And that correct that of probably I be later are our a we're on we than capacity. strong get making lot more already, into peak when So, quarter end, our suggest and you opportunity second into quarter, there quarter the late third But the a end

Donald G. Maltby

Yes.

Thomas Wadewitz

Okay.

outsourced some you related that drayage Just other need? get to big than the as of the have been or more a one been experienced or you for capacity significant more question. Have issue have able that drayage an players? drayage Has you you you constraint

David P. Yeager

We have drayage capacity get able we to need. been the

about is $XXX million spend Our roughly...

David P. Yeager

Yes.

David P. Yeager

that We way but to be ...without draymen. we our our We them we very not transactionally try closely clients very, outsourced with the work with work same outsourced us. focused work with to try drayage. want to

think, that so fact very in been that build to us, some get has required. strong that's able relationships I have allowed we capacity And to the

Donald G. Maltby

Absolutely, yes.

Thomas Wadewitz

Right.

you Okay, time. the for great. Thank

David P. Yeager

Tom. Thanks,

Operator

question next The in KeyBanc. the from queue Todd with Fowler comes

line Your is open.

Todd C. Fowler

it think Great. the Hub assumptions was if the X% segment? stands, $X.XX, And in thing and share the you volume color Good what sure previously, and I it volume to think sounds updated. evening. guidance on then, mid-single as I the it and to to wasn't the are now. been talking as But it it you're for do for any was did same Terri, expectations in the the X% you pricing that guidance that's stands? more right like give I what right digits now, have $X.XX previously, pricing,

Terri A. Pizzuto

Sure.

we're mid-single-digits, raised And as volume have on segment instead but what rest it we between X% that X%, we X%, – the bids of our with and we assuming confident Hub pricing, and can Dave we're And now to complete intermodal the guidance. our Our visibility seeing of then, between and is said. in more as that's went we'll we because guidance X% execute. to the demand

Todd C. Fowler

bit some maybe comments we the mark. think from seems Okay. these volume higher And of a I the help to a in think the it's intermodal on targeting more seems then, pricing? network of on And you little truck but we're in well, is covered mid-single in market just but the little had speaking been I a the I growth so pricing the to a clarify digit And the again, bit bit? that understand, think you maybe what below think pricing good be the which comments high-single talked quarter the digits in as this bit Can little comments your hearing approximately think level. your a you volumes more reported than more versus just on the was or mid-single we peers. and have pricing, how focus little I that have of some this industry of about some but the that digit the that to peers do Is

David P. Yeager

would said Dave. this empty increases in I suggest network, our to what's in we on to fits what the focused pricing. I of that going reduce through. certainly Well, balance is way Todd, of are here, have some very remarks create a the as to We're third is you, miles. better But seen only we sequentially,

high-single that third And very again, But continue fact only this to all the we end way discount could we in would increase not digits. percentage. signals a through can process we're the the of bid process. up I our positive re-pricing that at so, that certainly, are But and point

Donald G. Maltby

Yeah.

Todd C. Fowler

Okay.

think I understand coming where from there. you're I

on winning, And I that to the dedicated you're else? you've to coming ask dedicated speak being you that that's from? that private Just that can retaining some startup existing costs wanted expecting you've Is that converted? fleets the for know where at where won somebody in I business in of half drivers. driver with recruiting the quantified right But back costs and least now, that the we've market it seeing Is been additional you're the – year. also is

business you the confidence amount to to hoping you some onboard that that expecting. and at just extent margins the you're that get to can do have of that was the I can capacity So, provide

Terri A. Pizzuto

represent are conversion really from of total the $XX million private an top is and two is we're the The Todd, dedicated, Yes. most significant XX% business. customer. fleet existing about annually and the excited about business about new business then wins that

Todd C. Fowler

Okay.

Terri A. Pizzuto

the pretty to Group huge wins. They're compared Dedicated the Hub for historical wins

bonuses, so, we're million to quarter. And believe $X.X the that orientation, the we the but that'll we have training be be in and drivers cases, some we're would costs, startup successful. and are right, project We $X.X about drivers then, to driver that – travel, And to million adding the ramp well-positioned you're include and first million and in tractors that up. sign-on we year fact the and whole we for the it's as $X recruiting, the

Donald G. Maltby

Yeah.

value The we service We do to and that, Todd, support safety to is to want not to to other customers. we sacrifice make deliver want them. sure our point

be we So, conservative expectations onboard our we also dedicated. right. a approach and very far want that it business and to how that's do It's to we cognizant as we're want our went we in add good thing, but exceeding

Todd C. Fowler

Okay, good. is helpful, context for of these couple I what guidance got your of the this think in expectations a areas. on you've your too, Yeah, in just

I how be I that I know maybe was you I away might lastly, was some that of that and the us you but of of be timing know market And that helpful. the far very general doing comment be obviously So think speak curious reminder, on, you're made could areas just then, and something, if focused criteria a just acquisition about the can the or some lumpy. could close Thanks. give from the still to how

David P. Yeager

final are far in where signed that with may the we've cycle kind but pipeline as were – stages they several several stages, as that have not do the if We Sure. the will, actually of the acquisition. you stand actually in gone in through we're

hoping year. we've this that feel possibly So, some there. we acquisitions we're We're that will more progress close. made We two, have one,

Todd C. Fowler

Okay.

David P. Yeager

then more is sense of competitive, them sure doing where in job strategically and identifying a it's pipeline Geoff's makes us. very the we're so, full. making appropriate and And great that it

that us IMC complementary will looking be in diversify. a of those at always, desire businesses desire the do And can particularly drayage build the have we be may to help to business, in As we're at particular. productive. business attractive, technology that also, make have We looking this within constrained scale truck a us but that'll more We're brokerage, to drivers. build also market

are always, into that opportunities, transportation that that also as would us I And at management, not in, are right now. two verticals primary those looking logistics be areas would may attractive. we we're they So, say very the take

Todd C. Fowler

tonight. for Thanks time Interesting. Okay. the

David P. Yeager

Thanks, Todd.

Donald G. Maltby

Thank you, Todd.

Operator

in queue comes The JPMorgan. the next from Brian question Ossenbeck from

Brian P. Ossenbeck

Hey, good my evening. taking question. Thanks for

we've trends about recently, renewals, to clarification on you're as versus the there this back isn't as talking I with you seeing the that the go efficiently used prior of perhaps those accessorials? trying know just and we're a been being perhaps equipment contract Are years, get especially year pricing. quick might So, like. inclusive trend

a you on little us if can that maybe So, please? comment give

Donald G. Maltby

a to in way accessorials Don. contracts going are the certainly This absolutely. brings after that back positive. We is Yeah, negative

our customers transaction in agreement as also our place. price the part at the them look the the for have move, So, agreements but accessorial not we of is with only that of we

the over changing So, four that, five bearing and those to months, going and last we're fruit. it's we've months, been actively to continue agreements do

David P. Yeager

we're of – because under we in is a because go agreement think it's that the change option agreement, really slower do increase of at you something if plus, has beauty accessorial real part it's X, accessorial accessorial of keep a I the it approach their given customer if number, is is want a that as they or the when place agreement, we the that cost. a negative And And to control. that's which X cost the –

way, that so, actually take. large or they how can don't they an take And direct of increase

Brian P. Ossenbeck

helpful. It's Okay.

is to So, – accessorials. the at way you interpret that you're the I would way guess excluding the pricing, heard now, correctly, to looking mid-single-digits be I if that

would decide be if reflective shippers choice interest or So in that to rates? not the make (XX:XX)

David P. Yeager

accessorial... negative have customers our of all like sounds It Yeah.

Terri A. Pizzuto

No.

David P. Yeager

now. ...but those that right do upfront were addressing

Donald G. Maltby

a It's cost.

Brian P. Ossenbeck

Right, right.

Okay.

that have leverage I you worked that to technology some rolling see start – anything where we've have question TMS on just might on is and right other in with And the refresh out you now? works else the spend The pieces to investments, the system. just us of

Terri A. Pizzuto

Yeah.

which go live will This the within cash And XXXX. create design to quarter, system business. addition, of first in we new Brian, configure that capabilities of to asset the finalizing working OTM will our spent we our the in financial of the on portions majority continue quote our half facilitate time in our foundation

So, working that's what really we've on. been

David P. Yeager

our I now right feel progress it's we've consultants. Unyson Logistics very on excellent working with it's implementation And we're outside been And – within focused making that product. also Right. good and the

Brian P. Ossenbeck

right. All

of I a lot outsourcing insourcing, factors one along mean, the if contracts lines. side you me, of of or quick think And insourcing could this on more we the think is comment customer logistics. I anything on – can for just or in typically, environment the trend. it's would M&A last those be As drive where incumbents

a outsourcing market, more would I expect tight in within. So

give you a context could So, that? maybe around if

David P. Yeager

the TMS an them internally. our then, of In and Yeah. surprise? a it. contract's they accounts were understand. that point, contract I'd the absorbed be brought a tools able the that use And Was to being of I one own to others had the to because to change but was acquisition, one handle their in so wanted two, they say other

resources right. you're insource want but yeah, to can't versus that customers their That's it to those of cost that So the find support customer it. much they that And get IT quickly to insource outsource the they balance to day, some it. how of realize this they own

Brian P. Ossenbeck

Okay. Is customer? that large one included in the that or the million was $XXX just

David P. Yeager

includes four contracts. loss million $XXX the the of The

Brian P. Ossenbeck

Okay. thanks right. All Well, lot a for your time.

David P. Yeager

you. Thank

Operator

in Majors Susquehanna Financial. next comes Bascome the from question from queue The

Bascome Majors

Yeah. Thanks taking for my here. question

basis or a line Just of about M&A the we think this year. these as pennies two needle? a may XXXX. year, I talking done on the mean, get on questioning. if up think one follow-up size moving Can that run hopefully, rate will about go EPS deals The into through? cadence done the you here that things get we Just this of that are to trying we

David P. Yeager

that one accretive... nothing the we – – of that is with this accretion latter be Yeah, We give trying trying bit we're numbers off we're and our we're major it's difficult. – with to – the to stages still in here obviously process of finalized would these. is still in we're at point a initially and have But an focuses number

Donald G. Maltby

Yeah.

David P. Yeager

...to earnings.

that be purchase can the So, that's and where cost. not we finalize hard because price the we're would right that do point at now to

We an eye closer on that but don't are yet. getting we have

Bascome Majors

things dealer size or of us kind – you a up, about may be think coming of on? around bracket give to can you what we size so value could the just investment talk maybe Now, directionally about

Terri A. Pizzuto

we to along be enough would it we're paid hard just yet. That's basis, too, a combined On not than do, because dedicated. far less for

Bascome Majors

it question of year. That's intermodal-related the where the put year add full are half sounds If like material of is plus most guided acceleration first seasonality. helpful. maybe that more logistics finer is that maybe hoped the of guide takes reconcile went how the and on comments, you that businesses fair of the to a fairly point is call It quarter anything aren't kind headwind lastly, of normal I kind year or earlier you kind half or and it accelerating you've at there the happening Yet, pricing and tailwind that would trying what seasonal in first up that? to and but puts in could just trucking the see a would is. kept Is seasonality a potential to to like off. you looks And assessment from for the interpret rail just significant with like second to as you're the the guiding a of of Understood. second suggesting guide be pretty loss the willing

David P. Yeager

Yeah.

I as think said, the we're But end range. top of we pretty that's number one, fair. have with comfortable that the

the indications cycle. accelerate we're conservative Secondarily, we that the but by nature within third only though, do are a pricing economy through feel our of continue as bid dramatic the are through unless happens all will something year. Again, we the very that to the increases way

up to I can we want the so, that but as find And with you sure – a to trying something to. that not from guidance, price we that I increase, ceiling think live we're give what is think it's being we make cautious approach

Bascome Majors

this for Thanks Understood. afternoon. time the

Operator

from Stanley. question from Morgan comes in queue the Diane next The Huang

Diane Huang

the is first there from will been in market fears Great. My Thanks question have that for squeezing me here. TL some weaken here.

and of load from the in you second the impact market? how half perspective, seen outlook ELD TL intermodal what And for much second Have your your any of are ELDs? from So the impact your dependent on is pricing expectations half?

David P. Yeager

Okay.

of As far that of year. lengths more number half of or the if truckload get of trucks. the be excess in dependency year on first does shocked shorter half the would occurs this the next haul I on an market, in second even our when, as fact, there's competitive it course, of

impact how with still capacity. because to we're large exemptions think partially, is the it fact drivers ELDs, goods, of quantify it's that continue time. once – those it's see at are I again, point effective, that I aging, And the really of shrinking truck that become do on impact believe truckload leaving demographics some the to an ELDs type it's the this overall there going thing. hard agricultural people in in with of is in to the industry

think to next continue pace half next half the existing certainly that intermodal and I through at well-positioned So, the to the of year year. into first very, is – grow this very

David P. Yeager

our seeing said third before, we of that growth incremental As it top a We're of we was we bids. mentioned on what had.

up coming prices is on So, growth and intermodal the happening side.

Diane Huang

it. got Okay,

will more impact be XX sounds than X. or April it an the gradual impact the from you immediate following rather like So, months next ELDs six think over

David P. Yeager

Yes.

Donald G. Maltby

Absolutely.

Diane Huang

And guys Last I about quick of would million think to the out question be that Okay. you cost in onetime-ish then, quarter, Terri. quarter. called first $X for million $X

$XXX to transportation, costs, lower million quantify you if had I if than much was those at when because in costs million. XQ, wondering can guidance you Just any $XXX of look XQ's excluding of the it

Terri A. Pizzuto

about couple what first then, I million the cost? you're was about quarter. be $X.X first expected onetime was down the XXXX. XX our what our onetime costs $X.X because gross to we The cost they million on million was $X to yeah. down from in it's down at and that $X Oh, Number we three, in what different our IT from you're projected million we actually Number for you're than then, projected were head that on expenses people, commission And of a originally and margin the in was projected one, referring also in mentioned. spend number And Mode's up higher than came agency talking we as two, Is reasons. what count our right about, less quarter. guidance

Diane Huang

IT the to, and the yeah, but those referring restricted it changed. spend, was bonuses, stock I like Yeah. like the Okay. sounds

Terri A. Pizzuto

Yes.

Diane Huang

much. Thank great. you very Okay,

Donald G. Maltby

Thank you.

David P. Yeager

Thanks, Diane.

Operator

from Research. next from Buckingham The queue question comes the Brooklier in Matt

Matthew Brooklier

Good Hey, thanks. afternoon.

So, had question. another driver I

market as terms a driver and market driver of tight or they there market tightness, right are difference In equally the between now? the dedicated is drayage

David P. Yeager

driver you drayage think do an But – a obviously – tight. a They carrier, if business, because changed it's we showing likes actually, that recruiters the total will, when the added intermodal base have kind ongoing very, were set, you operated. And we're dedicated well are we and about have have for it's another adding are that is lot from of very, with as driver our very the several this year the need certainly way for thinking Group that Trucking, both question of to drivers. intermodal the simpler to likes very last are it's No positive drivers recruiting. we weeks, signs fleet. on take of that and staying you a as our so, XXX obviously very automatic add we We that we'll Group when over actually total and level think fleet We've that we achievable. Hub Hub those the have Dedicated both

Matthew Brooklier

can then, to kind driver they're but increases have think you trending going the competitors pricing for Okay. your that wage to hear of the your where the they're that be topic. with talked year? are in opinion commensurate where driver of those quarter, to the on to land And getting curious wages, A right would now you couple talk

David P. Yeager

we'll basis make in really of wages the we increases by increasing wages. end they're agree also the And changed with look drivers, pay very driver I taking structure February. to attractive. year, be the upon it. We've that geographic our increase this some by likely, of additional that at intermodal, a it's down that did it of within region, our region more driver particularly We would Yes. depending we But how maybe region

key So, point time. is assets question, the driver of in no certainly one this the there's at

Matthew Brooklier

exposure industries you currently get you're and through do just markets, potentially markets then, like potentially mentioned you switching gears, I'm that there's that not that And to M&A? end assuming some of are What in. some those Okay. to some would you'd some

David P. Yeager

existing think more Yeah. Unyson, towards business transportation talk verticals. what different that we're a you we're for with offer on, looking if company solutions lines. When will, Matt, with adding I may management looking I actually the about

adding in brokerage, big big in look space. very Those like the want we not as more we're within example, space industrial largest we be refrigerated we're the because an very depth. businesses the at in it, logistics. businesses. in value truck With second we to we're very As us we be With We're the deep do those would to want and player. intermodal, not

Donald G. Maltby

Yes.

David P. Yeager

depth. want we more the dedicated, with logistics, And grow With organically. same we'll that

expand So, products. our was verticals that's different what looking some I of existing with at was business into actually to, referring to

Matthew Brooklier

mile? about What helpful. That's Okay. final

David P. Yeager

We've it. at We've looked about it. talked

that belief in infrastructures rebuild are found our large that, those But would solidly to an change. have target positioned we than it's defensible space be be us would that think that That that think do not that longer-term. put fact, I in could we better have would us. to costly enough that acquisition

Matthew Brooklier

I Okay. you. got. Thank all That makes sense. That's

Donald G. Maltby

you. Thank

David P. Yeager

Thanks, Matt.

Operator

the comes in question Stifel. with next David Ross from queue The

Your line is open.

David G. Ross

find much too you Thank size You're in. capacity? decent time right appreciate squeeze guys mentioned, you. you Not going but hard Truck is to take broker. do up me market a brokerage, now. How a you

the brokers for truckers. into competing the not You're only other

freight to or What find carrier has increase in competing other your and truckers. the customers' carriers You're or allowed you shippers for base? keep

Donald G. Maltby

this to – we've how that regards service drive are different the performance. carriers are business. XXX those our always contract we've really We the we day, We've do relationship XXX carriers with generally we've that to end space the carriers that with – the leverage have is market. got Well, Don that of But been folks went in always to to with under is able XX,XXX at to us. what around go-to been brokerage

a capacity the a leverage has side more business it you the side business, we greater which, lean part get the more as transactional is where spot more tight, as know, amount and on other we of that when The on to try to us. which carrier space for more brokerage grow of rapidly is got of on carriers And our growing to been base. into load to gets boards truck and

So, we've we've able carriers our brokerage been to loyal and had those since relationships. we've to been develop

transactional, is look when three to we're one brokerage one products three selling projects. is those in and to stools: again customer, we contract we're them. And at is one selling a So,

David G. Ross

target fairly allow just you look it What It's a having product view margin you on for in business you your as want business line that you provide quick like the And safe then, the that new but or dedicated. real for to far. do success to ratio customers? all for you're so good, operating target

Terri A. Pizzuto

Yeah.

Don As ramp mentioned, Dave make both and we up and we're right to carefully and going on this sure do carefully. business new it

So is competitors to in target our mid digit. ratios which to high-single in what similar have, we the dedicated run, long operating the

David G. Ross

you. Okay. Thank

Donald G. Maltby

Thank you.

David P. Yeager

David. Thanks,

Operator

call There are time. at for the no back remarks. turn questions over Yeager further queue this the to in final Mr. I'll

David P. Yeager

call first earnings our quarter thank great. for joining for Okay, us you Well, today.

there's questions, not you us. a questions Terri I, call that do good like please Don, Have to if always, any hesitate As further or ask night. to

Operator

today's teleconference. this gentlemen, Ladies and concludes

lines phone You time. evening. may your disconnect this your Enjoy at

Hub (HUBG) 27 Apr 182018 Q1 Earnings call transcript