HUBG - Earnings call transcript Q2 2018

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Operator

Hello, and welcome to the Hub Group Second Quarter 2018 Earnings Conference Call. David 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 beliefs, of words these forward-looking use and and as be by expects, identified Statements the are of words. project anticipate variations can review cautionary statements the in Please the release.

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

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

You participating begin. thank Dave Group's and call. afternoon, you in may for Yeager] second [XXHXBX-E Good Hub quarter earnings

in strong, earnings first grew was into with Intermodal quarter the $X.XX economy coupled the market the revenue for per with the while share. per consolidated capacity as robust grew discussed constraints. momentum very ongoing quarter, XX%, second share As That continued to volume a we XXX% Consolidated quarter, west. investments X.X%, in are in in is to believe is line service overall Rail has industry. and service and out these the partners being bottomed some is up east the the improvements. signs that of show which both our with improvement rail the was reflected We making begun

effective, offset yield have become drayage now year. XX% of in the will rail over recently repriced our improvement improvement second will price anticipated, increases. we've continued half of the strengthen of be did our Many and As partially cost and the allow The yield awards quarter, throughout business. by for which

have clients environment season. with strong long and in tail, like a pricing lengthy very planning process We April, positive an that are been XXXX. much a We've XXXX. expecting our towards and for will in a that peak the this early will anticipating strong believe peak peak a of contribute are shipping peak since We

past, continue the that to in for to As Hub offerings. value we've continues diversify network would to product acquisitions expressed add Hub look our our allow to and

the reviewed with As transportation. base strategic we we strong acquisition an team, customers. and management solid alternatives it is pipeline, to loyal the agent organization believe investigate for excellent Mode a and Mode prudent has that

While in Mode has been existing investments These of from of a will and create acquisitions lines, our significant help value quite platform build strategic intend Don portfolio with We to a to for new shareholders, its to Hub's service base capital there redeploy our and about It not further intent centralized lack that With like technology. model. retaining success. of growing into to is over business successful turn alignment client disclosure and services, business to units. of I'd is that, any is the sale appropriate. businesses our and call determine to us until talk the continue an for updates stronger performance provide we to do even long-term derived

Donald G. Maltby

premiere Thank to implementing all multi-modal strategy to lines, service the quarter see you, A of a business Dave. results of our continue be as strong our provider. for we

In positive and accessorials, at reductions alignment network implementing from we last addition, our improved recent fully balance. These management, in include are results the seeing equipment improvements we call. discussed

has and Truck customers, with our to Mode improvement. all share on gain existing attributed us our the and For focus customers, our with and growth targeted quarter, Intermodal, Logistics allowed customers. These year-over-year were new Brokerage, which results service experienced to core lines service,

been network lines. our our our volume clients, network, to gain support to to sell and XX% service our accounts, cross to across for and customers management Truck we've all has new in expect. both With level focus efficiencies attract in on existing and of Our positive provide all trends, able sales also to of improve being With organizations now tight and complete, of availability, customers continue and growth delivered while pipeline which service we and up drive share a with products, targeted capacity account our to robust yielding bids with strategic Intermodal network box Brokerage, continue needs. to equipment our the

that for Over Truck and position are same we've few in time, a while support solid establishing also Brokerage, our at new yield months, past both approaches, period in diligent as opportunities. we in business plans to a increasing and and believe with in service them. peak and support position solutions We our with best awarded the Intermodal to the peak working been clients are so providing we

the talk quarter across and project revenue yield units. market, Brokerage in increase was a about XX% our Now, Truck the tight-capacity and to business. transactional able contracted, by grew let's business in

remained project transactional and tight were capacity we network, in the our Although business. drive to growth yield across fortunate with

to our continue Truck year. we'll diversified a solutions. market market continue customers the of us provide remainder Our truck Brokerage believe flex model we the We allows for to to conditions, tight see with while with

us revenue However, support, growth continued our XX%. spot existing well with by committed have along diversified growth. The organic growth with Logistics our driven customers. by as was for as throughout portfolio accounts positioned grew capacity, onboarded well new market of XXXX, top line

improvement cost along customer increases networks. our contracted transactional and During were control, increases. on quarter, with price business, initiatives within price opportunities the our to we support focused These process

third customers We lost recover ground will to and call. have on onboarding fourth which Logistics mentioned organic emphasis new scheduled we yield, customer and growth last on continued the position existing quarter, from in the quarter the

our challenging new our will a solutions logistic provide Mode newly-developed modes. We strategy, We across as develop we solutions all truckload to lead our future all customer lines. technology allow growth, our XX% operational continue from Logistics our onboard by provide and platform, are experienced solution standardized able and solutions leveraging greatly believe double-digit by legacy had improve this and while service growth XX%. to deep will a our We support customers drive capacity and scale and with strong carrier migrate to loyal multi-modal to very TMS performance continuing for in tools. to XX%, very across invest logistic Intermodal us our agent were growth. To tapping into market. our using base, overarching in network to constrained we

and new securing technology wins to we the seek breadth capacity. technology as XXXX. recorded customers continue The applications, continue capacity. During of applications new customer through several also on develop Mode's quarter, of services development primarily and focused Mode will XXXX into these truckload

over review numbers. Now, Terri, we'll turn it the to to

Terri A. Pizzuto

gross first, an third, all-time pricing when I'd Thanks, grew year, quarter that released earnings. Intermodal our because we're compared second, guidance was high; operating Don, everyone. excited for XX% anticipated we income last year; margin like raising at to higher and than and we three hello, quarter; the first Intermodal points we're for is highlight the to

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

in up combined XX% X% our down points or higher organic pay which Intermodal quarter and to increase of freight revenue up to revenue due revenue, growth local Brokerage closer resulted up volume growth we sequentially mix, third-party Group segment. was which with price The July increased basis were increased as XX%, well and which mix in east talk at as was recovery, combined improved loads sales offsetting a decline were the X%. or Taking million, balance, a network XX%, XX%, Price for of $XXX a with about $XX.X existing higher in Gross addition increases in to XX%, as repo cost was year. performance XX%, driver X%. cost Brokerage Hub rates lower a margin, compared million XX%, and the margin the for This is Intermodal up gross better due price Logistics business progressed. purchased was a revenue of look and growth by accessorial to Hub X%, increase financial and Intermodal growth of and increased this drayage gross year. and increases, to margin generated last starting offset was quarter, the margin volume as customers. volume due local up the slight XX.X%, primarily from gross XX% Hub loads. let's increase Truck up Truck volume came increased Now, last Dedicated, increases carriers. and than from XXXX. $XX.X million, were of lines, partially margin. Hub's Fuel Hub revenue was due in Logistics west a percentage by Dedicated, XX%. of Partially details revenue on and XXX and of segment costs. rail fuel increase Transcon Xst

Second up quarter transits negatively results. a average rail day, which of X/XXth our impacted were

factors in sales. reason more gross start-up Truck in expenses, total was of second expenses approximately new decline factors All to Us business of addition and gross Hub last primarily Truck primarily headwinds purchase $XX.X $XX.X as declined million the were associated and costs, flat. about cost using primary the 'R and and of of bonus, was spot margins XX% expenses customer a offset of this sales due a for diligence combined the higher increased Toys severance Dedicated's loads million costs. as Dedicated's Brokerage improvement compared these in with These to relate commission increase Spot gross year, margin gross in percentage year. drove million, by mix, to higher driver XXX-basis XXX-basis the liquidation. a percentage Logistics quarter. as percentage of is Hub changes $XX.X second and productivity Intermodal The cost a increased the drove Brokerage gross Costs of of about because point of margin third-party business. Logistics' quarter point partially X%, and to sale. margin margin business in carriers. transportation a $X.X XX% from lower million, due

on working aggressively are enhancing We productivity.

margin was X.X%, of the for an X.X% improvement or points. operating basis compared in XXX segment to Hub Finally, XXXX,

revenue was $XXX our Now, XX% up year Mode's quarter, $XXX last increased in Operating to was commission. I'll $XXX was all XX-basis as margin in a and all an margin million, to in Intermodal million margin three from to increase three Mode gross a up up year-over-year $XX down million lines. Gross year. compared compared which an XX.X% XX.X%, discuss of the Truck which percentage was in breaks results due was segment. Logistics, Revenue margin XX%. to up XX%, decline XX%, of increase due which Mode's in and in for service In last mostly second expenses as compared revenue last in in Mode was Intermodal million lines. Mode's was Brokerage $X.X sales million margins. because year X.X% million year, service for $X.X X.X% agency point up of which because to cost were higher last

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

now million ended $XXX.X and Turning with the cash. to cash, quarter We our $XX.X balance sheet the in and debt. million in

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

full between expect per XX% the share at that range $X.XX earnings revenue the to line service diluted for our to earnings XX% Mode in growth XX% estimate from XX% Hub $X.XX full we believe XXXX. Brokerage, slight in segment and to the X for what Hub discuss revenue estimate XX% share Logistics year be per We I'll year. $X.XX. the from revenue. that range year to segment, And $X.XX. We segment's the growth growth earnings and We expect will in to for we $X.XX By per $X.XX. will share growth Truck will Intermodal, Now, consolidated

will the expect $XXX the half from We range sales Dedicated in $XXX of million. last to year million

to quarterly are our will the year. half as from million expect wraps last $XXX range between Included going to that customer of the XX%. last and technology. million XXXX. wins. approximately you million year to expected $XX rate of strategy, our and in to believe equipment, million effective be to income XX.X% in million That Dave, to $XXX equipment in and million for of to We're million a half will million project range between million expenditures Group for in and investing this Dedicated sales and execute gross percentage Hub $XXX will our financials. related contract closing $XX tax and the $XXX We $XXX $XXX margin customer range from million cost in Capital We the spend XX% over from between to $XXX the up for expenses new renewals We $XX that both is XX.X%. remarks. for consolidated

David P. Yeager

Terri. other lines are with we from We results pleased value you, performing rapidly-evolving very quarter. the the market. of levels, are made well. we're bringing the Intermodal believe Thank also this that and performing have quite at is the in Obviously, second investments record business

We the pricing in half a And single-digits the we'll We any line to year that, XXXX. mid improve expect to questions. the with second believe the up to our increase this environment. in of in enhance capacity-constrained price will sequentially in ability open

Operator

Thank you.

Please question go a ahead. Wolfe have from Group We from Research. Scott

Scott H. Group

guys. thanks, afternoon Hey

David P. Yeager

Scott. Hi

Scott H. Group

a quarter and single-digit back it year? from pricing double-digit of getting far So ex-fuel pricing pricing can about the the we like high second July? talk quarter. be then trends in Should to the volume standpoint, the the you throughout looks in And so in Intermodal maybe half in

David P. Yeager

as Well, did did have we some increases as far that sequentially a quarter. better the sequentially, over bit get

along a strong strong, So Intermodal and it business. quite to we see did a pipeline, continue robust go and well,

Terri A. Pizzuto

but some QX But And did pricing you're right And we and from sequentially we went did more it's on. like on then the single-digits. QX. that as an to overall pricing double-digit basis quarter in customers, said, high increase increase Scott, increases expect Dave as get

So that. we're happy with

And was then was terms X%, Intermodal was it if volume June at X%. X.X%. the you flat, volume, our look up In May up business July, by day, and of was April up

Donald G. Maltby

with issue's were and increases bids thought the seeing single-digits. The complete, which XX% we're see, we bids, we is certainly are to the the the going in high

Scott H. Group

Okay.

in talk limiting industry UP of lot caps. of impacting putting this all in big is the doing, what a there's How's about So you? surcharges, volume,

David P. Yeager

they Pacific. impact predominantly made this as they've commitments us fleet their doesn't can that up we with the all they Scott, That's and peak. to where believe this that feel our really Union UMAX though have business, at on EMP own Yeah. because the I fact in point live

to going impacts we we we've minor, it's does to very us use the be the feel very that capacity that, it we've able comfortable made to. So our commitments in small to because deliver EMP, and customers, with we're extent, to do but fact, a committed that

Donald G. Maltby

Right.

Scott H. Group

pay to this your peak guess, the are do get I you you surcharges? So and along to those have Dave, lines about to ability rails surcharges year, confident peak

David P. Yeager

that we confident have will surcharges. very feel do We peak

into any far we able fact, very would comfortable feel certainly, Union we might with cost In but we we that we the have, really have surcharges, as be to overall contract recoup. get it. as with can't the Pacific, But

Donald G. Maltby

get customers spikes pricing that above our us on as their on that, the surcharges. volume, with we're to And based our and how able to commitment well is

Scott H. Group

last one along. it then I one And Okay. before pass

Post. XX Mode? So it Is XXXX from on think Deutsche times about Mode looks valuation like that paid in EBITDA you fair trailing way to a today for

David P. Yeager

in that talk can't really about We time. at Scott. Yeah, this point

Scott H. Group

Do something in flawed now? that there's you thinking think

David P. Yeager

comment have on I really it. don't No, a

Scott H. Group

right. guys. you, Thank All Okay.

David P. Yeager

Scott. Thanks,

Operator

from we Kevin Please And go Global. from question a Seaport Sterling have ahead.

Kevin Sterling

afternoon, Terri you. Dave, Thank and Don. Good

David P. Yeager

Kevin. Hi,

Donald G. Maltby

Hey, Kevin.

Terri A. Pizzuto

Hi.

Kevin Sterling

a quarter. on Congrats great

Donald G. Maltby

Thank you.

David P. Yeager

you. Thank

Kevin Sterling

tariffs. Yeah. trade back impact general, comment, Obviously, the just you things thinking just they be some like guys any from customer that, But conversations, of and the could about maybe aren't might how year. and half seeing wars you

David P. Yeager

April. as have major And finalized. in our that's with peak for early with except Yeah. plans all of place we We client as actually planning our one base initiated now retailers

it's very So feel peak strong they to be though as going season. a

be levels, think a they're tight. while pretty little before, than that they looser inventory that I sees bit might still everyone

have and season. strong look confirmed, our so we And shipping to, a very clients peak forward

Donald G. Maltby

with we in about started during back all working they're concerned Dave's our clients point, To I peak. April, when Yeah. capacity mean,

wanted have we why a them that's with set So good to dialogue and expectations.

David P. Yeager

a Right. And and very this. the on believe be that tail early, will we be peak do long it's going

Donald G. Maltby

Yeah.

Kevin Sterling

Okay.

I we normal maybe, gave last momentum similarities. up guidance can haven't continue, the put peak, this least least Dave, So seeing me XXXX, today, you we're some of, kind cycle, you if what something think, expect about XXXX, or XXXX, like about to obviously, pricing of years. you I some multi-year kind kind compare at talked the of And to could XX single-digits looks in mid the to in you Maybe we're think of guess, seen cycle, freight today what XXXX. seeing at I

help So context kind now in we're us put seeing to years we the don't you of maybe mind. what what XX if ago, saw

David P. Yeager

I hard But a is similar have constraints. I ago, back. quite years no, far it that in there's much XX Well, recalling as as think, capacity time

to see all for that well-positioned seen, the just this environment think And into strong. gets my see And the it sector. believe in leads we've pricing Intermodal the it's will at not point been point, of in the if, certainly strong trying drivers, into of to think a hazy. perspective that this I driver a we with economy, and fact, to within it's truckload looking at time the easily this XXXX. after always I just again, would very the capacity very we challenges very from XXXX, we new market. just different. tightness going drivers longer exacerbated though certainly, the It's seems as But it's the even be economy, that's everything dynamics, strictly of dependent very It's driver a course. the into from future extraordinarily believe ball is crystal because going that Again, itself continue, has really industry, of I for that market that, have year, the rectified. the it love it's of upon – more to remainder something attract I demographic because And for in but allow tight peak.

Kevin Sterling

you. Got

Donald G. Maltby

you've over got mean, Dave's early of now I in XXXX, last few the impact point, the started e-commerce to years. and peak So

earlier you're then longer start what seeing and So it is just season. the goes an up, to peak

Kevin Sterling

question. that you Mode, Got comment gave can't question more for if Terri, much Thank and some on around see question, think makes Mode. because modeling a you. sense. I'm know No, And you just last just you I mind. you ask It's the of this don't you. I going numbers contribution

As Do just Mode, with I'm sale adjust for Mode sense maybe and asking, estimates a estimates should of idea make timing we common adjust Mode, XXXX? XXXX back-out for the think timing that and about for a of we for XXXX? we Does for of should our potential the you sale timing? as have we our what Mode think about

David P. Yeager

We Kevin, sense. does if, that Yeah, may or comment may that, time period. prior sold your make fact, question can't in really to on not Mode be

Kevin Sterling

is Okay. I obviously capital to that sold, you But have plans business. if it redeploy guess, the even quickly from

David P. Yeager

centralized We redeploy potential of will in though of maybe lot do and We Hub a such there's that a aligned, as acquiring feel as more that we businesses be plans control, have upside Group is. better what may capital. the

very We be culturally that fit, offer our But we're redeploy sure they're would our able to something we going a be yes, relationship. that we'll then our make So to enhance going would and approach clients in as we – to to – be good service it's that. cautious to acquisitions. always, that's that we're able a

Kevin Sterling

Thank so all I'll much I queue. get a for Okay. back quarter. great you. once Got That's on and again Well, congrats you right your time, had in now.

Donald G. Maltby

Thank you.

David P. Yeager

Kevin. Thanks,

Operator

Ben from go from ahead. Baird. question a Please have we And Hartford,

Benjamin J. Hartford

there final to decision that Was everyone. billion any broader now, on this forward here Maybe or when that, one ago? you acquisition the in it. just previously you evening, kind a strategy Maybe just one context discussed, target? first go the strategy, change is had exploring $X year Dave, what have framework articulated of embedded with here good and approach billion on $X so Mode, Hey, exploring that somewhat in of just to your X-year,

David P. Yeager

has Yeah, Mode the billion. a say, total over say it years wouldn't period with that, But been on I certainly, that would $X process has The five number not about sudden. over an it's discussed focus I no, one, of time. changed thought acquisition would

but going continuing will be forward. acquisition no, our strategy So we with

Benjamin J. Hartford

Dave, And think kind as business profile Does gross XXXX to was a then, the of And of based the comment loose Terri last of either helpful. or peak-ish, And okay, Terri, growth peak-ish think roughly mid that roughly that you've peak question guys I alluded in two constituted cycle single-digit the pricing to to forecast. about a for Sure, healthy on margins. quarter? last that's EBIT guess, those a call pricing Dave that pricing year it's in your matter healthy you was enough it expected overall predicated qualify X% I presently comment talked had cycles. the on is targets I as next place XX% you put margins, made

Terri A. Pizzuto

with Certainly, this we is better than expected year the pricing.

it And single-digit Yes, up to we gone what year. costs yes, And To feel our are. through start have up good XXXX. are. cost the increases those us next here what another where to of and process so visibility drayage haven't that detailed honest, our to pricing would come would sets targets strong a rail be we'll what budgeting for margins. with like well be mid getting But we our be we would

Benjamin J. Hartford

Okay. Thanks the for That's helpful. time.

David P. Yeager

Ben. Thanks,

Operator

have from Stephens. a we go ahead. Please Long, from And Justin question

Justin Long

And the Thanks. on quarter. congrats

you're the about ask pace how coming back the how truck-to-rail of Intermodal, the conversions and X.X% conversion seeing. consolidated activity environment of you conversions year? to are improving, the thinking underlying half think of in to on versus much the level that start we of demand So volume from I this growth, When about about wanted that's Intermodal

Donald G. Maltby

really exact store because And are that's difficult us question. specific we just the conversion. the we constrained, for But we're environment, that getting of on We of in they capacity continue. their as But to have an do clients just conversion Intermodal to think have that trucking an focusing think clients, our know shelves, talking our place I allow that'll to us conversion. that market would or the looking are far are get we we identify so It's a it. when specifically more remains on lot don't progressive at metrics them Justin, really can good quantify really them. in the amounts don't you as some customers. product they as number as give can this we awful their to get

Terri A. Pizzuto

was And over-the-road to one from that about of business transcon in up XX%. intermodal. Our converted freight group customer XX% their

of per retail customers difficult pay it's and Dave converted. some our like to also aggregate But And said, number. pretty that get

Donald G. Maltby

It's Right. hard.

Justin Long

I'm Okay. sorry I it, give that did X% volume Understood. missed for what growth but for Just to half you expectation the And of quarter curious year? a you're if expecting about. you to the if full X% back good guidance gave year Intermodal is last of be volumes, still and thinking ballpark

Terri A. Pizzuto

volume It the ballpark, our to would Justin, to the year. the We year X%. is first X% of was be it half the half of in slightly expect the than good still second higher a in

Justin Long

about and Okay. level, And you'll that then talk from that more confidence just try capital one in high from your way lastly, guess, time you Great. Mode be I could level to EPS results divest accretion? redeploy maybe able different on angle, a a that Mode, to a in

David P. Yeager

we really at in talk point something this Again, Yeah. about that's cannot time. that

Justin Long

congrats Okay. leave at the that. Fair quarter. enough. And it I'll on again

David P. Yeager

Thanks, Justin.

Operator

Please a Wadewitz Tom from from go we ahead. question And UBS. have

Michael Triano

this Tom. Hey, Mike on Triano is for

David P. Yeager

Hi, Mike.

Michael Triano

Hey.

about quarter. to and income cadence quarter the in So I wanted ask fourth operating third of

similar a expect season that You mentioned you to year's. last peak

gradual kind and XQ? XQ should expect in So improvement we bigger then in step of a a up

Terri A. Pizzuto

Yes.

to than third to the income. and that fourth quarter be goes of in lot margins operating in We a higher expect our quarter,

will that strong to the our quarter will have such growth strongest. fourth a expect fourth quarter we in EPS however, quarter, of we in be expect correct, more we we see because XXXX. than So fourth third quarter say And I the

Donald G. Maltby

comp. Difficult Right. Right.

Michael Triano

year-over-year fourth on in the given comp? it possible be quarter, income Is difficult could up you operating

Terri A. Pizzuto

We Yes. year-over-year. will estimate be up we

Michael Triano

on think then in service rail bringing more on of the half, one And given better the locomotives? do rails much Okay. know, can just rail what how How kind are crews get service. and and you some second you

David P. Yeager

switch, will I to daylight everywhere. be be it's light a be would going love able say there to and to

is I gains. think be realistically, that incremental this going to

gain – We which over disasters to see they've issues second fires would kind most Norfolk are day But that I ongoing. Southern collapse, with the we the think now with the a the Pacific. from starting investments, of could of not gains we and those these Union were incremental will that with be see hope I-X half the what kind a Corridor and it's year-over-year. right versus the to half of both Union had in unfortunately, recently, had I wait types – several Pacific's tunnel the maybe

going take we with we to just So the see be. you dramatic a will have it'll how incremental improvement. to know be can really levels, into gains, investment large don't fair And just et quarters it where current continue of cetera, several XXXX know it's to improve a amount time, it

Michael Triano

perspective? Right. collapse in Was the cost a tunnel issue, was meaningful that the quarter, from just

David P. Yeager

a enormous, expensive certainly it But lot did over probably UP diverting impact Lake. for it as wasn't about Salt an was sure they was but the us. more on I'm It It everything have were $XXX,XXX.

Michael Triano

All time. the for Okay. Thanks right. Great.

David P. Yeager

Thank you.

Operator

Please Todd a Fowler have from question Markets. we And go Capital from ahead. KeyBanc

Todd C. Fowler

side good like guidance, price you've on Thanks. you year. got Dave, what then to when the second what than that in numbers? present some are the risks are guidance anticipating through. and are sounds half, might visibility that think opportunities feels come the to the of the rail a in cost half It half both of things the the the some little Good and like with going could where better in the where some the the of you're volumes evening, about everyone. second come What that environment it back is,

David P. Yeager

would worse. rail foresee service the in obviously I be a be risk. getting don't the economy. risk The would That largest really slowdown

our process. be XX% repricing, So business, can But But sudden, is, I it in We're we XX% so overall get leaves still of event. substantially of we much The (XX:XX) those XX% us are about think that how a surcharges. costs. swan price with now increase in that have we highly our and how the dramatic, biggest done kickback risk unlikely. would can upside black

is better far Terri, upside currently miles to the so think you within have our bit And empty and a our gaining I margins, add under. being be primary larger and operating get possibly do to as anything little the side trucking is as that would that? able Intermodal to that

Terri A. Pizzuto

the Brokerage No, for in would of projected, improves the quarter. we business, get to And more lines pretty we said business comp in in I got guess, the the get than other spot that on. we spot higher the previously had I we driver might at you're anticipate. Dedicated to way had terms tough of productivity high we might a faster then end as Truck fourth if that Intermodal, we say, end third than is

Todd C. Fowler

Those make other the maybe sense. towards on one And more I'll Okay. side, end. just ask the lower

like big rail second and side about capacity in that you not on dray about sounds a half it the service. think costs So as drayage What year? the expecting deterioration of you're the

David P. Yeager

Yeah.

boost the be issue up have we're costs ongoing to ongoing We're third to we gone dray Our right manage looking well. an going single-digits. high that the our That's another to drivers going for concern, now, have need an in do in quarter.

basis. business we well. third-party As on not spot since I We've just we but and outsourced capacity, inception, basis, to so handle relationships. drayage far really think very permanent long-standing a the We have on tender as a that our them, very

for strongly very, in the that. So while challenging a relationships with California intact. position good in peak, during it very drayage capacity, Todd, And very we're be are Southern I that can feel particularly

Todd C. Fowler

Okay.

Donald G. Maltby

Dave's on in go the transactionally past, point, To drayage. our don't we

period. Dave's a and try act on business to like that customer, tender we point, So a XX-month to

we're spikes to subject market. the So not in the

David P. Yeager

Right.

clients be treat partners we to our in our drayage try as essence. we treated So to like by

Terri A. Pizzuto

for Yeah. double-digit said, third-party for drivers. to our that as And good our low single-digit, both carriers increase, and visibility, high we have Dave

So...

Todd C. Fowler

Okay.

off. mean Terri, Sorry, I cut you to didn't

Terri A. Pizzuto

No, that's I'm okay. good.

Todd C. Fowler

dual I one Just to of in or you do that to put last to Can would before acquisitions, prior or can have else Mode? something process you wait to I an anything to place? or Mode some that is of you're it of is, able size with some on you'd what able happens kind track something see kind with wanted that scale the doing acquisition close ask mean, you to be

David P. Yeager

not any comment occur. you it make low. we at size. current it's on, really could if EBITDA to we a we of debt certainly, But look an can acquisition timing, if ratio, We to fair able something without Mode, know when will don't our very of sale or it's certainly, because Yeah, be any

Todd C. Fowler

Thanks Okay. lot That the for helps. tonight. time a

David P. Yeager

Todd. Thanks,

Todd C. Fowler

Thank you.

Operator

from And a question Ross, David have from we ahead. go Stifel. Please

David G. Ross

Don, Dave, Yes, Terri, afternoon. good

David P. Yeager

Hi, David.

Terri A. Pizzuto

Hi.

David G. Ross

I but at wanted a It's very though X% even bit grew they Brokerage. the down truckload Hub, to a obviously, talk Mode. loads strong little I the at was market, Why tight were think capacity, Truck that? about

Donald G. Maltby

Tracksward down our bit. we was call business, the as projects, mix of Yeah, transactional services, a it up But we (XX:XX) and business with made specialized business. our our it,

And expect we're services strong marketplace. second the very half our in in the position we be So with to strong.

David G. Ross

think sound up. I made of be loads it doesn't hauled. you growing. out it loads need I just like there know down, that If why would were plenty it don't just there's to that wasn't

Donald G. Maltby

to the tied the end of bids. customer Yeah, And negotiations we're I think and at contracts and day, it's the mix.

low-margin through and that went eliminated we cycle. worth simply the transactional project And some on work. wasn't we it. So that focused We business

David G. Ross

Dedicated division on you've or improved? have the learned, been over What's what's Then over little the a had a What now. right. you period? All year changed side, that

Terri A. Pizzuto

customers right very in We're new for bringing it's quarter. on new first the able And a was carefully, it that wins. think our lot land We us Certainly business it's want. the customer what do. to we because to significant of were acquisition

very that the culture learned it's So and we the very focused ours, customer. right we've got company, bought to on similar

when that than on. smaller lot we deploy wins, we wins a They brought new of what much were do past. and big Estenson customer and customer that, we hadn't done in the learned also really when all We big try

our we during $X had costs in over said quarter, start-up as in very we're million on we remarks, the productivity. prepared So and focused

And are to with with by better. some driver us customers for working our working to productivity delivery impact we're changing allow that of to things which customers parameters the remove doing that optimize to changing our we're enhance ability there us is optimize, windows. that our constraints include will example, And could, operating

be of over recruiting keep with increasing has market in successful effective. pace all been sharing has drivers And again. been hiring to would we're Dedicated Intermodal the reducing third-party need buy driver prices for increases head Our drivers, the to because driver and it very challenging. finally, more so we carriers. new are cost in expensive pay the But

Donald G. Maltby

Absolutely.

Terri A. Pizzuto

was that think decision. the I right

David P. Yeager

able every things team. we major just culture again, expand be think the would And business culturally this management I a very I work the who they is one to Yeah, the positive were They're think I is there, that to issue And cultures solid. were, and very together acquisition, for it. much add going we're seen and to with continue of I've thought they aligned. are very

And so acquisition the we're and with moving very it. with forward pleased

Donald G. Maltby

and Estenson, had bigger It's a a are And traditional landed than exciting. which onboards We brought on good accounts at the Terri's very is pipeline. experience. strong that we've point, the to

So and we'll work it we're getting now, it. through through

David G. Ross

good fit. to Glad it's hear cultural

million something something Estenson fleets factored and Just dedicated at may with had the start-up the it's of be that that should do pricing, that impact is to of associated doesn't down was large-scale with experience something high a given because lot come margin already follow though lack the Is start-up that or over a $X.X that that have into up costs of cost, dedicated all? that costs, lastly of but on it. implementations, that kind unusually time,

David P. Yeager

will down that over something be will It come time.

was I it contracts of so this. more than Estenson's or large think as history on dedicated ability that such putting

which as to causes such cost timing. carriers I you off. which do think and moved things the throws It third-party it quickly, and that, the was to too outsource more really

think it I issue a more So anything was else. so timing than

David G. Ross

you. Thank Excellent.

Operator

Please from go ahead. Ossenbeck And Brian we from have question JPMorgan. a

Brian P. Ossenbeck

Thanks question. taking evening. good my for Hey,

David P. Yeager

evening. Good

Brian P. Ossenbeck

rail go minute. So back to to just for service wanted a

basically expecting you Just now. consistent capacity way rail but right sounded to as improvements, hoping of levels it? to service sort to from it of see clarify, a fair of like and the were for that characterize Is

David P. Yeager

seeing hours, half is incremental seeing it's something. like this mean, The as We're is in speed day, at are consistency improvement. as the point by are time. nearly or But not service up incremental It's the we really of key. we're I or the level. which a improvement. a not five we important jumping Yeah, seeing better consistency,

– problematic. take that's the container So we're something, always improve. may or an a seeing extra longer sometimes seeing We're it day

compressed well. as somewhat being that's So

both again, going seeing it's incrementally, to believe So to we're do it NS and we that as invest. improve UP and continue continue

Brian P. Ossenbeck

wings, to merge rid intermodal I and past. of addressing CSX know talked some we've reroute I their a And but impact wouldn't at kind be service, your Okay. terminals a the change fees lot move They've of forward different know to network. necessarily density, direct the about they're into got which starting of to put in

when that you? So from you if perspective. this just to point. see from if at seen, put if anything, Just that and over, see shippers, you perhaps you're curious seeing to Are with volumes they change seeing anything come coming, seeing curious more interest have

David P. Yeager

interline the suggest would I'm by the some despite we're of that our intermodal is we at with CSX, well not Burlington are impacted as that volumes the it just we I truck connect they've at of of Southern changes as, that they using impact Norfolk Western them, will, as some of And some NS dramatically. And see on you had of fact the on that that despite have far And Northern, extended traffic as things look make, service our growing CSX, connecting result if conversion, fact is gateways. the conversion but some obviously I'm that, some partner, some that bogs from a you Yeah. not sure as you the to carriers. the versus issues you made of sure that, is does changes of CSX. and if they we're because can that down, because

Brian P. Ossenbeck

last is change expected Or it's And think to with just you some increase Is to quarter, of about this response in Understood. one start-up costs kind in I almost of and one laying full-year sales the costs? it at all which Dedicated. last I groundwork Right. growth. catch-up, double like were incurred number, guess, start-up mid-point, on future maybe the the for that $XXX million the sounded question, were the estimate

kind So bring can maybe together. those two you back of

Terri A. Pizzuto

And your $XXX comfortable when point, given will that with of with the half And and expensive at. the of market to carrier Dedicated guidance more a services for get of second Sure, the that driver to of drivers. Dedicated half think third-party But from million challenging sales we now. to gave year our timing start-up the we we don't And yeah, majority carriers, have last where feel were a those you costs $XXX we range in the incurred the Brian, in projections have thing year. you expect have we're we the million.

Brian P. Ossenbeck

for Thanks Okay. time. your

Donald G. Maltby

Thank you.

David P. Yeager

Brian. Thanks,

Operator

question Bascome Susquehanna. ahead. a from from Please And go have we Majors

Bascome Majors

Yeah. the of front, on XXXX. talked And in and the preliminary comments us items things expectations Thank pricing Thanks them, with year. XXXX, generalized cost made afternoon. into for the on overhead just any costs this any into notable about some preliminary the of some inflationary, how on Good can were for some from for you. here should side In helpful other to taking rails, Terri? my that So and anything directional kind question sort Intermodal help think you've you outlook about some you here, here. year, back uniquely trend how on could including labor the margins, that that incentive comments some next business be of or any even should pricing into think other we comp, or or things base we that pacing coming on

Terri A. Pizzuto

our million year you the we second had how Yeah. about you're bonus this would much year from year. bonus in is have last I than headwinds Sure. well, it's $X if much Well, tell to last didn't We this quarter, higher higher. right. were bonus. you year, the And And say,

flows better throughout guidance our our the As bonus expense year it with whole for our EPS. and we year, done as we're because the should, goes raising have it up,

we because year us as being we year, per QX, for the wouldn't reset with do board every so a next big this quarter higher And EPS million headwind that bonus have year. gives QX, scale and that beginning QX that of is at the $X about

marketing, use better $XXX million that same will and discretionary. continue, perhaps the to years. made And over spend, expenses, and those things our would controls effectively, effort lot advantage. that so only that's that travel get good go a make we've next We've that absolutely that to will competitive as we're have invest five more in money entertainment, And our costs a think give our trend that in come other And that sure going discussed, of including are expenses then, in cost got this the about and because lot next year. expect year, we And of terms to we a a to down of we've the place technology us look stay lot IT away. at also

Bascome Majors

(XX:XX) pricing the other from And any rails? on

David P. Yeager

paying That bit the We clear what not rails. be price with idea hazy, escalate. pretty the what on quite amount a we'll as as as more is. continue sure will increases, driver of the far pay. to you It's our if have a I'm little will,

pressure We we're on wages. have to going I would to be believe that driver market competitive. But continue upward certainly see to

Bascome Majors

said ago, you And the to last Terri. something thing, just clarify second a

but me that kind help at absolute and where with you and basis that assume went raise plan above tailwind, the could works, this year-over-year, could least plan accruing on as guidance you incentive wouldn't to that if a with XXXX, you're would an in be of at the year. said actually comp You headwind next I be would point, this how big year, how look?

Terri A. Pizzuto

I good we're our get with it now, sized so hope we of didn't get pretty to This plan Yeah, bad, pretty we exactly we be we're goes territory. a above right, went you're to and so plan. year accruing year It plan bonus, would mean, bonus if the bonuses. we Last above a any did bonus. we're well, doing lower. at kind

it even out. Next probably will year

Donald G. Maltby

Right.

Bascome Majors

Thank the for time. you

Terri A. Pizzuto

you. Thank Sure.

David P. Yeager

Thanks, Bascome.

Operator

Diane ahead. from from question go Please Huang Stanley. a have we And Morgan

Diane Huang

questions. my taking for you Thank Hi.

the First, peak yet. can have season they like that don't carriers, TL upcoming on thoughts you visibility strong? It the and to some on lengthy your elaborate be of seems

your TL? So and I Intermodal for comments just was wondering, on are peak both

David P. Yeager

I would with early peak. retail are clients, to that conversations CPG our our as as our well they say an clients, based expect on

case over an then e-commerce by and the e-commerce in were in gone a have do to We have impact. e-commerce. longer years earlier down the slow begin e-commerce last that in going years And companies of before. lot And mid-August, point, that does presence. brick-and-mortar dramatically. a it product of that we Don's seen even and by, tail, is basically, – fair bringing with that are would retailers multiple done, any is have not where Thanksgiving, business participate longer simply And number several and with we've retailers we Traditionally, large the

Donald G. Maltby

in history, Yeah, if in came XXXX at same. XXXX to the be expecting the we're peak you look later and started anticipated. start than earlier, XXXX

bullish So our seeing the they're bids, talking this the in in year. results on to be to the customers, going Dave's what point, peak's and

Diane Huang

industry Okay. there's in another That's now very volumes? on and focus of pricing than greater And color. in space, like the price more question. terms discipline, whether helpful the What is competitive a Intermodal dynamic now

David P. Yeager

that been a that this a prices year, XX make From to orderly of question we no last until is up has that it product pricing months very peak realizing prior for down were the our just June driving point everyone There think I reinvestable. our perspective, is didn't that a where season.

well were know very very contracts unacceptable, out, been some to looking to the approaching in I very as of we been may disciplined. bid season, had price network, that disciplined it's adjust which the costs to take so that And have we had, much our have increases. accessorials balance as

in And expect that So well. very it as I think orderly. we'll has that see I XXXX been would that

Diane Huang

it. Got

pricing squeezing like And half additional one you increase outlook include in second single-digit accessorials? for Does high mentioned a your in the Just more. accessorials.

Terri A. Pizzuto

does. It

Diane Huang

Thank Great. you. Okay.

David P. Yeager

Thanks.

Operator

from Jason go from Please Cowen And we have ahead. Company. a Seidl, & question

Jason Seidl

Because Hey, good terms trying company drag in changed as company. flow. It a back dead going On operator. sorry I it? of horse you, off has guys, swing free Hub what so a within you good at but from some throws it. understand, where fit just fairly cash Thank the guess, a acquired it's the ask to out, to Mode, get I'm I'm you to

have CapEx You requirements. minimal

to high-water or I'm there. of just on making get You're curious close of track sort mark. to sort exceeding your XXXX

David P. Yeager

centralized good it's same product a directed decentralized it, far that at structure agent The do enhance It's has would our I what team. the first I if it's board part management It's is, is very and we said. at Well, that is also foremost not look got to looking we're an as suggest company. excellent good those But network, to think Yeah. is to to currently and I you best a except basically very agent a in by diversify our the you What fairly the us structure. company. services our company, a versus we of have, Mode business. in offerings have. strong have

that relationships from can, that takes that So if lines we of be interest and be into of of of place, to clients. in our that sale believe our that we the with business clients benefit proceeds with to fact redeploy other able our we'd Mode, deepen to would our the clients,

strategic really the So it's now years just that's really business the rationale. had And this has several for been and of coming part board our with to an that overall at look fruition. now, we've

Jason Seidl

like fit? fit? the same acquisitions really, Is for for a And that multiple-type how that? or or better for should going the that'll or might company be Hub other we just less, trading somebody better look about without potential be Mode multiples a out this Is giving this more at anything like there any some numbers of

David P. Yeager

well. build. we Mode agent-based it's growing. also again, is It's that a can is doing better fit. It's one But Mode an model.

grow theory clients, though we that them, that with will our add the this to services was that a and the That the clients, was on bring can additional feel the behind want. relationship our is impact behind agents' clients that also We based allow value growth. us service with deepen it's rationale So it those we entity. can that as That was our to trucking. Dedicated buying,

client As service we've first. and on Dedicated or risk want the too and not Group try safety service the now it earlier, to we had is, obviously, focus back and to thing major to alluded the and high quickly, is a grow hold Hub fact, Terri done levels organization, overall throttle their Estenson right because don't in

Jason Seidl

any Mode, it however should get whenever as of going it be, so that might we much And proceeds Estenson? to for towards think might towards you acquisition, of growth using to be, not redeploying

David P. Yeager

cash to, don't and fund with and flow can no. free we the need the No, Estenson with debt. finance own of growth our We

Jason Seidl

right thought. as always. All That's Nice appreciate what guys. quarter. I the time I

David P. Yeager

Thanks Jason.

Donald G. Maltby

Thank you.

Operator

a And question go Wolfe from Scott we Please have ahead. Group Research. from

Scott H. Group

follow What's for a $XXX you cost on Hey, guidance there? quarter. million the the to $XXX thanks raised be Terri, going up. I'll to guys, quick. million

Terri A. Pizzuto

end Yeah. of we're expense that. grow. the The insurance a higher biggest more health we reason we up on increased increased to originally costs our we people because And as that it going we plan touch. running is salaries continue hiring also that projected of because bonus project we than to And had because high are

would highest, be at be third $XXX in expense IT lower also We fourth we'll closer million, the to quarter end, We expense the the the the that deferred have spending million. fourth some the and anticipate see would quarter that quarter. $XXX quarter will and third the to closer

Scott H. Group

back the well, then next happening? year year. and that thought the high year? are are be, I And got next want think they're this up, What's rail high pricing increases sort pricing year, rails Okay. you Do I next of that mean, I they next guess concern higher this have, single-digit want Dave, think that guys say, risk you've of single or or would we you you to you getting said I come year? not. Do the to for increases year, that follow implied than cost you visibility

David P. Yeager

is, it Plus, goal to we customers, clear grow pass quarter, all, rail. the still saw comment this visibility, on today, even operating and to can't this cost to from because But improvement confident see what we very our first get we see the least year. we where we'll to we're continue to. have we – focused that at our not or feel we of we it's be on on with Well, our that very the we we're increases no, rails this to is really it comfortable knowing, the need as feel income giving able obviously,

Scott H. Group

putting without smaller increases than you think higher your next or similar, year? do numbers, cost are this year And

David P. Yeager

I best it's now. would say guess be that right similar, my would

Scott H. Group

All Perfect. guys. Thank Okay. you, right.

David P. Yeager

Scott. Thanks,

Terri A. Pizzuto

you. Thank

Operator

time we the now I no turn have questions. closing David this to At call Yeager further will for over remarks.

David P. Yeager

for available Have joining Don call the have. questions to day. conference like always, I'd for I again, everyone today. And are may thank and us any you Terri, a Well, additional great as on that

Operator

Thank today's you. Ladies for participating. and Thank gentlemen, concludes conference. this you

now disconnect. may You

Hub (HUBG) 1 Aug 182018 Q2 Earnings call transcript