Hub (HUBG) 26 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

David P. Yeager	Hub Group, Inc.
Donald G. Maltby	Hub Group, Inc.
Terri A. Pizzuto	Hub Group, Inc.
Ryan Greenwald	Wolfe Research LLC
Ben J. Hartford	Robert W. Baird & Co., Inc.
Justin Long	Stephens, Inc.
Todd C. Fowler	KeyBanc Capital Markets, Inc.
David G. Ross	Stifel, Nicolaus & Co., Inc.
Brian P. Ossenbeck	JPMorgan Securities LLC
Diane Huang	Morgan Stanley & Co. LLC
Jason Seidl	Cowen Securities
Matthew Brooklier	The Buckingham Research Group, Inc.

Call transcript

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Operator

Hello, and welcome to the Hub Group Third Quarter 2018 Earnings Conference Call. Dave Yeager, Hub's CEO, Don Maltby, Hub's President and Chief Operating Officer, and Terri Pizzuto are joining me on the call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. happen during release of good represent as what made contained call faith statements to the future. in the may forward-looking the the course or judgment Any the in company's best that such believe, of words these forward-looking use and and as be by expect, identified Statements the are of words. project anticipate variations can review cautionary statements the in Please the release.

differ to filings materially company's Form actual other SEC regarding In the 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 Sir, call is the recorded. may begin. It turn you Dave pleasure to

David P. Yeager

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

of effort in work Our great a third network. quarter to our expenses reducing deal and results our while Intermodal margins culmination the increase of are

X% was very execution. quarter Our strong up environment we a and pricing Intermodal for excellent operational benefited from the volume as

while We contribute continue experiencing continue end We strong The will across of the environment Intermodal coupled positive cost the trucks that environment strength through pricing with tight believe our versus advantage will the market year. a to XXXX. capacity constraints capacity the this of toward see in a peak network.

units. to to Don mid- talk And with continued about with increases performance high volume forecasting are to in the We our growth. call the that, price single-digit XXXX business other over along I'll of turn

Donald G. Maltby

strong quarter customers the to our had we solutions a services provide expect. reflect our come Dave. Thanks, and and to have to market We as continue price the products that

improvements execution. well while we grow to workflow We us believe XXXX. drive revenue the and also engineering, yield positioned quarter allowed and further to yield, process, are has improvement growth fourth and approach targeted Our we focus on and in network both

service all we for is our pipeline to strategy. of market further our deploy robust go as lines Our

customers from the and XX% to to due the earlier declined lost bankruptcy about as revenue this for in-sourcing. businesses. feel talk impact let's continue we of year Now Logistics the quarter

by taking and customers However, increase we were increases, costs to additional able price our drive contractual our existing solutions results. to reducing customers our yield with providing

yield process customers and with existing focused future improvements and with are ones. We on new growth our

Logistics in third were accounts We quarter a that as as from the two for strong XXXX. boarded late in well on growth expect pipeline

During contribution the third in we renewing quarter incremental several that and provide quarter, for margin were fourth contracts of duration in the successful the contracts. will those customer

standardize to strong. increased our Logistics We as TMS customers. quite revenue remains continue offering onboard Dedicated new and continue we as to advance a technology XX%

robust on of use wage start-up our pipeline very sales to to experience service, outside higher however, due expenses, carriers. to a due great value cost focus increases and our driver have We We safety customers. and did, greater

Brokerage and service and positioning value-added Truck are We rapidly strong returns grew we ensuring margin on focused growing to in our largely targeted services. both our line. in due revenue this have customer approach

We business leveraging are go focused strategy. our and aligning services team transactional market to with on better growing and contract value-added by the our our

carriers our pricing reengineering building capacity with enhance ability align In that our and addition, to in operational demand. investing deeper developing and are talent, our process, relationships technology we will and

grow in contract expect business believe as lines. value-added We We long continuing service we quarter. our have enhancements of the in segment and to of first runway focus on first be we transactional in the place wave growth a Truck technology while our to Brokerage

in positioned leaders are are and space. high industry this We service well dynamic

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

Terri A. Pizzuto

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

statements. Mode First, in we on million for operation $XXX.X sold a financial August XXst. Mode is approximately discontinued as reported our

and higher of spite beat pricing, Second, excellent improved in recovery because service. accessorial execution of Intermodal our expectations rail

due spent acquisitions to continue about of and diligence management had We supply we end integrated at in the quarter solutions. September. enhance for cash our explore chain million $XXX.X this will that we $X.X Third, million

This percentage costs is impressive Truck the as quarter. That's Intermodal than third diluted a third quarter a a compared more $X.X XXX higher declines to margin effective that XX% XXXX last I'll earnings the price offset as XX% metrics, look Logistics. the our few to is and or XXXX. in gross $XXX million an revenue closer percentage of each percentage Dedicated Hub numbers third and increase per increased was year This performance increased higher about since due growth key per last and million increase. share, of Intermodal by Group's points was sales take $X.XX Intermodal uses The let's and a we've a as contributor margin tax to basis points million. XXX gross up our month adjusted in Taking at seen $X.XX. sales the at the in-depth quarter rate. Now quarter excludes be earnings year. share that partially to was Group's sold since Hub $XX.X XX% improvement. Mode diluted was talking yield highest gross was than higher year-over-year or of Hub we Brokerage, margin All in look basis Gross it. one-time progressed. margin largest an of a the XXX% XX.X% exclude

in challenging increases the group reduce the results. headwinds. margin actions appropriate gross contracts, center in to year. last declined existing basis lanes business or the our a X.X% and up right of points start-up percentage percentage price. customers these Logistics were taking have a driver increase at basis will This of changes XXX quarter significantly overcome changes the we as was our mix impacted to negatively on as on increasing Operating the percentage and X right an We're was in up actions a gross market. of pricing because sales margin which sales contractual points Dedicated because our the as of rates. We was Third productivity margin Brokerage margin of focused gross costs recruiting returns mix. of We're up rail due reliance on sales aligning for improving and Truck Dedicated X/XX basis customer average day transits and retention. right price XX third-party several carriers. deals. driver for to points Those new on with than solid ensure higher also team a our solutions customer XX

a $X.XX X% XX% expect earnings decline lines, revenue. By I'll what for diluted XX% fourth Logistics We we $X.XX. in range XXXX. in service a in and believe to expect XX% decline Brokerage Truck to our revenue XX% we Now to share discuss quarter of the per from Intermodal, will to that XX% growth revenue,

in million. We range sales fourth will million the $XX expect quarter from Dedicated to $XX

XX% our XX.X% of XX.X%. income our gross our We fourth and expect That range over from a to We that in as project will expenses will performance. million. between be financial year to and percentage rate believe rate be XX.X% We tax range around you quarter, wraps effective quarterly from margin that XX.X%. $XX in our tax for the remarks. that quarter Dave, will costs up fourth $XX the will for closing and the to million sales

David P. Yeager

process process third business the you, changes Terri. environment of They're significant We're due quarter upside earnings. our bullish focused across pleased opportunity freight very lines. Thank XXXX of of across pricing result our and the and Intermodal positive deploy with with to the all service in the remainder We're market Intermodal, the to enhancements on coupled XXXX that has lines. strong believe the

Another positive third quarter of note Mode. sale the was

of for model, asset was We Hub. value our Mode is use its not for Mode to that a to to strategic we the agent-based acquisitions While sale a will it network. due the strategic cash good from business intend add received

we on for continued any of a strong offerings up line significant growth us allow that shareholders. open for with diversify We are our that, and the focused platform questions. the service to value acquisitions our to we'll And build as creation

Operator

comes from Wolfe The first in Research. Group the question with Scott queue

line Your sir. open, is

Ryan Greenwald

afternoon, Good Ryan This on everyone. for Scott. is

David P. Yeager

Ryan. Hi,

Ryan Greenwald

How And bad are this UNP you good you thinking is of at for precision guys or NSC? implications and guys? about railroading

David P. Yeager

as western Norfolk eastern UP, that of slash of Southern, costs. our think I radical not the our partner, is approach Well, – the as a the partner, well both

an be the operators. a with As in also Plan fact, reduce but costs Plan the XXXX] bottom-up example, (XX:XX:XX) they'll in term service [Unified the levels. to enhance Unified to, XXXX longer (sic) UP's looking And the is from

we to get So continue confident. are over better will very Service We're very near- is it that confident the long-term. and stabilized.

very we're in much moves have. So favor they of the

Ryan Greenwald

kind or smaller And Makes you increases increases do what relative cost of year? rail to rail sense. in bigger to this guys And have XXXX? cost expecting visibility are you

David P. Yeager

visibility to similar be XXXX, We good have and they'll into XXXX.

Ryan Greenwald

pricing And can XXXX a do And next more it. XX little or over provide you more you on on Got months? color pricing? plan to the focus guys volume

Donald G. Maltby

take targeted this is think business We It's you price. plan grow your market both. we and your with can if on a that customers

we in on XXXX. price plan So taking

Terri A. Pizzuto

high we mid- said As in market. Dave to consistent volumes our single-digits. expect his And remarks, prepared would the then to with growth be expect we

Ryan Greenwald

Right.

kind more balanced So approach? a of

David P. Yeager

so. Very much

Donald G. Maltby

Yeah.

Ryan Greenwald

the And to color how then are the replace your have acquisition? about from fully for thinking just us. next of you from timing guys lastly the any on And deal? Do you additional Mode kind dilution ability

David P. Yeager

Yes.

what would. I year. we we But don't acquisition level I I I us, accomplished would been we'll that timing, looking by any an think have That acquire not something other on at immediately have end that would be suggest that is said, of said as very in far being to would very accretion As that this disappointed calls, to I've you Mode the able to to be strategic the for fact if acquisition the is think grow. that be

company. we're earnings the it what with of we It's the make just today not acquired buying management it's what of term the team So can today. buying and long we're

Ryan Greenwald

Great. Appreciate guys. time, the

David P. Yeager

Thanks, Ryan.

Donald G. Maltby

Thank you.

Operator

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

open, Your is sir. line

Ben J. Hartford

Point everyone. been point seeing December. maybe well. peak, on a data the two, forward been going to I'd your has be I to interested guess about the normal Hey the any point relative that have your X seasonality? a into one. mixed. Dave, be from I how standpoint, tariff that's little January perspective trending good whether points pull your strong there's looming to back in and point peak about think as evening, But topic

David P. Yeager

Yeah.

peak as this far a As been has very robust. season, it

Angeles, the Seattle, constrained environment. That constrained – markets. very are has As on fact Chicago, capacity fact declared of Atlanta, tight of XXth, intermodal. a in the Pacific lot Los a on to-date July continued major you seeing still most we're cities for may Union recall, to in

Donald G. Maltby

Right.

David P. Yeager

emphasize to that. want do I

little the road, a that been truck over industry, Intermodal's the has seen have We softened bit, but the the strong. extraordinarily

are people that's I possibility. product? to going think some a some pull forward So

in I some think which early pulled have even early peak have late-July and the caused that may our forward of clients early-August.

had some haven't base. customer of So that, we on a discussion of but we may our with lot it see

deal great a So, it, thus see of far I going say that we're Ben. can't to

Donald G. Maltby

Right.

Ben J. Hartford

the about Okay. Terri, the this to Hub should two gone look and business core the profile now questions calls, the maybe is back past point like. margin what Mode of that

you guys pricing maybe said healthy I that X% you a couple margin, can in XX% the past gross have get think margin. to EBIT cycles

the First, XXXX? is guideposts strong it in outlook the are still Is pricing about put XXXX to in targets And be environment, for present XXXX. to the has those able in play enough model? think enough those to in been

Terri A. Pizzuto

than Yeah. XX.X%, quarter, that sales this so fourth excellent gross execution. our year third other from higher to certainly the XX.X% was last quarter this as X.X% any We the and than operating quarter, higher percent with will range environment, that it which margin pricing margin was a think forecast our for Intermodal's of quarter. – in year was basis to XXX due points We

certainly that peak We numbers, it's although X% the for we be will fourth strong year the think with impacts season we've bit right a or with are margin and higher, how been. our peak got has now operating little pricing that environment, quarter and so strong tailwinds next projecting that maybe

our we to on our X%, one still mid- to So grow business. and think not have grow next of those higher we'll hit Truck we're our Brokerage of there. margin we prices, volume opportunity businesses that We get high if year. think a and That's target lot highest single-digit

Ben J. Hartford

to Dave, acquisition. just, one back on last the And circle helpful. That's Okay.

book you or the focused what more intensity present to to be them more at asset strategic As Do fit be or it expect a other or is factors? of more as to targets, want you sense the look you you're matter based these business? on the have in does asset-light and and do context what them capital you of

David P. Yeager

strategic non-asset at we're the the over far definitely think on as looking I longer-term looking at as we're an based. basis, fit, immediate it's but ones definitely

later So we're there that's think we in but the to on I looking at. these years asset years see least that non-asset may going are and some several add-ons, could the some based have direction what you'll want intensity next be four three over us at or

Ben J. Hartford

you. Thank That's Okay. helpful.

David P. Yeager

Thanks, Ben.

Operator

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

Justin Long

and Thanks good afternoon.

with on quarter the in maybe start increases pricing, Intermodal So question XXXX. about talked to last I mid-single-digit think you

saying you're increases mid- Now single-digit XXXX. in to high

little mentioned spot You spot softened has market seen rates. bit. the the or We've a that the in truckload

what confidence in outlook year? So pricing that gives for you increased next

David P. Yeager

Number Justin, issue. continue going think to Well just one think be is that I several there're that's an reasons. I do to capacity.

is other The costs.

During over this significant has the period increases to time fact still spread fuel able – been to expanded that the continues high-single-digit and we're Truck really despite low-double-digit, between rise, take in the this period. Intermodal as year that we've

partners more as escalate will didn't increases the the going pricing. a are That perspective there One to capital critically is amount some third the long with longer-term. of less will lot our were prepared said, driver runway feel from margin which tremendous so was to I offsets a as us we enhancement rail – can here to and our course, well are gross far thing investing recoverable, in than continue increase and the it's clients as continue much have of actually costs contractual in a as little because that longer-term we that margin. it with arrangements made bad with a stick so of unnecessary we to not was lot as a being overall rail cost with And a our accessorials so they've about also comfortable put that and we very remarks cost over wages in team a on revenue-neutral that aggressively of changed negative versus that out and went over a gross had as us Intermodal such eliminated of Intermodal

Terri A. Pizzuto

much leadership we've to in than the processes we're more would got we should and getting pricing what got sure make price market. I get in have and thing we've And nimble say we're other ever Yeah. is we now with the been right the terrific it's the

David P. Yeager

I to think go is process biggest market. Justin, Yeah we the how

in been strategy, Our results I structuring market how the market the lane of and internally go price helping the to targeting defining accounts, the and a good course, all seeing network over the of we the last but we've think market improved our that. Besides, you're of of year have that. done job

Justin Long

if And helpful. in contractual a between spread to on and look does your Intermodal Dave, pricing, at the all what point look on basis? truckload That's that like you your network pricing today

David P. Yeager

and miles. and On a the contractual at probably looking XX% on say, is the are these less XXX haul I XX% than maybe basis ,where road the rough business, the numbers, as but we're longer XX%, – range, shorter It's the in transcontinental let's can intermodal. get what moves you the again, think differential. in XXXX-mile as It's up high a XX%, the between haul, over variance

Justin Long

Dedicated you're ask to in get wanted potentially startup could I secondly, of I into year onboarding then if see margin year, growth about of margins. what kind back And about operating Dedicated year? just XXXX, next this think the half costs as and helpful. moderating business the we That's In Dedicated next that Okay. in improvement we the and specifically

Terri A. Pizzuto

operational focused are aligned We One, where now. from pricing and why some intermodal process processes today. of That's it'll we new execution, the to in our pricing is significantly that our where Yeah. improving Dedicated it implementing on team We've we some got in things. couple Dedicated. have think the place business up we processes go secondly with a daily

Justin Long

points? XXX were it, it's think put XXX to ballpark? any Okay. you points, do you have basis numbers basis But you Do on if

Terri A. Pizzuto

how it'll much go? and higher Oh

Justin Long

Correct.

Terri A. Pizzuto

XXX would Yeah. (XX:XX:XX) basis I basis XXX points at think points. to least

Justin Long

Okay. Great. it you that. All at right. I'll Appreciate Thank very the leave much. time.

David P. Yeager

Thanks, Justin.

Operator

from Todd We with have next question our Fowler KeyBanc.

Todd C. Fowler

evening, Good everyone. Great.

David P. Yeager

Todd. Hey,

Donald G. Maltby

Hi, Todd.

Todd C. Fowler

single-digits, things given that mid- Hey, market's you Group do just to or pricing your be going that with Dave. in can the that's XXXX number? to or a that is your Hi, some industry think opportunity Hi, certain So to high of that that where where Intermodal Terri. on on next going questioning, Dave, really that's the year? line think you think that the be Don. of you do up focusing commentary, you're maybe on type doing Hub accessorials do some is into different more the lanes? of set Or follow

David P. Yeager

effect a And that roughly have about but get where XX%-plus to at think into that for of able quarter. the lot is the were you we're I yet opportunity efficient despite in take more through bids, can and there. we through the I lagging certainly it of XXXX, looked which that, speak industry, operators fact the be. XX% I quarter price. to sequentially set each think that's the can't fact entire And are our if progressively there's then more fourth they

bids catch-up to a So of going quarter. be first there's the that did in second effect the we quarter

continuing very to very So reasonable a to to just prices, anticipate. offset think addition we trying to in to that on capital increase that But that partially yes, achievable. And we're focused invested costs is that level. our those get on again, I return the

Todd C. Fowler

you're renewed market months I sense. maybe just below makes ago that where point, is understand contract that is nine That Sure. that what basically so a would saying be And today. the

the to of first that's those of part reset opportunity? the you as So half XXXX, pricing

David P. Yeager

eloquent exactly than there, I more that's Todd. But correct. Far

Todd C. Fowler

make wanted sure. Just to

Okay.

fourth couldn't into quarter. that rate rate may unusual XXXX? So I And acquisitions not fourth move may quarter quarter into like about think why Okay. my guidance, base Is sequential that what XXXX? understanding as to first follow-up, guess for shouldn't or we is a then reason there XQ why we the And and a the not be point going normal into for starting be specific any patterns about And But as we run but off there use as into that take just if that obviously Good. run we using that. guidance. as just year? there thinking of the would something anything for looking or a next

Terri A. Pizzuto

Yeah. expenses gross the and talking Are cost you the about line both? or or margin

Todd C. Fowler

Well, about just to EBIT just so the took and that backed I $X.XX talking an there... if the and midpoint EPS. we into was at I think mean, I'm really trends, of number sequential off is Terri, did the about trying

Terri A. Pizzuto

Yeah.

Todd C. Fowler

– mean Yeah, I yeah, ahead. go

Sorry.

Terri A. Pizzuto

Yeah, peak now. no. I season say would is this

are during quarters than more when and would we year first we price peak than in able slower garner So the it's sometimes to second next peak.

So little that they're at margins lot could offset year we carriers many in have up to we Intermodal. won't of Dedicated bit go Intermodal, weigh in and a won't as a But now. start-up use improvement I we taking putting room on hopefully where we're think for that costs, we Dedicated. margins and at also that, next project Because pricing from right them disciplines third-party our the that have have in

line, cost we're doing million quarter prior bonus, So get expenses, for little just year, and net-net, of then $X.X well at the every the margin year. component bonus any had very than we because the didn't lower. bonus. the year maybe EPS And last a And higher we the this

at for prior would that year. year, probably resets and the next landed generally so resets, So it that where we –

of that have fourth you'd be this in benefit So that see a would quarter year the you next that year. wouldn't

David P. Yeager

lack deserve didn't you just bonus suggest that that the proves bonus it. to We of Yeah. plan works. would XXXX I Right. our

Todd C. Fowler

there. motivation Some

David P. Yeager

any I Unyson with team Intermodal the say also were incorporated rate, pricing incorporated that some were by where area our that strategies them. because another there's the of that's upside would At with Logistics,

improvement we'll as contribution in so And see their well.

Terri A. Pizzuto

as as of customer in Brokerage our Intermodal Since hope great improvement our should same pricing able division capitalize also see and under relationships to we with the in in Plus, business we Brokerage. grow the is well we Truck And to that Truck now some margins. Brokerage. is, the so be umbrella Truck and on have

Donald G. Maltby

business our grow Truck contracted could in We Brokerage. Right.

David P. Yeager

Absolutely.

Todd C. Fowler

for very and the lot things a Thanks. time to I quarter of of. us That's here. work Good. Okay. nice off appreciate

David P. Yeager

Thanks, Todd.

Operator

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

Please sir. open, line Your is begin.

David G. Ross

everyone. afternoon, Good Yes.

David P. Yeager

Hi, David.

David G. Ross

costs. price Just elaborate you on different that? you made the it, Intermodal Just following to longer-term I in than tends because contract Intermodal. pricing Could Dedicated about a be comment like aspects in think about to to up more terms the of with as looking on Dedicated

So, it what Dedicated? I guess that should Intermodal pricing is about help

David P. Yeager

existing didn't Well, our some we the I that is we price our one clients think of the and clients, should admittedly, self-inflicted have as but this number is take increases with with costs.

substantially, up fuel. Of course driver wages going

And allow to a fact so it our how we just XXXX to about. like talking continue the escalation that and It's making us science clauses that about the we that's that price contracts, certainly inflation going specifically offset level and future and it to sure of that we a methodology increases we're will to as wage believe, at in we through go also see incorporate and where perspective. we're in do going from we're

Terri A. Pizzuto

then And is capital with thing on the connection Yeah. price look in intensive the the at business, that other the so we'd ROIC.

David P. Yeager

Right.

David G. Ross

railroads? been pricing an offer in important. unfolded any very the a next service, hear your allows how whether and you you for see drag, with the That's into that's that been discussions that. you what comments guess can going it and or quarter say I benefit year to about not issue. how Rail through Good

David P. Yeager

have a result it; other hurricanes. – with from doesn't that of really do I'll It impacted railroads volume is last and revenue. start wildfires, some record delays. one environmental quarters first. service And the issues have seeing that the that there's we some are been direct And

So increases part, mind, the they're due effectively. do that the investing believe in large I is, service to volume. in my in

seeing that now the is XX,XXX only of slower We where probably probably we're times. it, it's actually part capacity XX,XXX we're fleet our It's stable. of we the have to is contributing stable. industry but as transit of rail not services because want within – probably constraints right And the really it seen overall containers

as to Plan but with UP's Southern us the that answer the XXXX] changes costs a to we power [Unified Unified as we more So with see the question, (sic) do result our service, expect that undertaking your XXXX. not (XX:XX:XX) Norfolk reduce improvement we're the and rail towards be of and service what some Plan accelerated will is quarter into going any that we will first of see in XXXX get to into

David G. Ross

like the that pass constraints. And on allow capacity sounds improves, to it once as customers up way the meantime service volume in that well? and So that would price to can you you to pick due grow

David P. Yeager

That is very true, David.

David G. Ross

Cool. Thank you.

David P. Yeager

Okay.

Operator

you. with Thank next question Ossenbeck The Brian comes from JPMorgan.

line open. is Your

Brian P. Ossenbeck

Hey, on operational good evening. taking was you wondering pricing comments expand and if the I question. can Thanks for process the Brokerage. earlier the about reengineering Truck in

Donald G. Maltby

Sure. that This our our there's franchise we've transactional Don. contractual piece we side. looked at upside the business. the we've value-added on Yeah, think well We've business. in added of We've brokerage very large side some and a services in and great is got done our

all done few at what looked how is we of we over go that. lines, market of our deliver course, we've across years, how So business to the last and

of we're services of we business bid, take to grow you that. price to do as bids, is how to Intermodal our when our other it most know targeted we business win into that market, want going approach service then it, from which and a So to go

really can at contracted side grow especially we business, and of specific targeted it's and the see looking the So approach it taking how on that.

Brian P. Ossenbeck

bid season go this longer? for ready will will and to the take be bit a And Okay. little next or it place in

Donald G. Maltby

be should place It sure. bid No. season in the by for

Brian P. Ossenbeck

the see counting fleet from Is up purchase and follow-up on year? time rail here capacity? that to little bit the do How some the a as on service or you transit point a expanding about next for a to and And think that capacity. more then something it. container of in bit improvement free are just you you would Got

David P. Yeager

we improvement last units. in a incremental build rail thinking four smaller maybe had see transits, the do We X,XXX some over we're will three but or years, think we've than the

will build. a it be So smaller

your that the enhancement service point fleet. to believe essentially we'll equivalently the to us within rail ,we As do that allow will grow some see

Brian P. Ossenbeck

your Thanks Okay. Great. for time.

David P. Yeager

Brian. Thanks,

Operator

from Please Morgan question Stanley. The Ravi next proceed. with comes Shanker you. Thank

Diane Huang

Hi. This from Stanley. Morgan is Diane

and with in So that my carriers occurred and between this a the and of other first have talked pricing carriers to a lot is gap have year. lag seemed Truck question of about Intermodal intermodal a some

gives pricing are would So with mid- Intermodal high what you which be some year in the expecting? can line next that confidence single-digit what TL achieve to you carriers

David P. Yeager

Sure. changed think basically that Well, I we've processes. our

traditionally changed more team months cycle. reacted providers six Intermodal were behind We've I to the Intermodal Our processes. nine a anywhere agree, from much quickly. market

right of on keep top highs. are We We the it. testing

And so I believe right the with will in that them. exceed lock increases step be trucking and even in possibly XXXX we

As is XXXX. very constrained into now will likely and be capacity rail intermodal, the right

there. see a I So opportunity lot of

our I in take market. to think advantage in opportunities of that Hub structurally, the is Intermodal team a position able those to

Diane Huang

Great. Intermodal Has Hub pricing? in the exceeded past truck the on front

David P. Yeager

a much costs, up lot extraordinary just the driver my seen the more is but That's seen where market. in are fact bargain experience, little with right road over we've a time escalation has bit Intermodal And that we of in the have loosen seen the an trucking a in it really now. that think constraints, industry a of capacity And just not seeing good we question. rather that, like I do that the now is this

may lot case, And And historically, with level agree that there's that believe upside. you and that so XXXX. than a that we change not more but rate a has that would been has a I truck, priced in slower historically at the lower Intermodal

I think good so. it's very do got to opportunity a

Diane Huang

growth throughout how That October? you on volumes you're quarter be your detail is what seeing my us Okay. thus exciting Intermodal far question trended in will can give the and just see. second And to

Terri A. Pizzuto

We Sure. look at it by day business basis. a

September up was was up X.X%, And X%. X.X% down so July and August

July day the and business to So in more part growth was the X%. for of volume day in our reason equates of less quarter September. the that, one there That business one for

David P. Yeager

And through October.

Terri A. Pizzuto

day we business up And October basis. October, through are like on a through X.X%, XXrd

David P. Yeager

specific. be To

Terri A. Pizzuto

Yeah.

Diane Huang

Great. that. Thank Okay. you. Appreciate

The Truck is that space. in new Just offensive maybe given embarking the move, on, initiatives Brokerage. competition more you are on guys the one an this just a defensive or

David P. Yeager

we what and and There's the as we've is technology to very the strong Yeah. support and very feel with franchise space entries business deploying know, I fragmented. mean, is doing technology processes to and new resources we're you got a regards business.

end going we're the with folks matches to at better technology deploy So and and the our demand capacity that. enable of do job that to day, a be to able

much not share new to So and service. with I a grow market business defensive it's delivers with business as it's product say get effort as an existing that would

Diane Huang

Great. Thank you.

David P. Yeager

Thanks.

Operator

The with & your Jason Company. next you. Cowen from Please Seidl question Thank comes question. with proceed

Jason Seidl

some Hey, on Want operator. Thank of on Terri. comments made circle back to Logistics. you, Hey, Hey, Dave. Don. the you

contracts you you that for, for re-upped what contracts new you business Can of got account better several and pricing mentioned Logistics? on. that You the those us percent tell got

Donald G. Maltby

I'll answer the yeah, kind I and Logistics, so don't to bankruptcy it maybe define we some with due of to insourcing. let business Terri lost better, – percentage.

mix the we've done has last you changed, also but know changed, business – the as market our of Jason, year. So

grow So prices we changing were contracted customers to and market with piece. more disciplined in to going margin to the our be start to able

Terri A. Pizzuto

as in Yeah. third half in I of of wasn't the changed quarter. And – – first we the increases started processes. It most we mean the the started that price year most materializing in

million think quarter. a business customers for So we've couple million gotten though through most revenue the $X bring new customers. of to we the that'll $X the price on Don fourth in referred now. And maybe was to that for existing And increases the of

Jason Seidl

Okay.

So it's impact than XQ did on XQ? more an on likely to it have

Terri A. Pizzuto

Correct.

Donald G. Maltby

we in and as take... because XXXX And, yeah,

Jason Seidl

exactly. Right, Exactly.

Donald G. Maltby

Yeah.

Jason Seidl

differently bit rail to the a I analysts. next little than want some question, of My other the side tackle

railroad that what times of day I rail a transit of and X that on You some lost the X/XX the in assume you hurt guys on is poor the quarter quantified we're going mentioned, results. say I improved basis dollar you Have in knock to services next year a tailwind I'll cost that year? be I'm what so at wood – this going here. Hub as with service. Just And think, to looking

David P. Yeager

We really we transit. more have in the roughly it's the anything X,XXX an of cost know do not is. than that what calculated do We with – boxes opportunity have slowdown cost because it's

manage not overly our to So we calculate something we could severe has that, it that been have it's able but been with and clients.

them. able transit as lost haven't realistic it, of to communicate We we're clients result to a times because

X,XXX of cost opportunity and... an boxes it's So

Terri A. Pizzuto

they because two, month. a twice Times turn

David P. Yeager

month, understand I And turn they so. twice a

Terri A. Pizzuto

X,XXX.

David P. Yeager

X,XXX units.

Jason Seidl

as, some have some second of that major And to freight hopefully railroading let's should XXXX improves putting as clears up? Is you two network service gain that additional for that some with as in call and Okay. precision partners, it, I'm practices helpful. rail of assuming their opportunity here That's half the correct? improves your

David P. Yeager

not I us I'd amount be free mentioned new that mean, going earlier it'll the transformational. maybe some Angeles, X% overall in definitely fleet. It very Seattle, would would in cities I the to suggest call, some in as Los increase of up, it's particularly such in assist the a It's constrained But equipment. Chicago. supplying of

So it's would not extremely impactful, but it helpful. be certainly

Jason Seidl

Okay. Those the you are my everyone. for time questions. always, as Thank

Donald G. Maltby

Jason. Thanks,

David P. Yeager

Jason. Thanks,

Operator

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

Matthew Brooklier

and thanks Hey, good evening.

costs guys some start-up Dedicated. at about You talked

to quarter? quantify you're more about if in we margin Do how the curious headwind think able Just the in How the should much start-up costs there? fourth we have quarter?

Terri A. Pizzuto

costs Matt. carriers, very related of and we Yeah. expensive. Most drivers To market which about the answer third-party incurred to outsourcing related We the this tight start-up to costs driver your is were to a first needed. $XXX,XXX costs having not crate quarter, start-up question,

We also new driver had costs recruiting for bringing on drivers with business. associated new our

We with hiring we and fourth travel to new terms significant what of fourth on the And expect in between made costs new the the contracts. quarter, your incurred associated And $XXX,XXX costs finally, $XXX,XXX. drivers. staffing, progress start-up to expect range and we question training have quarter in for onboarding in then in

that smoothly is running to increasing Our appropriate business profitability of goal have is wage. the ever existing light ensure our we driver in that and

Matthew Brooklier

gotten Terri. answer still the portions more supply bit driver of spot think coming the if Very market And and little there driver maybe We're market's, also is Okay. the market. hearing Has about tight. into there, maybe a that robust take it's we about the driver half we bit availability were in this little second as year started a as tight better in when the or the to where market first think off? still do you of half

David P. Yeager

the to in particularly seem is just rates. near and go that It's amount though market, think to lot lessen I double-digit was of available, we but market at attracting capacity still that's very spot difficult that as attract. tight the be spot The year continue up do this that year. so a is to higher first driver difficult contractual could drivers very it's some pricing went does it the throughout tried as as be It very, But it of competitive. the to part in the of of capacity. wages over

So it has not gotten easier. any

Matthew Brooklier

Okay. I there It sounds really your thoughts of guess And then hasn't a been on either? things. there driver the like pay change side

David P. Yeager

that we're wages. replay instant to for increases going it or be of XXXX XXXX near driver an in see will at basically double-digit think We

Matthew Brooklier

time. I got. Okay. That's all the Appreciate

David P. Yeager

Matt. Thanks,

Operator

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

Your proceed. Please line is sir. open,

Ben J. Hartford

CapEx a just follow-up Hey any thoughts initial Terri, on XXXX? here. for

Terri A. Pizzuto

this Yeah. new year. we mentioned that the now around will We it about buy $XXX maybe half in want what think next preliminary of to determining CapEx containers be Dave was earlier many right year, phases are of so million. how we our

for that's to HDT, about number. best Our million, IT not will for anticipate be Dedicated similar is is year. $XX then And our a of tractors which we be million X,XXX million and and concrete $XX spend will $XX HGT this guess but CapEx trailers, our to them, approximately and that Trucking, that and

Ben J. Hartford

And XXXX? for rate tax Okay. then

Terri A. Pizzuto

XX%. About

Ben J. Hartford

Thank That's you. Okay. great.

Operator

to Okay. for Mr. the the queue. call in Yeager There are final further turn will remarks. I no any questions over

David P. Yeager

thank Well everyone, today. for you, joining us

I be appreciate and have additional again, available questions. once Don Terri, always As And participation. you would we if your

Operator

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

disconnect. now may You

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