Hub (HUBG) 30 Oct 192019 Q3 Earnings call transcript

Company Profile

Participants

David Yeager	Chairman & CEO
Phillip Yeager	President & COO
Terri Pizzuto	EVP, CFO & Treasurer
Scott Group	Wolfe Research
Benjamin Hartford	Robert W. Baird & Co.
Justin Long	Stephens Inc.
David Ross	Stifel, Nicolaus & Company
Todd Fowler	KeyBanc Capital Markets
Brian Ossenbeck	JPMorgan Chase & Co.
Bascome Majors	Susquehanna Financial Group
Nicolette Shender	Morgan Stanley
Michael Triano	UBS Investment Bank
Matthew Brooklier	Buckingham Research

Call transcript

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Operator

Hello and welcome to the Hub Group Third quarter 2019 Earnings Conference call. Dave Yeager, Hub's CEO; Phil Yeager, Hub's President and Chief Operating Officer; and Terri Pizzuto, Hub's CFO are joining me on the call. [Operator Instructions].

Any forward-looking statements made during the course of the call or contained in the release represent the company's best good-faith judgment as to what may happen in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate and project, and variations of these words. statement release. cautionary the review in the Please

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

call host, Dave your is my It to now pleasure over to turn the Yeager.

You begin. may now

David Yeager

have Chief Earnings with you thank participating Hub call. for President Today Quarter Chief Terri I Phil Good Officer; afternoon, and and me Group's in Hub's Financial Yeager, and Third Operating Pizzuto, Officer. our

the you record third consider At revenue quarter. when had reported we achievement X% a an today, close that decline. Hub That's a quite

EPS to Our CaseStack to and our share. value diversified business with our service well, contributed perform operational these Phil adding to offerings to our and over call adjusted $X.XX clients acquisition synergies was The to see continues strong lines. to review we Hub's as that the enhancing continue per are I'll sales turn And that as profitability. results,

Phillip Yeager

tractor the procurement revenue margin now intermodal We improved and volume our decreased of decline, points. as Despite Thanks, softer will we we outside than a legal and improved of declined X% discuss Intermodal XX competition. utilization, I service as saw excluding management. by offset revenue line with demand gross volume basis year, a last settlement percentage and Dave. truckload were costs. to increased capacity performance, able volume

an as improved volume strong are Truck environment, brokerage market. Truck our percentage and quarter believe of increase margin of XX% point another gross enhances soft a proposition improvement operating technology. service and value in levels record providing a and had difficult seeing this and model, in pricing our a is we basis XXX in team Our revenue. we benefits brokerage in of this the delivered

via results. growth saw our and the CaseStack of solid service carrier customer LCL benefits all We value of our provide levels, record the propositions, and continue to improved drove which

opportunity in our sales this We line a the grow and significant service have to organization support opportunity. to are investing

results saw new profitability basis integrated operating new XXX during percentage we as in point our We a We onboarded business. a model revenue. and a margin have pipeline improvement Logistics and several sales revenue in engagements a won and CaseStack, of for increase as XX% delivered strong growth growth. and the quarter customer in strong improved gross

the quarter, see beginning CaseStack, of which cross-selling improvement is engagement We of CaseStack's included history. one our are largest with during which wins in customer the to several

continue we in We rollout to the logistics as additional our service offerings. technology see of organizational significant opportunity our platform, growth new business and structure complete

offsetting X% percentage margin in Dedicated was sales. margin decline operations. a had efficient returns expansion on point improved management. more a The a strong as with in We revenue basis operational gross increase remain to our XXX improve through by driven additional opportunities better a quarter, and revenue focused of discipline

contracts a quarter pipeline strong We maintaining in for also growth. new won the while

our talented more operate thank at great feel efficiently a We and to and team teamwork to market to have opportunity we results. we conditions. grow regardless had though would for quarter we Hub of Overall, and ample like continue strong their as

over performance. it I will discuss now hand to to our financial Terri

Terri Pizzuto

Thanks Phil, hello, and everyone.

$XX.X third press $X.XX. the for our highlight three I'd can million for was share to earnings net from like release, was see you As income per and the quarter. quarter points

related of exclude the a for our the that of of in XXXX made for settlement consulting related auto liability and of of XXXX include to total third drivers, approximately I'm for million misclassification share. claim a first to a excluded quarter First, legal all about $XXX,XXX alleged costs $X.XX costs $X million to project. million $X.X settlement or discuss legal These claims numbers a $X.X

Second, margin. a operating strong profit improvement our X% execution resulting in we're of excited initiative, the about relentless

interest, was $XX.X or amortization XXXX, taxes, Third, XX% earnings depreciation $XX before and million an of million. increase over

to look Hub $XXX a million margin in discussed, as Group's a offset sales as last history. in was every Now of lines. up a margin sales the our more service X% And at logistics highest an to XXX percentage quarter. by in XX.X%, decreased line as points. Phil third Gross increased our of in-depth revenue Hub's performance basis driven was in increase the declines Gross percentage other compared let's service take revenue year. by

expense X.X%. operations million of acquisition-related This per XXXX and earnings of of compared share $X.XX, share diluted Group's is record Operating compensation was per continuing a $X.XX. increase to an was diluted margin, $X XX%. Hub from the earnings amortization excluding at

to increase cash an at nine Cash year before $XXX for last totaled interest, operations Looking our taxes, cash totaled from million. flow. depreciation the flow or $XXX amortization $XXX of first million compared $XX months flow Earnings million. X was for months million XX%. Free and

end went end balance cash the on X. October early than month. That's ERP paid live Our expected of on at was $XX.X the vendors We September of the we this did million. because lower at because we

payable accounts balance the Our end also September. was of at low unusually

Our current is million. about cash balance $XXX

fourth quarter. from $X.XX, share our Turning expected We adjusted project to range $X.XX. We a to for revenue to to from brings $X.XX now earnings guidance. XXXX fourth range which believe the mid-single-digit high decline per quarter $X.XX will our single-digit per earnings that share

gross to a range the percentage from of We in sales quarter. to XX.X% fourth as XX.X% expect margin

We costs the between the fourth spend in effective project our quarter XX.X% will We capital on rate $XX that in fourth to expenditures expenses with a and these of debt. about be quarter. $XX cash million. million plan fund We and million our to fourth will and $XX $XX range combination and quarter tax purchases between believe million that and

our financial you, Over up for Dave, remarks. wraps to closing That performance.

David Yeager

initiatives profit continue generate We of on excellent Thank providing strong Terri. our to while improvement you, will that clients our returns. to focusing believe strategy service

billion previously a and in organic that acquisition-driven we achieve profitability continuing to and As goal by while XXXX accomplish our of to intend We capital. on expand growth. combination invested stated, revenue our return goal $X is to through

pipeline robust of a extension would will offerings. that represent service existing strengthen our current lines or of have targets our an We acquisition

time, this up open to questions. the lines any we'll At

Operator

[Operator Instructions].

Our first Research. Scott Wolfe of from Group comes question

Scott Group

the quarter revenue wanted I fourth guidance. to than mid- ask quarter I to than implies still quarter. fourth but revenue So fourth third the Typically, about get digit it third quarter is high higher single higher quarter. the decline,

in third drop steep a such fourth? why in relative to earnings So

Terri Pizzuto

seeing similar our we to we in really we service haven't or thought line and because last peak did peak we we year. when see the season matter. that a XXXX, back both seen season on in brokerage, for we're that Basically projections about July, not like talked either, a truck And Intermodal would

thought we that high so single digits in is be now environment our a volumes July. going was and Intermodal, -- back slightly be instead, down they're would different and to probably it So than had the to bit mid- down just in

David Yeager

we've what but Yes, robust L.A., see as beginning some customers anybody Scott. we forecast we take of peak All or couple thought Chicago, NorCal, that relatively Seattle, in gotten weeks, forecasts just reflected kind as would place. it's would in XXXX. last are strong to a not from tightness had of our now again, see really And like just the we much the

Scott Group

and what Okay. October? then you're seeing Can in you give volume Intermodal us trends the monthly

Terri Pizzuto

and yesterday, August X%, was XX%. down July was September through XX%, down Sure. can. was went October We down down XX%

Scott Group

inflation, then, cost cost And can any Okay. say cost similar inflation, XXXX, inflation to have cost you on this do rail at inflation rail visibility what -- lower have higher about you Do you is point? XXXX, the with -- side?

Phillip Yeager

have and visibility Phil. Yes, on anticipating year. Scott. This inflation is next lower cost good We're

Scott Group

of Okay. the million drop? run when million, other wanted want to release -- understanding -- year-to-date have just And savings seen then and much make make I in And sure sure these press I'm I I'm -- I million? the incremental $XX $XX in just does to the the the that that how just million all numbers. rate just the we of $XX the of understand $XX

David Yeager

efficiency half the half our majority through tell headcount to is of what reducing done Sure. gains Yes, year. I'll place the in investments, about technology that so. What there already, that The ability spend. services is related took you of outside latter to of we've and reduce

is our procurement enhanced to the improvements and last operational months, we've done driver that we've seen and utilizing And related over mainly also great The really our effectively. program few job other tractor half a capacity more there.

much And effective I also in our more our -- think be management. revenue

leverage to our to We're will on opportunity be As going goal I the but improve to going continue to But invest those efficiency open operationally we're the the we is go to on a to growing that's ongoing while to and to of is in reduce there million, XXXX. be going driven. be to perform get have, on revenue that, in very and We network, that continuing basis, majority out headcount in continuing think after also We're significant and aggressively. the and procure market. and drayage that the look well management an technology. our going cost majority to $XX our dedicated

Scott Group

sure just I want I'm to understanding. make

actually million you in numbers, $XX have much the show the of $XX So XXXX you that actually the up much -- million? how said, will how

Terri Pizzuto

is QX, time mean, savings QX X% the look if Yes. headcount specifically that and happened in the lot saw year, period half Like of about said, we a versus the I latter Phil you of of in to that just headcount down mid-QX. our

full go So have have. we'll And the a of to for that that mentioned, quarter anticipated as then in with savings on see quarter, we'll top more we Phil obviously. fourth that,

Phillip Yeager

very Yes. We majority until that hadn't garnered recently, really right? the of

Terri Pizzuto

Yes.

Phillip Yeager

it should see forward. So you going

Terri Pizzuto

Exactly.

Scott Group

Okay.

next half like $XX it and So year the million this we the million get next as year $XX million, portion we'll full -- get and of than well. $XX the we'll got so then some of year, less of portion sounds some the

Terri Pizzuto

Correct. Right.

Phillip Yeager

Correct.

Operator

Our Baird. from next from Hartford question Ben

Benjamin Hartford

be a XXXX in Dave, bid of some baseline of now and maybe forward, might perspective -- results look are you how a on how, the the context expectations what your from trending [indiscernible] [indiscernible]. start of just peak, lack

David Yeager

paper the there, do how impact in of will again was, the and bit how it bid right season perceive Ben, in but shuffling XXXX. now, question little a There's we

then often the now. turn right peak, we've relatively more pricing We that in a the as relatively it's lot beginning in think year As become and be upticks bid able flat that, -- do goes probably season a reflected to that slight may how the, said, on raise maybe so be more early is will constrained. we'll believe become and of the it -- flat the again capacity in the more of that prior will as or we bit along, price out

where at kind that's now. So of right we're

Phillip Yeager

It's would I Phil. is season. bid We're really This into just add. getting early. Yes. just

think I early share a but probably an competition we exactly as on focused and on how on increased going tell to it's area keeping eye where think a we truckloading to just continue go, watchful we're our and well. anything, maintaining is side little from see I very the it stay to or

Benjamin Hartford

what you type what's In leverage model scenario, context the what's headcount, that were you Okay. progress should describing organization going year, are what cost we the to given you the from today, bit a of next in to can about see? to if date come done kind saving how of been position downturn a perspective, and little your react talk a

whole terribly just relevant. reference We a have think that lot difficult. It's is framework of we don't historical

if it in So year to if to cost think potential margins difficult look XQ sense way are to able mean, that to about back do able got XQ be environment? and coming, more have any for get that whipsaw environment, margins, I flat like? Just in the is these what trying maintain there a XXXX. the Or you've to have versus the EBIT decremental is we're to we may in that we how half a of describe there be savings this

David Yeager

to to diligently Sure. would cost sure of get all make these we are that opportunities. Yes, going say I we work extremely

a the in do I position state and opportunity. well. we're tough a have We you good think magnitude might we feel it's we up look those exactly but lot of if hold think to at a of markets really to look -- plan that like, what recessionary

of Dedicated to of on are our very there's we us, there source before, a opportunity it operate on side, that we the for so think for opportunity significant that reduce lot improve just has operations, capital cost, and and think large mentioned large us focused also efficiency, is been to more a improve and but I efficiently, As still opportunities. a

say, opportunities way even it, continue So we're I given that in our would environment. recessionary feel going I after these the in a ability confident to and to deliver,

Benjamin Hartford

get can one if I Terri, in. then And Okay.

CapEx, for for CapEx maintenance Just building of think about $XXX in million, thinking XXXX million. but to are know $XXX you XXXX? I how earmarked, What you've terms got the still

Terri Pizzuto

We $XX to million which be we think million. to XXXX, will believe will $XX similar XXXX be around

Benjamin Hartford

include the that Does building?

Terri Pizzuto

it does. Yes,

Operator

of Stephens. Our next Long question from Justin

Justin Long

Intermodal we need some the OR of for the Intermodal the Intermodal gave volumes expectation see updated But even see OR? Intermodal in your think down So it call in for single-digit do Intermodal And specifically? pricing XXXX full let's Intermodal Terri, we to quarter order you in thinking an about fourth you volume to can the flat do for the improve year. year, expectation next pricing commentary Intermodal to then if up Or improve, pricing? low what's

Terri Pizzuto

digits that'll down single be for that slightly, we quarter. had had I thought I down now, fourth fourth We be in the think previously that When said mentioning to fourth volume mid- quarter Sure. our high was would the the quarter.

could down to probably it mid- well. single year, full high be as For digits

full similar. fourth for less are be in we'll So year, we quarter. than down believe it's we But the

Phillip Yeager

this And Phil. is

a and we on with start in that, good second second a to in in have to a be strong from question, Just see would we're half be, the year. tightening budgeting position would now, perspective very our a process a you anticipation your but pricing right

the offsets for I opportunity in ability think and our us us and perform business. portion back there, get confident in of ability We're Intermodal velocity continue these to cost network, next improve is we, well our given in to to strong continue the the very more think to year. I for the

David Yeager

particular in $XX and Hub-specific The the cost reviewed is Phil a I we rate and and something and is is. initiatives. million what think that's their year, know and inasmuch of it's next very think story, it run kind the I as real million teams achievable Terri Yes, have for $XX that

economy half and we be that So I second that stronger as through taken out have but to getting cost without of we've lot expect even the left. opportunity we a of said Phil the that, certainly think lot a

Terri Pizzuto

Yes.

So we the drayage significant much driver and drayage little talk really Intermodal coming and Dedicated that operational down of obviously improvement we about and specifically the recently pipe. seen and utilization, I'll tractor bit we as on haven't just of in a expect opportunity side of the in house, impacts yet our as margin, that seen

Justin Long

Okay. That's all helpful.

margin and step the market there and thinking back of things. and the lot how forward, around brokerage just how on feel walk both your based through a Secondly, the brokerage how disrupt is of you market? the there's business out line a role broader uncertainty you positioned Can dynamics going and both relative to we technology that could and about brokerage should top trends be take

Phillip Yeager

Sure. This Phil. is

improve a to I heard you've started the we've talk our about us We brokerage. done lot think that focus. work really

our purchasing, saw enhanced a incentives starting and amount year, strong show -- think in a tremendous and to during last service really -- the last think our capabilities in the you up from have I I structure margin technology, results our started of we enhanced and we've us with our seen improvement quarter. and organizational and improvement setting the on focus right we've as since pricing really gross then, that's up

about So model it feel very we and is. good our where

clients also We a has and and growth this would the capabilities. competitive We're be We're continued a service trust CaseStack so new good we're at through extremely position with of think really player we anticipate full brokerage to bid lines our XXXX. point, LTL portion a bottom more that through going and acquisition, year, building our line this well. season top in been with and watch added much strong adding and the as which we're

it think technology invest to competitive to So that's and anticipation. that in on need keep a a is we to continue and market very to certainly be very are determined and it. we to up focused real our But do I player.

Justin Long

Okay. then, one Great. sneak last to one And in. quick

You for opportunity improvement Dedicated mentioned and there. the

you Dedicated does versus normalized, would gap today like? margins If you operating your look for what as more think view that about what

Phillip Yeager

significant. say would I

that we get think to to We service or that's near that -- line we operating that, where is way. that that and are and is clear we that. where to want doable be want to to positioned And where pathway margins, that make get do we a not be should there we we double digit sure the be, and are working diligently which think business to within we

Operator

Our of next Stifel. Ross Dave question from

David Ross

fleet on expectations next First in the out any question on somewhat adding you and year. fleet, to container plan muted XXXX? on Do year expect in fleet for this Or you the Intermodal year? container container the you do drop given the to containers? Where volume removing do next fall plan

Terri Pizzuto

add also it'll we don't our best guess retiring is we'll much think containers, grow in we're containers, Well, but X,XXX right probably now, XXXX. so

Phillip Yeager

That should about be moving.

Terri Pizzuto

not it'll we're for And either, this Exactly. up be XXX terminating probably growing containers, year. year again year, Dave, Yes. this so because this

David Ross

Okay.

year, for X,XXX next the replacements? So just

Terri Pizzuto

Yes. Correct.

David Ross

color Okay. truck sales investing your you things, And you regionally the up growth follow nicely they in comments Could talked centrally you brokerage brokerage bit organization? based, the inside it's Are truck you a there? little sales? field are then I and How sales more organization. about sales, growing a have in side about think investing how on that? of in the in guess based, do

Phillip Yeager

is this Phil. Yes, Sure.

where force in think we a area inside combination, recognize that are to one our it's right? we be I particular. is not So where need we sales

to amount relationships that and consistent we them great are that that. stock more the We good with support of effort through the really with ability and a have a customers feel on access really good into putting basis larger our market our about leverage and

brokerage truck although of it, good that lot We in of one we're our regional folks perspective more We a signs a specialized need more made that changes bring seeing continue that and our sales talent whether position both hunter-type force, to sales opportunities our of organization, we, the also for think to train or or able that's to execute positions. that. be a to outside our really role to there, from need we've we can to in to product we

organization. And right inside biggest so that's would within we're to going us opportunity the in be continue of invest sales in the front to both. But

Operator

And our of KeyBanc. Fowler next question from Todd

Todd Fowler

do there's of Dave, the bid your solely volumes you to the on that's season, what going think just in from the that market now? right standpoint? that related on on a seeing you're shift lack is Or and comments peak some share compliance

David Yeager

hauls, think that compliance up -- of the a their lot What year. and still lost tractors bid very It's some has is last doing become to much competitive it even it's going not line definitely strategy. It's it prior X,XXX. of up think I type that truck the it's not in I moving, slightly, their Intermodal where It's just has in fact is XXX and that do a in XXXX-mile I drivers less long-term still the but but be share, to so a just improved was still less. keep think than not to year. to anything that's the Dallas-LA competition, they're viable. lot a market, and it's

Todd Fowler

yes. Right,

the the that on the then at lot there in the improve like And of that's then, into not things there with is revenue But sequentially function takes, anything revenue all a any makes of all seeing season. the margins where that's fourth a with of And quarter. it seems kind the to expect That going guidance helpful. peak else costs of assuming and why with and for it PT? net But net the you revenue opportunity, quarter, just of there that reason part decline the net move would XXXX. in sense. fourth particularly from you be, sounds should that cost That's on I'm you've kind laid quarter. that Okay. side, third the the on through out as the of you're puts drayage some have given we is

Terri Pizzuto

third only to of increase month X as then Todd, then might also most in in in be that of compared third fourth expecting Western be peak, increases in had right, that the in than for would the quarter. quarter and QX margins the quarter, X that we fourth quarter real no to impact partner You're worse day our months, that was the utilization rail a we're on a all due half the QX and

margins, were as basis which mentioned XXX We his we thrilled. would Phil were remarks, up prepared points, earlier expect truck in in brokerage which

down those Now points truck XX we to XXX of project want to brokerage talked points decline to logistics XXXX hit just you're mix customer we from of market. initiatives about And basis QX, lot maybe to volume, improve we because the course. right, But cost in a you'd more maybe the between be improvement expect in QX QX. challenging opportunity XX of because to margins of then changes that that basis and have with earlier. But Phil margins

Todd Fowler

Great.

And amount at organic just side Okay. growth year. the this think about kind tremendous get there's the cost both to then top do me, shaking going $X like you top line? both line, into the sounds growth just flattish billion a last XXXX It be for to that and of one you opportunity forward. out pathway to the inorganic But and of how on

David Yeager

$X be been as about organic Yes, being, acquisitions. billion getting obviously by I as Todd. it talking a, growth will to a and -- we Okay. through of both XXXX, would, we've well combination

strong up as you consumer far there does it as the forever, greater for is but appear to certainly the though just part, so be a a inventory, least and last doing asset of that it's current robust of demand bit most at very have right to at quite to or is a new us as business, now service looking would burn for part we're slowdown, continue acquisition light, lot lines cycle, transportation. these going We this are that And not overall, in that. be diligence freight we're of will with a economy a of the the put as We have and complementary fact lines companies, pipeline encouraged either and and into we think of work. our

Phillip Yeager

opportunity this a capabilities, to well, we're just the profit would I that revenue operating more we're enhancement of we Phil, efficiently, And think, more pricing utilize really managing Yes. effectively. add, better our as it's a as is I lot whether built or growth

better we're technology. think I putting in

organic all really come the we scale. good in an see feel those, and So return on basis, market favor, back about of when to do our the ability growth we very our

Operator

Our Brian next of from JPMorgan. question Ossenbeck

Brian Ossenbeck

Terri, couple give So if providing? the you the maybe rest housekeeping can us you ones. guidance, outlook a of maybe of you're -- can just of updated EBITDA with if the just giving to last Start go couple which quarters, you've the been

Terri Pizzuto

Sure.

$XX So range for we only fourth our don't is between you could that the project and which EBITDA would quarter, $XX million the have, quarter million.

Brian Ossenbeck

when down some in you XX-K. then the soon in and do you be expected think the look comp acquisitions do how from and the are of that a the And Okay. disclosures little have a 'XX amortization at expense, go And to tailwind? those you bit

Terri Pizzuto

was. much, a go It's not bit, little what but 'XX down very They'll Brian. to similar

Brian Ossenbeck

steps provide some opportunity it you take, the context internal exactly just and of back to And Okay. already need got -- some it all a that? especially capital of self-help? going the have of going is the initiatives, then what require them you Are you like gray these it got investments? started. some side, Is to to sounds monetize and -- little they on the behind Maybe to you realize more bit can see what you of buckets

Phillip Yeager

opportunity the right processes Yes. the utilizing leveraging best place This the getting would network, tell in you, and biggest our is is practices. those I across Phil. really

purchasing We're areas OTM tools utilizing our higher range terminals would our we're have with level we're to there Where our platform We is -- customers have and and to has. even drivers We're enhanced we're really drivers be our performing drivers there say capital single is where then we're where we to our This be others better out from would we where reorganizing the continue better I our side, very going service the to massive and have we on function through as just opportunity. sites and well, support efficiency. how planning some could some technology tractors. performing able optimization how to OTM. roll our and that leverage and that load provide

really that a So and tackle area. that we would requirements else making don't The capital sure only anything I is from and just execute. see the rest capital be besides perspective. block

Terri Pizzuto

because our help we'll more be the we and we use business tractors should actually as of at result way how the It look have. a efficient us drivers CapEx our with we that the and

that down. our CapEx should So bring

Brian Ossenbeck

that been Okay. on still or you on And then to at if relief some continuing get on buyback, there. that it from reason the that you potentially last there's you deployment, kind that in the see do like of Maybe topic, back Do capital feel a question rates you've the increase? executing XXXX? you step CapEx side, can deploy

rest sheet deployment. balance the on of thoughts just the So

Terri Pizzuto

during and of really acquisition. stock about use our $XX worth quarter, bought first of cash this million We is

Board in we'll talk up have a mid-November. So Board about we meeting, coming reevaluate then. so We meeting every it

Operator

Our Susquehanna of next Majors Financial. Bascome question,

Bascome Majors

you believe the the competition in much And to of a rail bringing you I'm just else question I Intermodal truck? in it on IMC rail this volume weren't rebid expecting the little if you up by the that follow an it. surprised said lack season of magnitude I to about last wanted quarter I business uptick of IMC bid a or against that. seeing you by could peak going more. was compliance. customers current Or there on is for? Are actually is be break Intermodal and competition? your freight you little volumes to it the something hoped out Or gain in not wondering

Phillip Yeager

really I yields. say improve And dumbfounding. has the disciplined of a to So and on is Intermodal pricing that I my we to continuing comparables then been increased our take sometimes combination, some trying is something advantage come right? say I are There would some that Phil. there This are deal staying are with. the term, is as see some to -- said market focus of competition to short it's the remarks. which prepared continuing customers we've the in would in truckload are But we

the focused we tightens. the to I plan I think that on to are continue think market challenging that's part volume truckload seen and certainly yields. opportunities as stay And we've of there

that us, a and of get to volume continue lot back our network For to volume. utilize

Terri Pizzuto

Yes. and X% quarter, X%. down we The whole were industry the third in down was Bascome,

couple a the that customer in for a last of Now that was percentage year, year. us went last of bankrupt points

a lost So of we don't think we lot market share. whole

Phillip Yeager

There a and for [indiscernible]. percent was weather

Terri Pizzuto

Exactly.

Bascome Majors

today just peak you you business on what -- more Can might in normal and at where share a compliance look bid are Intermodal like?

David Yeager

the where quarter, And in to uptick would with some hasn't brought Sure. customers, we but percent similar little have our range. it that to down. were been We think we've see, very in very I season where and it's large they've expect. been interesting we XX-ish second forecasts it bit, say peak a And to been it's seen

right, you seen So at we function, inventory import the level given but the it's disappointing, is volumes the which certainly I also think -- levels a -- also where would've that demand where anticipated, are. just we understandable, haven't some

Bascome Majors

one. last And

are blow? in initiatives be about And to prove variable more the now? to cost along year ease with may you've I for you that or originally where next accrued even year, think than a is think the on though right have thought. little line? cushion I different cadence, full Where year help talked some above, you in bottom the Your incentive Is at should comp there challenging coming comp, the you guided is on the year bit that

Terri Pizzuto

Yes.

right the incentive by Our we our our comp EPS That's Board how EPS. the at grow year. the with of determined and beginning along tracks

But And when So where I we're accruing we to headwind, it how need you you turns We'll mean, it out, turn could for can't we year, grow be the tell should that that a proxy think tailwind. we how accrue based we're it. the and next we depending it where going in be. I be on out to at. get year. on way only tell we're could file specifically if the a compensated that's we

Phillip Yeager

EPS, compensation. grow prior on would the so. the annual X, on the outside It's and from we by directors get very it's budget, on partially we what we our decision our don't basis, partially year. a effective a That's based is Right. prior which deserve, obviously, But performed is it an year, if and

Terri Pizzuto

Yes, based we think going and supposed to out. up true come where quarter that we're we on forecast, the and we're every

Bascome Majors

the for Anything was dollar kind I asking appreciate need roughly this level, the, can number. earn And just, we're tracking share where you grow clarity year? do I to target -- I for wasn't on above, of you below? on a it. to directionally

Terri Pizzuto

We're Above. above. tracking

Operator

Our Morgan Shanker next question from Stanley. Ravi of

Nicolette Shender

And as you is Robbie. follow-up, one you're you any volume spread Shender a truck East? through inversion from in This seen have Maybe price run the for a different seeing me. Intermodal versus the for a on lanes, quick in perspective particularly Nica regions? Can what just in select

Terri Pizzuto

down competitive XX% Sure. East XX%, Local very in seeing in East, the competition than And -- some I'll rates volume Yes, that's into and region. truck down Local we are run West seeing are we lower rates by X%. where why competition we spot transcon truck so the down Intermodal east? was was take our rates the the and was cases there. most, that's in -- truck

Operator

Instructions]. [Operator

Tom Our question is of next Wadewitz from UBS.

Michael Triano

Tom. on Mike is this Triano for Hey,

just Intermodal. next ramp wanted of that think all forward show I the about within But something to mean when that obviously, the as some year becomes up, see you make to could competition look we discipline? just to players I see you're a pronounced? is I bid more start you that mean So ask little could that tick up. you Or there to do starting think

David Yeager

and invested the times in margin discipline fact in reason in I we are really really acceptable our point, to I operating this income, again, at had of at I are significant increases to at no think, players gross some think And think our we've don't still capital. any despite percentage, the the we -- on have there's believe return so that need on yielding shown past, not we up. an continue to focus

see those we of -- price that's course, course, part of one that, is, of Of customers. levers with

cost our they earnings side, team add can The can, all been is because his and Phil and other lever, operating which have income. our our towards on exploring

been to today. and that And point all been -- disciplined we've ever here of I I believe cost which had very So been quite I at are in they're X laying the we levers, this that we've focus attainable, improvements have our don't we've out those numbers with on we've the aggressive those -- think very and think pricing. that

Terri Pizzuto

that the did we're orderly that's so will on expected it competitors And be. think, call I midseason, way our Yes. that say, their they an hopeful

Phillip Yeager

We certainly hope, right?

Michael Triano

Then just -- in on that efficiency Intermodal. about point

probably that And driving think really talk of a But in terms worse. I think miles efficiencies seeing Or less factors Is in reducing -- you about so while Intermodal, empty factor improve other just the the with just there, is technology could transcon it? I saw volumes or you've that you just being are miles? load done haul you turns within mentioned were box in last of what to length were driven? quarter there really down. growth you

Terri Pizzuto

terminals as We're effectively and to put we is, Yes. sheeting, have as portion technology possible. drivers opportunities call there we tractors given our playbook on We doing through to also an utilize as the point make freight can. operate identify a really is utilizing of related. significant sure and we're of agreed-upon that all capacity clean it we terminal, It and more to emphasis trying effectively -- our going process. to is what we're all utilize that of The our a that of that, efficiently, flows is the going possibly at end that

the practices. opportunity done our the making focus our are to the to and be We ability But team of we that and to members is year. understand terminals execute to really and platform OTM by have our plan and have out of of process our main rolling middle next sure all all

Operator

Our Research. from next Brooklier question Buckingham Matt of

Matthew Brooklier

the I about potential could was UP. that are in closures I'm Can you further you incremental the their around we think about can for quarter talk assuming potential the, i.e., see going Intermodal fourth And timing talk that forward? closure? lane network, with the changes in there

Phillip Yeager

further on in that our us. the There's Phil. cancellations that of impacted was portion the you is about a rails. network. been they our any more think before. of rationalization Certainly, communicating changes But changed of on time, I to actually both they'll lanes UP was have The anticipate minds small this lane I great This lanes. a pretty with us is actually don't The reopening Sure. see well. hope than would as their have partners I impact cancellations, tell more a East. little their At real bit

Matthew Brooklier

reopening as the lanes a And XXXX event. that guessing a be I'm of follow-up, the would

Phillip Yeager

we I lanes don't sure. reopened. hoping just we're tell know would that you for I see

had, at industry that that be challenges a think volume move. the this point, would prudent of the some I has given

David Yeager

are that. they closely looking at But

Phillip Yeager

I'm on hope. sure that's but that it ongoing -- yes, basis, they're assessing our an certainly

Matthew Brooklier

that quarterback Intermodal during then that and that it. Got it volume in side that I would And your Were product some some more. was Of one quarter. point recaptured volume just line. able to third of lost move percentage the assume in other nodes? you X truck of the of on brokerage that particular we

Phillip Yeager

bringing we exactly to That's We in always our go make disruption a them might first. sure It right. neutral, mode, there's to we're like but customers Yes. and not be a them want to when solution any offer cost solutions.

And to back, weather that particularly we being continue as going been freight our for move in customers so of to the garner anticipate we saw we impact. the the to impacts, were long-term market, So have City weather able proactively disruption the we with majority them. to a solutions don't Kansas

Operator

our Group from question is of And last Scott Wolfe Research.

Scott Group

what you expecting quarter share surcharges in did last fourth Any season how chance in peak this year? Intermodal you much can year you're in and

Terri Pizzuto

as about as we now. Probably right doing Xx are much

David Yeager

It's significant.

Scott Group

so are think the quarter. fourth first it as right in year. it? relates an think specific way Is headwind is surcharges trying to quarter it's half 'XX headwind, this risk, next a but peak Pricing like, -- it that be wouldn't a maybe fourth to as about peak but is surcharge at issue I'm to specifically, risks

Phillip Yeager

Correct.

Terri Pizzuto

Yes.

Scott Group

thought it supposed next are year higher capital? Is year? was a be Is new CapEx? some around a this in this run we normal a, CapEx, rate, new to deferring million I $XXX

Terri Pizzuto

No, our with relates we and efficient. and improvement talked doing more initiatives operations about to the and looking That being capital expenditures at as more profit well, initiatives, the less.

So that that's number down, why came Scott.

Scott Group

all I so but margin above did quarter, Do are do year. Okay. X%? what obviously we these think not X%? Or you potentially takes for that you X% -- just think then costings And to you know you the lastly, not for to get need the the

Phillip Yeager

the and tightening cooperate, environment then read. us, pricing numbers, environment, I economy, that a stronger see with doesn't be Well, goal. to to a it's continuing That market those would hit and X% in target a gets us for some. truckload the if that and the but strong challenge think our pricing still some our to our creates And

Operator

meeting. our closing concludes We our now of Yeager to call that for the back And part remarks. turn question-and-answer Dave

David Yeager

again you, quarter thank our Well, third for on earnings Great. call. us joining

always, come Thank any As us. for there if joining again available Oak up, Brook. questions we're in that additional all you here

Operator

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

disconnect. You may now

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