Hub (HUBG) 27 Jul 232023 Q2 Earnings call transcript

Company Profile

Participants

Phil Yeager	President and Chief Executive Officer
Brian Alexander	Chief Operating Officer
Geoff DeMartino	Chief Financial Officer
Bascome Majors	Susquehanna Financial Group
Justin Long	Stephens
Bruce Chan	Stifel
Scott Group	Wolfe Research
Thomas Wadewitz	UBS
Brian Ossenbeck	JPMorgan

Call transcript

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Operator

Hello, and welcome to the Hub Group Second Quarter 2023 Earnings Conference Call. Phil Yeager, Hub's President and CEO; Brian Alexander, Hub's Chief Operating Officer; and Geoff DeMartino, 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 [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. can believe, by and expect, these forward-looking words use variations are words. as such anticipate that be the identified of of Statements and project the the statements review in Please cautionary release.

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

reminder, conference is this a As recorded. being

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

You begin. may now

Phil Yeager

second Group's Hub earnings joining for you Thank afternoon. quarter Good call.

Joining officer. environment Hub for focus on and America service team me and their all Group's chief to Geoff DeMartino, Group are Brian freight North today Alexander, to their thanking operating resiliency our I by Hub excellent across officer, chief providing customers. start during our financial a of members our evolving wanted rapidly

The trend has surplus have inventories. that to is this continued Import year, lower, yet in And driven freight and volumes been quarter. elevated by industry been second economy challenged the capacity. the exit

This transactional turn activity, our decreased on and putting pressure to spot more rates has our driven market in services. customers down

However, inventories capital activity. in as which transportation the believe and and strong freight shipping as carrier industry small increase will are normalized demand spending on an increased in the well spot the drive growth and as consumer exits remained well higher restraint has related we horizon, as

ensure that improves. transition is of in that unclear, Group change we market Hub this timing will a remains The market capitalize position conditions in the as on to but

portfolio of last of not quarter showed results, as of our the and our while second services Our quality year, team. robust strength as

which dwell lower increased intermodal to velocity costs It was increased. declined equipment led and with and as demand pricing, street challenged

increase to better and actions managing our taking while equipment costs. are velocity We balance

strong increased service We controls, offset drainage improved in strength dedicated with cost in-source, offering. and our rail agreements, challenges our those

both Intermodal majority competition. maintaining, with levels increased and and in in of the incumbency of and dedicated, season through new are existing and growing vast despite clients We bid performed well

returns, driven partners in we Rail remained and has rail ongoing service their the strong making by continuing demand networks. investments as our anticipate that are

about Mexico, the have unlocked Pacific between and opportunity We with the Canada are corridor in growth our Premium Union U.S. north the service south product. utilizing extremely excited partner Falcon we the

We to the the believe industry and services that transits our access via segments. enable excellent industry near have in all shoring and us customers our expanding will existing improved providing of across automotive and clients, growth security new service with while we to

dividends to our market, the Our is focus and paying of this cash on segment development over in enabling challenging past the logistics several us years stabilize earnings flow.

services continue to value of costs driving their our differentiate Our to clients pipeline growth is strong as chains. supply customers while focus added opportunities in build a and on resiliency to us reducing ways

grow performed we see have existing extremely and Our This during to teams position are clients us the logistics well diversification demand return from executing segment and shareholders as free in onboard our repurchases success our by capital our flow as enabling we have and had wins we exhibited to stabilize. continue quarter. line service is generation to in on cash share to strong new

position strong through will excellent that in also focused customer growth view and a demand non-asset the near are end-to-end are drive class believe service logistics our segment. year, through approach. of a our to remainder continue the the acquisition the a bolster that relationships with improvements We to opportunities term that strong will maintaining investment market We best fantastic we challenged pipeline of remain in team, and in but maintain in

performance. Brian discuss to will service-line that, hand I to With it over our

Brian Alexander

continued team to value thank environment executing and through customers. leading freight and also for you, I their delivering a changing in wanted Phil our and Thank talented to efforts our

segments intermodal reportable by declined the our transportation softer discuss volume quarter, solutions. driven revenue our that with second XX%. declined intermodal I In will XX%, its starting now

local and declined east XX% volume Intermodal the Transcon the west X%, declined local declined percent.

are third expansion to second the dedicated strong very confirmed along onboard with of wins a pleased scheduled growth trucking in in pipeline quarter. quarter We and with yield our the

import generated of volume of a in quarter, volume operating basis Software revenue. year-over-year. decline XXX led the lower and Continued assessorial and second income inventories as elevated which its a to points percent Software in revenue

We pressure cost improvements. with continue several price offset to

second quarter have the continued and in this to We improvements XX% to expect our XXXX and year, of beyond. we which in XX% of last in-source to second from in we accelerate year generate our to drainage half the continue agreements, rail

we improvements addition, half initiated street have in of the be will that economics cost year. second our In to benefit further the

defend set incumbency for to that have We long our incremental will success. term wins up us and continue

service and confident to grow. we Rail continues it as that remain strong are improve will volumes

expand border solutions to We wins. cross already are excited rail implement our American further to and new North have started

our in intermodal. these long the term rail that to conversion business and along improved intermodal confident are We support with will service, help over investments will to road the for invest further continue from

are position high low service of for levels we to take are our customers us results volume, for to the long-term. sustainable deliver While impacted near-term the and continuing by actions profitability to

with basis our chain, customers turning end to an XX supporting value as deepen integrated the strategy quarter. in Now our by logistics supply income percentage expanding to points logistics to successful diversification our over continue were to our revenue first as segment a our to approach operating we end we our

They grow, continues first the customers. held team existing continue Despite over to our grew flat with They brokerage close freight perform well. volume to challenging share the and year-over-year to X% environment, quarter. volume

several been customers on-boarding month. successful in each new have And

the fourth revenue confirmed softer but of decline the second quarter, strong with a experienced third pipeline segment logistics has of with overall in quarter. XX% a on-boarding Our wins in and

harvest integration hub a improvement, purchase internal selling we us volume lowering In to on generated our of and continue cross network non-asset been continue have and cost we two logistics expect of addition, grow. acquisitions, to as the our that yield integrating to in service, successful strong illustrated our the in transportation synergies executing offering past has

leverage provided Choptank position asset mode, to non for our diversification brokerage be cross us continue growth. further has as We upside pleased buying and will very selling team continued which with integration our

in continue we the earnings are growth. These multipurpose volume to to chain hub supply of calls, our needs. locations our to consolidation growth as our mentioned and support locations multimodal new network onboard strategic previous service enable outbound our customer's logistics to solutions and As freight they hub LTL support inbound of

to close remains logistics and size Our deal continues ratio grow our strong.

of we integrate to and growth in enhancements, a position profitable are future these to organic our with continue that. trajectory continue With great acquisitions

discuss over it financial hand Geoff performance. our to I'll to

Geoff DeMartino

Thank Brian. you,

one we've environments some in quarter was of the The time. demand softest second seen

the impacted for U.S. shape, levels, in While high services our consumer to activity be relatively be import demand low and continues inventory transportation retail continued by of capacity. plentiful to good many

taken position coming We in and actions fully success horizons. expect have group to several all time important short to the quarters in term improve for both the hub these factors and long

excellent have who with desire secular scaled the intermodal rail our in like of channel and growth partners believe to We Hubgroup. partners story relationships with high service work

advantages. both of higher our to in-source service and cost offering a We percentage drainage, continue

second logistics We quarter are accounted segment, which of growth the pleased half nearly our of operating with income. for

drive into wins several which We recent have will a XXXX. sales strong large profitability pipeline and

broad a on support our remain as driving very chain supply logistics offering and provider. stream and functions. operations focused provides Our solutions earnings improves in efficiencies stable more We our a positioning

of margin Finally, revenue flow enables conditions, to to market we Hub the have over long for over ability quarter freight Group and our X%. free invest operating of software an excellent business income generated we success billion the cash that Despite the position an in for profile term. $X

and rose as revenue reflecting Logistics. of driver focus significantly in from operations to and through prior year TAGG declined transportation we the as expanded costs on warehousing Costs our a percent containment, our and acquisition as cost Purchase, benefits. salaries of count prior added compared warehousing year,

lower by This compensation increase lower and incentive costs expense. was employee office offset

and costs both in to the drainage claims operation. investments due year fixed depreciation the of increased from and Our our expansion assets prior

spend. due acquisition less decreased G&A lead prior to the from year and costs related

EBITDA was ended Our diluted for on during in quarter with earnings $XXX quarter. cash the million and per quarter $XXX the hand million the $X.XX. of generated of We share

of for purchased our X.X million shares We stock million. $XXX

improvement low current the higher end tightening while minimal of for levels, the near marketplace The year. the updating the demand our some in assumes are guidance from We XXXX. assumes end end in

and For XXXX, we per share. EPS $X.XX expect $X.XX to between of generate diluted

We will $X.X billion. revenue $X.X expect from range to

year. four the intermodal, For declines we're forecasting high digit single volume for

partially The remainder year which less of purchase the transportation lower pricing operating impacted by assessorial softer offset surcharge efficiency. by and costs improved and be and will will revenue, be

the as in impact to higher and a into state a decline rate quarter a lower a year tax and in mid XX.X price second teens in apportionment, change sequential will from expect for of result approximately result in in the rate a tax of QX. XX.X% of rate with QX QX XX% a We of the a of rate EPS

range to Our debt to EBITDA capital with $XXX shareholders. as is cash business invest capital with flexibility net to combined capital through would at expect less well guidance, in approximately zero generate to we capital expenditure profile, returning This $XXX financial free Based flow of our us positions balance, million. as our expenditures in the on acquisitions expenditures and $XXX unchanged XXXX. million this

that, open to operator questions. With any I'll to call to over line the the turn the

Operator

Instructions]. [Operator you. Thank

Group. question. Please Our from your first Susquehanna is of question Financial Bascome Majors proceed with

Bascome Majors

Just the puts the things Thank quarter, load takes on two talk from a that's purchase third the feeling some getting customers relief and quarter As the transportation and how a maybe if assessorials and you can look your understand of between contribution and the between bid to as bit per about trending into full little well. intermodal those sequentially you. pricing season and trying you side?

Phil Yeager

quarter's into of cost will the QX. with to down. driver going of continued throughout rail We well full We be do that year, Those down, into biggest reductions happen from in a offsets is operation. we that purchase rail go a so as reprices of see full transportation going Sure. the earnings QX. QX comes that more transportation in course as have down expect drainage Yeah. we costs pickup do in quarter QX Sequentially. would cost The cost of our happen that of But EPS impact a QX. during expect don't both as benefit

Geoff DeMartino

Southeast a seeing particular are continue. kind tightness just good improvement as a bid as we volume think a also hope and we're some we now, compliance of us well is add trend in Southern right July, that in few sequential improvement and continued be anticipating for which will key We're award what in will June for well. as California, seeing in would to sequential to the I I indication corridors ports, improvement overall

Bascome Majors

minimal assuming tax where other talk that get our guidance impact, basically you in there, to early will one from be so sequential to when too. today? you've low or a Thank is And in seen but rate substantially improvement, is you piece, what quarter are And walkback of you. lower end that flat-lining It's far the an less QX. of the

Phil Yeager

Yeah, does the modest would end I'd say the lower The assume date. assume the retrenchment volume. improvement, consistent trend low improvement, with quarter we've a in to seen very in half some

so end of end to are market. a tightening talk obviously stability would down, spot pickup in highlight demand of of well just QX recognize we capacity a to overall in not upper we I get to exit higher assume the case, that our revenue some the to we that are generally transportation enough. some in an us trend in surcharge the would would in we're and range. that attrition some customers. the destocking as more coming lead that The as Inventories rates seeing In capacity seeing would range get expect to as would

is to But I also believe capEx limited. very related going be the growth

all and you well. So up put those frame does pretty it together

Geoff DeMartino

Yes. with And I'll Brian, that, Bass, this chime too. in is

that now brokerage seen Our the well. challenging a We in how customers or growth. adding volume to the increases up face a for close anywhere economics that them have new that in and XXX right they really uptick standout and us we XX% we well big and from seeds volume planted each them to as And so seeing those in But think XXX volume month. sets requirement far. as in consider is industry up we've volume July overall

Operator

Thank you.

Please Stevens. Our question. of with next question Long your is from Justin proceed

Justin Long

July monthly about up I to improvement. seeing by thus start throughout did July share Phil, wanted you where the and your you're to comment what some XQ made, in Thanks. following you and volumes Could June intermittent far? tracking on

Phil Yeager

Yeah.

down was June from then by So, down April XX. was twelve, but was is XX, July and May XX. June. up down X% down over sequentially

trend. So a positive

areas activate, and well been see key tightness a we've of an in come are hope that awards us that's is about online as We some starting Yeager. and to of to is great, demand few those good indication which seeing it talking for of some further that but

Justin Long

kind question, you I Got XQ curious provide sequentially it. any thoughts earlier following change the on of you margin could about of And Its driven the expected And higher that metric. were quarter XQ last be up lot to the talking Geoff, XQ third was by on sequentially tax for in gave EPS to that in declining a quarter, to if rate. but the seems from an earlier XQ. you

sequentially So consolidated third well think quarter? in I'm income curious the you as if will decline operating

Geoff DeMartino

the to a QX. QX only drive Yeah, from is portion tax rate that of

to a is pretty price So important contributor margin profile. our

the see its decline So expect sequentially. margins we would to

Phil Yeager

the know, we so we're in estimates like But to want I are to seeing that. out and stay maintain we consistent conservatism positive continue with some that you also as putting some do to And think trends.

Geoff DeMartino

add logistics Okay, will offset be our as too. with that a to well. Those bit just

see continue transaction cross customers to the take volumes brokerage the and with We into service them the our solution. transportation we're but our of I and where giving selling a play, pipeline. logistics to just already mentioned that also in strong have able strong they beyond offerings

So there. pipeline our is strong

is size remain close close and Our very deal to our double ratios strong.

Brian Alexander

in, Yeah, driven segment remarks. think home in and to our path. us we've all Performance so I add executed that emboldens diversification of continue on strategy prepared logistics I the just of has that the I'd kind highlighted really, think, we

Justin Long

to wanted in second great. in And incremental just Are guidance, the the buybacks I beyond was that about buyback. the assume thing assuming ask you last XXX Okay, the million quarter?

Brian Alexander

Yeah.

have we current remaining million authorization. XXX So our on

well So as our guidance assumes execution. both full no as execution that of

are cents where we to twelve approximately would full So EPS. the we were think year, XXX, because the if execute of that in we add of on

strong range, M&A our within do that's pipeline. guidance a we So have

will I to capital of to execute be as that but good weigh our very to able and we on maintain our want in when conscious are strong we So as ensure to very well. we the want continue And if obviously stock, that value also I think see transaction. we structure

Operator

you. Thank

Please comes Kawan. next proceed Our from of Kanapakar line your the Uday question of with question.

Unidentified Analyst

associate dialed made. wanted dial It's actually of you Jason comments My me one Gentlemen in. Seidel. into the to

X%. prior You How talked the that about compare July to sequential does to growth June of years? from

Brian Alexander

into you day see you see business do out of that August. July actually to a Typically Yeah. August, not on that coming adjusted basis. coming August, Typically

So we're that with past. actually the pleased trend in

kind slowdown You in some see X that of pop then month June, and July there. end, quarter from end holiday

us it And I port support and portion east, but we've getting and mentioned, tightness also areas. priority Southern some very winds also the been think very to local some is for successful a strong there. in lanes that awards bid to balance to some growth we're there that the also But as in growth, return which southeast starting big is California on. in I a of is to seeing, come of

still are with have go. that team But signs. our seeing to positive progress but room So is commercial making we obviously pleased the

Unidentified Analyst

X% positive normal, of versus drop? a movement bit little So a

Brian Alexander

Correct.

Unidentified Analyst

on questions the about Okay, other side. lot talked logistics one my are the here you a wins

an So that's annualized you size hear. any half logistics in and on to talk the the costs those good basis then you side us on year might we us startup forward? could the Can to wins second going about help of see

Geoff DeMartino

yeah. Sure,

logistics is that think set nicely up I our the staggered what pipeline us seen. within we've starts of kind

to wins, are are cadence we'll in close. but the are some keep to that a of see in we of on-boarding the few we've pipeline good QX, So sight those now ones close that good a of that got line coming, confirmed QX,

and into QX up wins, in set well good implementation really next and On start a the don't we got year. then those. see really to implementation We've well that's established. with team logistics startup us high process our of a Hit cost

that the new some are schedule if to we've any and have we're say so would good multipurpose got with that take I growth would costs we with a of growth buildings really it of see already. our some able with fill we we those how be that enabling even ramp our startup

model, into three similar But PL very our fast. then insource some also drayage fill very able we're those them space in where our we new buildings source to to that of

into in this first So out the in we've of with the year. buildings Midwest, two that year south in new proven additions expanding the yet two so recent the we're the half far this then and west, and of into further east, buildings

Phil Yeager

add obviously I driven, with you're a double digit you is but probably if about that Brian at team those to about think of a is in portion growth. which just our I sort market talking looking brokerage would the is logistics more sequential think mid wins, portion segment,

I mentioned, be service given well. think anticipating wins And feed other we at our as would Brian bringing as on do Strong. help those we're the that lines

And to And so logistics on customers. made of Those that come enable more it our LTL for lot help growth. new mentioned is this of that film that is I a consolidation. that, think our me enable as too, well very to integrated as Jason, also those just are to solution one helping board a buildings point

that a our We've providers, under to got but dollars that LTL take is runs traditional for the behalf larger traditional of service cost customers, out LTL a improve the and good portion with close on consolidation the solutions of customers. that of management a through help portion and billion our our of

back growth half well. a see year in we of as the lot with the So of those

Unidentified Analyst

for you consolidation, up Freight, pending the That's bankruptcy an Yellow to is business? that price? opportunity impact get to great. My more last one going of here, consolidation brought since how the is you this LTL And

Brian Alexander

with and for great some making de-risking set We've networks their to expand it time are to continue our sure been quite see our we customers. as that solutions a opportunity our Yeah, customers up some spill spill through consolidation will for of that some our success. network. over But transactionally already well both as into over we into of we've as see solutions that our seen

That's So. underway. well

Phil Yeager

And increase manage in have we over pipeline of seen an where dollars LTL. a solution. managed for particular, transportation we our In our billion

the to be bring consolidation And wins some mentioned, significant think as continued ahead. on opportunities to We we able our they I mitigation and has are look will for as network, those Brian our do cost bringing as grow, customers well. pipeline,

So that segment. should logistics be incremental the all to

Operator

you. Thank

Please Chan proceed Our next question is question. Stifel. from your of with Bruce

Bruce Chan

and little the a You bringing sites the talked online bit side. Logistics some you're on that about of incremental

to sense stand capacity do how how where bringing a further utilization, were win get have. terms subsequent want in you Just if time in much lag involved in of online? the or quickly to spare your sites now And of rate you what's accelerate quarters,

Phil Yeager

Yes. That's think a one great And important question, an it's I Bruce. as well.

consider model of that ourselves And out of further because and space. we've never we enabled sold into. it's the our investments So

we've our these that So, buildings we've and done are we e-commerce and acquisitions. asset got that multipurpose run, can do transloading, through operate locations that cross-docking, And enabled.

into a to Then square fleet third-party That down. really space. we is also have able third-party footage our up and flex flows complementary space of that

that opportunities leverage those on, space, and that. as growth so, start third-party come And in-source we then to we

really So us to strategy new that's enable that also the yield but we put on improve out as those the what building has growth buildings.

Bruce Chan

color. a That's And great. follow-up. maybe X helpful then, really just Okay,

pretty with successful You've in-sourcing. the drayage been

back percentage that West that Coast I be? or to do if levels? at can the what and think import keep And high a sense you percentage as go these target XX% could how now. you then, might volumes think and we migration in-source have said up, see up pick you for you the that Do a

Phil Yeager

them these We to at to keep Yes. up levels. intend continue

them in we our think up remain But see addition to that, strong. I is our continues mid-XX's. Potentially, very driver productivity count to could into driver the press XX%.

up. Street on economic of is to continue we'll efficiency drayage to our cost So, that invest take a to in-sourcing plan in out. fleet to that And the part continue drive

is to to continue want There a balance strike. we

is in we're investment fluctuations few we industry. we need drayage maintain more are purchaser where to the to us stay XX%. to consistent very to There the our think over able that in-house. hire And a continue the of beneficial we that are that. customers markets are to We to react surge. largest where in There demand bring third-party to need to But will in be as to several share

that great as I XX% markets job of a concern bringing have I we would done volume so really don't be many ground have we've could of in a around losing tell a necessarily on, recruiting that in you a lot and returns backlog share. us on candidates

job our we to the drivers I has for and think as us productivity that positioned on continue great a team balance focus well. So, need But well. to done and

in an done thus we're with share pleased So opportunity that zeroed in But that's managing we've on. far. very how

Operator

Wolfe Our next Group is from Scott of question Research.

Scott Group

Anyway model? offset event. the get a intermodal per some just in rev that understand revenue you intermodal. on I then, the help help transparency in we're to bit of I with can give third want or more total quarter to just or color the to us the transportation a And thought intermodal load it was supposed purchase just from

Now a it like more fourth sounds it's event. quarter of

rail -- I'm the by see benefit a delay. that's 'XX if PT? getting why why ultimately that or we then maybe right. half benefit of But from first do bit incremental So, is right, of And into there full QX the a not

Phil Yeager

Sure.

It So no the portion business. works. reset it quarterly a is of in change how on a

on by rate that will the will QX implemented. basis, a -- time we fully run So, be starts,

we probably anticipated. initially a I than the time had the bit from price change think little last is worse is biggest we talked

So a the we by that offset release. of rail worth is quarter's not cost do fully have which now, full hitting yet

Geoffrey DeMartino

And June. realization we volumes anticipating I were price the that think improved in it's without

So, trying of be we're just to cognizant that.

latter the which carry your of adjustments see as as of QX XXXX. over would will We QX, into point of to further end the well QX portion in some near

feel not fully though we in but at time. So realizing fully this release, we PT point as price are are do baked we on

Phil Yeager

dedicated to question intermodal on your run to And revenue annual is a million so within and intermodal, business. obviously that $XXX segment

a revenue decline impact year-over-year. the per then, points XX% couple would include does hundred QX obviously basis rest was price the in load of be from lower intermodal. fuel. That a of a And about basis, So,

Scott Group

can Okay. within logistics assuming share for Very half? helpful. you back the what just And in you're margins the then, the guidance

Phil Yeager

Sure.

So course logistics that expect of year. around basis into throughout improve you the We XX will do continue QX points QX. saw margins in the

Scott Group

And cost getting market better? hopefully is that sort of driven more or

Geoffrey DeMartino

little mean, of some I both. it's a bit mixed. of also It's

are We bringing margin that that some wins customers operating significant well. higher also a really, contribution. on as had new management we've under that able capture margin We're as freight Brian some have been we've to high been online. There's warehouses mentioned, filling bringing

that a fulfillment cost And and from overall consolidation help margins the warehousing in the business. up so of and really will bring that portion

Scott Group

I'll Okay. the when are color? quick what already, customers answered and And if you or you your again. comments that flips to anything, give just say last and saying restocking inventory in one this any Did And answer about just and transcript. destocking real read peak any

Phil Yeager

Happy sure. it.Again, Sure. to hit for on

as kind of And are rates by really I market customers, seeing tightness. out some segment. varies talk to bottomed We're here. we spot think we it seeing our

Some are destocking certainly their conversation. in the further along is But that than others.

lot think it great the limited, of a and to there encrypt back. maintained capacity being going service going the growth that truckload option to capEx and to focus a is conversion if intermodal be I -- discussion see around a really and is product on at we're start intermodal is, is really where

seeing So in already early its tightness we some are stages.

areas Southern we tightness seeing of some But are certainly some want port it California. a in larger we So don't like call trend. our to

a that sign of a to peak we're that hoping points season. so, And

peak We aren't would guidance end. to anticipating high get be a high robust likely in at our the us would a somewhat that peak muted It end.

Scott Group

the of makes that that if So framing kind would guidance, sense. be

Operator

Wadewitz comes Our question UBS. from Thomas Instructions] next of [Operator

Thomas Wadewitz

XQ, versus then up of think just kind is segments and is you how versus When two about kind it's about you peak some both like you versus thinking the were and the earnings, think Intermodal talking XQ peak, for when and for income XQ rates expecting XQ sequentially of in tax think, are we you operating I were think increase we lower, about XQ? and about XQ? Or Logistics the

Phil Yeager

both. answer The yes to Yes. is

through up from the So, high. on newer becomes more our load flow as of the higher end contribution incremental of more Logistics we some as Obviously, well towards that that benefit margin side, the online, capacity. the space the coming we'll as things of profit is warehousing pretty

is going the towards of logistics drive to that So profitability end year. the

expect operating quarter rail profit sequentially for And at driven full relief we cost the largely ITS, in we then, by in also a QX. do an have improvement

As assets, well of out as we of it also in partially be we're achieving of efficiency if to our as has end result the the are which more get benefit upper volume, able would more but a surcharges guidance, QX. our

Thomas Wadewitz

up think believe. how bit X right? and a apologize improvement. but at beginning, is I You I how So I in is progression? the July the little are thinking you volume you said July, if showing down -- said missed I Is you this are guess, about that some sequential I normal

Phil Yeager

from June. of X.X sequentially Yes, up month the

Thomas Wadewitz

sequential? the And what's normal

Phil Yeager

Flat. point anticipate We pickup wouldn't this a normally in at see the to year.

Geoffrey DeMartino

of September peak a off point month-end you to the flow and seasonality to in of the quarter-end better gets you Flat little kind if holiday. then, would down a is, then be and of July Xth in come Yeah. front that June, typical of August would And really would through in October.

that would typical So follow seasonality.

Thomas Wadewitz

Right.

you bit Okay. mean, to parse I it's of about of around and questions that's other seasonality or than improvement. it's think that's but to July. out, what's you think a might this normal had are to factors obviously you of over the little getting think there further? know continue? do kind kind think some bit it hard whether it that a it's driving just, I primarily hard I you -- Do volume in you've know better see is constructed improve could do inventory reduction how

little you intermodal whether sequential is that, a kind of and continues imports are the tough earlier? maybe peak the little a is that the Or some or coming but you of driving think what know do I not? think and different that improvement shape imports do decipher, of it's maybe to

Geoffrey DeMartino

inventories more shipping think are coming In discussions to that going get line is to customers, our there back to a need back levels. and I normalized around with be into

you're rates of come We're at have the really in solidified think, for starting spot seeing already California and low time, Southern that are realization same many in somewhat to I the under the market market. going time been gone our see spot customers for a there pricing pressure. that has some quite as up that to out

seeing You're ports as in well. Southeast the that

service intermodal chain, right very strong, And I I'm focus a supply is option that on if a so, rail great sure make I now. that my think de-risking is there's I'm can capacity, in locking

I the and that XX% trucks low think not have that is really to XX% between in point, that the and on the told would too range same mid-teens. you was long intermodal spread I ago to now, in growing

so, a and spread service And need as really apart ahead. as and end, demand I for product the will capacity coming to stronger think market coming an that on the well further I looking that drive think likely reliance spot environment

to factors, So numbers framework. positive though are given that's It's that exactly we're the early a we're data happen, what's points these and of well feeling internal that to positive. on as now right our watching but little it's data say a would external be kind that as looking going as the

Phil Yeager

a I we volume. of of during feel once like ready well question we up that there's would a we're move mid-season their in to customers' on More tendering is. and that when substantial perform just add, a based resumption awards

Thomas Wadewitz

spread, rates intermodal truckload contract are are on you versus comment saying or the understand you at I contract? looking so Just spot

Phil Yeager

Contract.

Thomas Wadewitz

Contract versus contract?

Phil Yeager

increasing are solidified you to spot think I several markets seeing week. But market a week Yes. with

think our through just a As Southern Coast -- we I to customers know ports. stability is of all an continued California, example, large and think ports, important West shift the network. our the I very to I see Coast West of in which obviously if want see stability. And want portion They

think So I that's be there. catalyst another out may positive that

Brian Alexander

of QX Yes. of Then bid. volume that's bid so we to tendering We've to indicator. and XX% think mentioned start we end bid another up far compliance compliance, the and good the in go the year seen QX, that they just

Operator

Brian Ossenbeck JPMorgan. is question from next with Our

Brian Ossenbeck

how maybe major move if each by the once implemented, expect they've them spreads, just this maybe you and you expect at from any on So, point? everything you follow-up and here, to forward differences trended gets how through the to go can of major those regions

Phil Yeager

Sure.

moved and to contract was about So Transcon during In East, the to in XX%, XX%. in Local in West then up up the that's moved was That's up of about to moved to QX, XX% was XX%. that's and XX% the and as QX, quarter, today. it contract XX% spread

of normal I getting would more would seen we that. So, into Transcon say, back of range. have so we're a north is approaching XX%, Typically,

now. not price, I just stable And think but from

and to way able highs, As you are and offer transit our value we're so times that well. multi-year more take at know, as down service levels

Brian Ossenbeck

long in a there's boxes of Obviously, a showed terms supply lag showed front? up time. lot that chain you of the Okay. pretty competitive And now? be on disciplined like boxes do right storing then in wrong just them many -- to the you And and are on the feel with rails, is how kind at up front of maybe ordering other at the industry going

basis? do you So how And rail-to-rail storing see of through do fringe a Where you are the manage competition your incremental signs any boxes? on on you that?

Phil Yeager

Yes.

percentage a of So is sort mid-high we currently teen that stacked. have

There's play Given seeing, off enter some holding seasonality of level the doing. we that out. we're were the if and you that slowing normal we're we as related to cost restacking unstacking QX of stacking down obviously tightness a or see

which would to focus to on to going are utilization most players I so, going size anticipate focus what try And current is the of their of we're improved on. fleet,

there. of a have lot believe we And I runway

very We positive cost very anticipate we've best structure. year for throughout we is our utilization that thing a obviously this which the going thus improved had lower to turn are and the quarter, getting was times actually far, Last week levels.

with tell it would let's remain our you, would our is, on sense. supporting to make clients focused if is I need view economic And to, that, but what obviously we'll access So, unstacked. need we

Brian Ossenbeck

follow-up. And for There's Could just Canada. Obviously just ratification. X on West contracts the then, Understood. disruption comment the you ports? Coast other in are quick out

for season? back already you from front? Have they moving currently is shippers this are that feel do moved What peak So, back? expected

Phil Yeager

likely some season, already have I lead times ordering been customers that although may depending opportunities think set. be this have of on the set, deviate our to patterns the peak some there

be import in is going to activity. I think a lag there

that the if that stability, So, is deviation could stronger. be there much

back of with their late, based majority just is the as pushing customers there freight and been effectiveness. get the West on through as that mentioned, cost of interacting I've to desire With to Coast I the a ports speed

stability think I is that an there's even if year, so, And maintained into leading next opportunity. bigger

Operator

Thank for back conference closing remarks. you. Phil I Yeager would turn now the like to to

Phil Yeager

our I any available Brian, always, Great. call afternoon. questions. Geoff you Well, and as for this are for thank joining And much so

Operator

concludes This participating. Thank conference you call. today's for

disconnect. now may You

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