HUBG - Earnings call transcript Q3 2024

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Operator

Hello, and welcome to the Hub Group Third Quarter 2024 Earnings Conference Call. Phil Yeager, Hub's President, Chief Executive Officer and Vice Chairman; and Kevin Beth, Chief Financial Officer, are joining the call. [Operator Instructions] Statements made on this call and in other reference documents on our website that are not historical facts are forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that might cause the actual performance of Hub Group to differ materially from those expressed or implied by this discussion and therefore, should be viewed with caution. Further information on the risks that may affect Hub Group's business is included in the filings with the SEC, which are on our website.

call, measures today's be on addition, non-GAAP will financial used. In measures GAAP earnings in and between are presentation. non-GAAP quarterly Reconciliations and financial included release our earnings

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

now begin. may You

Phillip Yeager

call. and afternoon, earnings for Group's third joining Good Hub you quarter thank

all and members Joining me the one forward signs to peak American port Hub events Hub by North weather recent Outside the welcoming Beth, family consumer start and their create to Group market Financial pull hard the of exits, team capacity is Chief replenishment. our commitment a resilient strike or today Group's and is another. The showing broader not of prolonged and for America North to thanking tightness. season, EASO and did a across customers Kevin wanted Officer. our as team work I recovery significant such with inventory transportation factors supporting

more for of capital time, expenditures recovery small an industry. a and and remains to in carrier growth anticipating with although pricing are factors timing environment, will, minimal the These constructive demand capacity along improved due we the to in velocity strength demand, framework lead However, exits in continued and over market unclear. the that

operated capital core, repurchases. and our our transactions, and pleased cash in strategic flow, strong bring through generating challenging to We are resilient how market to and shareholders dividends to to have invest customers are and trough results via value through which we with conditions, return trough share shareholders delivering more continue utilizing to we

highlight to particular quarter, these examples. of me items and X that all I allocation capital on out executed initiatives have as stand this X will We

trends. new growing given near-shoring is joint with as First is great company marketing largest the in is well their reputation as significantly Mexico service, and EASO and intermodal EASO. our venture

long-term Just a great track like of a family are with record success. us, they business

service resources facilities, premier scaled and Mexico building and of focused relationships. cross-border combined cultures customer are similar product have logistics, financial for utilizing and on the network We density, fleets, our intra- drayage

that to capital is share acquisition shareholders previously our and on while strong pipeline. our a capital $XX through million returning repurchases robust Second executing allocation and maintaining we structure plan, dividends are year-to-date announced

third In a We by hiring organization highlight high revenue multipurpose implementations. alignment to we regarding network give strategy Kevin to unusual and revenue. I position margins to network in quarter, while growth XXXX. Despite quarter. market. year's convert transition, results ITS declining by position service alignment which million and year-over-year million compete are the estimate in by will and while as this us was recovery. Prior the well points costs, in great operational price and an $X.X are our a service single increased segment mile position are $X.X drive position a be will and in systems the XXX of product square and management integrating forward create this the network and efforts. year-over-year in facilities for will action volume quarter million These transferring our can to expenses quarter improve are comprised of a in continued service better and in XX% highly We space, feet these our fourth a of to feel product load to clients, Coast as efficient right utilized us Hub This and a guided of the we in X.X to Group Hub is that despite focus for and customers and win fourth segment detail initiative. quarter, intermodal Group dock, conclude the we execute labor further our consolidation of us volumes, week. earnings on completing week we integrated discuss commenced now significant and is to continued order operating the this consolidation expanding on from market supported fuel our basis logistics an over due results, estimated ahead discuss based for to restructuring-related our pulled which in as network Logistics million Intermodal our client with basis. due segment the the year-over-year, earnings decline costs, the strategy reviewing in our transaction road the adjustments the quarter. and wanted business increased cost cross year-over-year on to I dedicated I which our final West fulfillment and networks. The down our but per the integration third in will volumes will a as the fees, and for rates success peak. Revenue fully to better Logistics impacted $X.X serve the XX% will full retention in year improved excellent quarter strategy was revenue as mix,

West the XX% We XX%, was we volume continued and growth. volumes growth increased with quarter, the Local East our onboarded transcon volume, we year-over-year continued peak our X%. in Along to Mexico up as EASO results momentum these X% volumes Local strong any with up in with prior later in

productivity, per XX%. incremental well over in on the day utilization improved increased utilizing the are we we our road. Dedicated to container are our We as about enhanced rail growth carrying better performed of year-over-year momentum basis balance percentage bid network posting are driver into quarter, by service, we per and and a in-sourced from revenue operations season improved drive increasing excited as strong the drayage, conversion revenue tractor

and and through and utilization due our customers are service. In onboardings enhance growth earnings strong new cost asset new Logistics, potential management. to with existing pursuing we to and excellent continue adjusted driver sequentially deliver increased as improved earnings We and business revenue

our in of segment, our and to due customers customer Final as a the the continues onboardings in had and temporarily Transportation as new integration Logistics legacy well as Mile, improvements Managed quarter. In consolidating support the business fourth supporting on large teams perform costs inflated our we we to continuous Within facilities well, lower facilities. volumes completed with bringing

We onboardings, for the reduced of revenue in on we team, end well which market surge spot mix volumes year-over-year load higher the is but grew costs demand. In and continued per several and delivered have year flat since basis, activity. high-value which face due in a Brokerage, lower completed the in positioning of quarter LTL, a reorganized to headwinds XX% to us

maintaining We transition, levels improving from and are minimizing we the service efforts our continued on focus customers also our Southeast on our completing our supported costs. network CFS, recovering management impacting the and yield while productivity. In our in hurricanes focused

our which actions to We longer-term XX we to improvement items, these will and lead a have and client address believe productivity, percentage in point quarter-to-quarter place improved retention all drove and utilization growth are enhancing rates. in we

solid in committed hand of factors to believe our with team, wins XXXX. With that momentum across will service lines, great we are an financial our an integrated services, into a scale cost over As to I controls, we as are the leading previously I position that, close profile, performance. These our discuss into of and and solutions. passionate to and the it portfolio and year Kevin are carrying a mentioned, organization financial strong we best-in-class service, across

Kevin Beth

you, Thank Phil.

warehouse and the start segments, and alignment $XXX,XXX with impacted and and insurance of will initiatives, the quarter Final align the initiative the included segment improve These the Consolidation joint and on incremental expenses network $X.X adjustments I'd reported $X anticipate and service items the professional us QX venture, $X.X quarter Fulfillment in million operational to closure be million my network date. cash for deal million cross-dock expenses closed for our final the Logistics adjustments diligence, and prepared and of and other $X.X new which lines associated to remarks, alignment for of Banker and business. better transfer expenses I of well both EASO October like discuss our of EASO transaction will Transaction-related to are with network the $XX.X due in in business as ITS efficiency as including compete allow Before alignment XX. efforts, approximately as fees in with services. We majority that expenses. fees to fees of costs, the customers the million in the labor impacted million the Mile of legal

included In $X.X million expect our addition, fourth be $X.X results. we in quarter to to million network alignment expenses of

As on performance through will my our comments a non-GAAP results, operating I basis. walk our financial focus go-forward adjusted or on

release between non-GAAP a measures or investor GAAP in As reminder, this prior earnings our issued call. presentation to reconciliations are included financial and

Intermodal volume to which Revenue Dedicated X.X% the revenue offset our revenue and of approximately revenue revenue of of quarter, second contributed revenue revenue and reported was from XX% offset of compared was million, the revenue business declined comparable and not $XXX $XXX Final accessorial ITS million. business. revenue in enough $XX in X.X% to For quarter. revenue million per the fuel million Hub Mile down $XXX Brokerage the as decrease. million quarter to lower to prior $XXX was year to Logistics Intermodal load, $XXX as year year third contribution prior is last was the million. of stronger fuel growth Lower the lower in compared

overall when basis $X.X expenses due warehousing year of declined and Moving estimates and decrease the basis to down and XXX employees, to the to include an lower accessorial $XXX point due amortization and This of well manage year headcount, X%. Depreciation as compared assumption. million trailers and salaries improvement our purchased prior the on million the headcount. GAAP warehouse which benefits equipment Final costs for previous continued rail XXXX. basis. legacy on P&L. costs. a to prior Mile from acquisition and decreased we QX a to by and were were third-party useful the million Total a as were transportation acquisition of lasting revenue results lower both transportation beyond excludes Adjusted Adjusted a $XX.X million, employees adjusted percent life drivers higher containers lower our costs, than Results $X.X in change

that quarter. G&A to management million Final Gain cost lower were by offset sale were million, increased acquisition, Insurance associated industry the by more the by by than conservative with claim was efforts. We which decreased we also partially on claims driven costs in practice. Mile $X.X operating quarter. Adjusted discovered $XXX,XXX in the $X.X costs and due

the point XX OI Dedicated the quarter. Logistics for in percentage points second income cost basis a adjusted efforts margin percentage from As improvement XX lower XX X.X% depreciation of quarter, amortization operating over and the Intermodal was improvement Mile and XX a results X%, management offsetting from an margin we as was and improvement margin OI and QX's over a quarter. ITS Brokerage to our X.X%, over growth, year and basis a QX point basis due over sequential adjusted XX a Consolidation point of result, revenue from prior margin. lower a operating Final of basis basis increase growth, year the adjusted services, strong X.X% and X.X% benefited point volume improvement operating the strong expenses is Fulfillment prior

despite income year-to-date Brokerage in the contribute income Our the continued and being to lower $X.X positive market. Interest the and interest challenged in expense was other by business income totaled million quarter operating the in as quarter. overcapacity

slightly than was of Our XX.X% QX XX.X%, higher tax as anticipated. rate our rate

management. full we the share important earned expenses approximately the we expect cash EPS anticipated. Overall, for tax-related per $X.XX from of originally as rate previous third an XX%, an average quarter. the is For Hub of better goal Generating diluted have year, than of down adjusted managed tax assumption

We by are insurance cash X the efforts quarter. million for to renewal months third pleased in our $X.XX the our and $XXX payments XXXX the of Cash tax alignment EPS network transaction. expenses first of were and EASO third impacted in adjusted from the Free with flows flow $XX annual operations quarter was cash of million. fees, the related

quarter. $XX the hand We the dividends on $XXX In And million with quarter the stock million to in and million. shareholders cash we returned $X purchased $XX million our also the of million with ended in $XX in third we quarter of of repurchases. total, stock

year-to-date quarter. second of expenditure life, capital was purchases and $XX.X for their At the end million. end and XX% quarter was warehouse third the $XX replacement Third our spend of the reached down tractors included CapEx equipment that technology have projects. quarter, million CapEx totaled for

debt statements. Net our slightly stated range is $XX closer was financial the expect be was leverage levels, QX QX. expenditures our below X.XXx. end in The including We with million, our X.XX and our of debt-to-EBITDA QX increase net QX EASO in year $XXX JV, QX and to lower between the to EASO which full to expected X.Xx, million leverage related transaction $XX spend to be to and will consolidated spend million,

as $XXX EBITDA demonstrating be in greater cash the the Hub's We year million in adjusted this continue to environment. expect for XXXX cash than to resiliency freight challenging expect less generated CapEx growth XXXX, full earnings we

our XX% customers capacity. seen above improved rates We that to to shareholders pulled reported of in volume Additionally, We've quarter, we and $XX which stock will the for quarterly in perform to plan, these as our repurchases ability dividend we've Year-to-date, confident dividends, acquisitions. paying well Coast $XX some in million. Hub third growth in strike. includes million the demand well East of of strategic tightening capital lead of forward the and IANA's optimistic remain through continues remain execute factors and payments on port Intermodal demand million Group stock repurchases with returned $XX to volumes also allocation future. preparation

adjusted per our year for full be digits. $X we double in billion. revenue ITS and expect quarter, share growth to range the the to in the of segment low expect diluted Intermodal $X.XX volume In $X.XX EPS approximately fourth We

For expect full now Dedicated, be to comparable revenue we last for year year. to the

In in in to total for remain When to and excluding fourth as initiative quarter For Brokerage in digits revenue expected revenue expect we continue growth. impacted low- segment, network in volume price. we single low earnest the Logistics is be to Brokerage, digits to to negatively quarter to we expect low by tailwind the grow begin fourth pricing challenged continues expect mid-double-digit revenue the single overcapacity the XXXX. expected given the in market. Further, alignment Brokerage, up

mentioned the facing being rate normalization of annual gain incentive on including last higher at some minimal interest to versus and sale. year, costs, year, our XX% of As the are we headwinds the beginning compensation, tax closer

disciplined As third balance Intermodal, quarter, flow strong growth date the initiatives, we free cash volume generation financial a strong our pleased sheet. cost-savings with management, are to in exit we and with performance

asset we Over out expense our earnings. also significantly our returns. We've focus the on past efficiency, in and and operating several management, years, drive business, stability build acquisitions important to including has strategic several more changes which yield offering profitability made have to our and utilization completed improved our

and from the in we free $XX growing have million year-to-date this with over any success These operating million cyclical trough-to-trough over soft versus margin Hub a marketplace, environment. With X% actions in results in with $XXX changes with both strong improvement XXXX as long-term reported well positioned it in cash accelerated in operator horizons, strategic time open XXXX. While quarter, the demand and line compete as have X.X% that, for Group in to an turn to to these along compared flow the questions. short- I'll to the the

Operator

recorded, [Operator Stifel. on like available from I the for to a Group call is Hub question replay and first that Our would participants days. being XX this will be Instructions] remind of Chan website also Bruce is

J. Bruce Chan

under pressure? spot? any in about that accessorials pricing helpful drag Intermodal pressure. being some more from backdrop seeing Phil, you color Kevin, pressure you maybe and ] the be us that quarter. I I&P Or know you are talked pricing where [ of can backdrop would any continued through from on during fuel just other walk pockets Is the underlying seeing you're the providers? competitive But

Phillip Yeager

to third see Yes. This strong season. season the a quarter. demand in hold. We're Phil. very has through think the It's really of early Sure. I into is fourth take and great the bid quarter part And peak been

we're to everybody for obviously the environment, XXXX, anything that's get gear think peak because wants everybody not but service upwards. I with irrational. competitive have. to I we come It's As the still we moving, been a kick that competitive price wants assets off think bids their It's seeing to season great strong it's in and but

anticipating we not go bid prices into that be will we're down. season as So

being unknown I customers how enhancing think they help be productivity. our network-friendly can then it's prescriptive where business focused much very driver us with retaining on productivity, asset they'll up. around enhancing our We're areas and in

QX we and carry to earlier obviously, going pricing some are the this year. of from through We forward have, QX, that

opportunities about business very And in our So obviously, with volume. our convert feeling the and have the to quarter. positioning, cross-border good and we our EASO second tailwind we're about intra-Mexico volumes. XX% we'll reprice first then of But

confident feeling season. successful another in bid overall, So, have to our ability

J. Bruce Chan

helpful. a Mile side. Super then follow-up Great. And Okay. Final the quick on just

Any some sorts on might what about and integration be the talked what of timeline initiatives. You you'll there those be making? thoughts for adjustments

Phillip Yeager

really We've a some from bit of though Yes. executed We really we're we a larger facilities. lost consolidating were customer good into facilities on We as feel -- little in those. a business position.

So they the highly a in bringing through some then and margin-accretive are going tandem we of were with lost. smaller on that, rationalization actually facilities organization we business. But

demand, are now of great our have feel a and that. as nice business that position we continue new good all service and the customers take we're start-ups surge those a onboardings anticipating we're a quarter first through in We've go here. We're we the as from in seasonal So upside position to to the reorganized really quarter. capture that hold line. enter And fourth will in in to we

So excited ahead. business the Mile at is the trajectory about and where Final

Operator

Our Daniel Imbro next question Stifel of -- Daniel of from I'm comes Stephens. sorry, Imbro

Unknown Analyst

to the in on XQ is volume bit to wanted This talk you growth ask change a Daniel. just the Brady your I Can previous It there? below volume full about for guide. guidance imply ITS. what's year driving seems little about

Kevin Beth

October. in did there forward volumes Yes. low-double This hearing down We to We from quarter, was increase and strong. had believe still was Kevin. is it we're customers like our that correct. October in The price guiding to that Yes, is some pull of mid- we're digits with looked you're and fourth third volume quarter single-digits. XX%

that rest we're forward that, little eaten we're a the feeling has of volume. the we -- expectations think of with pull quarter, that's into But the some So original really the of good.

Phillip Yeager

original think seen of pull East bit I that of a little Coast forward, we think guide, I And a have diversion. bit Yes. little

think we in see exactly potentially We to do things at the first trend some be I to right potentially continue how few least the there know go. think upside Thanksgiving in might through continue peak don't is November. could far We through if weeks. direction beyond it going

I more been and demand service is peak. We've of some very domestic overall into could other intermodal strong. the this That part and has push extend think interesting disruptions international into potentially transloading there. seen the

there. So it's a variable out

incremental some you I to think just digits. gave what we the adds EASO low-double on

that the didn't guidance. but into it in think we include could the I that teens, push

all feeling our So all, though, we're in performance. about good volume

continuing East Local in think have I we opportunities to the outperform to continue to but convert and there, volume grow.

Unknown Analyst

Great. Okay. a follow-up. Maybe just quick

I call, you just step to ITS any there given expectations color Just around margins in helpful. think last the Is up XQ on you margins still levels. in from here XQ step-up that mentioned case would XQ? the expected the be adjusted

Kevin Beth

Yes.

going fourth some forward You're at thought. of quarter, for in that to you quarter. step-up Again, you quarter, original I helped correct really quarter. seasonality. quarter. second we're fourth that little hurt half the see the when the look that, bit we're going lot of margin think pull fourth overall step-up that when normal the And was back costs of fall fixed a to and here And sort have Again, a we that third the back

helped some So little quarter, they this we came third savings forward and here a of saw and in that actually quarter. quicker that

forward. a it's coming little bit down So think looking we will

Phillip Yeager

Yes.

QX QX. if to the a you sequential slight guide, I look think decline at it's

quarter-to-quarter network Logistics XXXX. some seasonal with well although anticipated we'll some actually slowdown see really volumes ITS thinking the initiative or a after to starting upside We're progress, show Thanksgiving that is driver I undertaken bit Mile in that the an alignment decline. some near with in little uplift having the have Final full as in will as of we've think

Operator

And Alper [Operator our last Instructions] comes Elliot of from Cowen. question

Elliot Alper

Seidl. is Elliot This on for Jason

the sure. will just how about maybe some some small, guide, cross-selling to the into medium, about that -- over that want that, of make give maybe opportunities the You of your for Mexico? then contribution talk the the And earnings talk you -- maybe the could longer term, if I but you joint venture in new venture, assume I joint fits

Phillip Yeager

is sure. Phil. Yes, This

So strategic To the not it is is this although to kicking transaction to where now. that ties very -- with bid opportunity business. a off immediately well accretive is we've but it's season is really one the me, we as be our Intermodal think in really timed cross-selling, earnings, huge biggest going just perfectly slightly and right transaction,

So we're have with strategic growth. to able our around opportunities customers for very discussions

opportunity I side. is of in had strategic think something we a the drayage border, haven't that within the is area. and drayage On on that both are value. other area in It's of they the synergy sides having and Mexico, the fleet past capture experts

its demand and there's that the is along So on synergy local macro, the strong growth business that with then the EASO I business has that capital and own. And opportunity and knowledge help incremental scale can capture. already bring and just a if the growing the lot the and team XX% as take we the of reputation, brand take on to and you trends year-over-year really think we and near-shoring great for think resources

excited we're So all opportunities have we ahead. the about

Kevin Beth

just this is And reminder, Kevin. a

that So XX. October closed transaction on

a we're little So we don't seeing than full quarter. less -- a

And so in that come really see to accretion we expect 'XX.

Elliot Alper

right would that? you could they now any the USMCA regulatory other as then I evolving had was with about you talked when trade And guess, the sidelines on maybe floodgates the couple some announced, be and the pivotal seeing about Or if customers venture you guys Are open potential on there's that of that the think are helpful. front how Great. I sitting some the years, the over of up on catalyst your see act? guess, commentary environment you clarity Okay. next joint volumes.

Phillip Yeager

everybody Again, in growing that committed market. still very customer Yes. to Sure. is conversations,

if look trade be the partner mean, trends, to I at United fastest-growing the you the States. of just think continues I it

do beneficial been anticipate I But both sides. think a we it's for investment. further agreement

significant are business nearshoring, I of for differential think is all trends and is improving. the doing the labor customer had, more cost ease we've conversations the the that

you, seeing creates the invest are would timing their of encouraging, more customers our season. I to again, just And we're it's, been a customers we've and lot been having continuing for far has and us. which bid So that opportunity thus our for tell with good opportunities growth. with very dialogue once there, And very vendors

Operator

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

Phillip Yeager

you there's evening. for to Great. follow-up and feel evening. Obviously, time thank your a I, much much. if reach you any Kevin this Hope very Well, or questions, you free to thank have great very out

Operator

this gentlemen, with and Hub Thank Group. you conference call concludes joining. for Ladies today's

You may now disconnect.

Hub (HUBG) 30 Oct 242024 Q3 Earnings call transcript