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Hub Group, Inc. Reports First Quarter 2023 Results

Highlights:        

  • Diluted earnings per share (EPS) of $1.88 for the quarter
  • First quarter revenue of $1.2 billion
  • Quarterly operating income of $78 million (6.8% of revenue) driven by our focus on operating efficiency and yield management
  • Ended the quarter with cash and cash equivalents of $343 million

OAK BROOK, Ill., April 27, 2023 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced first quarter 2023 net income of $62 million, and diluted earnings per share of $1.88. Net income for first quarter 2022 was $88 million, or $2.58 per diluted share.

“Although we are in a softer demand environment the $1.2 billion of revenue we generated in the quarter is the second highest first quarter revenue in the history of our company. Our yield management, cost containment and operating efficiency initiatives resulted in operating income margin of 6.8% of revenue. We continue to execute on our long-term strategy, investing in our core business and technology while diversifying our service offering. We remain focused on managing our costs and capital structure, while supporting our customers with great service and investing for growth to drive success in a variety of market conditions,” said Phil Yeager, Hub Group’s President and Chief Executive Officer.

Changes to Financial Reporting

As we have continued to expand our service offerings and diversify our business we have also made changes to the financial information that our CEO uses to make operating and capital decisions. Beginning with the first quarter of 2023, we concluded that we had two reportable segments: Intermodal and Transportation Solutions (“ITS”) and Logistics. Our ITS Segment includes our asset-light business lines: intermodal and dedicated trucking. Our Logistics Segment includes our non-asset business lines: managed transportation, truck brokerage, final mile, consolidation, warehousing and fulfillment. In addition, we have made changes to the presentation of certain expenses in our Consolidated Statements of Earnings. Included in this release is an exhibit providing an unaudited historical recast of our Consolidated Statements of Earnings as well as segment financial information for 2022.

First Quarter 2023 Results

Consolidated revenue for the first quarter of 2023 decreased to $1.2 billion as compared to $1.3 billion in first quarter 2022. Purchased transportation and warehousing costs declined as compared to prior year due to lower volumes, reductions in third-party carrier costs per load, and decreased use of third-party carriers for drayage, partially offset by higher equipment and rail costs. Salaries and benefits costs increased $9 million relative to prior year due to $28 million of incremental expense related to growth of our driver and warehouse employee headcount, partially offset by a $19 million reduction in office employee compensation due to lower headcount and lower incentive compensation expense. General and administrative expense increased as compared to prior year due to higher rent expense and higher outside services expense primarily for IT software related to the acquisition of TAGG Logistics, LLC (“TAGG”). Depreciation and amortization expense increased as compared to prior year due to investments in our container and tractor fleets, as well as amortization of intangible assets related to the acquisition of TAGG. Operating income for the quarter was $78 million (6.8% of revenue) as compared to $115 million (8.9% of revenue) in the prior year. EBITDA (non-GAAP)1 for the quarter was $124 million. The first quarter 2023 effective tax rate of 19.4% benefitted primarily from a change in state apportionment methodology.

First quarter ITS Segment revenue was $709 million, as compared to $777 million in the prior year. Intermodal revenue per load for the quarter increased 3% while volume decreased 12% as compared to prior year. Volume for the quarter was impacted by softer demand conditions as retailers’ inventory levels increased from the lows seen in 2021, which impacted demand for our services. Revenue for our Dedicated business line grew 5% in the quarter. ITS operating income decreased to $49 million (7.0% of revenue) as compared to $86 million (11.0% of revenue) in the prior year due to lower volume, higher equipment costs and lower surcharges. These headwinds were partially offset by lower drayage costs as we increased the portion of drayage handled on our own fleet to 74% in first quarter 2023 as compared to 58% in the prior year, as well as an improvement in profitability at our Dedicated service line.

First quarter Logistics Segment revenue was $469 million, as compared to $541 million in the prior year. The decline in revenue was driven by lower revenue per load in our brokerage business line and lower managed transportation business line revenue, partially offset by revenue from TAGG. First quarter operating income was 6.1% of revenue as compared to 5.4% last year. Operating income was unchanged at $29 million, as lower revenue was offset by lower purchased transportation costs and our yield management initiatives.

Capital expenditures for the first quarter of 2023 totaled $27 million. As of March 31, 2023, we had cash and cash equivalents of $343 million.  

2023 Outlook

We expect our 2023 diluted earnings per share will range from $6.00 to $7.00. We estimate revenue will range from $4.6 to $4.8 billion. We project our effective tax rate for the year will be 23.5-24.5%. We expect capital expenditures for containers, tractors, warehousing equipment and technology will range from $140 to $150 million.

Non-GAAP Financial Measure

In this press release, we present EBITDA, a non-GAAP financial measure of profitability defined as earnings before interest, taxes, depreciation and amortization. As required by the rules of the Securities and Exchange Commission (“SEC”), we have provided herein a reconciliation of this non-GAAP financial measure to Net Income, the most directly comparable measure under GAAP. Management believes that EBITDA provides relevant and useful information, which is used by our management as well as by many analysts, investors and competitors in our industry. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company’s profitability for the periods presented. EBITDA should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and is not necessarily comparable to non-GAAP measures that may be presented by other companies.   

CONFERENCE CALL

Hub Group, Inc. will hold a conference call at 5:00 p.m. Eastern Time on April 27, 2023 to discuss our first quarter 2022 results.

Hosting the conference call will be Phil Yeager, President and CEO. Also participating on the call will be Brian Alexander, Chief Operating Officer, and Geoff DeMartino, Executive Vice President, Chief Financial Officer and Treasurer.

This call is being webcast and can be accessed through the Investors link on Hub Group’s web site at www.hubgroup.com. The webcast is listen-only. Those interested in participating in the question and answer session should follow the telephone dial-in instructions below.

To participate in the conference call by telephone, please pre-register at

https://register.vevent.com/register/BIeccf0be1980b42baab60bc9181ac7ce1

to receive the dial-in number and unique PIN. On the day of the call, dial in approximately ten minutes prior to the scheduled call time and enter the unique participant PIN received during registration. The call will be limited to 60 minutes, including questions and answers. An audio replay will be available through the Investors link on the Company’s web site at www.hubgroup.com. This replay will be available for 30 days.

CERTAIN FORWARD-LOOKING STATEMENTS: Statements in this press release that are not historical may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. Forward-looking statements are inherently uncertain and subject to risks, uncertainties and other factors that might cause the actual performance of Hub Group, Inc. to differ materially from those expressed or implied by this discussion and, therefore, should be viewed with caution. All forward-looking statements and information are provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally may be identified by the use of forward-looking terminology such as “trends”, “assumptions”, “target”, “guidance”, “outlook”, “opportunity”, “future”, “plans”, “goals”, “objectives”, “expects”, “anticipate”, “expected”, “may”, “will”, “would”, “could”, “intend”, “believe”, “potential”, “projected”, “estimate” (or the negative or derivative of each of these terms), or similar words, and include our statements regarding our outlook, profit improvement initiatives and capital expenditures. These statements are based on Hub Group’s current beliefs and expectations of future events or future results, and involve risks and uncertainties that are difficult to predict and subject to change. Factors that could cause actual results to differ materially include, among other things, general or regional economic conditions, including inflation and changes in trade policy; the effect of the ongoing COVID-19 pandemic (including any spikes, outbreaks or variants of the virus) and any future government actions taken in response to the pandemic, on our business operations and general economic and financial market conditions; governmental or regulatory requirements affecting tax, wage and hour matters, health and safety, labor and employment, insurance or other areas; shipping and intermodal costs and prices, the integration of acquisitions and expenses relating thereto; driver shortages; the amount and timing of strategic investments or divestitures by Hub Group; the failure to implement and integrate critical information technology systems; cyber security incidents; and retail and other customers encountering adverse economic conditions. Further information on these factors and other risks that may affect the Hub Group’s business is included in filings it makes with the SEC from time to time, including but not limited to those discussed under the “Risk Factors” section in Hub Group’s Form 10-K for the fiscal year ended December 31, 2022, and other filings with the SEC and in other investor communications of Hub Group from time to time. Hub Group assumes no obligation to update any such forward-looking statements.

SOURCE:   Hub Group, Inc.

CONTACT: Geoff DeMartino of Hub Group, Inc., +1-630-271-3623

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
                       
              Three Months Ended March 31,
                2023       2022  
                % of     % of
              Amount Revenue   Amount Revenue
Operating revenue       $ 1,152,265   100.0 %   $ 1,298,123   100.0 %
                       
Operating expenses:                
  Purchased transportation and warehousing       866,931   75.2 %     995,265   76.7 %
  Salaries and benefits         137,431   11.9 %     128,739   9.9 %
  Depreciation and amortization       35,449   3.1 %     31,289   2.4 %
  Insurance and claims         12,683   1.1 %     9,293   0.7 %
  General and administrative         25,541   2.2 %     23,222   1.8 %
  Gain on sale of assets, net         (3,975 ) -0.3 %     (4,745 ) -0.4 %
Total operating expenses         1,074,060   93.2 %     1,183,063   91.1 %
                       
Operating income         78,205   6.8 %     115,060   8.9 %
                       
Other income (expense):                
  Interest expense, net         (1,594 ) -0.1 %     (1,698 ) -0.1 %
  Other, net         39   0.0 %     131   0.0 %
Total other expense, net         (1,555 ) -0.1 %     (1,567 ) -0.1 %
                       
Income before provision for income taxes       76,650   6.7 %     113,493   8.8 %
                       
Provision for income taxes         14,870   1.3 %     25,990   2.0 %
                       
Net income       $ 61,780       $ 87,503    
                       
Earnings per share                
  Basic       $ 1.90       $ 2.60    
  Diluted       $ 1.88       $ 2.58    
                       
Basic weighted average number of shares outstanding       32,549         33,644    
Diluted weighted average number of shares outstanding       32,838         33,966    
                       
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
                March 31,   December 31,
                  2023       2022  
                (unaudited)    
ASSETS              
  CURRENT ASSETS:          
    Cash and cash equivalents   $ 342,570     $ 286,642  
    Accounts receivable trade, net     696,789       716,190  
    Accounts receivable other     4,300       3,967  
    Prepaid taxes       9,382       16,987  
    Prepaid expenses and other current assets   19,297       32,914  
        TOTAL CURRENT ASSETS     1,072,338       1,056,700  
                     
  Restricted investments       19,187       18,065  
  Property and equipment, net     776,656       783,683  
  Right-of-use assets – operating leases     174,194       102,114  
  Right-of-use assets – financing leases     4,357       1,194  
  Other intangibles, net       190,235       197,386  
  Goodwill         629,407       629,402  
  Other assets       21,608       21,537  
        TOTAL ASSETS   $ 2,887,982     $ 2,810,081  
                     
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY      
  CURRENT LIABILITIES:        
    Accounts payable trade   $ 330,260     $ 344,751  
    Accounts payable other     12,343       15,563  
    Accrued payroll       28,673       66,669  
    Accrued other       130,909       132,324  
    Lease liability – operating leases     35,248       29,547  
    Lease liability – financing leases     2,375       1,175  
    Current portion of long term debt     97,899       101,741  
        TOTAL CURRENT LIABILITIES   637,707       691,770  
                     
  Long term debt       236,160       240,724  
  Non-current liabilities       47,725       43,505  
  Lease liability – operating leases     145,612       78,557  
  Lease liability – financing leases     1,890        
  Deferred taxes       159,840       155,923  
                     
  STOCKHOLDERS’ EQUITY:        
    Preferred stock, $.01 par value; 2,000,000 shares authorized;      
      no shares issued or outstanding in 2023 and 2022.          
    Common stock          
      Class A: $.01 par value; 97,337,700 shares authorized; 41,312,185      
        shares issued in both 2023 and 2022; 32,760,635 shares outstanding      
        in 2023 and 32,646,621 shares outstanding in 2022.   413       413  
      Class B: $.01 par value; 662,300 shares authorized;      
        574,903 shares issued and outstanding in both 2023 and 2022.   6       6  
                     
    Additional paid-in capital     206,111       208,165  
    Purchase price in excess of predecessor basis, net of tax      
    benefit of $10,306       (15,458 )     (15,458 )
    Retained earnings       1,843,362       1,781,582  
    Accumulated other comprehensive loss   (180 )     (214 )
    Treasury stock; at cost, 8,551,550 shares in 2023      
      and 8,665,564 shares in 2022     (375,206 )     (374,892 )
      TOTAL STOCKHOLDERS’ EQUITY   1,659,048       1,599,602  
        TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,887,982     $ 2,810,081  
                     
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                     
                Three Months Ended March 31,
                  2023       2022  
                     
                     
Cash flows from operating activities:        
  Net income     $ 61,780     $ 87,503  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:      
      Depreciation and amortization     45,810       35,193  
      Deferred taxes       4,901       5,286  
      Compensation expense related to share-based compensation plans   5,238       4,719  
      Gain on sale of assets, net     (3,975 )     (4,745 )
  Changes in operating assets and liabilities, net of acquisitions:      
      Restricted investments     (1,122 )     2,759  
      Accounts receivable, net     18,951       (65,288 )
      Prepaid taxes       7,605       535  
      Prepaid expenses and other current assets   13,617       3,403  
      Other assets       (653 )     (1,516 )
      Accounts payable       (17,705 )     7,771  
      Accrued expenses       (40,065 )     7,130  
      Non-current liabilities     (5,007 )     (2,540 )
        Net cash provided by operating activities   89,375       80,210  
                     
Cash flows from investing activities:        
  Proceeds from sale of equipment     10,172       6,444  
  Purchases of property and equipment     (26,845 )     (30,927 )
  Acquisitions, net of cash acquired     108        
        Net cash used in investing activities   (16,565 )     (24,483 )
                     
Cash flows from financing activities:        
  Repayments of long term debt     (29,237 )     (26,024 )
  Stock withheld for payments of withholding taxes   (7,606 )     (5,585 )
  Finance lease payments       (888 )     (526 )
  Proceeds from issuance of debt     20,831       23,512  
        Net cash used in financing activities   (16,900 )     (8,623 )
                     
                     
  Effect of exchange rate changes on cash and cash equivalents   18       8  
                     
Net increase in cash and cash equivalents   55,928       47,112  
Cash and cash equivalents beginning of period   286,642       159,784  
Cash and cash equivalents end of period   $ 342,570     $ 206,896  
                     
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
       
  Three Months
  Ended March 31,
Operating Revenue   2023       2022  
Intermodal and Transportation Services $ 709,249     $ 776,570  
Logistics   469,141       540,984  
Inter-segment eliminations   (26,125 )     (19,431 )
Total operating revenue $ 1,152,265     $ 1,298,123  
       
       
  Three Months
  Ended March 31,
Operating Income   2023       2022  
Intermodal and Transportation Services $ 49,379     $ 85,696  
Logistics   28,826       29,364  
Total operating income $ 78,205     $ 115,060  
       
       
  Three Months
  Ended March 31,
Depreciation and Amortization   2023       2022  
Intermodal and Transportation Services $ 27,142     $ 24,375  
Logistics   8,307       6,914  
Total depreciation and amortization $ 35,449     $ 31,289  
       
RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
         
  Three Months
  Ended March 31,
         
    2023       2022  
         
Net Income $ 61,780     $ 87,503  
         
Interest Expense, net   1,594       1,698  
         
Depreciation and Amortization   45,810       35,193  
         
Provision for Income Taxes   14,870       25,990  
         
EBITDA $ 124,054     $ 150,384  
         

(1) See the “Non-GAAP Financial Measure” section of this release for the definition of EBITDA and a discussion of this non-GAAP financial measure.

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
           
    2022  
Operating Revenue Q1 Q2 Q3 Q4 YTD
Intermodal and Transportation Solutions $ 776,570   $ 875,150   $ 856,001   $ 804,710   $ 3,312,431  
Logistics   540,984     548,613     525,178     507,043     2,121,818  
Inter-segment eliminations   (19,431 )   (22,307 )   (25,772 )   (26,249 )   (93,759 )
Total operating revenue $ 1,298,123   $ 1,401,456   $ 1,355,407   $ 1,285,504   $ 5,340,490  
           
           
    2022  
Operating Income Q1 Q2 Q3 Q4 YTD
Intermodal and Transportation Solutions $ 85,696   $ 100,601   $ 86,773   $ 75,467   $ 348,537  
Logistics   29,364     37,035     30,966     28,819     126,184  
Total operating income $ 115,060   $ 137,636   $ 117,739   $ 104,286   $ 474,721  
           
           
    2022  
Depreciation and Amortization Q1 Q2 Q3 Q4 YTD
Intermodal and Transportation Solutions $ 24,375   $ 25,383   $ 26,020   $ 26,501   $ 102,279  
Logistics   6,914     6,861     7,522     8,213     29,510  
Total depreciation and amortization $ 31,289   $ 32,244   $ 33,542   $ 34,714   $ 131,789  
           

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
              2022  
            Q1 Q2 Q3 Q4 YTD
Operating revenue     $ 1,298,123   $ 1,401,456   $ 1,355,407   $ 1,285,504   $ 5,340,490  
                     
Operating expenses:              
  Purchased transportation and warehousing     995,265     1,062,983     1,023,051     955,204     4,036,503  
  Salaries and benefits       128,739     129,499     137,666     147,106     543,010  
  Depreciation and amortization     31,289     32,244     33,542     34,714     131,789  
  Insurance and claims       9,293     10,645     17,615     20,511     58,064  
  General and administrative       23,222     36,213     34,382     26,762     120,579  
  Gain on sale of assets, net       (4,745 )   (7,764 )   (8,588 )   (3,079 )   (24,176 )
Total operating expenses       1,183,063     1,263,820     1,237,668     1,181,218     4,865,769  
                     
Operating income       115,060     137,636     117,739     104,286     474,721  
                     
Other income (expense):              
  Interest expense, net       (1,698 )   (1,402 )   (2,150 )   (1,382 )   (6,632 )
  Other, net       131     (195 )   (384 )   317     (131 )
Total other expense, net       (1,567 )   (1,597 )   (2,534 )   (1,065 )   (6,763 )
                     
Income before provision for income taxes     113,493     136,039     115,205     103,221     467,958  
                     
Provision for income taxes       25,990     33,193     27,880     23,947     111,010  
                     
Net income     $ 87,503   $ 102,846   $ 87,325   $ 79,274   $ 356,948  
                     

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