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Hub Group, Inc. Reports Fourth Quarter 2023 Results

Highlights:        

  • Completed 2:1 stock split; Q4 Diluted earnings per share (EPS) presented post-split of $0.46 and $2.62 for the full year
  • Adjusting for acquisition related expenses of $5.1 million, Q4 adjusted EPS (non-GAAP) of $0.54 and $2.68 for full year
  • Full year revenue of $4.2 billion; Fourth quarter revenue of $1.0 billion
  • GAAP Quarterly operating income of $29 million (3.0% of revenue)
  • Significantly increased our Final Mile business heading into 2024 through the acquisition of Forward Air Final Mile (“FAFM”)
  • Executing on Capital Allocation Plan including $26 million of shares purchased during the quarter
  • Introduced 2024 outlook with expected revenue of $4.6 billion to $5.0 billion and diluted EPS of $2.00 to $2.50

OAK BROOK, Ill., Feb. 01, 2024 (GLOBE NEWSWIRE) —  Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2023 net income of $29 million, and diluted earnings per share of $0.46. Net income for fourth quarter 2022 was $79 million, or $1.21 per diluted share. Fourth quarter results were impacted by acquisition related expenses of $5.1 million (pre-tax) ($0.08 per share tax effected) related to the purchase of FAFM in December. Full year 2023 net income was $168 million, or $2.62 per diluted share.

“I am very proud of the way the organization supported our customers while delivering our second-best financial performance in the company’s history during a very challenging year. We continue to implement key strategic priorities that position us to grow for the long term, while keeping a significant focus on managing our cost structure. At the end of 2023, we continued to execute on our growth focused capital allocation plan acquiring Forward Air Final Mile, which adds new capabilities in appliance delivery and installation, while continuing to drive diversification into non-asset based logistics services, while also purchasing $26 million of our stock. We are excited to continue the momentum and deliver for our customers and shareholders in 2024,” said Phil Yeager, Hub Group’s President and Chief Executive Officer.   

Fourth Quarter and Full Year 2023 Results

Consolidated revenue for the fourth quarter of 2023 was $1.0 billion as compared to $1.3 billion in fourth quarter 2022. Full year 2023 revenue was $4.2 billion, down 21% compared to 2022 revenue of $5.3 billion. The decline in quarterly revenue was driven by changes in customer rates and volumes in our ITS and Logistics Segments. Purchased transportation and warehousing costs declined as compared to prior year due to lower volumes, reductions in third-party carrier costs and a higher percentage of insourced drayage. Salaries and benefits costs decreased relative to the prior year due to a $16 million reduction in office employee compensation due to lower headcount and lower incentive compensation expense, partially offset by $3 million of incremental expense for our drivers as increased productivity led to more insourced drayage. General and administrative expenses increased $2 million as compared to the prior year, driven by the acquisition related expenses of $5 million to purchase FAFM, partially offset by lower legal claim reserves and improved cost management. Depreciation and amortization expense increased as compared to prior year due to investments in our container and tractor fleets as well as acquisitions. Operating income for the quarter was $29 million (3% of revenue) as compared to $104 million (8% of revenue) in the prior year. EBITDA (non-GAAP) for the quarter was $78 million.  

Fourth quarter Intermodal and Transportation Solutions (“ITS”) Segment revenue was $576 million, while full year revenue was $2.5 billion. Intermodal volume for the quarter decreased 11.6% as compared to prior year due to continued low transportation demand and an oversupply of truckload carrier capacity. Intermodal revenue declined due to lower volume, lower customer rates and lower accessorial revenue, but was offset by the resilience of our dedicated service line. ITS operating income decreased to $12 million (2.1% of revenue) due to lower customer rates, volume and accessorials. These headwinds were partially offset by lower drayage costs, rail expenses and equipment costs. In fourth quarter 2023 we increased the portion of drayage handled on our own fleet to 80% as compared to 65% in the prior year.

Fourth quarter Logistics Segment revenue was $438 million, as compared to $507 million in the prior year. Full year revenue for the Logistics Segment was $1.8 billion. The decline in quarterly revenue compared to prior year was due to lower revenue in all service lines driven by 3.8% lower volumes and rates in our more transactional brokerage services as well as higher inventories and lower demand in our contractual service lines. Fourth quarter operating income was 3.9% of revenue as compared to 5.7% last year. Operating income was $17 million as compared to $29 million last year, as lower revenue was partially offset by lower purchased transportation costs and our yield management initiatives.

Capital expenditures for the fourth quarter of 2023 totaled $34 million as we continued to invest in our tractor and trailer fleet as well as expanding our multipurpose warehouse footprint. As of December 31, 2023, we had cash and cash equivalents of $187 million following the $261 million spend for the FAFM acquisition completed in December.  

2024 Outlook

We expect our 2024 diluted earnings per share will range from $2.00 to $2.50. We estimate revenue will be approximately $4.6 to $5.0 billion. We project our effective tax rate for the year will be approximately 24%. We expect capital expenditures for containers, tractors, warehousing equipment and technology will range from $55 million to $75 million.

Non-GAAP Financial Measures

In this press release, we present certain non-GAAP financial measures. As required by the rules of the Securities and Exchange Commission (“SEC”), we have provided herein a reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, along with an explanation why management believes these non-GAAP financial measures provide relevant and useful information. These non-GAAP financial measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are 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 February 1, 2024 to discuss our fourth quarter 2023 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 Kevin Beth, 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/BIeeaae6d02102421ea6f53479bff39a89 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 facts are forward-looking statements, provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995. 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 filings it makes with the SEC from time to time, including those discussed under the “Risk Factors” section in Hub Group’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. Hub Group assumes no obligation to update any such forward-looking statements.

SOURCE:   Hub Group, Inc.

CONTACT: Laura Simek of Hub Group, Inc., +1-630-271-3833

HUB GROUP, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(in thousands, except per share amounts)  
(unaudited)  
                         
              Three Months Ended December 31,  
                2023       2022    
                % of     % of  
              Amount Revenue   Amount Revenue  
Operating revenue       $ 985,023   100.0%     $ 1,285,503   100.0%    
                         
Operating expenses:                  
  Purchased transportation and warehousing       742,405   75.4%       955,204   74.3%    
  Salaries and benefits         135,569   13.7%       147,106   11.4%    
  Depreciation and amortization       36,624   3.7%       34,714   2.7%    
  Insurance and claims         12,999   1.3%       20,511   1.6%    
  General and administrative         29,260   3.0%       26,760   2.1%    
  Gain on sale of assets, net         (1,236 ) -0.1%       (3,079 ) -0.2%    
Total operating expenses         955,621   97.0%       1,181,216   91.9%    
                         
Operating income         29,402   3.0%       104,287   8.1%    
                         
Other income (expense):                  
  Interest expense         (3,812 ) -0.4%       (2,206 ) -0.2%    
  Interest income         3,709   0.4%       825   0.1%    
  Other, net         478   0.0%       315   0.0%    
Total other income (expense), net       375   0.0%       (1,066 ) -0.1%    
                         
Income before provision for income taxes       29,777   3.0%       103,221   8.0%    
                         
Provision for income taxes         992   0.1%       23,947   1.9%    
                         
Net income       $ 28,785       $ 79,274      
                         
Earnings per share                  
  Basic       $ 0.47       $ 1.22      
  Diluted       $ 0.46       $ 1.21      
                         
Basic weighted average number of shares outstanding       61,850         64,794      
Diluted weighted average number of shares outstanding       62,562         65,630      
                         
HUB GROUP, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(in thousands, except per share amounts)  
(unaudited)  
                         
              Years Ended December 31,  
                2023       2022    
                % of     % of  
              Amount Revenue   Amount Revenue  
Operating revenue       $ 4,202,585   100.0%     $ 5,340,490   100.0%    
                         
Operating expenses:                  
  Purchased transportation and warehousing       3,145,595   74.8%       4,036,503   75.6%    
  Salaries and benefits         553,326   13.2%       543,010   10.2%    
  Depreciation and amortization       143,523   3.4%       131,789   2.5%    
  Insurance and claims         49,040   1.2%       58,064   1.1%    
  General and administrative         105,705   2.5%       120,579   2.2%    
  Gain on sale of assets, net         (6,835 ) -0.2%       (24,176 ) -0.5%    
Total operating expenses         3,990,354   94.9%       4,865,769   91.1%    
                         
Operating income         212,231   5.1%       474,721   8.9%    
                         
Other income (expense):                  
  Interest expense         (13,435 ) -0.3%       (7,506 ) -0.1%    
  Interest income         10,011   0.2%       874   0.0%    
  Other, net         397   0.0%       (131 ) -0.0%    
Total other expense, net         (3,027 ) -0.1%       (6,763 ) -0.1%    
                         
Income before provision for income taxes       209,204   5.0%       467,958   8.8%    
                         
Provision for income taxes         41,676   1.0%       111,010   2.1%    
                         
Net income       $ 167,528       $ 356,948      
                         
Earnings per share                  
  Basic       $ 2.65       $ 5.37      
  Diluted       $ 2.62       $ 5.32      
                         
Basic weighted average number of shares outstanding       63,324         66,418      
Diluted weighted average number of shares outstanding       63,954         67,118      
                         
HUB GROUP, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
                December 31,   December 31,  
                  2023       2022    
                (unaudited)      
ASSETS                
  CURRENT ASSETS:            
    Cash and cash equivalents   $ 187,270     $ 286,642    
    Accounts receivable trade, net     600,197       716,190    
    Accounts receivable other     3,358       3,967    
    Prepaid taxes       17,331       16,987    
    Prepaid expenses and other current assets   41,089       32,914    
        TOTAL CURRENT ASSETS     849,245       1,056,700    
                       
  Restricted investments       20,763       18,065    
  Property and equipment, net     791,692       783,683    
  Right-of-use assets – operating leases     210,742       102,114    
  Right-of-use assets – financing leases     2,522       1,194    
  Other intangibles, net       304,607       197,386    
  Goodwill         733,695       629,402    
  Other assets       22,781       21,537    
        TOTAL ASSETS   $ 2,936,047     $ 2,810,081    
                       
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
  CURRENT LIABILITIES:          
    Accounts payable trade   $ 349,378     $ 344,751    
    Accounts payable other     14,471       15,563    
    Accrued payroll       21,731       66,669    
    Accrued other       121,253       132,324    
    Lease liability – operating leases     44,690       29,547    
    Lease liability – financing leases     1,579       1,175    
    Current portion of long term debt     105,108       101,741    
        TOTAL CURRENT LIABILITIES   658,210       691,770    
                       
  Long term debt       245,574       240,724    
  Non-current liabilities       55,287       43,505    
  Lease liability – operating leases     177,699       78,557    
  Lease liability – financing leases     865          
  Deferred taxes       163,767       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; 75,524,189        
        shares issued in both 2023 and 2022; 62,200,921        
        shares outstanding in 2023 and 65,868,145 shares outstanding in 2022.   755       755    
      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     225,288       207,823    
    Purchase price in excess of predecessor basis, net of tax        
      benefit of $10,306       (15,458 )     (15,458 )  
    Retained earnings       1,949,110       1,781,582    
    Accumulated other comprehensive loss   (129 )     (214 )  
    Treasury stock; at cost, 13,323,268 shares in 2023        
      and 9,656,044 shares in 2022     (524,927 )     (374,892 )  
      TOTAL STOCKHOLDERS’ EQUITY   1,634,645       1,599,602    
        TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,936,047     $ 2,810,081    
                       
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                     
                Years Ended December 31,
                  2023       2022  
                     
                     
Cash flows from operating activities:        
  Net income     $ 167,528     $ 356,948  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:      
      Depreciation and amortization     184,449       153,726  
      Impairment of right-of-use asset     2,012       5,874  
      Deferred taxes       9,587       4,448  
      Compensation expense related to share-based compensation plans   21,348       20,426  
      Gain on sale of assets, net     (6,835 )     (24,176 )
  Changes in operating assets and liabilities, net of acquisitions:      
      Restricted investments     (2,698 )     6,191  
      Accounts receivable, net     145,088       8,298  
      Prepaid taxes       (344 )     (14,796 )
      Prepaid expenses and other current assets   (5,974 )     (3,111 )
      Other assets       (3,732 )     (4,231 )
      Accounts payable       1,215       (89,103 )
      Accrued expenses       (63,626 )     57,613  
      Non-current liabilities     (25,860 )     (19,944 )
      Net cash provided by operating activities   422,158       458,163  
                     
Cash flows from investing activities:        
  Proceeds from sale of equipment     27,717       42,929  
  Purchases of property and equipment     (140,068 )     (219,140 )
  Acquisitions, net of cash acquired     (260,810 )     (102,661 )
      Net cash used in investing activities   (373,161 )     (278,872 )
                     
Cash flows from financing activities:        
  Purchase of treasury stock     (143,770 )     (75,000 )
  Repayments of long term debt     (105,771 )     (111,482 )
  Stock withheld for payments of withholding taxes   (10,148 )     (8,312 )
  Finance lease payments       (2,708 )     (2,093 )
  Purchase of treasury stock from related party         (34,767 )
  Proceeds from issuance of debt     113,988       179,195  
      Net cash used in financing activities   (148,409 )     (52,459 )
                     
                     
  Effect of exchange rate changes on cash and cash equivalents   40       26  
                     
Net increase in cash and cash equivalents   (99,372 )     126,858  
Cash and cash equivalents beginning of period   286,642       159,784  
Cash and cash equivalents end of period   $ 187,270     $ 286,642  
                     
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
               
  Three Months   Years
  Ended December 31,   Ended December 31,
Operating Revenue   2023       2022       2023       2022  
Intermodal and Transportation Solutions $ 576,474     $ 804,709     $ 2,495,663     $ 3,312,431  
Logistics   437,857       507,043       1,820,856       2,121,818  
Inter-segment eliminations   (29,308 )     (26,249 )     (113,934 )     (93,759 )
Total operating revenue $ 985,023     $ 1,285,503     $ 4,202,585     $ 5,340,490  
               
               
  Three Months   Years
  Ended December 31,   Ended December 31,
Operating Income   2023       2022       2023       2022  
Intermodal and Transportation Solutions $ 12,141     $ 75,468     $ 106,780     $ 348,537  
Logistics   17,261       28,819       105,451       126,184  
Total operating income $ 29,402     $ 104,287     $ 212,231     $ 474,721  
               
               
  Three Months   Years
  Ended December 31,   Ended December 31,
Depreciation and Amortization   2023       2022       2023       2022  
Intermodal and Transportation Solutions $ 27,483     $ 26,501     $ 109,234     $ 102,279  
Logistics   9,141       8,213       34,289       29,510  
Total depreciation and amortization $ 36,624     $ 34,714     $ 143,523     $ 131,789  
               
RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
               
  Three Months   Years
  Ended December 31,   Ended December 31,
               
    2023     2022     2023     2022
               
Net Income $ 28,785   $ 79,274   $ 167,528   $ 356,948
               
Interest Expense, net   103     1,381     3,424     6,632
               
Depreciation and Amortization   47,674     43,313     184,449     153,726
               
Provision for Income Taxes   992     23,947     41,676     111,010
               
EBITDA $ 77,554   $ 147,915   $ 397,077   $ 628,316
               

By providing this non-GAAP measure of EBITDA, management intends to provide investors with a meaningful, consistent comparison of the Company’s profitability for the periods presented.

 
HUB GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts)
(unaudited)
 
The following is a reconciliation of GAAP earnings to Non-GAAP earnings, excluding certain items for earnings before tax (pre-tax), net income (after-tax) and diluted earnings per share (per share):
 
          Three Months Ended   Twelve Months Ended
          December 31, 2023   December 31, 2023
           
          Pre-Tax   After-Tax   Per Share   Pre-Tax   After-Tax   Per Share
GAAP Earnings   $ 29.8   $ 28.8   $ 0.46   $ 209.2   $ 167.5   $ 2.62
Acquisition related expenses     5.1     4.9   $ 0.08     5.1     4.1   $ 0.06
Adjusted Earnings   $ 34.9   $ 33.7   $ 0.54   $ 214.3   $ 171.6   $ 2.68
                               
                               
          Three Months Ended   Twelve Months Ended
          December 31, 2022   December 31, 2022
           
          Pre-Tax   After-Tax   Per Share   Pre-Tax   After-Tax   Per Share
GAAP Earnings   $ 103.2   $ 79.3   $ 1.21   $ 468.0   $ 356.9   $ 5.32
Acquisition related expenses           $     3.1     2.4   $ 0.04
Adjusted Earnings   $ 103.2   $ 79.3   $ 1.21   $ 471.1   $ 359.3   $ 5.36
                               

By providing this non-GAAP measure of Adjusted Earnings, management intends to provide investors with a useful measure of Hub Group’s performance that excludes certain acquisition-related items and allowing better evaluation of underlying business performance and period-to-period comparability.

Acquisition-related expenses are comprised of banker fees, legal fees, insurance fees and other professional service fees incurred as part of the process of closing the acquisitions of Forward Air Final Mile in 2023 and TAGG Logistics in 2022.

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