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Hub Group, Inc. Reports Fourth Quarter and Full Year 2022 Results

Highlights:

  • Diluted earnings per share (EPS) of $2.42 for the quarter, and $10.64 for the full year which is growth of 110%
  • Full year revenue of $5.3 billion, up 26%, with double-digit growth in all business lines; Fourth quarter revenue of $1.3 billion
  • Quarterly operating income of $104 million (8.1% of revenue) driven by diversification of our business and focus on transportation cost containment, yield management and operating efficiency
  • Ended the quarter with cash and cash equivalents of $287 million
  • Introduced 2023 outlook, with expected revenue of $5.2-$5.4 billion and diluted EPS of $7.00-$8.00

OAK BROOK, Ill., Feb. 02, 2023 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2022 net income of $79 million, and diluted earnings per share of $2.42. Net income for fourth quarter 2021 was $84 million, or $2.48 per diluted share. Full year 2022 net income was $357 million, or $10.64 per diluted share.

“Hub Group had a record year in 2022, delivering 26% revenue growth while more than doubling our earnings per share. We grew ITS to over $3 billion in revenue and grew both Brokerage and Logistics to $1 billion in revenue, while we supported our customers with high service levels and innovative supply chain solutions. Our strategy of service line diversification, and our focus on transportation cost containment, yield improvement and operating efficiency led to a significant increase in profitability. Market conditions softened during the quarter, but we anticipate demand will return by mid-2023. 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.

Fourth Quarter and Full Year 2022 Results

Revenue for the fourth quarter of 2022 increased by 2% to $1.3 billion compared to fourth quarter 2021. Full year 2022 revenue was $5.3 billion, up 26% as compared to 2021. Gross margin for the quarter was 15.9% of revenue, with operating income of $104 million (8.1% of revenue). EBITDA (non-GAAP)1 for the quarter was $148 million.

Fourth quarter Intermodal and Transportation Solutions (“ITS”) revenue increased 5% to $802 million, while full year revenue grew to $3.3 billion. Intermodal revenue per load for the quarter increased 19% and volume decreased 12% as compared to prior year. Volume for the quarter was impacted by softer demand conditions as retailers’ inventory levels improved from the lows seen in 2021, which impacted demand for our services. ITS gross margin decreased compared to the prior year due to lower volume, higher transportation and equipment costs, and lower surcharges, partially offset by higher pricing and accessorial revenue.

Fourth quarter Logistics revenue increased 9% to $245 million due to organic growth with existing customers, and revenue from recently acquired TAGG Logistics, LLC (“TAGG”), partially offset by exited customers. Revenue for the full year increased 11% to $989 million. Fourth quarter gross margin increased due to growth with existing customers, new business onboardings, yield management initiatives and the contribution from TAGG, partially offset by higher warehousing and transportation costs.

Full year Truck Brokerage revenue grew 52% to $1.0 billion due to growth in revenue per load and the acquisition of Choptank but declined 11% in the fourth quarter to $238 million as higher transaction volumes were more than offset by lower revenue per load. Gross margin for the quarter decreased relative to fourth quarter 2021 due to lower revenue per load, partially offset by lower costs for purchased transportation.

Costs and expenses increased to $100 million in the fourth quarter of 2022 due to incremental operating costs from TAGG, higher expenses for outside services, and lower gains on the sale of equipment as compared to prior year, partially offset by lower compensation expense.

Capital expenditures for the fourth quarter of 2022 totaled $61 million. As of December 31, 2022, we had cash and cash equivalents of $287 million.

2023 Outlook

We expect our 2023 diluted earnings per share will range from $7.00 to $8.00. We estimate revenue will range from $5.2 to $5.4 billion, and that gross margin as a percentage of revenue will range from 14.5% to 15.0%. We estimate our costs and expenses will range from $420 to $440 million for the year. We project our effective tax rate for the year will be 24-25%. We expect capital expenditures for containers, tractors, warehousing equipment and technology will range from $170 to $190 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 February 2, 2023, to discuss our fourth 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/BI0e495bb799694c1cb3763152fcd01ebf 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, 2021, 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 December 31,
        2022       2021  
        % of     % of
      Amount Revenue   Amount Revenue
Revenue $ 1,285,503   100.0 %   $ 1,256,403   100.0 %
               
Transportation costs   1,081,086   84.1 %     1,043,671   83.1 %
  Gross margin   204,417   15.9 %     212,732   16.9 %
               
Costs and expenses:          
  Salaries and benefits   62,422   4.9 %     70,544   5.6 %
  General and administrative   25,684   2.0 %     13,418   1.1 %
  Depreciation and amortization   12,024   0.9 %     11,185   0.9 %
    Total costs and expenses   100,130   7.8 %     95,147   7.6 %
               
Operating income   104,287   8.1 %     117,585   9.3 %
               
Other income (expense):          
  Interest expense   (1,381 ) -0.1 %     (1,747 ) -0.1 %
  Other, net   315   0.0 %     137   0.0 %
    Total other expense, net   (1,066 ) -0.1 %     (1,610 ) -0.1 %
               
Income before provision for income taxes   103,221   8.0 %     115,975   9.2 %
               
Provision for income taxes   23,947   1.9 %     31,661   2.5 %
               
Net income $ 79,274       $ 84,314    
               
Earnings per share          
  Basic $ 2.45       $ 2.52    
  Diluted $ 2.42       $ 2.48    
               
Basic weighted average number of shares outstanding   32,397         33,456    
Diluted weighted average number of shares outstanding   32,815         33,983    
               
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
               
      Twelve Months Ended December 31,
        2022       2021  
        % of     % of
      Amount Revenue   Amount Revenue
Revenue $ 5,340,490   100.0 %   $ 4,232,383   100.0 %
               
Transportation costs   4,450,985   83.3 %     3,632,743   85.8 %
  Gross margin   889,505   16.7 %     599,640   14.2 %
               
Costs and expenses:          
  Salaries and benefits   264,891   5.0 %     247,240   5.9 %
  General and administrative   103,933   1.9 %     76,476   1.8 %
  Depreciation and amortization   45,960   0.9 %     37,467   0.9 %
    Total costs and expenses   414,784   7.8 %     361,183   8.6 %
               
Operating income   474,721   8.9 %     238,457   5.6 %
               
Other income (expense):          
  Interest expense   (6,632 ) -0.1 %     (7,302 ) -0.2 %
  Other, net   (131 ) -0.0 %     (245 ) -0.0 %
    Total other expense, net   (6,763 ) -0.1 %     (7,547 ) -0.2 %
               
Income before provision for income taxes   467,958   8.8 %     230,910   5.5 %
               
Provision for income taxes   111,010   2.1 %     59,436   1.4 %
               
Net income $ 356,948       $ 171,474    
               
Earnings per share          
  Basic $ 10.75       $ 5.13    
  Diluted $ 10.64       $ 5.06    
               
Basic weighted average number of shares outstanding   33,209         33,434    
Diluted weighted average number of shares outstanding   33,559         33,892    
               
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
          December 31,   December 31,
            2022       2021  
               
ASSETS      
  CURRENT ASSETS:      
    Cash and cash equivalents $ 286,642     $ 159,784  
    Accounts receivable trade, net   716,190       701,512  
    Accounts receivable other   3,967       3,022  
    Prepaid taxes   16,987       2,191  
    Prepaid expenses and other current assets   32,914       27,779  
        TOTAL CURRENT ASSETS   1,056,700       894,288  
               
  Restricted investments   18,065       24,256  
  Property and equipment, net   783,683       681,451  
  Right-of-use assets – operating leases   102,114       44,036  
  Right-of-use assets – financing leases   1,194       1,252  
  Other intangibles, net   197,386       196,672  
  Goodwill   629,402       576,913  
  Other assets   21,537       18,426  
        TOTAL ASSETS $ 2,810,081     $ 2,437,294  
               
               
LIABILITIES AND STOCKHOLDERS’ EQUITY      
  CURRENT LIABILITIES:      
    Accounts payable trade $ 344,751     $ 424,923  
    Accounts payable other   15,563       12,493  
    Accrued payroll   66,669       56,938  
    Accrued other   132,324       82,827  
    Lease liability – operating leases   29,547       11,364  
    Lease liability – financing leases   1,175       1,251  
    Current portion of long term debt   101,741       97,273  
        TOTAL CURRENT LIABILITIES   691,770       687,069  
               
  Long term debt   240,724       177,479  
  Non-current liabilities   43,505       41,572  
  Lease liability – operating leases   78,557       34,916  
  Deferred taxes   155,923       155,944  
               
  STOCKHOLDERS’ EQUITY:      
    Preferred stock, $.01 par value; 2,000,000 shares authorized;      
      no shares issued or outstanding in 2022 and 2021.          
    Common stock      
      Class A: $.01 par value; 97,337,700 shares authorized; 41,312,185 shares issued      
        in 2022 and 41,224,792 shares issued in 2021; 32,646,621 shares      
        outstanding in 2022 and 33,907,734 shares outstanding in 2021.   413       412  
      Class B: $.01 par value; 662,300 shares authorized;      
        574,903 shares issued and outstanding in 2022 and 662,296 shares issued and   6       7  
        outstanding in 2021.      
    Additional paid-in capital   208,165       189,256  
    Purchase price in excess of predecessor basis, net of tax      
    benefit of $10,306   (15,458 )     (15,458 )
    Retained earnings   1,781,582       1,424,634  
    Accumulated other comprehensive loss   (214 )     (207 )
    Treasury stock; at cost, 8,665,564 shares in 2022      
      and 7,317,058 shares in 2021   (374,892 )     (258,330 )
      TOTAL STOCKHOLDERS’ EQUITY   1,599,602       1,340,314  
        TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,810,081     $ 2,437,294  
               
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
           
          Twelve Months Ended December 31,
            2022       2021  
               
               
Cash flows from operating activities:      
  Net income $ 356,948     $ 171,474  
  Adjustments to reconcile net income      
    to net cash provided by operating activities:      
      Depreciation and amortization   153,726       130,629  
      Impairment of ROU asset   5,874        
      Deferred taxes   4,448       (3,992 )
      Compensation expense related to share-based compensation plans   20,426       20,056  
      Gain on sale of assets   (24,176 )     (19,173 )
  Changes in operating assets and liabilities:      
      Restricted investments   6,191       (903 )
      Accounts receivable, net   8,298       (115,568 )
      Prepaid taxes   (14,796 )     (856 )
      Prepaid expenses and other current assets   (3,111 )     (647 )
      Other assets   (4,231 )     (2,883 )
      Accounts payable   (89,103 )     78,448  
      Accrued expenses   57,613       9,686  
      Non-current liabilities   (19,944 )     (13,436 )
        Net cash provided by operating activities   458,163       252,835  
               
Cash flows from investing activities:      
  Proceeds from sale of equipment   42,929       45,177  
  Purchases of property and equipment   (219,140 )     (132,952 )
  Cash used in acquisitions   (102,661 )     (122,360 )
        Net cash used in investing activities   (278,872 )     (210,135 )
               
Cash flows from financing activities:      
  Proceeds from issuance of debt   179,195       112,001  
  Repayments of long term debt   (111,482 )     (107,608 )
  Purchase of treasury stock   (75,000 )      
  Purchase of treasury stock from related party   (34,767 )      
  Stock withheld for payments of withholding taxes   (8,312 )     (9,123 )
  Finance lease payments   (2,093 )     (2,682 )
        Net cash used in financing activities   (52,459 )     (7,412 )
               
               
  Effect of exchange rate changes on cash and cash equivalents   26       (10 )
               
Net increase in cash and cash equivalents   126,858       35,278  
Cash and cash equivalents beginning of period   159,784       124,506  
Cash and cash equivalents end of period $ 286,642     $ 159,784  
               
HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
               
  Three Months   Twelve Months
  Ended December 31,   Ended December 31,
               
    2022     2021     2022     2021
               
Intermodal and transportation solutions $ 802,268   $ 764,292   $ 3,301,835   $ 2,656,128
               
Logistics   244,998     223,767     988,922     887,388
               
Truck brokerage   238,237     268,344     1,049,733     688,867
               
Total revenue $ 1,285,503 $ 1,256,403 $ 5,340,490 $ 4,232,383
               
RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
               
  Three Months
  Ended December 31,
          Change   Change
    2022     2021   $   %
               
Net income $ 79,274   $ 84,314   $ (5,040 )   -6.0 %
               
Interest expense   1,381     1,747     (366 )   -21.0 %
               
Depreciation and amortization   43,313     34,670     8,643     24.9 %
               
Provision for income taxes   23,947     31,661     (7,714 )   -24.4 %
               
EBITDA $ 147,915   $ 152,392   $ (4,477 )   -2.9 %
               
RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
               
  Twelve Months
  Ended December 31,
          Change   Change
    2022     2021   $   %
               
Net income $ 356,948   $ 171,474   $ 185,474     108.2 %
               
Interest expense   6,632     7,302     (670 )   -9.2 %
               
Depreciation and amortization   153,726     130,629     23,097     17.7 %
               
Provision for income taxes   111,010     59,436     51,574     86.8 %
               
EBITDA $ 628,316   $ 368,841   $ 259,475     70.3 %
               

(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.

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