Hub Group, Inc. Reports Record Second Quarter 2019 Results

Highlights of the quarter

• Record EPS from continuing operations of $0.87, 71% growth
• 31% increase in gross margin
• 60% increase in operating income
• Operating margin improved 160 basis points to 4.4%
• EBITDA increased 55% to $69.4 million

OAK BROOK, Ill., July 30, 2019 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2019 net income of $29.2 million, or diluted earnings per share of $0.87. Income from continuing operations for the second quarter 2018 was $17.2 million, or $0.51 per diluted share.   

Results of Continuing Operations

Revenue for the current quarter increased by 3% to $921.2 million compared with $894.7 million for the second quarter 2018 as a result of our success in providing multimodal solutions to our customers and the addition of the CaseStack business in December 2018.  Operating income for the current quarter increased 60% to $40.7 million versus $25.4 million for the second quarter 2018, primarily as a result of improved yield management and our intense focus on reducing costs while maintaining the highest levels of service. Operating margin expanded to 4.4% for the current quarter, as compared to 2.8% in the prior year quarter.

Second quarter intermodal revenue increased 1% to $542.9 million due primarily to a continued focus on yield management and enhanced efficiency, partially offset by a 7% decline in volume. Volume was down compared to the prior year due to a softening demand environment, increased truckload and intermodal competition, and a 2% volume decrease from lane cancellations and weather disruption. Intermodal gross margin increased compared to the second quarter of 2018 primarily due to our yield management strategy, improved efficiency and better purchasing, partially offset by decreased volumes and rail cost increases.

Truck brokerage revenue decreased 7% to $107.1 million in the second quarter of 2019 compared to the same quarter of last year.  Truck brokerage handled 18% more loads while fuel, price and mix combined were down 25% due primarily to the addition of the CaseStack LTL brokerage business.  Contractual truckload volume represented 86% of total truckload volume compared to 81% in the second quarter of 2018.   Truck brokerage gross margin increased due to a higher load count, further benefits from our new operating model and yield management strategy, as well as our new technology platform.    

Second quarter logistics revenue grew 15% to $193.5 million.  Revenue and gross margin expanded due to the addition of CaseStack, benefits from continuous improvements and cross selling to our customers and improved yield management. 

Dedicated revenue increased 5% to $77.7 million compared to the same quarter in the prior year due to improved pricing and growth with new accounts which was offset partially by lost business.  Dedicated gross margin improved compared to the second quarter of 2018 due to implementation of our yield management processes and improved operational discipline.  We ended the quarter with approximately 1,300 tractors and 5,200 trailers for Dedicated. 

Costs and expenses increased to $92.0 million in the second quarter of 2019 compared to $75.6 million in the second quarter of 2018 due primarily to costs and expenses of $12.7 million related to CaseStack (which includes $2.3 million of non-cash amortization expense), the absence of a $3.6 million Dedicated contingent earn out adjustment in the prior year, partially offset by a decrease of $1.0 million in compensation expense. Costs and expenses include a total of $3.4 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.6 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.

Results of Discontinued Operations

Income from discontinued operations related to the sale of our Mode segment for the second quarter of 2018 was $4.9 million, or $0.15 per diluted share. 

Cash Flow and Capitalization

Our capital expenditures for the second quarter 2019 totaled $11.7 million, primarily for tractors and technology investments.  At June 30, 2019, we had cash and cash equivalents of $150 million.    

2019 Outlook

We expect that our 2019 diluted earnings per share will range from $3.30 to $3.40. We estimate mid-single digit revenue growth for the full year. We expect gross margin as a percentage of sales to range from 13.9% to 14.3% in the second half of the year. We estimate our quarterly costs and expenses will range from $96 million to $98 million in the back half of the year.  We expect annual amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.6 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.5 million in 2019. We project our effective tax rate for 2019 will range from 25% to 26%.  We forecast we will spend between $100 million and $110 million on capital expenditures in 2019.

Non-GAAP Financial Measure

As required by the rules of the Securities and Exchange Commission (“SEC”), we provide a reconciliation of the non-GAAP financial measure contained in this press release to the most directly comparable measure under GAAP, which is set forth in the attached table.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Tuesday, July 30, 2019 to discuss its second quarter 2019 results.

Hosting the conference call will be Dave Yeager, Chief Executive Officer.  Also participating on the call will be Phil Yeager, President and Chief Operating Officer, and Terri Pizzuto, Executive Vice President and Chief Financial Officer.

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 register at http://www.yourconferencecenter.com/r.aspx?p=1&a=USsertzOHdGtXM. Registrants will be issued a passcode and PIN to use when dialing into the live call which will provide quickest access to the conference.  You may register at any time, including up to and after the call start time.  On the day of the call, dial (888) 206-4064 approximately ten minutes prior to the scheduled call time; enter the participant passcode and 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, including statements about Hub Group’s or management’s earnings guidance, intentions, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and subject to risks, and should be viewed with caution. Forward-looking statements may contain words such as “expects”, “expected”, “believe”, “projected”, “estimate”, or similar words, and are based on management’s experience and perception of historical trends, current conditions, and anticipated future developments, as well as other factors believed to be appropriate. We believe these statements and the assumptions and estimates contained in this release are reasonable based on information that is currently available to us. Such statements should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. Factors that could cause actual results to differ materially include intermodal costs and prices, the integration of any acquisitions and expenses relating thereto, the future performance of Hub’s Intermodal, Truck Brokerage, Dedicated and Logistics business lines, driver shortages, the amount and timing of strategic investments or divestitures by Hub, the failure to implement and integrate critical information technology systems, cyber security incidents, retail customers encountering adverse economic conditions and the factors listed from time to time in Hub Group’sSEC reports including, but not limited to, the annual report on Form 10-K for the year ended December 31, 2018.  Hub Group assumes no liability to update any such forward-looking statements.

SOURCE:  Hub Group, Inc.

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
					Three Months Ended June 30,
					2019						2018
								% of						% of
					Amount			Revenue			Amount			Revenue
Revenue					$	921,163		100.0	%		$	894,734		100.0	%
Transportation costs						788,460		85.6	%			793,743		88.7	%
	Gross margin					132,703		14.4	%			100,991		11.3	%
Costs and expenses:
	Salaries and benefits					60,859		6.6	%			54,068		6.1	%
	General and administrative					24,028		2.6	%			17,794		2.0	%
	Depreciation and amortization					7,095		0.8	%			3,723		0.4	%
		Total costs and expenses				91,982		10.0	%			75,585		8.5	%
Operating income						40,721		4.4	%			25,406		2.8	%
Other income (expense):
	Interest expense					(2,690	)	-0.3	%			(2,187	)	-0.2	%
	Interest and dividend income					595		0.1	%			14		0.0	%
	Other, net					(30	)	0.0	%			(182	)	0.0	%
		Total other expense				(2,125	)	-0.2	%			(2,355	)	-0.2	%
Income from continuing operations before income taxes						38,596		4.2	%			23,051		2.6	%
Provision for income taxes						9,379		1.0	%			5,897		0.7	%
Income from continuing operations						29,217		3.2	%			17,154		1.9	%
Income from discontinued operations, net of income taxes						–						4,897
Net income					$	29,217					$	22,051
Earnings per share from continuing operations
	Basic				$	0.87					$	0.51
	Diluted				$	0.87					$	0.51
Earnings per share from discontinued operations
	Basic				$	–					$	0.15
	Diluted				$	–					$	0.15
Earnings per share net income
	Basic				$	0.87					$	0.66
	Diluted				$	0.87					$	0.66
Basic weighted average number of shares outstanding						33,552						33,389
Diluted weighted average number of shares outstanding						33,715						33,562

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
					Six Months Ended June 30,
					2019						2018
								% of						% of
					Amount			Revenue			Amount			Revenue
Revenue					$	1,854,161		100.0	%		$	1,732,076		100.0	%
Transportation costs						1,594,169		86.0	%			1,540,046		88.9	%
	Gross margin					259,992		14.0	%			192,030		11.1	%
Costs and expenses:
	Salaries and benefits					122,887		6.7	%			106,373		6.2	%
	General and administrative					46,946		2.5	%			36,230		2.1	%
	Depreciation and amortization					13,849		0.7	%			7,486		0.4	%
		Total costs and expenses				183,682		9.9	%			150,089		8.7	%
Operating income						76,310		4.1	%			41,941		2.4	%
Other income (expense):
	Interest expense					(5,746	)	-0.3	%			(4,291	)	-0.2	%
	Interest and dividend income					968		0.1	%			25		0.0	%
	Other, net					(70	)	0.0	%			(231	)	0.0	%
		Total other expense				(4,848	)	-0.2	%			(4,497	)	-0.2	%
Income from continuing operations before income taxes						71,462		3.9	%			37,444		2.2	%
Provision for income taxes						18,351		1.0	%			9,221		0.6	%
Income from continuing operations						53,111		2.9	%			28,223		1.6	%
Income from discontinued operations, net of income taxes						–						9,995
Net income					$	53,111					$	38,218
Earnings per share from continuing operations
	Basic				$	1.58					$	0.84
	Diluted				$	1.58					$	0.84
Earnings per share from discontinued operations
	Basic				$	–					$	0.30
	Diluted				$	–					$	0.30
Earnings per share net income
	Basic				$	1.58					$	1.14
	Diluted				$	1.58					$	1.14
Basic weighted average number of shares outstanding						33,560						33,382
Diluted weighted average number of shares outstanding						33,650						33,520

 

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
						June 30,				December 31,
						2019				2018
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents				$	149,863			$	61,435
		Accounts receivable trade, net					421,139				477,088
		Other receivables					3,282				22,021
		Prepaid taxes					1,038				616
		Prepaid expenses and other current assets					11,602				27,533
				TOTAL CURRENT ASSETS			586,924				588,693
	Restricted investments						21,972				19,236
	Property and equipment, net						651,057				681,859
	Right-of-use assets – operating leases						32,165				–
	Right-of-use assets – financing leases						7,021				–
	Other intangibles, net						127,878				134,788
	Goodwill, net						484,568				483,584
	Other assets						18,534				16,738
				TOTAL ASSETS		$	1,930,119			$	1,924,898
LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade				$	233,399			$	272,859
		Accounts payable other					11,974				10,906
		Accrued payroll					41,402				55,535
		Accrued other					80,271				82,900
		Lease liability – operating leases					8,468				–
		Lease liability – financing leases					3,004				2,845
		Current portion of long term debt					98,601				101,713
				TOTAL CURRENT LIABILITIES			477,119				526,758
	Long term debt						199,194				229,071
	Non-current liabilities						34,537				29,619
	Lease liability – operating leases						25,351				–
	Lease liability – financing leases						3,384				4,739
	Deferred taxes						157,952				153,877
	STOCKHOLDERS’ EQUITY:
		Preferred stock, $.01 par value; 2,000,000 shares authorized;
			no shares issued or outstanding in 2019 and 2018				–				–
		Common stock
			Class A: $.01 par value; 97,337,700 shares authorized and
				41,224,792 shares issued in 2019 and 2018; 33,855,740 shares
				outstanding in 2019 and 33,793,709 shares outstanding in 2018			412				412
			Class B:  $.01 par value; 662,300 shares authorized;
				662,296 shares issued and outstanding in 2019 and 2018			7				7
		Additional paid-in capital					170,619				172,220
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306					(15,458	)			(15,458	)
		Retained earnings					1,125,541				1,072,456
		Accumulated other comprehensive loss					(178	)			(182	)
		Treasury stock; at cost, 7,369,052 shares in 2019
			and 7,431,083 shares in 2018				(248,361	)			(248,621	)
			TOTAL STOCKHOLDERS’ EQUITY				1,032,582				980,834
				TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,930,119			$	1,924,898

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
						Six Months Ended June 30,
						2019				2018
Cash flows from operating activities:
	Net income					$	53,111			$	38,218
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization				57,029				38,251
			Deferred taxes				4,272				11,767
			Compensation expense related to share-based compensation plans				8,687				6,982
			Contingent consideration adjustment				–				(3,571	)
			Gain on sale of assets				(1,526	)			(90	)
	Changes in operating assets and liabilities:
			Restricted investments				(2,736	)			74
			Accounts receivable, net				55,089				(29,748	)
			Prepaid taxes				(422	)			6,820
			Prepaid expenses and other current assets				15,932				9,935
			Other assets				(2,349	)			1,869
			Accounts payable				(38,391	)			9,878
			Accrued expenses				(14,620	)			4,857
			Non-current liabilities				1,187				2,382
				Net cash provided by operating activities			135,263				97,624
Cash flows from investing activities:
	Proceeds from sale of equipment						7,664				1,234
	Purchases of property and equipment						(28,712	)			(69,261	)
	Proceeds from the disposition of discontinued operations						19,439				–
	Cash used in acquisitions						(734	)			–
				Net cash used in investing activities			(2,343	)			(68,027	)
Cash flows from financing activities:
	Purchase of treasury stock						(7,282	)			–
	Proceeds from issuance of debt						18,335				58,161
	Repayments of long term debt						(51,324	)			(84,051	)
	Stock tendered for payments of withholding taxes						(2,746	)			(4,017	)
	Finance lease payments						(1,465	)			(1,483	)
				Net cash used in financing activities			(44,482	)			(31,390	)
	Effect of exchange rate changes on cash and cash equivalents						(10	)			(11	)
Net increase (decrease) in cash and cash equivalents							88,428				(1,804	)
Cash and cash equivalents beginning of period							61,435				28,557
Cash and cash equivalents end of period						$	149,863			$	26,753

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
			Three Months						Six Months
			Ended June 30,						Ended June 30,
			2019			2018			2019			2018
Intermodal			$	542,890		$	538,123		$	1,078,923		$	1,032,575
Truck brokerage				107,081			114,936			224,669			234,955
Logistics				193,463			167,822			396,725			330,297
Dedicated				77,729			73,853			153,844			134,249
	Total Revenue		$	921,163		$	894,734		$	1,854,161		$	1,732,076

 

HUB GROUP, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
	Three Months
	Ended, June 30,
									Change				Change
	2019				2018				$				%
Net income from continuing operations	$	29,217			$	17,154			$	12,063			70.3	%
Interest expense		2,690				2,187				503			23.0	%
Interest and dividend income		(595	)			(14	)			(581	)		4150.0	%
Other income, net		30				182				(152	)		-83.5	%
Depreciation and amortization		28,646				19,414				9,232			47.6	%
Provision for income taxes		9,379				5,897				3,482			59.0	%
EBITDA	$	69,367			$	44,820			$	24,547			54.8	%

 

HUB GROUP, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
	Six Months
	Ended, June 30,
									Change				Change
	2019				2018				$				%
Net income from continuing operations	$	53,111			$	28,223			$	24,888			88.2	%
Interest expense		5,746				4,291				1,455			33.9	%
Interest and dividend income		(968	)			(25	)			(943	)		3772.0	%
Other income, net		70				231				(161	)		-69.7	%
Depreciation and amortization		57,029				37,772				19,257			51.0	%
Provision for income taxes		18,351				9,221				9,130			99.0	%
EBITDA	$	133,339			$	79,713			$	53,626			67.3	%

CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

Source: Hub Group, Inc.