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Hub Group, Inc. Reports Second Quarter 2023 Results

Highlights:        

  • Diluted earnings per share (EPS) of $1.44 for the quarter
  • Second quarter revenue of $1.0 billion
  • Quarterly operating income of $62 million (6.0% of revenue) driven by performance of our Logistics Segment
  • Continued focus on return of capital with $100 million of shares repurchased in the quarter
  • Exceptionally strong balance sheet, ending the quarter with cash and cash equivalents of $342 million

OAK BROOK, Ill., July 27, 2023 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2023 net income of $47 million, and diluted earnings per share of $1.44.   Net income for second quarter 2022 was $103 million, or $3.03 per diluted share.

“Challenging market conditions have persisted throughout 2023 that have impacted demand for our services. We are seeing the benefits of our strategy to diversify and expand into less cyclical and non-asset-based services, with our Logistics Segment contributing nearly half of our operating income in the quarter, which has helped offset softer profitability at our ITS Segment. We performed well during this year’s intermodal bid season and are providing excellent service which has positioned us to grow as inventory levels normalize and demand increases. We returned $100 million of capital to our shareholders through share repurchases in the second quarter. We remain focused on managing our costs and capital structure and supporting our customers with great service while investing in our core business and technology to drive success in a variety of market conditions,” said Phil Yeager, Hub Group’s President and Chief Executive Officer.   

Second Quarter 2023 Results

Consolidated revenue for the second quarter of 2023 was $1.0 billion as compared to $1.4 billion in second quarter 2022. The decline in revenue was driven by changes in customer rate 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, partially offset by higher equipment and rail costs. Salaries and benefits costs increased $12 million relative to prior year due to $30 million of incremental expense related to growth of our driver and warehouse employee headcount, partially offset by an $18 million reduction in office employee compensation due to lower headcount and lower incentive compensation expense. General and administrative expense decreased as compared to prior year due to lower legal and acquisition-related outside services spending. 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 Logistics, LLC (“TAGG”). Operating income for the quarter was $62 million (6.0% of revenue) as compared to $138 million (9.8% of revenue) in the prior year. EBITDA (non-GAAP)1 for the quarter was $108 million.

Second quarter Intermodal and Transportation Solutions (“ITS”) Segment revenue was $615 million. Intermodal volume for the quarter decreased 17% as compared to prior year, driven by elevated retailer inventory levels and soft import activity that impacted demand for our services. Intermodal revenue per load was impacted by changes in customer rates, fuel and mix. ITS operating income decreased to $32 million (5.2% of revenue) as compared to $101 million (11.5% of revenue) in the prior year due to lower volume, lower customer rates, higher equipment costs and lower surcharges and accessorial income. These headwinds were partially offset by lower drayage costs as we increased the portion of drayage handled on our own fleet to 79% in second quarter 2023 as compared to 62% in the prior year, as well as an improvement in profitability at our Dedicated service line.

Second quarter Logistics Segment revenue was $454 million, as compared to $549 million in the prior year. The decline in revenue was driven by lower revenue per load in our brokerage service line and lower managed transportation service line revenue, partially offset by revenue from TAGG. Brokerage volumes were down slightly as compared to the prior year but increased relative to first quarter. Second quarter operating income was 6.7% of revenue as compared to 6.8% last year. Operating income was $30 million as compared to $37 million last year, as lower revenue was partially offset by lower purchased transportation costs and our yield management initiatives.

Capital expenditures for the second quarter of 2023 totaled $39 million. As of June 30, 2023, we had cash and cash equivalents of $342 million.  

2023 Outlook

We expect our 2023 diluted earnings per share will range from $5.80 to $6.40. We estimate revenue will range from $4.3 to $4.5 billion. We project our effective tax rate for the year will be 20.0-21.0%. 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 July 27, 2023 to discuss our second 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 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/BIc90f715b9f6743c8b6a0cc30dedd99b9

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: 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 June 30,
    2023     2022  
      % of     % of
    Amount Revenue   Amount Revenue
Operating revenue   $ 1,040,462   100.0 %   $ 1,401,456   100.0 %
             
Operating expenses:            
Purchased transportation and warehousing     763,609   73.4 %     1,062,983   75.9 %
Salaries and benefits     141,823   13.6 %     129,499   9.2 %
Depreciation and amortization     35,386   3.4 %     32,244   2.3 %
Insurance and claims     11,676   1.1 %     10,645   0.8 %
General and administrative     26,757   2.6 %     36,213   2.6 %
Gain on sale of assets, net     (859 ) -0.1 %     (7,764 ) -0.6 %
Total operating expenses     978,392   94.0 %     1,263,820   90.2 %
             
Operating income     62,070   6.0 %     137,636   9.8 %
             
Other income (expense):            
Interest expense, net     (3,116 ) -0.3 %     (1,407 ) -0.1 %
Interest income     2,087   0.2 %     5   0.0 %
Other, net     69   0.0 %     (195 ) -0.0 %
Total other expense, net     (960 ) -0.1 %     (1,597 ) -0.1 %
             
Income before provision for income taxes     61,110   5.9 %     136,039   9.7 %
             
Provision for income taxes     14,605   1.4 %     33,193   2.4 %
             
Net income   $ 46,505       $ 102,846    
             
Earnings per share            
Basic   $ 1.45       $ 3.06    
Diluted   $ 1.44       $ 3.03    
             
Basic weighted average number of shares outstanding     32,037         33,651    
Diluted weighted average number of shares outstanding     32,293         33,935    
             
 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
             
    Six Months Ended June 30,
    2023   2022
      % of     % of
    Amount Revenue   Amount Revenue
Operating revenue   $ 2,192,727   100.0 %   $ 2,699,579   100.0 %
             
Operating expenses:            
Purchased transportation and warehousing     1,630,540   74.4 %     2,058,248   76.2 %
Salaries and benefits     279,254   12.7 %     258,238   9.6 %
Depreciation and amortization     70,835   3.2 %     63,533   2.4 %
Insurance and claims     24,359   1.1 %     19,938   0.7 %
General and administrative     52,298   2.4 %     59,435   2.2 %
Gain on sale of assets, net     (4,834 ) -0.2 %     (12,509 ) -0.5 %
Total operating expenses     2,052,452   93.6 %     2,446,883   90.6 %
             
Operating income     140,275   6.4 %     252,696   9.4 %
             
Other income (expense):            
Interest expense, net     (6,086 ) -0.3 %     (3,110 ) -0.1 %
Interest income     3,463   0.2 %     9   0.0 %
Other, net     108   0.0 %     (63 ) -0.0 %
Total other expense, net     (2,515 ) -0.1 %     (3,164 ) -0.1 %
             
Income before provision for income taxes     137,760   6.3 %     249,532   9.3 %
             
Provision for income taxes     29,475   1.3 %     59,183   2.2 %
             
Net income   $ 108,285       $ 190,349    
             
Earnings per share            
Basic   $ 3.35       $ 5.66    
Diluted   $ 3.33       $ 5.61    
             
Basic weighted average number of shares outstanding     32,293         33,647    
Diluted weighted average number of shares outstanding     32,566         33,950    
             
 
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
    June 30,   December 31,
    2023   2022
    (unaudited)    
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents   $ 342,429     $ 286,642  
Accounts receivable trade, net     612,163       716,190  
Accounts receivable other     4,612       3,967  
Prepaid taxes     15,258       16,987  
Prepaid expenses and other current assets   15,445       32,914  
TOTAL CURRENT ASSETS     989,907       1,056,700  
         
Restricted investments     20,262       18,065  
Property and equipment, net     783,127       783,683  
Right-of-use assets – operating leases     167,681       102,114  
Right-of-use assets – financing leases     3,744       1,194  
Other intangibles, net     183,634       197,386  
Goodwill     629,407       629,402  
Other assets     22,280       21,537  
TOTAL ASSETS   $ 2,800,042     $ 2,810,081  
         
         
LIABILITIES AND STOCKHOLDERS’ EQUITY      
CURRENT LIABILITIES:        
Accounts payable trade   $ 293,005     $ 344,751  
Accounts payable other     12,213       15,563  
Accrued payroll     23,292       66,669  
Accrued other     128,825       132,324  
Lease liability – operating leases     35,687       29,547  
Lease liability – financing leases     2,365       1,175  
Current portion of long term debt     98,350       101,741  
TOTAL CURRENT LIABILITIES   593,737       691,770  
         
Long term debt     238,213       240,724  
Non-current liabilities     48,832       43,505  
Lease liability – operating leases     141,450       78,557  
Lease liability – financing leases     1,288        
Deferred taxes     165,786       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; 31,402,008 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     214,356       208,165  
Purchase price in excess of predecessor basis, net of tax      
 benefit of $10,306     (15,458 )     (15,458 )
Retained earnings     1,889,867       1,781,582  
Accumulated other comprehensive loss   (136 )     (214 )
Treasury stock; at cost, 9,910,177 shares in 2023      
and 8,665,564 shares in 2022     (478,312 )     (374,892 )
TOTAL STOCKHOLDERS’ EQUITY   1,610,736       1,599,602  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,800,042     $ 2,810,081  
         
 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
         
    Six Months Ended June 30,
    2023   2022
         
         
Cash flows from operating activities:        
Net income   $ 108,285     $ 190,349  
Adjustments to reconcile net income        
to net cash provided by operating activities:      
Depreciation and amortization     91,474       71,922  
Impairment of right-of-use asset     2,012        
Deferred taxes     10,837       3,279  
Compensation expense related to share-based compensation plans   10,615       10,237  
Gain on sale of assets, net     (4,834 )     (12,509 )
Changes in operating assets and liabilities, net of acquisitions:      
Restricted investments     (2,197 )     5,200  
Accounts receivable, net     103,270       (93,767 )
Prepaid taxes     1,729       (2,166 )
Prepaid expenses and other current assets   17,469       9,664  
Other assets     (1,899 )     (2,517 )
Accounts payable     (55,085 )     3,380  
Accrued expenses     (47,700 )     23,251  
Non-current liabilities     (12,595 )     (5,588 )
Net cash provided by operating activities   221,381       200,735  
         
Cash flows from investing activities:        
Proceeds from sale of equipment     15,135       18,584  
Purchases of property and equipment     (65,635 )     (85,942 )
Acquisitions, net of cash acquired     108        
Net cash used in investing activities   (50,392 )     (67,358 )
         
Cash flows from financing activities:        
Purchase of treasury stock     (100,026 )      
Repayments of long term debt     (56,191 )     (54,114 )
Stock withheld for payments of withholding taxes   (7,818 )     (5,715 )
Finance lease payments     (1,501 )     (1,059 )
Proceeds from issuance of debt     50,289       66,194  
Net cash (used in) provided by financing activities   (115,247 )     5,306  
         
         
Effect of exchange rate changes on cash and cash equivalents   45       9  
         
Net increase in cash and cash equivalents   55,787       138,692  
Cash and cash equivalents beginning of period   286,642       159,784  
Cash and cash equivalents end of period   $ 342,429     $ 298,476  
         
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
               
  Three Months   Six Months
  Ended June 30,   Ended June 30,
Operating Revenue 2023   2022   2023   2022
Intermodal and Transportation Solutions $ 614,632     $ 875,150     $ 1,323,881     $ 1,651,720  
Logistics   453,549       548,613       922,690       1,089,597  
Inter-segment eliminations   (27,719 )     (22,307 )     (53,844 )     (41,738 )
Total operating revenue $ 1,040,462     $ 1,401,456     $ 2,192,727     $ 2,699,579  
               
               
  Three Months   Six Months
  Ended June 30,   Ended June 30,
Operating Income 2023   2022   2023   2022
Intermodal and Transportation Solutions $ 31,777     $ 100,601     $ 80,981     $ 186,297  
Logistics   30,293       37,035       59,294       66,399  
Total operating income $ 62,070     $ 137,636     $ 140,275     $ 252,696  
               
               
  Three Months   Six Months
  Ended June 30,   Ended June 30,
Depreciation and Amortization 2023   2022   2023   2022
Intermodal and Transportation Solutions $ 27,117     $ 25,383     $ 54,003     $ 49,758  
Logistics   8,269       6,861       16,832       13,775  
Total depreciation and amortization $ 35,386     $ 32,244     $ 70,835     $ 63,533  
               
 
RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
               
  Three Months   Six Months
  Ended June 30,   Ended June 30,
               
  2023   2022   2023   2022
               
Net Income $ 46,505     $ 102,846     $ 108,285     $ 190,349  
               
Interest Expense, net   1,029       1,402       2,623       3,101  
               
Depreciation and Amortization   45,664       36,729       91,474       71,922  
               
Provision for Income Taxes   14,605       33,193       29,475       59,183  
               
EBITDA $ 107,803     $ 174,170     $ 231,857     $ 324,555  
               

(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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