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