• Hub Group, Inc. Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 26 Oct 2023 15:05:12   America/Chicago

    Highlights:

    • Diluted earnings per share (EPS) of $0.97 and revenue of $1.0 billion for the quarter
    • Quarterly operating income of $43 million (4.2% of revenue) driven by performance of our Logistics Segment
    • Exceptionally strong balance sheet, ending the quarter with cash and cash equivalents of over $400 million
    • Announced capital allocation plan, including a stock split effectuated by stock dividend, regular quarterly cash dividend, new share repurchase authorization and long-term leverage target

    OAK BROOK, Ill., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced third quarter 2023 net income of $30 million, and diluted earnings per share of $0.97. Net income for third quarter 2022 was $87 million, or $2.61 per diluted share. Third quarter results were impacted by lower gain on sale of assets of $7.8 million (pre-tax) as compared to the prior year ($0.18 per share), increased repair and maintenance expense of $3.0 million (pre-tax) as compared to the prior year ($0.07 per share), higher medical claims expense of $1.7 million (pre-tax) as compared to the prior year ($0.04 per share) and an increase in allowance for customer receivables of $1.1 million (pre-tax) as compared to the prior year ($0.03 per share), as well as consulting and office closure costs of $1.1 million (pre-tax, or $0.03 per share).

    Capital Allocation Plan

    Hub Group also announced today a comprehensive growth-focused capital allocation plan designed to drive long-term value creation and shareholder returns. Key elements of the plan include:

    • Continued capital expenditure investments focused on growing the Company’s intermodal business, as well as technology investments to drive efficiency and support our customer value proposition
    • Acquisition strategy focused on non-asset logistics businesses that provide an extension of our comprehensive service offering and build scale within our businesses
    • 2:1 Stock split effectuated through a stock dividend in January 2024 designed to improve market liquidity and trading performance
    • Initiation of a quarterly cash dividend program, initially set at $0.50 per share per year, which Hub Group’s Board of Directors intends to begin in first quarter 2024
    • New $250 million share repurchase plan, replacing the remaining availability under the current authorization
    • Long-term leverage target of 0.75-1.25x net debt/EBITDA supporting this capital allocation plan, including discretionary share repurchase activity scaled by the outlook for capital expenditures and acquisitions

    “Despite a very soft freight environment 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 70% of our operating income in the quarter. While profitability at our ITS Segment has been challenged, we have focused on reducing our costs and driving efficiency. We are very pleased to announce our capital allocation plan, which will allow for strong organic growth and service line diversification through acquisitions while returning capital to our shareholders. 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.

    Third Quarter 2023 Results

    Consolidated revenue for the third quarter of 2023 was $1.0 billion as compared to $1.4 billion in third quarter 2022. The decline in 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 increased slightly relative to prior year due to $19 million of incremental expense for our drivers and warehouse employees, partially offset by an $18 million reduction in office employee compensation due to lower headcount and lower incentive compensation expense. Company driver count increased 12% as compared to the prior year, and the acquisition of TAGG added $4 million of compensation expense for the quarter. General and administrative expense decreased $10 million as compared to prior year due to lower legal and use tax expenses, and the impairment of a leased asset in the prior year. 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 $43 million (4.2% of revenue) as compared to $118 million (8.7% of revenue) in the prior year. EBITDA (non-GAAP)1 for the quarter was $88 million.

    Third quarter Intermodal and Transportation Solutions (“ITS”) Segment revenue was $595 million. Intermodal volume for the quarter decreased 16% as compared to prior year due to low transportation demand and an oversupply of truckload carrier capacity. Intermodal revenue declined due to volume, lower customer rates and lower accessorial revenue, and was offset by resilience of our dedicated service line. ITS operating income decreased to $13 million (2.3% 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 third quarter 2023 we increased the portion of drayage handled on our own fleet to 78% as compared to 62% in the prior year.

    Third quarter Logistics Segment revenue was $460 million, as compared to $525 million in the prior year. The decline in revenue was driven by lower revenue per load in our brokerage service line, partially offset by performance of our managed transportation, consolidation and final mile service lines, as well as contribution from our fulfillment business. Brokerage volumes were up 5% as compared to the prior year. Third quarter operating income was 6.3% of revenue as compared to 5.9% last year. Operating income was $29 million as compared to $31 million last year, as lower revenue was partially offset by lower purchased transportation costs and our yield management initiatives.

    Capital expenditures for the third quarter of 2023 totaled $40 million. As of September 30, 2023, we had cash and cash equivalents of $401 million.

    2023 Outlook

    We expect our 2023 diluted earnings per share will range from $5.30 to $5.40. We estimate revenue will be approximately $4.2 billion. We project our effective tax rate for the year will be approximately 20%. 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 October 26, 2023 to discuss our third 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/BI5bbce1927fe04ba4bb0a27bed6a406e1

    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 September 30,
       2023   2022 
       % of  % of
      AmountRevenue AmountRevenue
    Operating revenue$1,024,835 100.0% $1,355,407 100.0%
           
    Operating expenses:     
     Purchased transportation and warehousing 772,650 75.4%  1,023,052 75.5%
     Salaries and benefits 138,503 13.5%  137,666 10.1%
     Depreciation and amortization 36,065 3.5%  33,542 2.5%
     Insurance and claims 11,681 1.1%  17,615 1.3%
     General and administrative 24,146 2.4%  34,382 2.5%
     Gain on sale of assets, net (765)-0.1%  (8,588)-0.6%
    Total operating expenses 982,280 95.8%  1,237,669 91.3%
           
    Operating income 42,555 4.2%  117,738 8.7%
           
    Other income (expense):     
     Interest expense, net (3,537)-0.3%  (2,190)-0.2%
     Interest income 2,838 0.2%  40 0.0%
     Other, net (188)-0.0%  (384)-0.0%
    Total other expense, net (887)-0.1%  (2,534)-0.2%
           
    Income before provision for income taxes 41,668 4.1%  115,204 8.5%
           
    Provision for income taxes 11,209 1.1%  27,879 2.1%
           
    Net income$30,459   $87,325  
           
    Earnings per share     
     Basic$0.98   $2.63  
     Diluted$0.97   $2.61  
           
    Basic weighted average number of shares outstanding 31,139    33,145  
    Diluted weighted average number of shares outstanding 31,493    33,521  
           


    HUB GROUP, INC.
    CONSOLIDATED STATEMENTS OF EARNINGS
    (in thousands, except per share amounts)
    (unaudited)
           
      Nine Months Ended September 30,
       2023   2022 
       % of  % of
      AmountRevenue AmountRevenue
    Operating revenue$3,217,562 100.0% $4,054,987 100.0%
           
    Operating expenses:     
     Purchased transportation and warehousing 2,403,190 74.7%  3,081,299 76.0%
     Salaries and benefits 417,757 13.0%  395,904 9.8%
     Depreciation and amortization 106,899 3.3%  97,075 2.4%
     Insurance and claims 36,041 1.1%  37,553 0.9%
     General and administrative 76,445 2.4%  93,819 2.3%
     Gain on sale of assets, net (5,599)-0.2%  (21,097)-0.5%
    Total operating expenses 3,034,733 94.3%  3,684,553 90.9%
           
    Operating income 182,829 5.7%  370,434 9.1%
           
    Other income (expense):     
     Interest expense, net (9,623)-0.3%  (5,301)-0.1%
     Interest income 6,302 0.2%  50 0.0%
     Other, net (81)-0.0%  (446)-0.0%
    Total other expense, net (3,402)-0.1%  (5,697)-0.1%
           
    Income before provision for income taxes 179,427 5.6%  364,737 9.0%
           
    Provision for income taxes 40,684 1.3%  87,063 2.1%
           
    Net income$138,743   $277,674  
           
    Earnings per share     
     Basic$4.35   $8.29  
     Diluted$4.31   $8.21  
           
    Basic weighted average number of shares outstanding 31,908    33,480  
    Diluted weighted average number of shares outstanding 32,208    33,807  
           


    HUB GROUP, INC.
    CONSOLIDATED BALANCE SHEETS
    (in thousands, except share data)
     
         September 30, December 31,
          2023   2022 
         (unaudited)  
    ASSETS    
     CURRENT ASSETS:   
      Cash and cash equivalents$400,686  $286,642 
      Accounts receivable trade, net 630,794   716,190 
      Accounts receivable other 5,590   3,967 
      Prepaid taxes 19,095   16,987 
      Prepaid expenses and other current assets 26,649   32,914 
        TOTAL CURRENT ASSETS 1,082,814   1,056,700 
            
     Restricted investments 19,809   18,065 
     Property and equipment, net 789,842   783,683 
     Right-of-use assets - operating leases 193,698   102,114 
     Right-of-use assets - financing leases 3,142   1,194 
     Other intangibles, net 177,032   197,386 
     Goodwill 629,772   629,402 
     Other assets 22,023   21,537 
        TOTAL ASSETS$2,918,132  $2,810,081 
            
            
    LIABILITIES AND STOCKHOLDERS' EQUITY   
     CURRENT LIABILITIES:   
      Accounts payable trade$345,451  $344,751 
      Accounts payable other 15,368   15,563 
      Accrued payroll 26,088   66,669 
      Accrued other 124,860   132,324 
      Lease liability - operating leases 39,688   29,547 
      Lease liability - financing leases 2,060   1,175 
      Current portion of long term debt 102,773   101,741 
        TOTAL CURRENT LIABILITIES 656,288   691,770 
            
     Long term debt 243,834   240,724 
     Non-current liabilities 48,496   43,505 
     Lease liability - operating leases 165,229   78,557 
     Lease liability - financing leases 997   - 
     Deferred taxes 174,220   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; 31,188,571 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 220,247   208,165 
      Purchase price in excess of predecessor basis, net of tax   
      benefit of $10,306 (15,458)  (15,458)
      Retained earnings 1,920,325   1,781,582 
      Accumulated other comprehensive loss (167)  (214)
      Treasury stock; at cost, 10,123,614 shares in 2023   
       and 8,665,564 shares in 2022 (496,298)  (374,892)
       TOTAL STOCKHOLDERS' EQUITY 1,629,068   1,599,602 
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$2,918,132  $2,810,081 
            


    HUB GROUP, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)
    (unaudited)
            
         Nine Months Ended September 30,
          2023   2022 
            
            
    Cash flows from operating activities:   
     Net income$138,743  $277,674 
     Adjustments to reconcile net income   
      to net cash provided by operating activities:   
       Depreciation and amortization 136,775   111,413 
       Impairment of right-of-use asset 2,012   5,361 
       Deferred taxes 18,832   (1,427)
       Compensation expense related to share-based compensation plans 16,031   14,973 
       Gain on sale of assets, net (5,599)  (21,097)
     Changes in operating assets and liabilities, net of acquisitions:   
       Restricted investments (1,744)  7,368 
       Accounts receivable, net 83,664   (55,994)
       Prepaid taxes (2,108)  (1,408)
       Prepaid expenses and other current assets 6,161   6,818 
       Other assets (2,515)  (3,381)
       Accounts payable 516   (21,169)
       Accrued expenses (46,243)  41,165 
       Non-current liabilities (21,848)  (9,825)
        Net cash provided by operating activities 322,677   350,471 
            
    Cash flows from investing activities:   
     Proceeds from sale of equipment 20,208   33,994 
     Purchases of property and equipment (105,667)  (157,664)
     Acquisitions, net of cash acquired 108   (102,661)
        Net cash used in investing activities (85,351)  (226,331)
            
    Cash flows from financing activities:   
     Purchase of treasury stock (117,352)  (75,000)
     Purchase of treasury stock from related party -   (34,767)
     Repayments of long term debt (80,965)  (81,905)
     Stock withheld for payments of withholding taxes (8,003)  (5,778)
     Finance lease payments (2,097)  (1,582)
     Proceeds from issuance of debt 85,107   127,017 
        Net cash used in financing activities (123,310)  (72,015)
            
            
     Effect of exchange rate changes on cash and cash equivalents 28   12 
            
    Net increase in cash and cash equivalents 114,044   52,137 
    Cash and cash equivalents beginning of period 286,642   159,784 
    Cash and cash equivalents end of period$400,686  $211,921 
            


    HUB GROUP, INC.
    FINANCIAL INFORMATION BY SEGMENT
    (in thousands)
    (unaudited)
            
     Three Months Nine Months
     Ended September 30, Ended September 30,
    Operating Revenue 2023   2022   2023   2022 
    Intermodal and Transportation Solutions$595,308  $856,001  $1,919,189  $2,507,722 
    Logistics 460,309   525,178   1,382,999   1,614,775 
    Inter-segment eliminations (30,782)  (25,772)  (84,626)  (67,510)
    Total operating revenue$1,024,835  $1,355,407  $3,217,562  $4,054,987 
            
            
     Three Months Nine Months
     Ended September 30, Ended September 30,
    Operating Income 2023   2022   2023   2022 
    Intermodal and Transportation Solutions$13,484  $86,772  $94,639  $273,069 
    Logistics 29,071   30,966   88,190   97,365 
    Total operating income$42,555  $117,738  $182,829  $370,434 
            
            
     Three Months Nine Months
     Ended September 30, Ended September 30,
    Depreciation and Amortization 2023   2022   2023   2022 
    Intermodal and Transportation Solutions$27,493  $26,020  $81,751  $75,778 
    Logistics 8,572   7,522   25,148   21,297 
    Total depreciation and amortization$36,065  $33,542  $106,899  $97,075 
            


    RECONCILIATION OF NET INCOME TO EBITDA (1)
    (in thousands)
    (unaudited)
            
     Three Months Nine Months
     Ended September 30, Ended September 30,
            
      2023  2022  2023  2022
            
    Net Income$30,459 $87,325 $138,743 $277,674
            
    Interest Expense, net 699  2,150  3,321  5,251
            
    Depreciation and Amortization 45,301  39,491  136,775  111,413
            
    Provision for Income Taxes 11,209  27,879  40,684  87,063
            
    EBITDA$87,668 $156,845 $319,523 $481,401
            

    (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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