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.
| 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 | ||||||||||
