Press Release

Hub Group, Inc. Reports First Quarter 2018 Results

    Highlights of the quarter

  • 23% revenue growth.
  • 21% gross margin growth.
  • 35% increase in operating income. 
  • Continued momentum with strong intermodal pricing.
  • Hub Group Dedicated wins over $70 million of new business.

OAK BROOK, Ill., April 26, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced first quarter 2018 net income of $16.2 million, or diluted earnings per share of $0.48 versus first quarter 2017 net income of $10.3 million, or $0.31 per diluted share.

Revenue for the current quarter was $1.1 billion compared with $892.8 million for the first quarter 2017. Hub segment revenue increased 23% and Mode segment revenue increased 19%.  Operating income for the current quarter increased to $23.1 million versus $17.2 million for the first quarter 2017. Hub segment operating income increased 39% and Mode segment operating income increased 26%.

Segment Information:

Hub
•  First quarter 2018 Segment Revenue:    $831.6 million, up 23%
•  First quarter 2018 Segment Operating Income:    $16.1 million, up 39%

Hub’s revenue increased 23% to $831.6 million compared to the first quarter of 2017 as a result of our success in providing multi-modal solutions to our customers.  This increase includes Hub Group Dedicated revenue totaling $60.4 million.

First quarter intermodal revenue increased 14% to $482.5 million reflecting a 6% increase in loads, price increases and higher fuel revenue.  Intermodal gross margin increased compared to the first quarter of 2017 primarily due to an increase in customer prices and volume, partially offset by higher rail, driver, and third party drayage costs.   

Truck brokerage revenue increased 13% to $120.0 million this quarter compared to the same quarter of last year.  Truck brokerage handled 1% fewer loads while fuel, price and mix combined were up 14%.  Truck brokerage gross margin increased primarily because of growth with strategic customers and increased spot activity.

First quarter Unyson Logistics revenue increased 16% to $168.7 million due primarily to growth from new customers on-boarded in 2017 and growth with existing customers.  Unyson Logistics gross margin declined primarily due to unfavorable customer mix and higher purchased transportation costs. 

Hub Group Dedicated revenue of $60.4 million in the first quarter of 2018 is up 6% sequentially from the fourth quarter of 2017 revenue of $57.1 million.  We project dedicated revenue in the last half of the year will increase between 30%-40% over last year. 

Costs and expenses increased $14.0 million to $74.2 million in the first quarter of 2018 compared to $60.2 million in the first quarter of 2017 due primarily to the addition of $10.7 million of costs and expenses for Hub Group Dedicated and higher bonus and commission expense partially offset by lower due diligence and severance costs.   

Operating income was $16.1 million compared to $11.6 million in the first quarter 2017.

Mode
•  First quarter 2018 Segment Revenue:    $287.9million, up 19%
•  First quarter 2018 Segment Operating Income:    $7.0million, up 26%

Mode’s revenue increased 19% to $287.9 million compared to the first quarter 2017.   Revenue consisted of $129.8 million in intermodal which was up 6%, $100.7 million in truck brokerage which was up 29% and $57.4 million in logistics which was up 38%. 

Gross margin increased $2.6 million compared to the first quarter of 2017 due primarily to increases in logistics and truck brokerage margin.

Operating income was $7.0 million compared to $5.6 million in the first quarter 2017.

Cash Flow and Capitalization:

Our capital expenditures for the first quarter totaled $22.2 million, primarily for tractors, trailers, technology investments, and containers. At March 31, 2018, we had cash and cash equivalents of $17.9 million

At March 31, 2018, we had total debt outstanding of $284.3 million on various debt instruments compared to $302.5 million at December 31, 2017. 

2018 and Long Term Outlook

We expect that our 2018 diluted earnings per share will range from $2.34 to $2.44.  We estimate that our 2018 capital expenditures will range from $190 million to $210 million.  We project our effective tax rate will be approximately 25%.

“Strong revenue and margin growth in the first quarter driven by a healthy intermodal pricing environment, spot opportunities, and new dedicated business position us well for a successful year,” said Dave Yeager, Hub’s Chief Executive Officer.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, April 26, 2018, to discuss its first quarter 2018 results. 

Hosting the conference call will be Dave Yeager, Chief Executive Officer.  Also participating on the call will be Don Maltby, Chief Operating Officer, and Terri Pizzuto, 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=UTeYFbrpkjuxyE. 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.

On April 26, 2018, the company will make available on its website an Investor Presentation, which includes updated business information and first quarter 2018 results, among other things. The presentation can be accessed by going to www.hubgroup.com, selecting the “Investors” tab, and then selecting the “Presentations” tab. The presentation will be available on the company’s website until the next regular update.

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 Unyson Logistics business lines, the future performance of Mode, the amount and timing of strategic investments or divestitures by Hub, the failure to integrate critical information technology systems, 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, 2017.  Hub Group assumes no liability to update any such forward-looking statements.


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
               
      Three Months Ended March 31,
       2018    2017
        % of     % of
      Amount Revenue   Amount Revenue
Revenue $   1,095,971   100.0 %   $   892,756   100.0 %
               
Transportation costs     973,180   88.8 %       791,171   88.6 %
  Gross margin     122,791   11.2 %       101,585   11.4 %
               
Costs and expenses:          
  Salaries and benefits     56,007   5.1 %       43,179   4.8 %
  Agent fees and commissions     19,142   1.7 %       17,993   2.0 %
  General and administrative     20,504   1.9 %       20,824   2.4 %
  Depreciation and amortization     4,005   0.4 %       2,412   0.3 %
    Total costs and expenses     99,658   9.1 %       84,408   9.5 %
               
Operating income     23,133   2.1 %       17,177   1.9 %
               
Other income (expense):          
  Interest expense     (2,104 ) -0.2 %       (1,098 ) -0.1 %
  Interest and dividend income     22   0.0 %       130   0.0 %
  Other, net     (55 ) 0.0 %       194   0.0 %
    Total other expense     (2,137 ) -0.2 %       (774 ) -0.1 %
               
Income before provision for income taxes     20,996   1.9 %       16,403   1.8 %
               
Income tax expense     4,829   0.4 %       6,069   0.7 %
               
Net income $   16,167   1.5 %   $   10,334   1.1 %
               
               
Basic earnings per common share $   0.48       $   0.31    
               
Diluted earnings per common share $   0.48       $   0.31    
               
Basic weighted average number of shares outstanding     33,375           33,205    
Diluted weighted average number of shares outstanding     33,478           33,373    
               

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                   
      Three Months
      Ended March 31, 2018
      Hub   Mode   Inter-Segment
Elims
  Hub Group Total
Revenue $   831,585   $   287,899   $   (23,513 )   $   1,095,971
                   
Transportation costs     741,211       255,482       (23,513 )       973,180
  Gross margin     90,374       32,417       -          122,791
                   
Costs and expenses:              
  Salaries and benefits     52,070       3,937       -          56,007
  Agent fees and commissions     13       19,129       -          19,142
  General and administrative     18,402       2,102       -          20,504
  Depreciation and amortization     3,760       245       -          4,005
    Total costs and expenses     74,245       25,413       -          99,658
                   
Operating income $   16,129   $   7,004   $   -      $   23,133
                   

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                   
      Three Months
      Ended March 31, 2017
      Hub   Mode   Inter-Segment
Elims
  Hub Group Total
Revenue $   676,480   $   241,834   $   (25,558 )   $   892,756
                   
Transportation costs     604,674       212,055       (25,558 )       791,171
  Gross margin     71,806       29,779       -          101,585
                   
Costs and expenses:              
  Salaries and benefits     39,596       3,583       -          43,179
  Agent fees and commissions     17       17,976       -          17,993
  General and administrative     18,479       2,345       -          20,824
  Depreciation and amortization     2,109       303       -          2,412
    Total costs and expenses     60,201       24,207       -          84,408
                   
Operating income $   11,605   $   5,572   $   -      $   17,177
                   


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
                 
    Three Months
    Ended March 31, 2018
    Hub   Mode   Inter-Segment
Elims
  Hub Group Total
Intermodal $   482,495   $   129,773   $   (11,270 )   $   600,998
Truck brokerage     120,019       100,721       (358 )       220,382
Logistics     168,676       57,405       (11,870 )       214,211
Dedicated     60,395       -        (15 )       60,380
  Total Revenue $   831,585   $   287,899   $   (23,513 )   $   1,095,971
                 


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
                 
    Three Months
    Ended March 31, 2017
    Hub   Mode   Inter-Segment
Elims
  Hub Group Total
Intermodal $   424,423   $   122,181   $   (15,237 )   $   531,367
Truck brokerage     106,185       78,161       (385 )       183,961
Logistics     145,872       41,492       (9,936 )       177,428
  Total Revenue $   676,480   $   241,834   $   (25,558 )   $   892,756
                 


HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
               
          March 31,   December 31,
           2018     2017 
               
ASSETS        
  CURRENT ASSETS:      
    Cash and cash equivalents $   17,930     $   28,557  
    Accounts receivable trade, net     573,722         583,994  
    Accounts receivable other     4,467         5,722  
    Prepaid taxes     12,136         12,088  
    Prepaid expenses and other current assets     19,009         25,697  
        TOTAL CURRENT ASSETS     627,264         656,058  
               
  Restricted investments     23,265         24,181  
  Property and equipment, net     568,048         562,150  
  Other intangibles, net     72,925         74,348  
  Goodwill, net     348,161         348,661  
  Other assets     3,607         5,543  
        TOTAL ASSETS $   1,643,270     $   1,670,941  
               
               
LIABILITIES AND STOCKHOLDERS' EQUITY      
  CURRENT LIABILITIES:      
    Accounts payable trade $   318,962     $   338,933  
    Accounts payable other     13,389         12,268  
    Accrued payroll     22,622         28,994  
    Accrued other     54,992         59,305  
    Current portion of capital lease     2,798         2,777  
    Current portion of long term debt     80,004         77,266  
        TOTAL CURRENT LIABILITIES     492,767         519,543  
               
  Long term debt     194,553         214,808  
  Non-current liabilities     37,687         37,927  
  Long term capital lease     6,980         7,696  
  Deferred taxes     125,611         121,095  
               
  STOCKHOLDERS' EQUITY:      
    Preferred stock, $.01 par value; 2,000,000 shares authorized;      
      no shares issued or outstanding in 2018 and 2017     -          -   
    Common stock      
      Class A: $.01 par value; 97,337,700 shares authorized and      
        41,224,792 shares issued in 2018 and 2017; 33,714,605 shares      
        outstanding in 2018 and 33,447,070 shares outstanding in 2017     412         412  
      Class B:  $.01 par value; 662,300 shares authorized;      
        662,296 shares issued and outstanding in 2018 and 2017     7         7  
    Additional paid-in capital     165,076         173,011  
    Purchase price in excess of predecessor basis, net of tax      
      benefit of $10,306     (15,458 )       (15,458 )
    Retained earnings     886,883         870,716  
    Accumulated other comprehensive loss     (165 )       (194 )
    Treasury stock; at cost, 7,510,187 shares in 2018      
      and 7,777,722 shares in 2017     (251,083 )       (258,622 )
      TOTAL STOCKHOLDERS' EQUITY     785,672         769,872  
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   1,643,270     $   1,670,941  
               


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
           
          Three Months Ended March 31,
           2018     2017 
               
               
Cash flows from operating activities:      
  Net income $   16,167     $   10,334  
  Adjustments to reconcile net income      
    to net cash provided by operating activities:      
      Depreciation and amortization      18,599         12,522  
      Deferred taxes     4,714         5,279  
      Compensation expense related to share-based compensation plans     3,501         2,609  
      Gain on sale of assets     (115 )       (48 )
  Changes in operating assets and liabilities:      
      Restricted investments     916         (1,436 )
      Accounts receivable, net     11,643         54,600  
      Prepaid taxes     (47 )       (171 )
      Prepaid expenses and other current assets     6,694         2,795  
      Other assets     1,866         373  
      Accounts payable     (19,465 )       (13,175 )
      Accrued expenses     (10,913 )       (25,990 )
      Non-current liabilities     (386 )       12  
        Net cash provided by operating activities     33,174         47,704  
               
Cash flows from investing activities:      
  Proceeds from sale of equipment     516         1,127  
  Purchases of property and equipment     (22,179 )       (6,625 )
        Net cash used in investing activities     (21,663 )       (5,498 )
               
Cash flows from financing activities:      
  Proceeds from issuance of debt     16,783         -   
  Repayments of long term debt     (34,300 )       (11,782 )
  Stock tendered for payments of withholding taxes     (3,896 )       (3,157 )
  Capital lease payments     (695 )       (727 )
        Net cash used in financing activities     (22,108 )       (15,666 )
               
               
  Effect of exchange rate changes on cash and cash equivalents     (30 )       56  
               
Net (decrease) increase in cash and cash equivalents     (10,627 )       26,596  
Cash and cash equivalents beginning of period     28,557         127,404  
Cash and cash equivalents end of period $   17,930     $   154,000  
               
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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Source: Hub Group, Inc.