Hub Group, Inc. Reports First Quarter 2018 Results

04/26/18

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

Source: Hub Group, Inc.

Press Releases

Hub Group, Inc. Reports First Quarter 2018 Results