Hub Group, Inc. Reports Fourth Quarter 2023 Results

Highlights:        

• Completed 2:1 stock split; Q4 Diluted earnings per share (EPS) presented post-split of $0.46 and $2.62 for the full year
• Adjusting for acquisition related expenses of $5.1 million, Q4 adjusted EPS (non-GAAP) of $0.54 and $2.68 for full year
• Full year revenue of $4.2 billion; Fourth quarter revenue of $1.0 billion
• GAAP Quarterly operating income of $29 million (3.0% of revenue)
• Significantly increased our Final Mile business heading into 2024 through the acquisition of Forward Air Final Mile ("FAFM")
• Executing on Capital Allocation Plan including $26 million of shares purchased during the quarter
• Introduced 2024 outlook with expected revenue of $4.6 billion to $5.0 billion and diluted EPS of $2.00 to $2.50
  
  

OAK BROOK, Ill., Feb. 01, 2024 (GLOBE NEWSWIRE) --  Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2023 net income of $29 million, and diluted earnings per share of $0.46. Net income for fourth quarter 2022 was $79 million, or $1.21 per diluted share. Fourth quarter results were impacted by acquisition related expenses of $5.1 million (pre-tax) ($0.08 per share tax effected) related to the purchase of FAFM in December. Full year 2023 net income was $168 million, or $2.62 per diluted share.

"I am very proud of the way the organization supported our customers while delivering our second-best financial performance in the company's history during a very challenging year. We continue to implement key strategic priorities that position us to grow for the long term, while keeping a significant focus on managing our cost structure. At the end of 2023, we continued to execute on our growth focused capital allocation plan acquiring Forward Air Final Mile, which adds new capabilities in appliance delivery and installation, while continuing to drive diversification into non-asset based logistics services, while also purchasing $26 million of our stock. We are excited to continue the momentum and deliver for our customers and shareholders in 2024," said Phil Yeager, Hub Group's President and Chief Executive Officer.   

Fourth Quarter and Full Year 2023 Results

Consolidated revenue for the fourth quarter of 2023 was $1.0 billion as compared to $1.3 billion in fourth quarter 2022. Full year 2023 revenue was $4.2 billion, down 21% compared to 2022 revenue of $5.3 billion. The decline in quarterly 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 decreased relative to the prior year due to a $16 million reduction in office employee compensation due to lower headcount and lower incentive compensation expense, partially offset by $3 million of incremental expense for our drivers as increased productivity led to more insourced drayage. General and administrative expenses increased $2 million as compared to the prior year, driven by the acquisition related expenses of $5 million to purchase FAFM, partially offset by lower legal claim reserves and improved cost management. Depreciation and amortization expense increased as compared to prior year due to investments in our container and tractor fleets as well as acquisitions. Operating income for the quarter was $29 million (3% of revenue) as compared to $104 million (8% of revenue) in the prior year. EBITDA (non-GAAP) for the quarter was $78 million.  

Fourth quarter Intermodal and Transportation Solutions ("ITS") Segment revenue was $576 million, while full year revenue was $2.5 billion. Intermodal volume for the quarter decreased 11.6% as compared to prior year due to continued low transportation demand and an oversupply of truckload carrier capacity. Intermodal revenue declined due to lower volume, lower customer rates and lower accessorial revenue, but was offset by the resilience of our dedicated service line. ITS operating income decreased to $12 million (2.1% 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 fourth quarter 2023 we increased the portion of drayage handled on our own fleet to 80% as compared to 65% in the prior year.

Fourth quarter Logistics Segment revenue was $438 million, as compared to $507 million in the prior year. Full year revenue for the Logistics Segment was $1.8 billion. The decline in quarterly revenue compared to prior year was due to lower revenue in all service lines driven by 3.8% lower volumes and rates in our more transactional brokerage services as well as higher inventories and lower demand in our contractual service lines. Fourth quarter operating income was 3.9% of revenue as compared to 5.7% last year. Operating income was $17 million as compared to $29 million last year, as lower revenue was partially offset by lower purchased transportation costs and our yield management initiatives.

Capital expenditures for the fourth quarter of 2023 totaled $34 million as we continued to invest in our tractor and trailer fleet as well as expanding our multipurpose warehouse footprint. As of December 31, 2023, we had cash and cash equivalents of $187 million following the $261 million spend for the FAFM acquisition completed in December.  

2024 Outlook

We expect our 2024 diluted earnings per share will range from $2.00 to $2.50. We estimate revenue will be approximately $4.6 to $5.0 billion. We project our effective tax rate for the year will be approximately 24%. We expect capital expenditures for containers, tractors, warehousing equipment and technology will range from $55 million to $75 million.

Non-GAAP Financial Measures

In this press release, we present certain non-GAAP financial measures. As required by the rules of the Securities and Exchange Commission ("SEC"), we have provided herein a reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, along with an explanation why management believes these non-GAAP financial measures provide relevant and useful information. These non-GAAP financial measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are 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 February 1, 2024 to discuss our fourth 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 Kevin Beth, 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/BIeeaae6d02102421ea6f53479bff39a89 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: Laura Simek of Hub Group, Inc., +1-630-271-3833

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
							Three Months Ended December 31,
								2023						2022
										% of						% of
							Amount			Revenue			Amount			Revenue
Operating revenue							$	985,023		100.0%			$	1,285,503		100.0%
Operating expenses:
	Purchased transportation and warehousing							742,405		75.4%				955,204		74.3%
	Salaries and benefits							135,569		13.7%				147,106		11.4%
	Depreciation and amortization							36,624		3.7%				34,714		2.7%
	Insurance and claims							12,999		1.3%				20,511		1.6%
	General and administrative							29,260		3.0%				26,760		2.1%
	Gain on sale of assets, net							(1,236	)	-0.1%				(3,079	)	-0.2%
Total operating expenses								955,621		97.0%				1,181,216		91.9%
Operating income								29,402		3.0%				104,287		8.1%
Other income (expense):
	Interest expense							(3,812	)	-0.4%				(2,206	)	-0.2%
	Interest income							3,709		0.4%				825		0.1%
	Other, net							478		0.0%				315		0.0%
Total other income (expense), net								375		0.0%				(1,066	)	-0.1%
Income before provision for income taxes								29,777		3.0%				103,221		8.0%
Provision for income taxes								992		0.1%				23,947		1.9%
Net income							$	28,785					$	79,274
Earnings per share
	Basic						$	0.47					$	1.22
	Diluted						$	0.46					$	1.21
Basic weighted average number of shares outstanding								61,850						64,794
Diluted weighted average number of shares outstanding								62,562						65,630

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
							Years Ended December 31,
								2023						2022
										% of						% of
							Amount			Revenue			Amount			Revenue
Operating revenue							$	4,202,585		100.0%			$	5,340,490		100.0%
Operating expenses:
	Purchased transportation and warehousing							3,145,595		74.8%				4,036,503		75.6%
	Salaries and benefits							553,326		13.2%				543,010		10.2%
	Depreciation and amortization							143,523		3.4%				131,789		2.5%
	Insurance and claims							49,040		1.2%				58,064		1.1%
	General and administrative							105,705		2.5%				120,579		2.2%
	Gain on sale of assets, net							(6,835	)	-0.2%				(24,176	)	-0.5%
Total operating expenses								3,990,354		94.9%				4,865,769		91.1%
Operating income								212,231		5.1%				474,721		8.9%
Other income (expense):
	Interest expense							(13,435	)	-0.3%				(7,506	)	-0.1%
	Interest income							10,011		0.2%				874		0.0%
	Other, net							397		0.0%				(131	)	-0.0%
Total other expense, net								(3,027	)	-0.1%				(6,763	)	-0.1%
Income before provision for income taxes								209,204		5.0%				467,958		8.8%
Provision for income taxes								41,676		1.0%				111,010		2.1%
Net income							$	167,528					$	356,948
Earnings per share
	Basic						$	2.65					$	5.37
	Diluted						$	2.62					$	5.32
Basic weighted average number of shares outstanding								63,324						66,418
Diluted weighted average number of shares outstanding								63,954						67,118

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
								December 31,				December 31,
									2023				2022
								(unaudited)
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents						$	187,270			$	286,642
		Accounts receivable trade, net							600,197				716,190
		Accounts receivable other							3,358				3,967
		Prepaid taxes							17,331				16,987
		Prepaid expenses and other current assets							41,089				32,914
				TOTAL CURRENT ASSETS					849,245				1,056,700
	Restricted investments								20,763				18,065
	Property and equipment, net								791,692				783,683
	Right-of-use assets - operating leases								210,742				102,114
	Right-of-use assets - financing leases								2,522				1,194
	Other intangibles, net								304,607				197,386
	Goodwill								733,695				629,402
	Other assets								22,781				21,537
				TOTAL ASSETS				$	2,936,047			$	2,810,081
LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade						$	349,378			$	344,751
		Accounts payable other							14,471				15,563
		Accrued payroll							21,731				66,669
		Accrued other							121,253				132,324
		Lease liability - operating leases							44,690				29,547
		Lease liability - financing leases							1,579				1,175
		Current portion of long term debt							105,108				101,741
				TOTAL CURRENT LIABILITIES					658,210				691,770
	Long term debt								245,574				240,724
	Non-current liabilities								55,287				43,505
	Lease liability - operating leases								177,699				78,557
	Lease liability - financing leases								865				-
	Deferred taxes								163,767				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; 75,524,189
				shares issued in both 2023 and 2022; 62,200,921
				shares outstanding in 2023 and 65,868,145 shares outstanding in 2022.					755				755
			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							225,288				207,823
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306							(15,458	)			(15,458	)
		Retained earnings							1,949,110				1,781,582
		Accumulated other comprehensive loss							(129	)			(214	)
		Treasury stock; at cost, 13,323,268 shares in 2023
			and 9,656,044 shares in 2022						(524,927	)			(374,892	)
			TOTAL STOCKHOLDERS' EQUITY						1,634,645				1,599,602
				TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	2,936,047			$	2,810,081

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
								Years Ended December 31,
									2023				2022
Cash flows from operating activities:
	Net income							$	167,528			$	356,948
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization						184,449				153,726
			Impairment of right-of-use asset						2,012				5,874
			Deferred taxes						9,587				4,448
			Compensation expense related to share-based compensation plans						21,348				20,426
			Gain on sale of assets, net						(6,835	)			(24,176	)
	Changes in operating assets and liabilities, net of acquisitions:
			Restricted investments						(2,698	)			6,191
			Accounts receivable, net						145,088				8,298
			Prepaid taxes						(344	)			(14,796	)
			Prepaid expenses and other current assets						(5,974	)			(3,111	)
			Other assets						(3,732	)			(4,231	)
			Accounts payable						1,215				(89,103	)
			Accrued expenses						(63,626	)			57,613
			Non-current liabilities						(25,860	)			(19,944	)
			Net cash provided by operating activities						422,158				458,163
Cash flows from investing activities:
	Proceeds from sale of equipment								27,717				42,929
	Purchases of property and equipment								(140,068	)			(219,140	)
	Acquisitions, net of cash acquired								(260,810	)			(102,661	)
			Net cash used in investing activities						(373,161	)			(278,872	)
Cash flows from financing activities:
	Purchase of treasury stock								(143,770	)			(75,000	)
	Repayments of long term debt								(105,771	)			(111,482	)
	Stock withheld for payments of withholding taxes								(10,148	)			(8,312	)
	Finance lease payments								(2,708	)			(2,093	)
	Purchase of treasury stock from related party								-				(34,767	)
	Proceeds from issuance of debt								113,988				179,195
			Net cash used in financing activities						(148,409	)			(52,459	)
	Effect of exchange rate changes on cash and cash equivalents								40				26
Net increase in cash and cash equivalents									(99,372	)			126,858
Cash and cash equivalents beginning of period									286,642				159,784
Cash and cash equivalents end of period								$	187,270			$	286,642

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
	Three Months								Years
	Ended December 31,								Ended December 31,
Operating Revenue		2023				2022				2023				2022
Intermodal and Transportation Solutions	$	576,474			$	804,709			$	2,495,663			$	3,312,431
Logistics		437,857				507,043				1,820,856				2,121,818
Inter-segment eliminations		(29,308	)			(26,249	)			(113,934	)			(93,759	)
Total operating revenue	$	985,023			$	1,285,503			$	4,202,585			$	5,340,490
	Three Months								Years
	Ended December 31,								Ended December 31,
Operating Income		2023				2022				2023				2022
Intermodal and Transportation Solutions	$	12,141			$	75,468			$	106,780			$	348,537
Logistics		17,261				28,819				105,451				126,184
Total operating income	$	29,402			$	104,287			$	212,231			$	474,721
	Three Months								Years
	Ended December 31,								Ended December 31,
Depreciation and Amortization		2023				2022				2023				2022
Intermodal and Transportation Solutions	$	27,483			$	26,501			$	109,234			$	102,279
Logistics		9,141				8,213				34,289				29,510
Total depreciation and amortization	$	36,624			$	34,714			$	143,523			$	131,789

RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
	Three Months						Years
	Ended December 31,						Ended December 31,
		2023			2022			2023			2022
Net Income	$	28,785		$	79,274		$	167,528		$	356,948
Interest Expense, net		103			1,381			3,424			6,632
Depreciation and Amortization		47,674			43,313			184,449			153,726
Provision for Income Taxes		992			23,947			41,676			111,010
EBITDA	$	77,554		$	147,915		$	397,077		$	628,316

By providing this non-GAAP measure of EBITDA, management intends to provide investors with a meaningful, consistent comparison of the Company's profitability for the periods presented.

HUB GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in millions, except per share amounts) (unaudited)
The following is a reconciliation of GAAP earnings to Non-GAAP earnings, excluding certain items for earnings before tax (pre-tax), net income (after-tax) and diluted earnings per share (per share):
					Three Months Ended									Twelve Months Ended
					December 31, 2023									December 31, 2023
					Pre-Tax			After-Tax			Per Share			Pre-Tax			After-Tax			Per Share
GAAP Earnings					$	29.8		$	28.8		$	0.46		$	209.2		$	167.5		$	2.62
Acquisition related expenses						5.1			4.9		$	0.08			5.1			4.1		$	0.06
Adjusted Earnings					$	34.9		$	33.7		$	0.54		$	214.3		$	171.6		$	2.68
					Three Months Ended									Twelve Months Ended
					December 31, 2022									December 31, 2022
					Pre-Tax			After-Tax			Per Share			Pre-Tax			After-Tax			Per Share
GAAP Earnings					$	103.2		$	79.3		$	1.21		$	468.0		$	356.9		$	5.32
Acquisition related expenses						-			-		$	-			3.1			2.4		$	0.04
Adjusted Earnings					$	103.2		$	79.3		$	1.21		$	471.1		$	359.3		$	5.36

By providing this non-GAAP measure of Adjusted Earnings, management intends to provide investors with a useful measure of Hub Group's performance that excludes certain acquisition-related items and allowing better evaluation of underlying business performance and period-to-period comparability.

Acquisition-related expenses are comprised of banker fees, legal fees, insurance fees and other professional service fees incurred as part of the process of closing the acquisitions of Forward Air Final Mile in 2023 and TAGG Logistics in 2022.