Hub Group, Inc. Reports Second Quarter 2022 Results

Hub Group, Inc.

Highlights:

• Strong freight demand conditions, combined with the attractive value proposition of our service offerings, led to record quarterly revenue of $1.4 billion, up 43% as compared to last year

• Record quarterly gross margin of $247 million (17.6% of revenue) driven by favorable pricing and yield management, combined with our continued focus on operating efficiency, resulted in operating income margin of 9.8%

• Record quarterly diluted earnings per share (EPS) of $3.03

• Generated net income of $103 million and EBITDA (non-GAAP)⁽¹⁾ of $174 million, and ended the quarter with solid liquidity and a conservative capital structure

• Named #2 3PL on Inbound Logistics’ Top 10 3PL list for the third straight year

• Increased 2022 outlook, with expected revenue of $5.6-$5.7 billion and diluted EPS of $10.00 - $10.50

OAK BROOK, Ill., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2022 net income of $103 million, and diluted earnings per share of $3.03. Net income for second quarter 2021 was $27 million, or $0.78 per diluted share.

“Our team continues to perform at a high level in today’s environment, delivering record revenue and profit as we support our customers with high service levels and innovative supply chain solutions. Our focus on yield improvement and operating efficiency led to record quarterly diluted EPS of $3.03, which is nearly four times the prior year’s diluted EPS. We are honored to once again be named #2 on Inbound Logistics’ Top 10 3PL list for the third consecutive year. As indicated in our revised financial outlook we expect a strong finish to 2022 but acknowledge some level of uncertainty as we look forward to 2023. We continue to remain focused on a disciplined cost and capital structure, while supporting our customers with great service and investing for growth, enabling our success in a variety of market conditions,” said Dave Yeager, Hub Group’s Chairman and Chief Executive Officer.

Second Quarter 2022 Results

Revenue for the second quarter of 2022 increased by 43% to $1.4 billion compared with $1.0 billion in the second quarter of 2021. Gross margin for the quarter was 17.6% of revenue, as compared with 12.3% last year. Operating income was $138 million (9.8% of revenue) versus $37 million (3.8% of revenue) in 2021. EBITDA (non-GAAP)¹ for the quarter was $174 million.

Second quarter Intermodal and Transportation Solutions (“ITS”) revenue increased 41% to $873 million. Intermodal volume increased 1% and revenue per load increased 44%. ITS gross margin increased compared to the prior year as pricing and cost recovery more than offset increased purchased transportation costs.

Truck Brokerage revenue grew 90% in the quarter to $266 million due to the acquisition of Choptank Transport (“Choptank”) as well as revenue growth from truckload and LTL. Gross margin increased relative to second quarter 2021 due to the acquisition and higher revenue per load.

Second quarter Logistics revenue increased 18% to $263 million due to the growth of our managed transportation, final mile and consolidation services. Gross margin increased due to growth with existing customers, new business onboardings and yield management initiatives, partially offset by higher warehousing and transportation costs.

Costs and expenses increased to $109 million in the second quarter of 2022 due to incremental operating costs from Choptank, higher legal and outside services spend, and higher compensation expense, partially offset by higher gains on the sale of equipment as compared to prior year.

Capital expenditures for the second quarter of 2022 totaled $55 million. At June 30, 2022, we had cash and cash equivalents of $298 million.

2022 Outlook

We expect our 2022 diluted earnings per share will range from $10.00 to $10.50. We estimate revenue will be $5.6-$5.7 billion, and that gross margin as a percentage of revenue will range from 15.8% to 16.0%. We estimate our costs and expenses will range from $415 to $430 million for the year. We project our effective tax rate for the year will be 24-25%. We expect capital expenditures for 2022 to range from $240 to $250 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 August 3, 2022, to discuss our second quarter 2022 results.

Hosting the conference call will be Dave Yeager, Chairman and CEO. Also participating on the call will be Phil Yeager, President and 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://registrations.events/direct/ID60118

For those who do not prefer to preregister, on the day of the call, dial (888) 500-3691 approximately ten minutes prior to the scheduled call time; enter the conference ID 60118. 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 forward-looking statements are based on management's experience and perception of 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. Factors that could cause actual results to differ materially include general or regional economic conditions and health concerns; the effect of the ongoing COVID-19 pandemic, including any spikes, outbreaks or variants of the virus, as well as any future government actions taken in response to the pandemic, including on our business operations, as well as its impact on general economic and financial market conditions and on our customers, counterparties, employees and third-party service providers; our ability to sustain or the effects of plans intended to improve operational execution and performance; changes in or implementation of governmental or regulatory rules and interpretations affecting tax, wage and hour matters, health and safety, labor and employment, insurance or other undeterminable areas; intermodal costs and prices, the integration of acquisitions and expenses relating thereto; the future performance of Hub’s Intermodal and Transportation Solutions, Truck Brokerage and Logistics business lines; driver shortages; the amount and timing of strategic investments or divestitures by Hub; the failure to implement and integrate critical information technology systems; cyber security incidents; retail and other customers encountering adverse economic conditions and other factors described from time to time in Hub Group’s SEC reports, press releases and other communications. Hub Group assumes no obligation to update any such forward-looking statements.

SOURCE:   Hub Group, Inc.                CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
							Three Months Ended June 30,
								2022						2021
										% of						% of
							Amount			Revenue			Amount			Revenue
Revenue							$	1,401,457		100.0	%		$	981,320		100.0	%
Transportation costs								1,154,619		82.4	%			860,759		87.7	%
	Gross margin							246,838		17.6	%			120,561		12.3	%
Costs and expenses:
	Salaries and benefits							68,041		4.9	%			54,375		5.5	%
	General and administrative							30,064		2.1	%			20,370		2.1	%
	Depreciation and amortization							11,097		0.8	%			8,868		0.9	%
	Total costs and expenses							109,202		7.8	%			83,613		8.5	%
Operating income								137,636		9.8	%			36,948		3.8	%
Other income (expense):
	Interest expense							(1,402	)	-0.1	%			(1,859	)	-0.2	%
	Other, net							(194	)	-0.0	%			(192	)	-0.0	%
	Total other expense, net							(1,596	)	-0.1	%			(2,051	)	-0.2	%
Income before provision for income taxes								136,040		9.7	%			34,897		3.6	%
Provision for income taxes								33,194		2.4	%			8,305		0.8	%
Net income							$	102,846					$	26,592
Earnings per share
	Basic						$	3.06					$	0.80
	Diluted						$	3.03					$	0.78
Basic weighted average number of shares outstanding								33,651						33,428
Diluted weighted average number of shares outstanding								33,935						33,879

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
							Six Months Ended June 30,
								2022						2021
										% of						% of
							Amount			Revenue			Amount			Revenue
Revenue							$	2,699,580		100.0	%		$	1,900,873		100.0	%
Transportation costs								2,237,725		82.9	%			1,671,565		87.9	%
	Gross margin							461,855		17.1	%			229,308		12.1	%
Costs and expenses:
	Salaries and benefits							136,967		5.1	%			111,326		5.9	%
	General and administrative							50,140		1.9	%			39,613		2.1	%
	Depreciation and amortization							22,052		0.8	%			17,370		0.9	%
	Total costs and expenses							209,159		7.7	%			168,309		8.9	%
Operating income								252,696		9.4	%			60,999		3.2	%
Other income (expense):
	Interest expense							(3,100	)	-0.1	%			(3,764	)	-0.2	%
	Other, net							(63	)	-0.0	%			(284	)	-0.0	%
	Total other expense, net							(3,163	)	-0.1	%			(4,048	)	-0.2	%
Income before provision for income taxes								249,533		9.2	%			56,951		3.0	%
Provision for income taxes								59,184		2.2	%			13,129		0.7	%
Net income							$	190,349					$	43,822
Earnings per share
	Basic						$	5.66					$	1.31
	Diluted						$	5.61					$	1.30
Basic weighted average number of shares outstanding								33,647						33,423
Diluted weighted average number of shares outstanding								33,950						33,827

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
								June 30,				December 31,
									2022				2021
								(unaudited)
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents						$	298,476			$	159,784
		Accounts receivable trade, net							794,785				701,512
		Accounts receivable other							2,933				3,022
		Prepaid taxes							4,357				2,191
		Prepaid expenses and other current assets							18,115				27,779
				TOTAL CURRENT ASSETS					1,118,666				894,288
	Restricted investments								19,056				24,256
	Property and equipment, net								712,571				681,451
	Right-of-use assets - operating leases								45,997				44,036
	Right-of-use assets - financing leases								2,230				1,252
	Other intangibles, net								183,883				196,672
	Goodwill, net								577,340				576,913
	Other assets								19,502				18,426
				TOTAL ASSETS				$	2,679,245			$	2,437,294
LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade						$	423,608			$	424,923
		Accounts payable other							17,192				12,493
		Accrued payroll							54,903				56,938
		Accrued other							109,918				82,827
		Lease liability - operating leases							12,214				11,364
		Lease liability - financing leases							2,036				1,251
		Current portion of long term debt							98,774				97,273
				TOTAL CURRENT LIABILITIES					718,645				687,069
	Long term debt								188,058				177,479
	Non-current liabilities								43,077				41,572
	Lease liability - operating leases								36,409				34,916
	Lease liability - financing leases								173				-
	Deferred taxes								157,694				155,944
	STOCKHOLDERS' EQUITY:
		Preferred stock, $.01 par value; 2,000,000 shares authorized;
			no shares issued or outstanding in 2022 and 2021						-				-
		Common stock
			Class A: $.01 par value; 97,337,700 shares authorized and
				41,224,792 shares issued in 2022 and 2021; 33,980,577 shares
				outstanding in 2022 and 33,907,734 shares outstanding in 2021					412				412
			Class B: $.01 par value; 662,300 shares authorized;
				662,296 shares issued and outstanding in 2022 and 2021					7				7
		Additional paid-in capital							195,603				189,256
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306							(15,458	)			(15,458	)
		Retained earnings							1,614,983				1,424,634
		Accumulated other comprehensive loss							(203	)			(207	)
		Treasury stock; at cost, 7,244,215 shares in 2022											-
			and 7,317,058 shares in 2021						(260,155	)			(258,330	)
			TOTAL STOCKHOLDERS' EQUITY						1,535,189				1,340,314
				TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	2,679,245			$	2,437,294

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
									Six Months Ended June 30,
										2022				2021
Cash flows from operating activities:
	Net income								$	190,349			$	43,822
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization							71,922				64,033
			Deferred taxes							3,279				4,428
			Compensation expense related to share-based compensation plans							10,237				9,289
			Gain on sale of assets							(12,509	)			(4,033	)
	Changes in operating assets and liabilities:
			Restricted investments							5,200				48
			Accounts receivable, net							(93,767	)			(20,088	)
			Prepaid taxes							(2,166	)			(395	)
			Prepaid expenses and other current assets							9,664				12,231
			Other assets							(2,517	)			(316	)
			Accounts payable							3,380				71,314
			Accrued expenses							23,251				(1,652	)
			Non-current liabilities							(5,588	)			(4,762	)
			Net cash provided by operating activities							200,735				173,919
Cash flows from investing activities:
	Proceeds from sale of equipment									18,584				19,912
	Purchases of property and equipment									(85,942	)			(26,337	)
	Cash used in acquisitions									-				(90	)
			Net cash used in investing activities							(67,358	)			(6,515	)
Cash flows from financing activities:
	Proceeds from issuance of debt									66,194				17,464
	Repayments of long term debt									(54,114	)			(57,854	)
	Stock withheld for payments of withholding taxes									(5,715	)			(3,973	)
	Finance lease payments									(1,059	)			(1,524	)
			Net cash provided by (used) in financing activities							5,306				(45,887	)
	Effect of exchange rate changes on cash and cash equivalents									9				(2	)
Net increase in cash and cash equivalents										138,692				121,515
Cash and cash equivalents beginning of period										159,784				124,506
Cash and cash equivalents end of period									$	298,476			$	246,021

HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
	Three Months						Six Months
	Ended June 30,						Ended June 30,
		2022			2021			2022			2021
Intermodal and transportation solutions	$	872,501		$	618,880		$	1,646,076		$	1,194,136
Truck brokerage		265,861			139,991			561,467			267,253
Logistics		263,095			222,449			492,037			439,484
		-			-			-			-
Total revenue	$	1,401,457		$	981,320		$	2,699,580		$	1,900,873

RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
	Three Months
	Ended June 30,
							Change				Change
		2022			2021		$				%
Net income	$	102,846		$	26,592		$	76,254			286.8	%
Interest expense		1,402			1,859			(457	)		-24.6	%
Depreciation and amortization		36,729			31,922			4,807			15.1	%
Provision for income taxes		33,194			8,305			24,889			299.7	%
EBITDA	$	174,171		$	68,678		$	105,493			153.6	%

RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
	Six Months
	Ended June 30,
							Change				Change
		2022			2021		$				%
Net income	$	190,349		$	43,822		$	146,527			334.4	%
Interest expense		3,100			3,764			(664	)		-17.6	%
Depreciation and amortization		71,922			64,033			7,889			12.3	%
Provision for income taxes		59,184			13,129			46,055			350.8	%
EBITDA	$	324,555		$	124,748		$	199,807			160.2	%

(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.