Market Overview

Hub Group, Inc. Reports Record Second Quarter 2018 Results

Share:

Highlights of the quarter

  • 28% revenue growth
  • 34% gross margin growth
  • 93% increase in operating income
  • Raising guidance - Expect 2018 diluted EPS will range from $2.73 to $2.83
  • Strong intermodal pricing environment

OAK BROOK, Ill., Aug. 01, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2018 net income of $22.1 million, or diluted earnings per share of $0.66 versus second quarter 2017 net income of $9.5 million, or $0.29 per diluted share.

Revenue for the current quarter was $1.2 billion compared with $923.6 million for the second quarter 2017. Hub segment revenue increased 26% and Mode segment revenue increased 29%. Operating income for the current quarter increased to $32.0 million versus $16.6 million for the second quarter 2017. Hub segment operating income increased 139% and Mode segment operating income increased 15%.

Segment Information:

Hub    
•  Second quarter 2018 Segment Revenue: $888.2 million, up 26%  
•  Second quarter 2018 Segment Operating Income: $24.8 million, up 139%  

Hub's revenue increased 26% to $888.2 million compared to the second 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 $73.9 million in the second quarter of 2018.

Second quarter intermodal revenue increased 17% to $526.0 million reflecting a 4% increase in loads, price increases and higher fuel revenue.  Intermodal gross margin increased compared to the second quarter of 2017 primarily due to improved pricing and increased volume.  These gains were partially offset by higher rail and higher drayage costs. 

Truck brokerage revenue increased 10% to $114.9 million in the second quarter compared to the same quarter of last year.  Truck brokerage handled 5% fewer loads while fuel, price and mix combined were up 15%.  Truck brokerage gross margin increased primarily because of growth with strategic customers and increased spot activity.

Second quarter Unyson Logistics revenue increased 17% to $173.4 million due primarily to growth from new customers on-boarded in 2017 and growth with existing customers.  

Hub Group Dedicated revenue of $73.9 million in the second quarter of 2018 is up 22% sequentially from the first quarter of 2018 revenue of $60.4 million. 

Costs and expenses increased $13.2 million to $75.3 million in the second quarter of 2018 compared to $62.1 million in the second quarter of 2017 due primarily to the addition of $12.2 million of costs and expenses for Hub Group Dedicated.

Operating income was $24.8 million compared to $10.4 million in the second quarter 2017.

Mode  
•  Second quarter 2018 Segment Revenue: $314.1 million, up 29%
•  Second quarter 2018 Segment Operating Income: $7.1 million, up 15%

Mode's revenue increased 29% to $314.1 million compared to the second quarter 2017.   Revenue consisted of $141.2 million in intermodal which was up 26%, $103.2 million in truck brokerage which was up 24% and $69.7 million in logistics which was up 45%. 

Gross margin increased $7.3 million compared to the second quarter of 2017 due to growth in all three lines of business.

Operating income was $7.1 million compared to $6.2 million in the second quarter 2017.

Hub is exploring strategic alternatives for Mode, with the intention of using the proceeds for investments in our existing business, including technology initiatives, and for acquisitions of businesses in both new and existing service lines.

Cash Flow and Capitalization:

Our capital expenditures for the second quarter totaled $47.1 million, primarily for tractors, trailers, and technology investments.  At June 30, 2018, we had cash and cash equivalents of $26.8 million. 

At June 30, 2018, we had total debt outstanding of $275.2 million on various debt instruments compared to $302.5 million at December 31, 2017. 

2018 Outlook

We expect that our 2018 diluted earnings per share will range from $2.73 to $2.83.  We estimate that our 2018 capital expenditures will range from $200 million to $220 million.  We project our effective tax rate will range from 24.5% to 25.5%.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, August 1st 2018 to discuss its second quarter 2018 results and corporate strategy. 

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=UWXldILszGSOoR. 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 August 1st 2018, the company will make available on its website an Investor Presentation, which includes updated business information and second 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's SEC 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.

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,
    2018
   2017 
 
    % of       % of
  Amount Revenue   Amount Revenue
Revenue $ 1,179,093 100.0 %   $ 923,596 100.0 %
 
Transportation costs   1,042,903 88.4 %     822,279 89.0 %
Gross margin   136,190 11.6 %     101,317 11.0 %
 
Costs and expenses:
Salaries and benefits   58,092 5.0 %     45,038 4.9 %
Agent fees and commissions   21,969 1.9 %     17,038 1.8 %
General and administrative   20,216 1.7 %     20,114 2.2 %
Depreciation and amortization   3,960 0.3 %     2,549 0.3 %
Total costs and expenses   104,237 8.9 %     84,739 9.2 %
 
Operating income   31,953 2.7 %     16,578 1.8 %
 
Other income (expense):
Interest expense   (2,187) -0.2 %     (1,032) -0.1 %
Interest and dividend income   22 0.0 %     200 0.0 %
Other, net   (189) 0.0 %     -    0.0 %
Total other expense   (2,354) -0.2 %     (832) -0.1 %
 
Income before provision for income taxes   29,599 2.5 %     15,746 1.7 %
 
Income tax expense   7,548 0.6 %     6,204 0.7 %
 
Net income $ 22,051 1.9 %   $ 9,542 1.0 %
 
Basic earnings per common share $ 0.66   $ 0.29  
 
Diluted earnings per common share $ 0.66   $ 0.29  
 
Basic weighted average number of shares outstanding   33,389     33,220  
Diluted weighted average number of shares outstanding   33,562     33,262  
             


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
 
  Six Months Ended June 30,
    2018
  2017
  % of       % of
  Amount Revenue   Amount Revenue
Revenue $ 2,275,064 100.0 %   $ 1,816,352 100.0 %
 
Transportation costs   2,016,083 88.6 %     1,613,450 88.8 %
Gross margin   258,981 11.4 %     202,902 11.2 %
 
Costs and expenses:
Salaries and benefits   114,099 5.0 %     88,217 4.9 %
Agent fees and commissions   41,111 1.8 %     35,031 1.9 %
General and administrative   40,720 1.8 %     40,938 2.2 %
Depreciation and amortization   7,965 0.4 %     4,961 0.3 %
Total costs and expenses   203,895 9.0 %     169,147 9.3 %
 
Operating income    55,086 2.4 %     33,755 1.9 %
 
Other income (expense):
Interest expense   (4,291) -0.2 %     (2,130) -0.1 %
Interest and dividend income   44 0.0 %     330 0.0 %
Other, net   (244) 0.0 %     194 0.0 %
Total other expense   (4,491) -0.2 %     (1,606) -0.1 %
 
Income before provision for income taxes   50,595 2.2 %     32,149 1.8 %
 
Income tax expense   12,377 0.5 %     12,273 0.7 %
 
Net income $ 38,218 1.7 %   $ 19,876 1.1 %
 
Basic earnings per common share $ 1.14   $ 0.60  
 
Diluted earnings per common share $ 1.14   $ 0.60  
 
Basic weighted average number of shares outstanding   33,382     33,213  
Diluted weighted average number of shares outstanding   33,520     33,318  
             

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
 
  Three Months
  Ended June 30, 2018
                 
  Hub   Mode   Inter-Segment Elims     Hub Group Total
Revenue $ 888,238   $ 314,078   $ (23,223)   $ 1,179,093
 
Transportation costs     788,087     278,039     (23,223)     1,042,903
Gross margin     100,151     36,039     -        136,190
 
Costs and expenses:
Salaries and benefits     53,839     4,253     -        58,092
Agent fees and commissions     11     21,958     -        21,969
General and administrative     17,768     2,448     -        20,216
Depreciation and amortization     3,719     241     -        3,960
Total costs and expenses     75,337     28,900     -        104,237
                       
Operating income   $ 24,814   $ 7,139   $ -      $ 31,953
 
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
 
  Three Months 
  Ended June 30, 2017 
                 
  Hub   Mode   Inter-Segment Elims     Hub Group Total
Revenue $ 704,344   $ 242,998   $ (23,746)   $ 923,596
 
Transportation costs   631,787     214,238     (23,746)     822,279
Gross margin   72,557     28,760     -        101,317
 
Costs and expenses:
Salaries and benefits   41,569     3,469     -        45,038
Agent fees and commissions   14     17,024     -        17,038
General and administrative   18,331     1,783     -        20,114
Depreciation and amortization   2,249     300     -        2,549
Total costs and expenses   62,163     22,576     -        84,739
                       
Operating income $ 10,394   $ 6,184   $ -      $ 16,578
 

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
 
  Six Months
  Ended June 30, 2018
                 
  Hub   Mode   Inter-Segment Elims     Hub Group Total
Revenue $ 1,719,823   $ 601,977   $ (46,736)   $ 2,275,064
 
Transportation costs   1,529,297     533,522     (46,736)     2,016,083
Gross margin   190,526     68,455     -        258,981
 
Costs and expenses:
Salaries and benefits   105,909     8,190     -        114,099
Agent fees and commissions   25     41,086     -        41,111
General and administrative   36,170     4,550     -        40,720
Depreciation and amortization   7,478     487     -        7,965
Total costs and expenses   149,582     54,313     -        203,895
                       
Operating income $ 40,944   $ 14,142   $ -      $ 55,086
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
 
  Six Months
  Ended June 30, 2017
                 
  Hub   Mode   Inter-Segment Elims     Hub Group Total
Revenue $ 1,380,824   $ 484,832   $ (49,304)   $ 1,816,352
 
Transportation costs   1,236,462     426,292     (49,304)     1,613,450
Gross margin   144,362     58,540     -        202,902
 
Costs and expenses:
Salaries and benefits   81,164     7,053     -        88,217
Agent fees and commissions   31     35,000     -        35,031
General and administrative   36,810     4,128     -        40,938
Depreciation and amortization   4,357     604     -        4,961
Total costs and expenses   122,362     46,785     -        169,147
                       
Operating income $ 22,000   $ 11,755   $ -      $ 33,755
 


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
 
  Three Months
  Ended June 30, 2018
               
  Hub   Mode
  Inter-Segment Elims
  Hub Group Total
Intermodal $ 526,028   $ 141,221   $ (6,559)   $ 660,690
Truck brokerage   114,936     103,168     (84)     218,020
Logistics   173,421     69,689     (16,580)     226,530
Dedicated   73,853     -        -        73,853
Total Revenue $ 888,238   $ 314,078   $ (23,223)   $ 1,179,093
 
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
 
  Three Months
  Ended June 30, 2017
               
  Hub    Mode
  Inter-Segment Elims
  Hub Group Total
Intermodal $ 451,420   $ 112,089     $ (12,866)   $ 550,643
Truck brokerage   104,289     82,869       (310)     186,848
Logistics   148,635     48,040       (10,570)     186,105
Dedicated   -        -          -        -   
Total Revenue $ 704,344   $ 242,998     $ (23,746)   $ 923,596
 


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
 
  Six Months
  Ended June 30, 2018
               
  Hub   Mode   Inter-Segment Elims   Hub Group Total
Intermodal $ 1,008,522   $ 270,995   $ (17,829)   $ 1,261,688
Truck brokerage   234,955     203,889     (442)     438,402
Logistics   342,098     127,093     (28,450)     440,741
Dedicated   134,248     -        (15)     134,233
Total Revenue $ 1,719,823   $ 601,977   $ (46,736)   $ 2,275,064
 
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
 
  Six Months
  Ended June 30, 2017
               
  Hub   Mode   Inter-Segment Elims   Hub Group Total
Intermodal $ 875,843   $ 234,269   $ (28,103)   $ 1,082,009
Truck brokerage   210,473     161,031     (695)     370,809
Logistics   294,508     89,532     (20,506)     363,534
Dedicated   -        -        -        -   
Total Revenue $ 1,380,824   $ 484,832   $ (49,304)   $ 1,816,352
 


HUB GROUP, INC. 
CONSOLIDATED BALANCE SHEETS 
(in thousands, except share data) 
(unaudited) 
 
  June 30,   December 31,
   2018    2017
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,753   $ 28,557
Accounts receivable trade, net   615,690     583,994
Accounts receivable other   3,851     5,722
Prepaid taxes   5,268     12,088
Prepaid expenses and other current assets   15,763     25,697
TOTAL CURRENT ASSETS   667,325     656,058
 
Restricted investments   24,107     24,181
Property and equipment, net   618,931     562,150
Other intangibles, net   71,501     74,348
Goodwill, net   348,106     348,661
Other assets   3,534     5,543
TOTAL ASSETS $ 1,733,504   $ 1,670,941
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade $ 348,222   $ 338,933
Accounts payable other   12,418     12,268
Accrued payroll   36,487     28,994
Accrued other   78,598     59,305
Current portion of capital lease   2,794     2,777
Current portion of long term debt   86,740     77,266
TOTAL CURRENT LIABILITIES   565,259     519,543
 
Long term debt   179,444     214,808
Non-current liabilities   39,083     37,927
Long term capital lease   6,196     7,696
Deferred taxes   132,463     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; 33,717,169 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   168,614     173,011
Purchase price in excess of predecessor basis, net of tax  
benefit of $10,306   (15,458)     (15,458)
Retained earnings   908,934     870,716
Accumulated other comprehensive loss   (190)     (194)
Treasury stock; at cost, 7,507,623 shares in 2018
and 7,777,722 shares in 2017   (251,260)     (258,622)
TOTAL STOCKHOLDERS' EQUITY   811,059     769,872
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,733,504   $ 1,670,941
 


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
  Six Months Ended June 30,
  2018   2017
 
Cash flows from operating activities:
Net income $ 38,218   $ 19,876
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization   38,251     25,288
Deferred taxes   11,767     7,713
Compensation expense related to share-based compensation plans   6,982     4,972
Other     (3,571)     -   
(Gain) loss on sale of assets   (90)     307
Changes in operating assets and liabilities:
Restricted investments   74     (2,408)
Accounts receivable, net   (29,748)     26,240
Prepaid taxes   6,820     (3,352)
Prepaid expenses and other current assets   9,935     4,493
Other assets   1,869     (2,653)
Accounts payable   9,878     307
Accrued expenses   4,857     (18,013)
Non-current liabilities   2,382     368
Net cash provided by operating activities   97,624     63,138
 
Cash flows from investing activities:
Proceeds from sale of equipment   1,234     2,356
Purchases of property and equipment   (69,261)     (29,593)
Net cash used in investing activities   (68,027)     (27,237)
 
Cash flows from financing activities:
Proceeds from issuance of debt   58,161     16,149
Repayments of long term debt   (84,051)     (23,118)
Stock tendered for payments of withholding taxes   (4,017)     (3,293)
Capital lease payments   (1,483)     (1,399)
Net cash used in financing activities   (31,390)     (11,661)
 
Effect of exchange rate changes on cash and cash equivalents   (11)     95
 
Net (decrease) increase in cash and cash equivalents   (1,804)     24,335
Cash and cash equivalents beginning of period   28,557     127,404
Cash and cash equivalents end of period $ 26,753   $ 151,739
 

Primary Logo

View Comments and Join the Discussion!