Market Overview

Hub Group, Inc. Reports Record Second Quarter 2019 Results

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Highlights of the quarter

  • Record EPS from continuing operations of $0.87, 71% growth
  • 31% increase in gross margin
  • 60% increase in operating income
  • Operating margin improved 160 basis points to 4.4%
  • EBITDA increased 55% to $69.4 million

OAK BROOK, Ill., July 30, 2019 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2019 net income of $29.2 million, or diluted earnings per share of $0.87. Income from continuing operations for the second quarter 2018 was $17.2 million, or $0.51 per diluted share.   

Results of Continuing Operations

Revenue for the current quarter increased by 3% to $921.2 million compared with $894.7 million for the second quarter 2018 as a result of our success in providing multimodal solutions to our customers and the addition of the CaseStack business in December 2018.  Operating income for the current quarter increased 60% to $40.7 million versus $25.4 million for the second quarter 2018, primarily as a result of improved yield management and our intense focus on reducing costs while maintaining the highest levels of service. Operating margin expanded to 4.4% for the current quarter, as compared to 2.8% in the prior year quarter.

Second quarter intermodal revenue increased 1% to $542.9 million due primarily to a continued focus on yield management and enhanced efficiency, partially offset by a 7% decline in volume. Volume was down compared to the prior year due to a softening demand environment, increased truckload and intermodal competition, and a 2% volume decrease from lane cancellations and weather disruption. Intermodal gross margin increased compared to the second quarter of 2018 primarily due to our yield management strategy, improved efficiency and better purchasing, partially offset by decreased volumes and rail cost increases.

Truck brokerage revenue decreased 7% to $107.1 million in the second quarter of 2019 compared to the same quarter of last year.  Truck brokerage handled 18% more loads while fuel, price and mix combined were down 25% due primarily to the addition of the CaseStack LTL brokerage business.  Contractual truckload volume represented 86% of total truckload volume compared to 81% in the second quarter of 2018.   Truck brokerage gross margin increased due to a higher load count, further benefits from our new operating model and yield management strategy, as well as our new technology platform.    

Second quarter logistics revenue grew 15% to $193.5 million.  Revenue and gross margin expanded due to the addition of CaseStack, benefits from continuous improvements and cross selling to our customers and improved yield management. 

Dedicated revenue increased 5% to $77.7 million compared to the same quarter in the prior year due to improved pricing and growth with new accounts which was offset partially by lost business.  Dedicated gross margin improved compared to the second quarter of 2018 due to implementation of our yield management processes and improved operational discipline.  We ended the quarter with approximately 1,300 tractors and 5,200 trailers for Dedicated. 

Costs and expenses increased to $92.0 million in the second quarter of 2019 compared to $75.6 million in the second quarter of 2018 due primarily to costs and expenses of $12.7 million related to CaseStack (which includes $2.3 million of non-cash amortization expense), the absence of a $3.6 million Dedicated contingent earn out adjustment in the prior year, partially offset by a decrease of $1.0 million in compensation expense. Costs and expenses include a total of $3.4 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.6 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.

Results of Discontinued Operations

Income from discontinued operations related to the sale of our Mode segment for the second quarter of 2018 was $4.9 million, or $0.15 per diluted share. 

Cash Flow and Capitalization

Our capital expenditures for the second quarter 2019 totaled $11.7 million, primarily for tractors and technology investments.  At June 30, 2019, we had cash and cash equivalents of $150 million.    

2019 Outlook

We expect that our 2019 diluted earnings per share will range from $3.30 to $3.40. We estimate mid-single digit revenue growth for the full year. We expect gross margin as a percentage of sales to range from 13.9% to 14.3% in the second half of the year. We estimate our quarterly costs and expenses will range from $96 million to $98 million in the back half of the year.  We expect annual amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.6 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.5 million in 2019. We project our effective tax rate for 2019 will range from 25% to 26%.  We forecast we will spend between $100 million and $110 million on capital expenditures in 2019.

Non-GAAP Financial Measure

As required by the rules of the Securities and Exchange Commission ("SEC"), we provide a reconciliation of the non-GAAP financial measure contained in this press release to the most directly comparable measure under GAAP, which is set forth in the attached table.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Tuesday, July 30, 2019 to discuss its second quarter 2019 results.

Hosting the conference call will be Dave Yeager, Chief Executive Officer.  Also participating on the call will be Phil Yeager, President and Chief Operating Officer, and Terri Pizzuto, Executive Vice President and 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=USsertzOHdGtXM. 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.

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 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 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, 2018.  Hub Group assumes no liability to update any such forward-looking statements.

SOURCE:  Hub Group, Inc.

 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
                   
          Three Months Ended June 30,
          2019
  2018
            % of     % of
          Amount Revenue   Amount Revenue
Revenue     $ 921,163   100.0 %   $ 894,734   100.0 %
                   
Transportation costs       788,460   85.6 %     793,743   88.7 %
  Gross margin       132,703   14.4 %     100,991   11.3 %
                   
Costs and expenses:              
  Salaries and benefits       60,859   6.6 %     54,068   6.1 %
  General and administrative       24,028   2.6 %     17,794   2.0 %
  Depreciation and amortization       7,095   0.8 %     3,723   0.4 %
    Total costs and expenses       91,982   10.0 %     75,585   8.5 %
                   
Operating income       40,721   4.4 %     25,406   2.8 %
                   
Other income (expense):              
  Interest expense       (2,690 ) -0.3 %     (2,187 ) -0.2 %
  Interest and dividend income       595   0.1 %     14   0.0 %
  Other, net       (30 ) 0.0 %     (182 ) 0.0 %
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