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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 
       AmountRevenue AmountRevenue 
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 
       AmountRevenue AmountRevenue 
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.


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