Hub Group, Inc. Reports First Quarter 2018 Results
Highlights of the quarter
- 23% revenue growth.
- 21% gross margin growth.
- 35% increase in operating income.
- Continued momentum with strong intermodal pricing.
- Hub Group Dedicated wins over $70 million of new business.
OAK BROOK, Ill., April 26, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ: HUBG) announced first quarter 2018 net income of $16.2 million, or diluted earnings per share of $0.48 versus first quarter 2017 net income of $10.3 million, or $0.31 per diluted share.
Revenue for the current quarter was $1.1 billion compared with $892.8 million for the first quarter 2017. Hub segment revenue increased 23% and Mode segment revenue increased 19%. Operating income for the current quarter increased to $23.1 million versus $17.2 million for the first quarter 2017. Hub segment operating income increased 39% and Mode segment operating income increased 26%.
Segment Information:
Hub• First quarter 2018 Segment Revenue: $831.6 million, up 23%• First quarter 2018 Segment Operating Income: $16.1 million, up 39%
Hub’s revenue increased 23% to $831.6 million compared to the first 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 $60.4 million.
First quarter intermodal revenue increased 14% to $482.5 million reflecting a 6% increase in loads, price increases and higher fuel revenue. Intermodal gross margin increased compared to the first quarter of 2017 primarily due to an increase in customer prices and volume, partially offset by higher rail, driver, and third party drayage costs.
Truck brokerage revenue increased 13% to $120.0 million this quarter compared to the same quarter of last year. Truck brokerage handled 1% fewer loads while fuel, price and mix combined were up 14%. Truck brokerage gross margin increased primarily because of growth with strategic customers and increased spot activity.
First quarter Unyson Logistics revenue increased 16% to $168.7 million due primarily to growth from new customers on-boarded in 2017 and growth with existing customers. Unyson Logistics gross margin declined primarily due to unfavorable customer mix and higher purchased transportation costs.
Hub Group Dedicated revenue of $60.4 million in the first quarter of 2018 is up 6% sequentially from the fourth quarter of 2017 revenue of $57.1 million. We project dedicated revenue in the last half of the year will increase between 30%-40% over last year.
Costs and expenses increased $14.0 million to $74.2 million in the first quarter of 2018 compared to $60.2 million in the first quarter of 2017 due primarily to the addition of $10.7 million of costs and expenses for Hub Group Dedicated and higher bonus and commission expense partially offset by lower due diligence and severance costs.
Operating income was $16.1 million compared to $11.6 million in the first quarter 2017.
Mode• First quarter 2018 Segment Revenue: $287.9 million, up 19%• First quarter 2018 Segment Operating Income: $7.0 million, up 26%
Mode’s revenue increased 19% to $287.9 million compared to the first quarter 2017. Revenue consisted of $129.8 million in intermodal which was up 6%, $100.7 million in truck brokerage which was up 29% and $57.4 million in logistics which was up 38%.
Gross margin increased $2.6 million compared to the first quarter of 2017 due primarily to increases in logistics and truck brokerage margin.
Operating income was $7.0 million compared to $5.6 million in the first quarter 2017.
Cash Flow and Capitalization:
Our capital expenditures for the first quarter totaled $22.2 million, primarily for tractors, trailers, technology investments, and containers. At March 31, 2018, we had cash and cash equivalents of $17.9 million.
At March 31, 2018, we had total debt outstanding of $284.3 million on various debt instruments compared to $302.5 million at December 31, 2017.
2018 and Long Term Outlook
We expect that our 2018 diluted earnings per share will range from $2.34 to $2.44. We estimate that our 2018 capital expenditures will range from $190 million to $210 million. We project our effective tax rate will be approximately 25%.
“Strong revenue and margin growth in the first quarter driven by a healthy intermodal pricing environment, spot opportunities, and new dedicated business position us well for a successful year,” said Dave Yeager, Hub’s Chief Executive Officer.
CONFERENCE CALL
Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, April 26, 2018, to discuss its first quarter 2018 results.
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=UTeYFbrpkjuxyE. 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 April 26, 2018, the company will make available on its website an Investor Presentation, which includes updated business information and first 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.
| HUB GROUP, INC. | |||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||
| (in thousands, except per share amounts) | |||||||||||||
| (unaudited) | |||||||||||||
| Three Months Ended March 31, | |||||||||||||
| 2018 | 2017 | ||||||||||||
| % of | % of | ||||||||||||
| Amount | Revenue | Amount | Revenue | ||||||||||
| Revenue | $ | 1,095,971 | 100.0 | % | $ | 892,756 | 100.0 | % | |||||
| Transportation costs | 973,180 | 88.8 | % | 791,171 | 88.6 | % | |||||||
| Gross margin | 122,791 | 11.2 | % | 101,585 | 11.4 | % | |||||||
| Costs and expenses: | |||||||||||||
| Salaries and benefits | 56,007 | 5.1 | % | 43,179 | 4.8 | % | |||||||
| Agent fees and commissions | 19,142 | 1.7 | % | 17,993 | 2.0 | % | |||||||
| General and administrative | 20,504 | 1.9 | % | 20,824 | 2.4 | % | |||||||
| Depreciation and amortization | 4,005 | 0.4 | % | 2,412 | 0.3 | % | |||||||
| Total costs and expenses | 99,658 | 9.1 | % | 84,408 | 9.5 | % | |||||||
| Operating income | 23,133 | 2.1 | % | 17,177 | 1.9 | % | |||||||
| Other income (expense): | |||||||||||||
| Interest expense | (2,104 | ) | -0.2 | % | (1,098 | ) | -0.1 | % | |||||
| Interest and dividend income | 22 | 0.0 | % | 130 | 0.0 | % | |||||||
| Other, net | (55 | ) | 0.0 | % | 194 | 0.0 | % | ||||||
| Total other expense | (2,137 | ) | -0.2 | % | (774 | ) | -0.1 | % | |||||
| Income before provision for income taxes | 20,996 | 1.9 | % | 16,403 | 1.8 | % | |||||||
| Income tax expense | 4,829 | 0.4 | % | 6,069 | 0.7 | % | |||||||
| Net income | $ | 16,167 | 1.5 | % | $ | 10,334 | 1.1 | % | |||||
| Basic earnings per common share | $ | 0.48 | $ | 0.31 | |||||||||
| Diluted earnings per common share | $ | 0.48 | $ | 0.31 | |||||||||
| Basic weighted average number of shares outstanding | 33,375 | 33,205 | |||||||||||
| Diluted weighted average number of shares outstanding | 33,478 | 33,373 | |||||||||||
| HUB GROUP, INC. | ||||||||||||||
| FINANCIAL INFORMATION BY SEGMENT | ||||||||||||||
| (in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Three Months | ||||||||||||||
| Ended March 31, 2018 | ||||||||||||||
| Hub | Mode | Inter-Segment Elims | Hub Group Total | |||||||||||
| Revenue | $ | 831,585 | $ | 287,899 | $ | (23,513 | ) | $ | 1,095,971 | |||||
| Transportation costs | 741,211 | 255,482 | (23,513 | ) | 973,180 | |||||||||
| Gross margin | 90,374 | 32,417 | - | 122,791 | ||||||||||
| Costs and expenses: | ||||||||||||||
| Salaries and benefits | 52,070 | 3,937 | - | 56,007 | ||||||||||
| Agent fees and commissions | 13 | 19,129 | - | 19,142 | ||||||||||
| General and administrative | 18,402 | 2,102 | - | 20,504 | ||||||||||
| Depreciation and amortization | 3,760 | 245 | - | 4,005 | ||||||||||
| Total costs and expenses | 74,245 | 25,413 | - | 99,658 | ||||||||||
| Operating income | $ | 16,129 | $ | 7,004 | $ | - | $ | 23,133 | ||||||
| HUB GROUP, INC. | ||||||||||||||
| FINANCIAL INFORMATION BY SEGMENT | ||||||||||||||
| (in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Three Months | ||||||||||||||
| Ended March 31, 2017 | ||||||||||||||
| Hub | Mode | Inter-Segment Elims | Hub Group Total | |||||||||||
| Revenue | $ | 676,480 | $ | 241,834 | $ | (25,558 | ) | $ | 892,756 | |||||
| Transportation costs | 604,674 | 212,055 | (25,558 | ) | 791,171 | |||||||||
| Gross margin | 71,806 | 29,779 | - | 101,585 | ||||||||||
| Costs and expenses: | ||||||||||||||
| Salaries and benefits | 39,596 | 3,583 | - | 43,179 | ||||||||||
| Agent fees and commissions | 17 | 17,976 | - | 17,993 | ||||||||||
| General and administrative | 18,479 | 2,345 | - | 20,824 | ||||||||||
| Depreciation and amortization | 2,109 | 303 | - | 2,412 | ||||||||||
| Total costs and expenses | 60,201 | 24,207 | - | 84,408 | ||||||||||
| Operating income | $ | 11,605 | $ | 5,572 | $ | - | $ | 17,177 | ||||||
| HUB GROUP, INC. | |||||||||||||
| FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE | |||||||||||||
| (in thousands) | |||||||||||||
| (unaudited) | |||||||||||||
| Three Months | |||||||||||||
| Ended March 31, 2018 | |||||||||||||
| Hub | Mode | Inter-Segment Elims | Hub Group Total | ||||||||||
| Intermodal | $ | 482,495 | $ | 129,773 | $ | (11,270 | ) | $ | 600,998 | ||||
| Truck brokerage | 120,019 | 100,721 | (358 | ) | 220,382 | ||||||||
| Logistics | 168,676 | 57,405 | (11,870 | ) | 214,211 | ||||||||
| Dedicated | 60,395 | - | (15 | ) | 60,380 | ||||||||
| Total Revenue | $ | 831,585 | $ | 287,899 | $ | (23,513 | ) | $ | 1,095,971 | ||||
| HUB GROUP, INC. | |||||||||||||
| FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE | |||||||||||||
| (in thousands) | |||||||||||||
| (unaudited) | |||||||||||||
| Three Months | |||||||||||||
| Ended March 31, 2017 | |||||||||||||
| Hub | Mode | Inter-Segment Elims | Hub Group Total | ||||||||||
| Intermodal | $ | 424,423 | $ | 122,181 | $ | (15,237 | ) | $ | 531,367 | ||||
| Truck brokerage | 106,185 | 78,161 | (385 | ) | 183,961 | ||||||||
| Logistics | 145,872 | 41,492 | (9,936 | ) | 177,428 | ||||||||
| Total Revenue | $ | 676,480 | $ | 241,834 | $ | (25,558 | ) | $ | 892,756 | ||||
| HUB GROUP, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (in thousands, except share data) | |||||||||||
| (unaudited) | |||||||||||
| March 31, | December 31, | ||||||||||
| 2018 | 2017 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 17,930 | $ | 28,557 | |||||||
| Accounts receivable trade, net | 573,722 | 583,994 | |||||||||
| Accounts receivable other | 4,467 | 5,722 | |||||||||
| Prepaid taxes | 12,136 | 12,088 | |||||||||
| Prepaid expenses and other current assets | 19,009 | 25,697 | |||||||||
| TOTAL CURRENT ASSETS | 627,264 | 656,058 | |||||||||
| Restricted investments | 23,265 | 24,181 | |||||||||
| Property and equipment, net | 568,048 | 562,150 | |||||||||
| Other intangibles, net | 72,925 | 74,348 | |||||||||
| Goodwill, net | 348,161 | 348,661 | |||||||||
| Other assets | 3,607 | 5,543 | |||||||||
| TOTAL ASSETS | $ | 1,643,270 | $ | 1,670,941 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable trade | $ | 318,962 | $ | 338,933 | |||||||
| Accounts payable other | 13,389 | 12,268 | |||||||||
| Accrued payroll | 22,622 | 28,994 | |||||||||
| Accrued other | 54,992 | 59,305 | |||||||||
| Current portion of capital lease | 2,798 | 2,777 | |||||||||
| Current portion of long term debt | 80,004 | 77,266 | |||||||||
| TOTAL CURRENT LIABILITIES | 492,767 | 519,543 | |||||||||
| Long term debt | 194,553 | 214,808 | |||||||||
| Non-current liabilities | 37,687 | 37,927 | |||||||||
| Long term capital lease | 6,980 | 7,696 | |||||||||
| Deferred taxes | 125,611 | 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; 33,714,605 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 | 165,076 | 173,011 | |||||||||
| Purchase price in excess of predecessor basis, net of tax | |||||||||||
| benefit of $10,306 | (15,458 | ) | (15,458 | ) | |||||||
| Retained earnings | 886,883 | 870,716 | |||||||||
| Accumulated other comprehensive loss | (165 | ) | (194 | ) | |||||||
| Treasury stock; at cost, 7,510,187 shares in 2018 | |||||||||||
| and 7,777,722 shares in 2017 | (251,083 | ) | (258,622 | ) | |||||||
| TOTAL STOCKHOLDERS' EQUITY | 785,672 | 769,872 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,643,270 | $ | 1,670,941 | |||||||
| HUB GROUP, INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (in thousands) | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2018 | 2017 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 16,167 | $ | 10,334 | |||||||
| Adjustments to reconcile net income | |||||||||||
| to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 18,599 | 12,522 | |||||||||
| Deferred taxes | 4,714 | 5,279 | |||||||||
| Compensation expense related to share-based compensation plans | 3,501 | 2,609 | |||||||||
| Gain on sale of assets | (115 | ) | (48 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| Restricted investments | 916 | (1,436 | ) | ||||||||
| Accounts receivable, net | 11,643 | 54,600 | |||||||||
| Prepaid taxes | (47 | ) | (171 | ) | |||||||
| Prepaid expenses and other current assets | 6,694 | 2,795 | |||||||||
| Other assets | 1,866 | 373 | |||||||||
| Accounts payable | (19,465 | ) | (13,175 | ) | |||||||
| Accrued expenses | (10,913 | ) | (25,990 | ) | |||||||
| Non-current liabilities | (386 | ) | 12 | ||||||||
| Net cash provided by operating activities | 33,174 | 47,704 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from sale of equipment | 516 | 1,127 | |||||||||
| Purchases of property and equipment | (22,179 | ) | (6,625 | ) | |||||||
| Net cash used in investing activities | (21,663 | ) | (5,498 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of debt | 16,783 | - | |||||||||
| Repayments of long term debt | (34,300 | ) | (11,782 | ) | |||||||
| Stock tendered for payments of withholding taxes | (3,896 | ) | (3,157 | ) | |||||||
| Capital lease payments | (695 | ) | (727 | ) | |||||||
| Net cash used in financing activities | (22,108 | ) | (15,666 | ) | |||||||
| Effect of exchange rate changes on cash and cash equivalents | (30 | ) | 56 | ||||||||
| Net (decrease) increase in cash and cash equivalents | (10,627 | ) | 26,596 | ||||||||
| Cash and cash equivalents beginning of period | 28,557 | 127,404 | |||||||||
| Cash and cash equivalents end of period | $ | 17,930 | $ | 154,000 | |||||||
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745