HUBG
$54.15
Hub Group Inc A
($.26)
(.48%)
Earnings Details
3rd Quarter September 2019
Wednesday, October 30, 2019 4:03:00 PM
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Summary

Hub Group Inc A Misses

Hub Group Inc A (HUBG) reported 3rd Quarter September 2019 earnings of $0.78 per share on revenue of $913.3 million. The consensus earnings estimate was $0.79 per share on revenue of $987.1 million. The Earnings Whisper number was $0.83 per share. Revenue fell 2.1% compared to the same quarter a year ago.

The company said it expects fourth quarter earnings of $0.81 to $0.85 per share. The current consensus earnings estimate is $0.98 per share for the quarter ending December 31, 2019.

Hub Group Inc is an asset light freight transportation management company, which offers intermodal, truck brokerage and logistics services in United States, Canada and Mexico.

Results
Reported Earnings
$0.78
Earnings Whisper
$0.83
Consensus Estimate
$0.79
Reported Revenue
$913.3 Mil
Revenue Estimate
$987.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hub Group, Inc. Reports Third Quarter 2019 Results

Highlights of the quarter

  • Earnings per share of $0.78 includes a reduction of $0.19 per share for legal settlements and consulting costs.  Non-GAAP adjusted earnings per share is $0.97 excluding these costs.  
  • Operating margin is 4.1% and includes $8.5 million of legal settlements and consulting costs. Non-GAAP adjusted operating margin excluding these costs is 5.0%.
  • Net income was $26.1 million.  EBITDA increased 21% to $66.9 million

OAK BROOK, Ill., Oct. 30, 2019 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced third quarter 2019 net income of $26.1 million, or diluted earnings per share of $0.78. Results were negatively impacted by $8.5 million of pretax costs, or $0.19 per share, which are comprised of $4.8 million for settlement of claims first made in 2013 for alleged misclassification of drivers (in general and administrative expenses), $3.0 million for settlement of a 2016 auto liability claim (in transportation costs) and $0.7 million for consulting costs (in general and administrative expense).  Excluding these costs, adjusted earnings per share is $0.97.  Income from continuing operations for the third quarter 2018 was $25.8 million, or $0.77 per diluted share. 

Update on Profit Improvement Initiatives

“We have been focused on executing our strategy, key tenets of which include delivering a best-in-class experience for both our customers and employees, diversifying our service offerings and investing in technology while increasing profitability and our return on invested capital. We’ve improved profitability through operational enhancements, revenue management, and procurement savings in transportation and general and administrative costs. These initiatives have driven our adjusted operating margin to our goal of 5.0% in the third quarter, and more importantly, position Hub for success,” said Dave Yeager, Hub’s Chairman and Chief Executive Officer.

Based on actions taken through the third quarter, the profit improvement initiatives identified above are projected to provide over $60 million of run-rate savings.  These actions include a 9% reduction in non-driver headcount since year-end 2018, reductions in purchased transportation costs, savings related to improved driver and tractor utilization in our drayage operation, investments in efficiency enhancing technologies and profitability improvements at Dedicated.  We expect an additional $40 million of annualized savings based on actions we anticipate taking over the next year.

We continue to invest in technology and anticipate that by mid-2021 we will have fully implemented our Elevate technology program across all business lines.  This program is expected to result in additional operating savings and profitability of over $20 million in 2022, while also fueling our growth as customers will benefit from our enhanced capabilities and freight visibility.

Results of Continuing Operations

Revenue for the current quarter decreased by 2% to $913 million compared with $933 million for the third quarter 2018 as a result of a soft freight market, partially offset by our success in providing multimodal solutions to our customers.  Operating income for the current quarter includes $8.5 million of legal settlements and consulting costs.  Operating income for the current quarter increased 7% to $37.2 million versus $34.7 million for the third quarter 2018, primarily as a result of improved yield management, our diversified model and our intense focus on profit improvement initiatives while maintaining the highest levels of service.  Adjusted operating income excluding the $8.5 million of costs was $45.7 million and increased 32%.

Third quarter intermodal revenue decreased 7% to $539 million due primarily to a 9% decline in volume. Volume was down compared to the prior year due to a soft demand environment, increased truckload and intermodal competition, and a 1% volume decrease from lane cancellations.  Intermodal gross margin decreased compared to the third quarter of 2018 primarily due to the decline in volumes, the $3.0 million 2016 auto liability settlement, and rail cost increases, partially offset by the benefits from revenue management, operational improvements, network balance, and better purchasing.

Truck brokerage revenue decreased 10% to $110 million in the third quarter of 2019 compared to the same quarter of last year.  Truck brokerage handled 14% more loads while fuel, price and mix combined were down 24% due primarily to the addition of the CaseStack LTL brokerage business.  Contractual truckload volume represented 91% of total truckload volume compared to 78% in the third 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.    

Third quarter logistics revenue grew 27% to $189 million.  Revenue and gross margin expanded due to the addition of CaseStack, benefits from continuous improvements, revenue management, new service lines and cross selling to our customers.   

Dedicated revenue decreased 5% to $75 million compared to the same quarter in the prior year due to the impact of lost business, partially offset by growth with new accounts.  Dedicated gross margin improved compared to the third quarter of 2018 due to revenue management initiatives and improved operational discipline.  We ended the quarter with approximately 1,300 tractors and 5,200 trailers for Dedicated. 

Costs and expenses increased to $98 million in the third quarter of 2019 compared to $80 million in the third quarter of 2018 due primarily to costs and expenses of $12.9 million related to CaseStack (which includes $2.3 million of non-cash amortization expense), $4.8 million related to settlement of claims first made in 2013 for alleged misclassification of drivers, $1.5 million of higher technology expenses, $1.6 million lower gain on sale of equipment, the $1.1 million contingent consideration adjustment for Dedicated in 2018 and $0.7 million for a consulting project, partially offset by a decrease of $5.1 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 third quarter of 2018 was $88.8 million, or $2.64 per diluted share. 

Cash Flow and Capitalization

Our capital expenditures for the third quarter 2019 totaled $27 million, primarily for tractors and technology investments.  At September 30, 2019, we had cash and cash equivalents of $89.6 million.    

2019 Outlook

We expect that our fourth quarter 2019 diluted earnings per share will range from $0.81 to $0.85, resulting in an expected 2019 adjusted earnings per share range from $3.36 to $3.40. We estimate flat revenue growth for the full year. We expect gross margin as a percentage of sales to range from 13.9% to 14.2% in the fourth quarter. We estimate our costs and expenses will range from $89 million to $91 million in the fourth quarter.  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 $90 million and $95 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 tables. Management believes that EBITDA provides relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management.  We adjusted GAAP earnings per share and operating margin to exclude the effect of unusually high costs for legal settlements and a consulting project that is non-recurring. We excluded the items we believe may obscure trends in our underlying profitability. By providing these non-GAAP profitability measures, management intends to provide investors with a meaningful, consistent comparison of the Company’s profitability measures for the periods presented.   

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on October 30, 2019 to discuss its third 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?]=1&a=UjvLetfIjInEoB. 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, 2018Hub 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 September 30, 
       2019 2018
        % of  % of
       AmountRevenue AmountRevenue
Revenue   $913,275 100.0% $933,224 100.0%
            
Transportation costs    778,057 85.2%  818,240 87.7%
 Gross margin    135,218 14.8%  114,984 12.3%
            
Costs and expenses:        
 Salaries and benefits    59,765 6.5%  57,123 6.1%
 General and administrative   30,906 3.4%  19,327 2.1%
 Depreciation and amortization   7,301 0.8%  3,800 0.4%
  Total costs and expenses   97,972 10.7%  80,250 8.6%
            
Operating income    37,246 4.1%  34,734 3.7%
            
Other income (expense):        
 Interest expense    (2,780)-0.3%  (2,411)-0.2%
 Interest and dividend income   613 0.1%  340 0.0%
 Other, net    56 0.0%  251 0.0%
  Total other expense    (2,111)-0.2%  (1,820)-0.2%
            
Income from continuing operations before income taxes 35,135 3.9%  32,914 3.5%
            
Provision for income taxes   9,030 1.0%  7,150 0.7%
            
Income from continuing operations   26,105 2.9%  25,764 2.8%
            
Income from discontinued operations, net of income taxes -    88,846  
            
Net income   $26,105   $114,610  
            
Earnings per share from continuing operations       
 Basic   $0.79   $0.77  
 Diluted   $0.78   $0.77  
            
Earnings per share from discontinued operations       
 Basic   $-   $2.66  
 Diluted   $-   $2.64  
            
Earnings per share net income       
 Basic   $0.79   $3.43  
 Diluted   $0.78   $3.41  
            
Basic weighted average number of shares outstanding 33,034    33,399  
Diluted weighted average number of shares outstanding 33,265    33,605  


 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
            
       Nine Months Ended September 30,
       2019 2018
        % of  % of
       AmountRevenue AmountRevenue
Revenue   $2,767,436 100.0% $2,665,300 100.0%
            
Transportation costs    2,372,226 85.7%  2,358,286 88.5%
 Gross margin    395,210 14.3%  307,014 11.5%
            
Costs and expenses:        
 Salaries and benefits    182,652 6.6%  163,496 6.1%
 General and administrative    77,852 2.8%  55,557 2.1%
 Depreciation and amortization   21,150 0.8%  11,286 0.4%
  Total costs and expenses   281,654 10.2%  230,339 8.6%
            
Operating income    113,556 4.1%  76,675 2.9%
            
Other income (expense):        
 Interest expense    (8,526)-0.3%  (6,702)-0.3%
 Interest and dividend income   1,581 0.1%  365 0.0%
 Other, net    (14)0.0%  20 0.0%
  Total other expense    (6,959)-0.2%  (6,317)-0.3%
            
Income from continuing operations before income taxes   106,597 3.9%  70,358 2.6%
            
Provision for income taxes    27,381 1.0%  16,371 0.6%
            
Income from continuing operations   79,216 2.9%  53,987 2.0%
            
Income from discontinued operations, net of income taxes  -    98,842  
            
Net income   $79,216   $152,829  
            
Earnings per share from continuing operations       
 Basic   $2.37   $1.62  
 Diluted   $2.36   $1.61  
            
Earnings per share from discontinued operations       
 Basic   $-   $2.96  
 Diluted   $-   $2.95  
            
Earnings per share net income       
 Basic   $2.37   $4.58  
 Diluted   $2.36   $4.56  
            
Basic weighted average number of shares outstanding   33,385    33,387  
Diluted weighted average number of shares outstanding   33,522    33,548  


 
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
           
        September 30, December 31,
         2019   2018 
ASSETS       
 CURRENT ASSETS:     
  Cash and cash equivalents $89,628  $61,435 
  Accounts receivable trade, net  434,552   477,088 
  Other receivables   3,945   22,021 
  Prepaid taxes   5,238   616 
  Prepaid expenses and other current assets 26,234   27,533 
    TOTAL CURRENT ASSETS  559,597   588,693 
           
 Restricted investments  21,428   19,236 
 Property and equipment, net  657,826   681,859 
 Right-of-use assets - operating leases 37,509   - 
 Right-of-use assets - financing leases 6,432   - 
 Other intangibles, net   124,422   134,788 
 Goodwill, net   484,514   483,584 
 Other assets   18,955   16,738 
    TOTAL ASSETS $1,910,683  $1,924,898 
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY   
 CURRENT LIABILITIES:     
  Accounts payable trade $180,490  $272,859 
  Accounts payable other  13,487   10,906 
  Accrued payroll   46,915   55,535 
  Accrued other   96,575   82,900 
  Lease liability - operating leases  8,665   - 
  Lease liability - financing leases  3,021   2,845 
  Current portion of long term debt  95,772   101,713 
    TOTAL CURRENT LIABILITIES 444,925   526,758 
           
 Long term debt   192,422   229,071 
 Non-current liabilities   35,011   29,619 
 Lease liability - operating leases  30,444   - 
 Lease liability - financing leases  2,600   4,739 
 Deferred taxes   160,725   153,877 
           
 STOCKHOLDERS' EQUITY:    
  Preferred stock, $.01 par value; 2,000,000 shares authorized;   
   no shares issued or outstanding in 2019 and 2018 -   - 
  Common stock     
   Class A: $.01 par value; 97,337,700 shares authorized and   
    41,224,792 shares issued in 2019 and 2018; 33,375,328 shares   
    outstanding in 2019 and 33,793,709 shares outstanding in 2018 412   412 
   Class B:  $.01 par value; 662,300 shares authorized;   
    662,296 shares issued and outstanding in 2019 and 2018 7   7 
  Additional paid-in capital  175,749   172,220 
  Purchase price in excess of predecessor basis, net of tax   
  benefit of $10,306   (15,458)  (15,458)
  Retained earnings   1,151,646   1,072,456 
  Accumulated other comprehensive loss (211)  (182)
  Treasury stock; at cost, 7,849,464 shares in 2019   
   and 7,431,083 shares in 2018  (267,589)  (248,621)
   TOTAL STOCKHOLDERS' EQUITY 1,044,556   980,834 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,910,683  $1,924,898 


 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
          
         Nine Months Ended September 30,
          2019   2018 
            
            
Cash flows from operating activities:     
 Net income   $79,216  $152,829 
 Adjustments to reconcile net income    
  to net cash provided by operating activities:    
   Depreciation and amortization   86,719   59,184 
   Deferred taxes    7,145   33,989 
   Compensation expense related to share-based compensation plans  12,434   9,490 
   Contingent consideration adjustment  -   (4,703)
   Gain on sale of assets   (1,313)  (1,458)
   Gain on disposition   -   (113,601)
 Changes in operating assets and liabilities:    
   Restricted investments   (2,192)  (2,454)
   Accounts receivable, net   41,000   (44,138)
   Prepaid taxes    (4,622)  11,918 
   Prepaid expenses and other current assets  1,299   438 
   Other assets    (3,365)  1,572 
   Accounts payable   (89,800)  8,070 
   Accrued expenses   2,408   30,952 
   Non-current liabilities   (225)  4,358 
   Transaction costs for disposition  -   (5,665)
    Net cash provided by operating activities  128,704   140,781 
            
Cash flows from investing activities:     
 Proceeds from sale of equipment   9,072   4,035 
 Purchases of property and equipment  (55,616)  (138,847)
 Proceeds from the disposition of discontinued operations  19,439   227,986 
 Cash used in acquisitions   (734)  - 
    Net cash (used in) provided by investing activities  (27,839)  93,174 
            
Cash flows from financing activities:     
 Purchase of treasury stock   (24,998)  - 
 Proceeds from issuance of debt   36,557   118,809 
 Repayments of long term debt   (79,147)  (107,341)
 Stock tendered for payments of withholding taxes  (2,875)  (4,262)
 Finance lease payments   (2,206)  (2,181)
    Net cash (used in) provided by financing activities  (72,669)  5,025 
            
            
 Effect of exchange rate changes on cash and cash equivalents  (3)  (30)
            
Net increase in cash and cash equivalents  28,193   238,950 
Cash and cash equivalents beginning of period  61,435   28,557 
Cash and cash equivalents end of period $89,628  $267,507 


 
HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
           
    Three Months Nine Months
    Ended September 30, Ended September 30,
     2019  2018  2019  2018
Intermodal  $539,484 $582,878 $1,618,407 $1,615,453
Truck brokerage   109,543  122,059  334,211  357,013
Logistics   189,470  149,642  586,196  479,940
Dedicated   74,778  78,645  228,622  212,894
 Total Revenue $913,275 $933,224 $2,767,436 $2,665,300


  
HUB GROUP, INC.  
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA 
(in thousands) 
(unaudited) 
         
 Three Months       
 Ended, September 30,     
     Change Change 
 2019 2018 $  % 
         
Net income from continuing operations$  26,105  $  25,764  $  341  1.3% 
         
Interest expense   2,780     2,411     369  15.3% 
         
Interest and dividend income   (613)    (340)    (273) 80.3% 
         
Other income, net   (56)    (251)    195  -77.7% 
         
Depreciation and amortization   29,690     20,780     8,910  42.9% 
         
Provision for income taxes   9,030     7,150     1,880  26.3% 
         
EBITDA$  66,936  $  55,514  $  11,422  20.6% 


         
HUB GROUP, INC.        
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA     
(in thousands)        
(unaudited)        
         
 Nine Months       
 Ended, September 30,     
     Change Change 
  2019   2018  $  % 
         
Net income from continuing operations$  79,216  $  53,987  $  25,229  46.7% 
         
Interest expense   8,526     6,702     1,824  27.2% 
         
Interest and dividend income   (1,581)    (365)    (1,216) 333.2% 
         
Other income, net   14     (20)    34  -170.0% 
         
Depreciation and amortization   86,719     58,552     28,167  48.1% 
         
Provision for income taxes   27,381     16,371     11,010  67.3% 
         
EBITDA$  200,275  $  135,227  $  65,048  48.1% 


      
HUB GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
         
       Three Months Ended
       September 30, 2019
         
        % of
       AmountRevenue
Revenue   $  913,275 100.0%
         
Transportation costs      778,057 85.2%
 Settlement of 2016 auto claim liability     (3,000)-0.3%
Adjusted transportation costs     775,057 84.9%
         
 Adjusted gross margin      138,218 15.1%
         
Costs and expenses:     
 Salaries and benefits      59,765 6.5%
         
 General and administrative     30,906 3.4%
  Settlement of claims for alleged misclassification of drivers   (4,750)-0.5%
  Consulting project      (700)-0.1%
 Adjusted general and administrative     25,456 2.8%
         
 Depreciation and amortization     7,301 0.8%
         
  Adjusted total costs and expenses     92,522 10.1%
         
Adjusted operating income     45,696 5.0%
         
Other income (expense):     
 Interest expense      (2,780)-0.3%
 Interest and dividend income     613 0.1%
 Other, net      56 0.0%
  Total other expense      (2,111)-0.2%
         
Adjusted income before income taxes     43,585 4.8%
         
Adjusted provision for income taxes     11,201 1.2%
         
Adjusted net income   $  32,384  
         
Adjusted earnings per share
    
 Basic   $  0.98  
 Diluted   $  0.97  
         
Basic weighted average number of shares outstanding    33,034  
Diluted weighted average number of shares outstanding    33,265  
      
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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Source: Hub Group, Inc.