Hub Group, Inc.

Hello, and welcome to the Hub Group third quarter 2020 earnings conference call. Dave Yeager, Hub CEO, Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DeMartino, Hub's CFO, are joining me on the call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please submit your inquiries to one primary and one follow-up question. Any forward-looking statements made during the course of the call or contained in the release represent the company's best good faith judgment as to what may happen in the future. Statements that are forward-looking can be identified by the use of the words such as believe, expect, anticipate, and project and variations of these words. Please review the cautionary statements in the release. In addition, you should refer to the disclosures in the company's form 10-K and other SEC filings regarding factors that could cause actual results to differ materially from those projected in these forward-looking statements. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Dave Yeager. You may begin.

Good afternoon, and thank you for participating in Hub Group's third quarter earnings call. I'm joined today by Phil Yeager, HUB's President and Chief Operating Officer, and Jeff DiMartino, HUB's Chief Financial Officer. I'd like to begin by acknowledging the men and women of HUB Group. During this pandemic, they have continued to provide great service to our valued clients while protecting their health and that of their families. Today, we announced that our third quarter volume in earnings grew significantly versus Q2. We've gone from a market that was extraordinarily surplus, which resulted in reduced pricing, to a highly constrained market with capacity at a premium and spot truck pricing at elevated levels. Our rail partners have been very resilient and have managed the significant sequential increases in intermodal volume extremely well. Anytime you have massive increases in volume, issues do arise. But our rail partners, being the Union Pacific and the Norfolk Southern, have responded quickly to mitigate issues, thereby avoiding any significant impact to our network or our customer service levels. Our clients' inventory levels continue to be constrained, while the demand for truckload and intermodal capacity remains strong. As a result of these market forces, going forward, we believe pricing has reached a trough, and the prices will continue to rise as demand is strong and capacity tight. With that, I'll turn it over to Phil to review our business lines.

Thank you, Dave. I would also like to start by thanking our team for their relentless focus on supporting our clients and each other in this dynamic environment. We have participated in a rapidly changing market since the trough in April, and we have continued to provide great service to our customers. We have done this while keeping a strong focus on our costs and continuing to invest in our business to drive long-term growth. For the quarter, intermodal volumes increased 9%, and revenue increased 4% as wins with strategic customers and the strengthening demand environment are driving our growth. Transcon volumes increased 18%, local west was up 17%, and local east volumes declined 3% as we experienced significant tightness in the west coast, leading to an earlier than anticipated peak season. Gross margin as a percentage of sales declined 390 basis points year over year. Our volume growth and improvements in our trucking operations could not offset headwinds from lower prices, rail cost increases, elevated equipment repositioning costs, and increased outsourcing of our drayage to support our volume growth. As the market has tightened, we invested in expanding our fleet, and we have continued to meet our customer commitments while providing a great service product. Strong rail service and continued tightness in inventory levels is positioning us for a strong 2021 bid season. Logistics revenue declined 7%, and gross margin as a percentage of sales declined 100 basis points year over year. We experienced strong growth in K-Stack and have continued to onboard new customer wins, given our excellent value proposition in our outsourced logistics solutions. This was offset by customer losses that were driven by the pandemic, as well as increased supplier costs. We have improved our productivity and continue to have a strong pipeline of onboardings. We anticipate excellent demand for our services will continue to accelerate, given the need of our customers to find more creative solutions to their supply chain challenges. Brokerage volume declined 10%, while revenue increased 10%, and gross margin as a percentage of sales declined 390 basis points year over year. We performed well as we moved into the spot market to support our clients who were experiencing lower primary tender acceptance rates while managing yield on committed business. meeting our customer commitments, and maintaining excellent service. We experienced margin compression as capacity costs increased more quickly than spot volumes early in the quarter. We also had a negative mix impact as LTL and project volumes declined during the quarter. We were seeing strong demand from our clients and are continuing to focus on supporting them during peak season and beyond. Dedicated revenue for the quarter declined 8%, and gross margin as a percentage of sales declined 110 basis points year over year. We have continued to support our clients as their demand surges while shedding unprofitable business and onboarding new customer wins. We are continuing to see improvement in our returns in the business and have a strong pipeline for growth. I will now hand it over to Jeff to discuss our financial performance.