Hub Group, Inc.

Hello and welcome to the Hub Group third quarter 2021 earnings conference call. Dave Yeager, Hub's CEO, Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DiMartino, Hub's CFO, are joining me on the call. At this time, all participants are in a listen-only mode. A brief question-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your queries 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 words such as believe, suspect, anticipate, and project, and variations of these words. Please review the cautionary statements in the release. In addition, if you refer to the disclosures in the company's Form 10-K and other ICC filings regarding factors They could cause actual results to differ materially from these projected in these forward-looking statements. As a reminder, this conference is being recorded. It is now my pleasure to give a call over to your host, Dave Yeager. You may now begin.

Good afternoon, and thank you for participating in Hub Group's third quarter earnings call. Joining me today is Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DiMartino, Hub's Chief Financial Officer. We had a solid third quarter as pricing continues to outpace rapidly accelerating costs, thereby creating record quarterly revenue and gross margin. And to kick off the fourth quarter, we've just closed on Chop Tank, a large truck brokerage operation specializing in refrigerated product. This is an acquisition that Phil had worked on for several years with Chop Tank's owner, Jeff Turner. We share a common vision and culture, and we welcome the Chop Tank team to the Hub family and look forward to growing our collective business. Strong demand continues as inventory to sales ratios are at near all-time lows while intense restocking of shelves persists. On the second quarter call, we related that we believe that this strong demand and tight capacity market may extend through the second quarter of 2022. Nothing has really changed since that last report, and we believe that this imbalance will continue through most of the first half of 2022 and very likely throughout most of the year. Today, there are many issues negatively impacting customer supply chains. Among the issues are labor shortages and port congestion, resulting in network imbalances. Hub's focus continues to be on supplying reliable capacity to our clients in order for them to deliver their products efficiently. And with that, I'll turn the call over to Phil to discuss the performance of our business lines.

Thank you, Dave. We are very pleased with these results and the efforts of our team to support our customers during this dynamic environment. We delivered strong results in Intermodal with a 17% increase in revenue and 530 basis point improvement in gross margin percentage year-over-year, which was offset by an 8% decline in volume after an 11% increase in the third quarter last year. For the quarter, transcon volumes declined 1%, local east was down 7%, and local west was down 10%. Although the intermodal network is more congested and we are seeing slower rail transit, extended customer unloading times, and more limited available drainage capacity, our team has done a great job offsetting those challenges with improved on-time performance to our customers, stronger pricing, a better balanced network, and improved cost recovery efforts. Demand continues to be very strong, in particular off the West Coast, and we anticipate receiving all of our new built containers this year, which will help us capitalize on that opportunity. We anticipate another strong bid season and improving network fluidity into 2022, given the strong demand backdrop and the need for shippers to lock in capacity. Logistics performed well with 17% revenue growth and a 100 basis point improvement in gross margin percentage year over year. We continue to have strong revenue growth from our consolidation and final mile service line, which was offset by lower revenue but improved yields in our outsource transportation management offering. We've had many strong new wins across all of our solutions, including exceeding our cross-selling synergy targets and final mile. We see continued opportunities for growth ahead as we provide our clients creative solutions to reduce costs and enhance service. Brokerage posted strong results again with 28% revenue growth on 3% lower volumes and a flat gross margin percentage year over year. We continue to see strength in the spot market and are bringing on new clients through our growing sales force while maintaining strong efficiency. We also are very excited about the addition of Choptank to our brokerage. We have shared values and believe that along with their aggressive sales culture, they will bring an improved technology platform, a new specialized service offering, and a large cross-selling opportunity. This acquisition will push us to over $1 billion in brokerage revenue, and we believe enable long-term sustainable growth. Dedicated revenue declined 7%, with a 450 basis point decline in gross margin percentage year over year. This decline was driven by increased insurance costs, M&R expense, and outside capacity costs. We are executing on customer renewal, onboarding new, more profitable wins, and continuing to enhance our systems and processes to help offset these challenges. Looking ahead, we believe we will see a strong demand environment and that Hub Group is in a great position to provide solutions to our clients and drive profitable growth. With that, I will hand it over to Jeff to discuss our financial performance. Thank you, Phil.