Hub Group, Inc.

Hello and welcome to the HUB Group first quarter 2022 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 and answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. To ask a question, you may press 01. 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, 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 now begin.

Good afternoon, and thank you for participating in Hub Group's first quarter earnings call. Joining me today are Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DiMartino, Hub's Chief Financial Officer. I'd like to thank the Hub team for the hard work and focus on delivering great service to our customers as we achieved record earnings for the first quarter of 2022. Our non-asset-based logistics and truck brokerage business units experienced accelerating growth as they provide reliable and economical services. And Intermodal gained momentum throughout the quarter with continued focus on the customer and delivering excellent service. There's been a great deal of discussion of late on spot rate declines and a looming recession. While no company is immune to an economic downturn, I strongly believe that Hub is well positioned for growth through 2022 and into 2023 and beyond. Each of the business units has built-in defenses that will assist them if a slowdown should occur. Dedicated consists of long-term agreements that commit capacity to a customer at a specified price. In today's environment, many customers are focused on securing consistent capacity after experiencing the shortages of the last several years. Both of our non-asset-based businesses can adapt to the vagaries of the economy. Brokers are able to perform well in both tight and loose capacity markets, taking advantage of the arbitrage through pricing. Our logistics business is focused on bringing value-added services to our customers in high-growth areas. Whether it's transportation management that brings technology to customers, allowing them to better control their supply chains, home delivery or LTL consolidation, all bring enhanced control with reduced costs for the customer. Lastly, intermodal represents 55% of HUB's revenue. Intermodal is the growth engine for the rail industry as well as for HUB. The advantages Intermodal offers to our clients include dramatically better economics than over the road, four times more fuel efficiency than over the road, thereby offering ESG advantages, significant capacity, and generally consistent service. As the price of fuel remains at elevated levels and the driver shortage continues, Intermodal is now experiencing more truck conversions than we've seen in several years. Hub is very well positioned in this growth business with 45,000 containers and 6,500 new boxes being added to the fleet this year. We have excellent relationships with our rail partners and have differentiated ourselves as a superior service provider. Through a strong balance sheet, we've made significant investments focused on growing Intermodal while diversifying our service offerings, improving our efficiency through technology, and continuing to enhance our operational discipline, which will help set the company up for growth in a variety of market conditions. And with that, I'll turn it over to Phil to review our performance.

Thank you, Dave. I wanted to start by thanking all of our team members across North America. for their constant effort and focus on delivering a world-class customer experience. Before I begin discussing our service line performance, I wanted to highlight a change to our reporting. Given the integration of our intermodal and dedicated organization systems, equipment, and drivers, we've adjusted our reporting to discuss our asset-based operations as one business unit, intermodal and transportation solutions. We believe this will appropriately reflect our performance in our asset-based operations in the future as we continue to leverage our density and improve the utilization of all of our resources. I'll now discuss our service line performance for the quarter. Intermodal and transportation solutions revenue increased 35% in the quarter with a 790 basis point improvement in gross margin as a percentage of sales. Our revenue growth was driven by 4% intermodal volume growth and a 35% improvement in revenue per unit which was partially offset by a decline in dedicated revenue, despite an increase in revenue per truck per day. Our intermodal revenue per unit improvement was partially driven by MIPS, as we grew TransCon moves 11%, Local West 7%, and Local East declined 5%. We experienced a decline both year-over-year and sequentially in rail service, but have seen positive trends at the end of the quarter and into this current one, as our rail partners make progress in improving staffing, chassis availability, and terminal congestion. Despite those headwinds, we executed well, driving a slight sequential improvement in utilization due to enhancements in customer and street wealth, as well as a large increase in year-over-year on-time performance to our customers. We have seen a very strong bid season thus far and anticipate continued growth in intermodal volumes and pricing, which will be supported by a great pipeline of new dedicated onboarding. Logistics revenue increased 6% year-over-year, driven by strength in final mile and consolidation, as well as new onboardings and managed transportation. Gross margin as a percentage of sales increased 240 basis points year-over-year as we continued our strong execution and yield management across all of our offerings. Our value proposition of great service, continuous improvement, technology, and supply chain savings is resonating with our customers and leading to a strong pipeline of wins we have brought on in the first quarter and will continue to see throughout the remainder of the year. Brokerage revenue improved 132% year-over-year, driven by a 51% increase in volume, and 54% improvement in revenue per load, mostly due to the acquisition of Chow Tank, as well as organic growth in our full truckload and LTL offerings. Gross margin as a percentage of sales declined 360 basis points year-over-year, as we executed higher revenue per unit spot shipments, which comprised 59% of our volume in the quarter. We continue to see success in our integration of Chow Tank and are performing well on our cross-selling synergy. We are continually identifying ways to leverage our increased scale, and generating large wins in bid season, which we anticipate will drive ongoing strength in this service line. With that, I will hand it over to Jeff to discuss our financial performance.