Hub Group, Inc.

Hello, and welcome to the Hub Group Third Quarter 2022 Earnings Conference Call. Dave Yeager, Hub CEO, Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DiMartino, Hub 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. 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 in 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 third quarter earnings call. Joining me today are Phil Yeager, HUB's President and Chief Operating Officer, and Jeff DiMartino, HUB's Chief Financial Officer. We had a strong third quarter, which resulted in doubling our year-over-year operating income. The results for the third quarter reflect our strategy of diversification, which allows HUB to be more resilient during all economic environments and helps us to mitigate the cyclical nature of the transportation market. The fourth quarter is generally the peak of the holiday shipping season. However, judging by the feedback from our clients, this peak will be muted versus historic norms. Beyond 2022, we do acknowledge the potential for continued softening economy, but we believe that we are positioned for success as we've taken several important steps to improve our resiliency in a down market. With our recent acquisitions and organic growth, our non-asset-based businesses represent a growing part of the overall results and will generate significant free cash flow while deepening our value to our customers. This diversification into non-asset-based services, along with enhancements to our intermodal agreements, allow us to be more flexible and market-based. We've also aggressively begun to insource a higher percentage of our drainage, which enhances our competitive positioning in intermodal. We expect to continue to benefit from these business model adjustments, as well as continuing our relentless focus on operating efficiencies. And with that, I'll now turn the call over to Phil to review our performance.

Thank you, Dave. I wanted to start by congratulating the entire Hub Group organization on their strong performance, which continues to be driven by their focus on supporting our customers and team members. I will now discuss our service line performance. ITS revenue increased 22% in the quarter, driven by a 31% increase in revenue per load and intermodal on 6% lower volume, as well as a return to strong growth in dedicated. Volume was impacted due to the averted rail strike, as well as slower turn times and increased competitiveness within shorter haul segments. Local west volume increased 1%, while transcom declined 1%, and local east declined 18%. We had a sequential deterioration in utilization, but an improvement in rail service while we dramatically enhanced our on-time performance to our customers. Gross margin as a percentage of sales increased 180 basis points year over year, driven by yield management initiatives and dedicated and intermodal, and enhanced purchase transportation costs through increasing our in-source trade percentage, which was offset by higher rail costs. We have opportunities to improve our network and capture incremental volume growth through our enhanced service and our compelling intermodal value proposition. We believe that with our improved street economics and rail partnerships, we will be in a strong position in this dynamic environment. Logistics revenue increased 12% as we onboarded new clients, completed the TAG acquisition, and drove organic growth with our existing customers through our focus on supply chain savings and continuous improvement. Gross margin as a percentage of sales increased 370 basis points as our continued focus on profitable growth was offset by increased purchase transportation and warehousing costs. With the addition of TAG, we are continuing our development of the premier third-party logistics solution, which we believe will enable long-term growth and bring significant value to our customers. Brokerage revenue increased 63% year-over-year, driven by a 54% increase in volume and 6% increase in revenue per load. Our growth was due to the addition of chop tanks, as well as organic growth in our LTL and dry van offerings. Our service levels continue to improve year over year and will help us differentiate ourselves along with our diversified capacity offerings. Gross margin as a percentage of sales declined 60 basis points year over year, as we saw more aggressive competition for a smaller amount of spot market shipments But we believe we will see improvement year over year in the fourth quarter and into next year as our mix shifts from 52% spot to a larger percentage of contractual volumes throughout bid season. We are continuing to focus on growing in this important service line and are investing in talent and technology to assist in propelling our growth. With that, I will hand it over to Jeff to discuss our financial performance.