Hub Group, Inc.

Hello, and welcome to the HUB Group second quarter 2024 earnings conference call. Phil Yeager, HUB President, Chief Executive Officer and Vice Chairman, Brian Alexander, Chief Operating Officer, and Kevin Best, Chief Financial Officer, are joining the call. At this time, all participants are on a listening mode. A brief question and answer session will follow the prepared remarks. 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, 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, Phil Yeager. You may now begin.

Good afternoon, and thank you for joining Hub Group's second quarter earnings call. With me today are Brian Alexander, Hub Group's Chief Operating Officer, and Kevin Beth, our Chief Financial Officer. I wanted to start by thanking all of our team members across North America for their hard work and dedication to serving our customers. The domestic prairie market has continued to be challenged with a highly competitive bid season, balanced demand, and excess supply of capacity. We've seen a more stabilized inventory environment, as well as incremental capacity attrition, and anticipate some peak season in the West Coast due to solid import demand and potential East Coast labor disruption, which along with our recent wins should support strong volume performance through the remainder of the year. We've seen some signs of market tightness, but nothing that would denote a sustainable trend at this time. Our customers continue to have options in selecting their providers, and we are supporting them with our full portfolio of services, strong costs and financial positions, as well as our best-in-class service, which we believe will lead to improvements in growth and returns. In Intermodal, we are providing record service levels, along with a cost-competitive product leading to 8% volume growth in the second quarter. A few highlights that stand out are continued growth in the local east of 26% and in Mexico, which was up 60% year over year in the quarter, while we also grew our trans-town volumes. Our margin per load day focus bid plan is enabling better balanced growth, which is leading to cost reductions in our drainage network and lowering empty repositioning costs. All of these initiatives are allowing us to win in this environment and position us for the future. We remain focused on servicing our customers through their fluctuations in demand and reducing costs to drive ongoing growth. In Dedicated, we continue to see top-line momentum as we onboard a new site for existing customers. However, Ernie's performance in the quarter was impacted as we invested in servicing our customers through their spring surge. This investment, we believe, will support additional growth opportunities and retention of our customer base in the long term. Our brokerage team continues to drive growth in LTL to offset the challenges of the broader truckload environment. Despite the first volume decline we've seen in several quarters, we are confident in the performance of our team and our value proposition to our customers, which is leading to strong bid wins that will be starting in the near term. In our contractual logistics services, margins have been strong, consistent with our diversification strategy, and we are completing our integration of our final mile acquisition from last year. Our best-in-class final aisle service offering and cost optimization efforts are leading to new wins, which will onboard during the second half of the year. In managed transportation, we are winning with new customers in full outsources and LTL management, helping them reduce costs and enhance control of their supply chain. Finally, within our consolidation network, we are focusing on optimizing our network to improve our service and costs and anticipate improvements in the months ahead. We continue to take action to position Hub Group for success. We are maintaining our focus on successfully navigating this challenging market through our disciplined operational and investment approach, while providing best-in-class service to our customers, which we believe will position us well for the market recovery and drive strong shareholder returns. Our diversification strategy has helped us deepen our value to our customers while stabilizing our margin profile, and we are continuing to successfully manage our costs across the organization. Finally, while results have been challenged given broader market conditions, we are in a phenomenal financial position with strong free cash flow generation, little net debt, and ample liquidity to continue to grow via acquisition and invest in our business while returning capital to shareholders through our dividend and ongoing share repurchases. With that, I will hand it over to Brian to discuss our operational results.

Thank you, Phil. In ICS, intermodal volume grew 8% year over year. On a sequential basis, second quarter volume growth was 12% over the first quarter, highlighting our momentum and implementation of new contracts. By region, Transcon volume was up 1% year-over-year, local East volume grew 26%, and local West declined 3%. The volume growth we are seeing is helping to improve driver productivity and network balance, as we improved driver productivity 15% year-over-year in the quarter, and reduced empty repositioning costs by nearly 25%. With our continued focus on controlling costs, new contractual frameworks, and aligned bid strategy, we believe we are well positioned to support our customers' peak needs and for the eventual market upturn. We delivered top-line growth in our dedicated business with an increase in revenue per tractor per day as we brought on new wins and drove efficiencies in our network. But profitability was challenged with increased expenses to support strong demand from our customers. Now turning to our logistics segment. We continue to be pleased with the growth and profit expansion of our logistics segment, with the second quarter earnings generating a 60 basis point improvement in operating margin over the first quarter. Revenue growth in our final mile business more than offset challenges in our brokerage business, resulting in logistics revenue of $459 million. 1% higher than last year. Final Miles generated strong growth on both the top and bottom line with several new customer and organic implementations in the first half of 2024. We expect this to continue with several confirmed wins to implement in the third quarter. Our successful integration is allowing us to leverage our combined non-asset based operating model to improve our cost structure. Brokerage continues to benefit from our diverse mode offering across several sales channels. We have maintained our roughly 50-50 split between contract and spot market, allowing flexibility to respond to our customers' needs. Despite market headwinds, the team has made productivity strides, resulting in sequential improvement in revenue per load of more than 300 basis points when comparing the second quarter to the first quarter. Another bright spot is LTL, which has generated several transactional and contract wins in the first half of 2024, resulting in volume growth of 18% in the second quarter. In addition, we have several confirmed wins that have already started onboarding in the third quarter. From a cost perspective, we've leveraged our technology to improve our loads per team member by 24% and have additional IT initiatives that we'll implement throughout the rest of 2024. Overall, brokerage is well positioned for accelerated growth as market conditions improve. We also continue to invest in our network of national multi-purpose logistics facilities with our largest location onboarding in the Northeast at the start of the third quarter. We are successfully optimizing our network of locations resulting in a quarter-over-quarter improvement of 411 basis points in warehouse utilization and expect this improvement to accelerate in the third quarter as we expand our service footprint to better serve our customers. The managed transportation team continues to grow as they are onboarding just under $60 million of new freight under management during the third quarter that will give us increased purchasing power along with additional optimization opportunities for our customers. The integration and diversification of our non-asset-based logistics solutions is continuing to play out well, and we expect continued growth and margin expansion in 2024. With that, I'll hand it over to Kevin to discuss our financial performance.