Q4 2021 Hub Group Inc Earnings Call

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Speaker 1: Hello and welcome to the HUB Group fourth quarter 2021 earnings conference call. Dave Jaeger, HUB's CEO , Phil Jaeger, HUB's President and Chief Operating Officer, and Josh 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 limit your inquiries to one primary and one follow-up question.

Hello, and welcome to the hub group's fourth quarter 2021 earnings conference call, Dave Yeager hubs CEO , Phil Yeager hubs, President and Chief operating Officer, and Geoff Demartino 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.

Order for everyone to have an opportunity to perhaps dissipate. Please limit your acquirers to one primary and one follow up question.

Speaker 1: Any forward-looking statements based 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 statement.

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.

Packed anticipate and project and variations of these words. Please review the cautionary statements in the release.

Speaker 1: In addition, you should refer to disclosures in the company's Form 10-K and other FCC filings regarding factors that could cause actual results to differ materially from these projected in these four looking statements.

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 these 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.

Speaker 1: As a reminder, this conference has been recorded. It is now my pleasure to call, turn the call over to your host, Dave Yeager. You may now begin.

Speaker 3: Good afternoon and thank you for participating in Hub Group's Fourth Quarter Earnings Call.

Good afternoon, and thank you for participating in hub group's fourth quarter earnings call.

Speaker 3: Joining me today are Phil Yeager, Hub's President and Chief Operating Officer, and Jeff DiMartino, Hub's Chief Financial Officer.

Joining me today are Phil Yeager hubs, President and Chief operating officer, and Geoff Demartino hubs Chief Financial Officer.

Speaker 3: 50 years ago, my parents founded Hub Group. On this, the 50th anniversary, we're reporting record revenue and net income for the fourth quarter and for the full year.

50 years ago, My parents founded hub group.

On this the 15th anniversary, we're reporting record revenue and net income for the fourth quarter and for the full year.

Speaker 3: Strong freight demand, coupled with the attractive value proposition of our services, has led to a record $4.2 billion in revenue, an EPS of $2.48 for the quarter, and $5.06 for the full year.

Strong freight demand coupled with the attractive value proposition of our services has led to a record $4 2 billion in revenue and EPS of $2.48 for the quarter and $5 <unk> for the full year.

We remain focused on providing value added services by integrating our business with the needs of our customers.

Speaker 3: We remain focused on providing value added services by integrating our business with the needs of our customers.

Speaker 3: We will continue to diversify our non-asset based services while focusing our capital investments on technology and growth in the intermodal business.

We will continue to diversify our non asset based services, while focusing our capital investments on technology and growth in the intermodal business.

From a macro perspective, we expect positive economic conditions will continue to benefit our customers.

Speaker 3: From a macro perspective, we expect positive economic conditions will continue to benefit our customers.

Speaker 3: We are very fortunate to work with customers who have been winners in today's economy.

We are very fortunate to work with customers who've been winners in today's economy.

Speaker 3: The macrooutlook remains favorable with 4% GDP, strong retail sales, a declining unemployment rate, and strength in imports.

The macro outlook remains favorable with 4% GDP strong retail sales are declining unemployment rate and strengthen imports.

Speaker 3: In addition, retail inventory to sales continues to be at historic and low levels and our customers continue to tell us that their shelves need to be restocked.

In addition, retail inventory to sales continues to be at historically low levels and our customers continue to tell us that there shouldnt need to be restocked.

On the supply side the outlook for truckload capacity continues to be constrained due to a shortage of drivers backlog of imports issues with truck production rising insurance expenses and driver of regulatory changes.

Speaker 3: On the supply side, the outlook for truckload capacity continues to be constrained due to a shortage of drivers, backloaf of imports, issues with truck production, rising insurance expenses, and driver regulatory changes.

We believe the 2022 will be similar to 2021 and as much as our prices will increase faster than our cost as the economy continues to experience inflationary pressure.

Speaker 3: We believe the 2022 will be similar to 2021 in as much as our prices will increase faster than our cost as the economy continues to experience inflationary pressure. With that, I'll turn the call over to Phil to review our business.

With that I'll turn the call over to Phil to review our business lines.

Thank you Dave.

Speaker 3: I wanted to start by thanking all of our team members cross North America for all their hard work and commitment to our customers, which resulted in records financial performance and several awards for our service and sustainability efforts this year. I'll now discuss our service line.

To start by thanking all of our team members across North America for all their hard work and commitment to our customers, which resulted in record financial performance and several awards for our service and sustainability efforts this year.

I will now discuss our service line performance for the quarter.

Speaker 3: Intermodal revenue increased 25% in the quarter, despite a 9% volume decline after 11% growth last year.

Intermodal revenue increased 25% in the quarter, despite a 9% volume decline after 11% growth last year.

Speaker 3: Transcon volume was flat while local wafts declined 10% and local leads to second maneuver.

<unk> volume was flat, while local whilst declined 10% in local leads declined 14%.

Speaker 3: Gross margin of percentage of sales improved 960 basis points year over year driven by improved yield management and network balance, which more than offset rising transportation costs.

Gross margin as a percentage of sales improved 960 basis points year over year, driven by improved yield management and network balance, which more than offset rising transportation costs.

Speaker 3: Network's fluidity declined in the quarter, both sequentially and year-over-year, as rail transit and street dwell remain elevated.

Network fluidity declined in the quarter, both sequentially and year over year as rail transit and street well remain elevated.

Speaker 3: We are continuing to focus on improving our productivity, while collaborating with our customers and rail partners to increase utilization of our leading capacity.

We are continuing to focus on improving our productivity, while collaborating with our customers and rail partners to increase utilization of our leading capacity.

Looking ahead, we anticipate a return to stronger services investments from hub group, our rail partners and customers drive greater throughput in our network.

Speaker 3: Looking ahead, we anticipated return to stronger service as investments from Hub Group are rail partners and customers. Drive greater throughput in our network.

Speaker 3: To the end of the main stront, we plan to invest to support our customers by expanding our intermodal fleet by 6,550 units this year while continuing to grow our driver.

Demand remains strong and we plan to invest to support our customers by expanding our intermodal fleet by 6550 units this year, while continuing to grow our driver fleet.

Speaker 3: Dedicated revenue declined 8% in the quarter despite improvement in revenue per truck per day and reduced third-party usage Which led to a 30 basis point improvement in gross margin as a percentage of sales year over year

Dedicated revenue declined 8% in the quarter despite improvement in revenue per truck per day, and reduced third party usage, which led to a 30 basis point improvement in gross margin as a percentage of sales year over year.

Speaker 3: We have improved our service offering and operational discipline and of a great pipeline of strong return opportunities and onboarding, which we believe will lead to growth this year.

We have improved our service offering and operational discipline and have a great pipeline of strong return opportunities and Onboarding, which we believe will lead to growth this year.

Speaker 3: which just makes revenue increase 13% year over year in the fourth quarter driven by strengths and final mile in consolidation, which was offset by lots of counts from the prior year in our managed transportation offer.

Logistics revenue increased 13% year over year in the fourth quarter driven by strength in final mile and consolidation, which was offset by lost accounts for the prior year and our managed transportation offering.

Speaker 3: Groves margin is a percentage of sales increased 390 basis points year over year. At new business onboarding, the yield management improvement, the managed transportation in final mile, offset warehousing and transportation cost increases in consolidation.

Gross margin as a percentage of sales increased 390 basis points year over year as new business Onboarding yield management improvements in managed transportation and final mile offset warehousing and transportation cost increases in consolidation.

Speaker 3: We continue to have extremely strong demand for our services given the dislocations in the global supply chain and anticipate continued growth this year.

We continue to have extremely strong demand for our services given the dislocations in the global supply chain and anticipate continued growth this year.

Brokerage revenue increased 112% year over year, and 48% higher volume due to the acquisition of <unk> bank as well as organic growth in our full truckload and <unk> solutions.

Speaker 3: Broker revenue increased 112% year over year and 48% higher volume, due to the acquisition of Chaaptinge as well as organic growth in our full truck load and LPL

Speaker 3: Drugs margin is a percentage of sales to climb 290 basis points year over year as we executed higher revenue per unit spot shipments which comprise 51% of our volume in the quarter.

Gross margin as a percentage of sales declined 290 basis points year over year, as we executed higher revenue per unit spot shipments, which comprised 51% of our volume in the quarter.

Speaker 3: The acquisition of chop-kanks has exceeded our expectations. We are winning with our customers and on track with our integration.

The acquisition of <unk> has exceeded our expectations, we are winning with our customers and on track with our integration plan.

Speaker 3: We're off to another strong start this year and see ample opportunity to leverage our expanded network, strengthen systems and Salesforce to drive growth through Crossbound. With that, I will hand it over to Jeff to discuss our financial performance.

We're off to another strong start this year and see ample opportunity to leverage our expanded network strengthen systems and sales force to drive growth through cross selling.

With that I will hand, it over to Jeff to discuss our financial performance.

Thank you Phil Q.

Speaker 3: Q4 featured all-time record revenue and profitability levels wrote a quarter in the full year.

Q4 featured all time record revenue and profitability levels for both the quarter and the full year.

Speaker 3: Revenue grew 32% in a quarter and 21% for the year.

Revenue grew 32% in the quarter and 21% for the year.

Speaker 3: Our yield management and cost recovery effort led to record gross margin of 16.9% for the quarter and 14.2% for the year.

Our yield management and cost recovery effort led to record gross margin of 16, 9% for the quarter and 14, 2% for the year.

Speaker 3: Gross margin performance in our focus on operating efficiency led to operating income of $118 million for the quarter or 9.3% of revenue.

Gross margin performance and our focus on operating efficiency led to operating income of $118 million for the quarter or nine 3% of revenue.

Speaker 3: For the full year, our operating income with a record $238 million or 5.6% of revenue.

For the full year, our operating income was a record $238 million.

Or five 6% of revenue.

Speaker 3: Salaries and benefits increased from last year due to our recent acquisition, as well as higher incentive competition expense.

Salaries and benefits increased from last year due to our recent acquisitions as well as higher incentive compensation expense.

Speaker 3: G&A declines compared to last year due to 10 million of dollars of gain on sale from the transportation equipment, offset by higher expenses related to the acquisition.

G&A declined compared to last year due to $10 million of gain on sale from the transportation equipment.

Asset by higher expenses related to the acquisition.

Our diluted earnings per share for the quarter was $2 48.

Speaker 3: Our diluted earnings for share for the quarter was $2.48, then, which has nearly four times the prior year, highlighting the substantial operating leverage in our business.

Which is nearly four times the prior year, highlighting the substantial operating leverage in our business.

Speaker 3: We generated $152 million of EBITDA on the quarter and $359 million for the full year.

We generated $152 million of EBITDA in the quarter and $359 million for the full year.

Speaker 3: With cash of $150 million and net leverage of 0.3 times even done, we continue to have a substantial flexibility to invest in our business to capital expenditure as an additional strategic acquisition.

With cash of $160 million and net leverage of three times EBITDA. We continue to have substantial flexibility to invest in our business through capital expenditures and additional strategic acquisition.

Speaker 3: We have a bullish outlook for 2022. We continue to demand from our customers driven by strong macro trends, growth and consumer spending and low inventory levels.

We have a bullish outlook for 2022 with continued demand from our customers driven by strong macro trends growth in consumer spending and low inventory level.

Speaker 3: We expect supply chain conditions will continue to be constrained and that our yield management and operational efficiencies will lead to further growth in earnings.

We expect supply chain conditions will continue to be constrained and that our yield management and operational efficiencies will lead to further growth in earnings.

Speaker 3: For 2022, we are expecting EPF of between $5.90 to $6.30.

For 2022, we're expecting EPS of between $5 90 to $6 30.

Speaker 3: The expected goal revenue to approximately $5 billion, putting us well on our way to achieve our goal, a 5.5 to 6.5 billion of revenue by 2025.

We expect to grow revenue to approximately $5 billion.

Putting us well on our way to achieve our goal of five 5% to $6 5 billion of revenue by 2025.

Speaker 3: The expect minimum volume will return to growth in 2022, supported by our container deliveries, and improving rail service.

We expect intermodal volume will return to growth in 2022.

Courted by our container deliveries and improving rail service.

Speaker 3: Before Gats Grotesque margin is a percent of revenue of 13.9 to 14.3 for the year. As rate increases, search charges, and app-issorial revenues, offset higher cost for real transportation, third-party drainage, and driver wages.

We forecast gross margin as a percent of revenue of $13 nine to $14 three for the year as rate increases surcharges and accessorial revenue offset higher cost for rail transportation third party drayage and driver wages.

Speaker 3: For the year we expect cost and expenses of 425 to 445 million dollars.

For the year, we expect cost and expenses of $425 million to $445 million.

Speaker 3: We expect our earnings will be roughly similar for each of the quarters of 2022. As seasonal strength and yields in the back-out, it's offset by rising transportation cost as the year progresses.

We expect our earnings will be roughly similar for each of the quarters of 2022.

As seasonal strength in yields in the back half is offset by rising transportation costs as the year progressed.

Our capital expenditure forecast of $240 million to $270 million.

Speaker 3: Our capital expenditure forecast is $240 to $277 million.

We are already at 6550 containers for 2022.

Speaker 3: We have ordered 6,550 containers for 2022, which will result in net growth of 6,000 or 14% after retirements of older units. This comes on top of 8% growth in 2021.

It will result in net growth of fixed or.

Our 14% after retirements of older unit.

This comes on top of 8% growth in 2021.

We also intend to take delivery of over 750 tractors. The majority of which are replacements for older model that have an attractive ROI with lower maintenance costs and improved fuel efficiency.

Speaker 3: We also intend to take delivery of over 750 tractors, the majority of which are replacements for older models that have an attractive ROI with lower maintenance costs and improved fuel efficiency.

We will also be finishing up a significant expansion of our headquarters campus. In 2022. Another example of the investments we're making for our future.

Speaker 3: We will also be finishing up a significant expansion of our high quarters campus in 2022. Another example of the investments we are making for our future. In 2021, we introduce our long-

In 2021, we introduced our long term revenue and margin targets.

Speaker 3: Our recent acquisitions of Chop Tank, NFC, and Caseback and the significant investments in our fleet are illustrative of the types of strategic investments we will make in our business.

Our recent acquisitions of chop tank, NFC and case back and our significant investments in our fleet are illustrative of the types of strategic investments, we will make in our business.

Speaker 3: Adding scale will also introduce a new service operance with strong cross-cell potential. Dave back.

Adding scale, while also introducing new service offerings with strong cross sell potential.

Dave back to you for closing remarks.

Speaker 3: Thank you, Jeff. Needless to say, 2021 was a strong growth year for hub. We believe 2022 has the same opportunity as we continue to expand our service offerings while investing in our core business bringing significant value to our clients. And with that, we'll open up the line for any questions. Thank you.

Thank you, Jeff Needless to say 2021 was a strong growth year for hub.

We believe 2022 has the same opportunity as we continue to expand our service offerings, while investing in our core business, bringing significant value to our clients and with that we'll open up the line for any questions.

Thank you we will now begin the question and answer session.

Speaker 1: If you have a question, please press star then one on your touchtone phone. If you wish to be removed like you, please press the pound sign or the hash key. If you're using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. And our first question comes in just in line for Steven's to align his open.

If you have a question. Please press Star then one on your Touchtone phone.

If you wish to be removed from the queue. Please press the pound sign.

You're using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone and our first question comes from Justin Long from Stephens. Your line is open.

Thanks, and congrats on the results I am still a little bit of shock after seeing that.

Speaker 4: Thanks and congrats on the results. I'm still in a little bit of shock after seeing this.

Speaker 4: But maybe to kind of start with that point, if I think back to when you gave guidance in October versus these results today that came in roughly a dollar above what you were expecting and the street was expecting, can you just help us bridge the gap into...

But maybe to kind of start with with that point, if I think back to when you gave guidance in October versus these results today that came in roughly a $1 above what you were expecting and the street was expecting can you just help us bridge the gap and debt.

Speaker 4: to where the upside primarily came from. And I guess more importantly, can you talk about those drivers and what you feel like is sustainable going into 2022 versus anything that is maybe more transient?

Where the upside primarily came from and I guess more importantly can you talk about the drivers and what you feel like it's sustainable going into 2022 versus anything that is maybe more transient or one time.

Speaker 5: Sure, Justin, this is Jeff. Thank you for your comments there. Yeah, Q4 did exceed our expectation. We saw a sprint in a couple of areas across our business.

Sure Justin This is Jeff. Thank you for your comments there, yes, Q4 did exceed our expectations, we saw strength in a couple of areas across our business.

Speaker 5: certainly Intermodal, the impact of surcharges around the holidays, the impact of our yield management actions really did lead to higher than we anticipated when it came to the gross margin generated by Intermodal.

Certainly intermodal.

Pact Av of surcharges around the holidays, the impact of our yield management actions really did lead to.

Higher than we had anticipated when it came came to the gross margin generated by intermodal. In addition, we do bring in chop tank in the fourth quarter chop tanks performance did exceed our expectations as well.

Speaker 5: In addition, we do bring in Chop Tank in the fourth quarter Chop Tank's performance did appear expectations as well.

Speaker 5: And our logistics business has done a really good job of bringing up yield. The top line results have not been where we want them to be. Yeah, we do expect that to improve next year, but they've really done a great job of managing the gross margin side of the business there.

Logistics business has done a really good job.

Bringing up yield.

Top line results have not been where we want them to be yet we do expect that to improve next year, but they've really done a great job of managing the gross margin side of the business there.

Speaker 5: Below the line, we did outperform our expectations, really based on strength and gain on sale. So we were able to sell more units than we anticipated at significantly higher gains per unit. So that really led to the outperforming.

Below the line, we did outperform our expectations really based on strength in.

And gain on sale.

To sell more units than we had anticipated at significantly higher gains per unit, so that really led to the.

Outperformance in Q4.

Speaker 5: Going in the next year, we do expect conditions will continue to remain like this in terms of freight demands and strain supply chain conditions. You anticipate we'll be able to build on our crates

Going into next year, we do expect conditions will continue to remain like just in terms of.

Freight demand.

Constrained supply chain conditions, we anticipate we'll be able to build on our price going.

Going into next year.

Speaker 5: We do have a cost increases coming, significantly on the rail side, on the third party derailleur side. We expect we'll continue to be competitive on the driver wage part of our business. We'll have increasing costs there during 2022.

We do have the cost increase is coming.

Significantly on the rail side.

On the third party Drayage side, we expect we will continue to be competitive on the driver wage part of our business, we will have increasing costs there during 2022.

Speaker 5: And then below the line, we do expect to have our typical merit increases.

And then below the line, we do expect to.

Have our typical merit increases.

Speaker 5: that will come into effect your infebruary as well as you know we do expect the use truck market will have some softening at some point in the year so we're not anticipating quite as strong about performance next year.

That will come into effect here in February .

As well as we do expect the used truck market will have some softening at some point in the year. So we're not anticipating quite a strong performance next.

Next year again, Phil.

Okay.

Speaker 4: Okay, that's a helpful rundown and maybe it's my follow up. Anyway, we could get a little bit more color on the Intermodal expectations that are getting baked in that the 2022 guidance. I know you said volume shouldn't grow, but could you give us some kind of order of magnitude on the growth you're expecting for Intermodal volumes, maybe Intermodal price and the trend in assasorial?

Helpful Rundown and maybe as my follow up any way, we could get a little bit more color on the intermodal expectations that are getting baked into the 2022 guidance I know you said volume shouldnt grow but.

Could you give us some kind of order of magnitude on the growth youre expecting for intermodal volumes, maybe intermodal price and the trend in accessorial.

Speaker 5: Sure, we are expecting a return to growth next year on the motor volume side, load amid single digits, really driven by the container deliveries, a lot of which we got in in Q4, and then we're starting to take deliveries right away in Q2 here in 2022, so that'll help with our volume. We expect rail service will continue to improve, that'll help create some capacity in our network to be able to handle that volume that we think will be there.

Sure we are expecting a return to growth next year on the intermodal volume side low to mid single digit really driven by the container deliveries a lot of which we got in Q4, and then we're starting to take delivery.

In Q2 here.

In 2022, so that will help with our volume we expect rail service will continue to improve that will help create some capacity in our network to be able to handle that volume that we think will be there.

Speaker 5: And on the price side we're expecting for the full year, we'll realize that mid single digit price will start off stronger in the first part of the year, and then the year-to-year increases will come down into the low single digits by the time it gets towards the end of the year. Okay.

And on the price side, we're expecting for the full year.

Realized mid single digit price will start off stronger in the first part of the year and then the year over year increases.

We will will come down into the low single digits by the time, we get towards the end of the year.

Okay. That's helpful. Thanks again.

Yes.

Speaker 1: And next question, comes with God's group for low-free search, your line is open.

Next question comes from Scott Group from Wolfe Research Your line is open.

Speaker 6: Hey, thanks. Good afternoon, guys. So you said at the beginning that you think pricing out pays costs, but when I looked at the, the guidance is for gross margins to be bladdish year over year and maybe help us understand those two comments and maybe just along those lines, if you have thoughts on first half, first, second half gross margins in the guidance.

Hey, Thanks, good afternoon guys.

So you said at the beginning that you think pricing outpaced costs, but when I look them.

The guidance is for gross margins to be flattish year over year maybe.

Help us understand those two comments and maybe just along those lines. If you have thoughts on first half versus second half gross margins in the guidance.

Speaker 5: Sure, so we do expect the margins will be roughly fine. We are going to cover our cost increases with price. But we do expect, you know, that the transportation cost you mentioned earlier are going to be increasing year by year. So some of that will be more back half weighted as the year goes on. So we're going to, you know, Scott, you typically would see

Sure. So we do expect the margins will be roughly flat, we are going to cover our cost increases with price.

But we do expect that.

The transportation cost you mentioned earlier are going to be increasing year over year there'll be some of that will be more back half weighted.

As the year goes on.

So Scott you typically would see.

Speaker 5: Through charge and seasonal strength in the back half of the year, we do expect that but we expect that will be kind of offset by some of those transportation costs that rise throughout the course of the year.

Surcharge and seasonal strength in the back half of the year, we do expect that but we expect that it'll be kind of offset by some of those transportation costs that rise throughout the course of the year.

Speaker 6: What do you think that roughly means for first half or second half gross margin?

So I'm just.

Roughly means for first half second half gross margin.

Speaker 5: Growth margin for that I think I think it's going to be pretty consistent throughout the course of the year

Gross margin percent I think I think it's going to be pretty consistent throughout the course of the year.

Okay.

Speaker 6: And then on the volume guidance load amid single digit, I think if we're thinking about this right, the container counts going to be up.

And then.

The volume guidance low to mid single digit I think if we're thinking about the strike the container count is going to be up.

Speaker 6: Over 10% and times like you're assuming some improvement in

Over 10%.

And it sounds like you are assuming some improvement in.

Speaker 6: service and then maybe some reduction in assasorials and implying improved fluidity. Why is it in the volume better?

Service and then maybe some reduction in accessorial and playing improved fluidity why isn't the volume better.

Speaker 5: Well, the containers come in throughout the course of the year, so on a four-year basis, we're expecting kind of that load of mid-single.

Well the containers come in throughout the course of the year. So on a full year basis, we're expecting kind of that low to mid single.

Speaker 6: And then just last thing, maybe just what the latest you're seeing at the ports, if you're seeing any improvement and then your thoughts on the market share ships coming to UP this year next year and what that means for you guys. Thank you.

Okay, and then just last thing.

Maybe just.

The latest you're seeing at the ports, if youre seeing any improvement and then your thoughts on the market share shifts coming to.

This year next year and what that means for you guys. Thank you.

Okay.

Speaker 3: This is Dave. As far as some of the new entrants that are coming on to the Union Pacific, we've been competing with them for many, many years. And so we really don't foresee a significant competitive change.

Dave.

It is.

As far as <unk>.

Some of the.

New entrants that are coming on to the Union Pacific we've been competing with them for many many years.

So we really don't foresee a significant competitive change I pointed out that hub is a largest intermodal partner on the <unk> in fact, what we're twice the size of Schneider intermodal and five times the size of night intermodal and we also have 40% more drivers that we have allocated.

Speaker 3: You know, I point out that hub is the largest intermodal parker on the UP.

Speaker 3: In that quote, we're twice the size of Schneider in a model in five times the size of 90 in a month.

Speaker 3: And we also have 40% more drivers that we have allocated towards the intermodal than either of our competitors.

Towards the intermodal than either of our competitors.

Speaker 3: We have a great relationship with the U.P. And I think on a very positive note is that we have a long-term contract that features benefits to come with that kind of scale.

We have a great relationship with the U P.

And I think on a very positive note is that we have a long term contracted features benefits that come with that kind of scale.

Speaker 3: I would suggest to you, it's also on the positive side that UP is gearing up for the additional business by investing $600 million of capital in 2022, targeting specifically chassis as well as terminals.

I would suggest to you. It's also on the positive side of that is gearing up for the additional business by investing $600 million.

Capital in 2022.

Targeting specifically chassis as well as terminals.

Speaker 3: So bottom line is we view these commercial to be basically a knit and neutral for hub and not a major competitive chain

So bottom line is we view these commercials.

To be basically a net neutral for hub and not a major competitive change.

Speaker 5: Yeah, this is the only other thing I'd highlight is, you know, obviously with...

This is still only other thing I would highlight is.

With.

One of the other providers coming on do you see being aligned with the Norfolk, Southern that'll give us maybe a little bit more density.

Speaker 3: You know, one of the other providers coming out of the U.C. being aligned with the North North Southern, that'll give us maybe a little bit more density than the two other asap based providers that are aligned with U.D. and CSX. So we think, within that, we have a better reach, more density and we'll have more interline options that we'll provide a good service on the court.

And then the two other asset based providers that are aligned with <unk> and CSI.

The effects.

We think with that as we have a better reach more density.

I'll have more interline option that will provide a good service on the port side.

Speaker 3: side of your question, I think we aren't seeing a rapid improvement in congestion there, you know, demand for international or make America very strong. You know, we're seeing that in the import of our own containers.

Of your question I think we are.

<unk> seen a rapid improvement in congestion there.

Demand for international remains very strong.

We're seeing that in the important of our own containers.

Speaker 3: So, if we even see some improvements over the next few months, in Q2, Q3, you're already back in peak season again. So at this point, we don't see a massive improvement to poor congestion this year, and that should continue to provide opportunities for us to grow one with a 2023.

So if we even see.

Some improvement over the next few months.

Q2, Q3, you're already back in peak season again, so at this point, we don't see a massive improvement to port congestion this year and that should continue to.

<unk> provide opportunities for us to grow well into 2023.

Thank you guys appreciate it.

Thanks, Kevin.

Speaker 1: The next question comes from Todd Fowler from Keeping.

And your next question comes from Todd Fowler from Keybanc.

Speaker 5: Great, thanks and good evening. So I wanted to ask kind of your views on rail service and I guess in the context of how important I understand from the volume guidance and kind of the expectations that you're embedding improvement in rail service.

Great Thanks, and good evening.

So I wanted to ask.

Kind of your views on rail service and I guess in the context of how important I understand from the volume guidance and kind of the expectations that you're embedding improvement in rail service, but when I look at the fourth quarter and I think about kind of the results that you're able to put up is the message that if rail service doesn't improve materially you can still kind of get to a similar answer on it just to move.

Speaker 5: But when I look at the fourth quarter and I think about, you know, kind of the results that you're able to put up, you know, is the message that a frail service doesn't improve materially, you can still kind of get to a similar answer and it's just a movement between volume and price and I guess how important you view your real service in the context of your guidance. I understand that it's important from a service perspective, but just from an outlook standpoint, how are you thinking about that?

Between volume and price.

I guess, how important do you view Youll rail service in the context of your guidance I understand that's important from a service perspective, but just from an outlook standpoint.

How are you thinking about that.

Speaker 3: Yeah, you're absolutely right, Todd. We do want to see improved service long-term. That's the right thing. That's gonna allow us to convert more business from over the road. I think as our customers get their inventory in better order, they're gonna look to expedite fewer shipments when I convert more data models. So having capacity and a better service product and a more consistent one available is really gonna help. We have seen, at least at this point,

Yes, you're absolutely right that we do want to see improved service long term debt.

The right thing that can allow us to convert more business from over the road I think as our customers get their <unk>.

Inventory, even better order theyre going to look to expedite fewer shipments went to convert more to intermodal, so having capacity and a better service product and a more consistent available and is really going to help.

Have seen.

At this point.

Speaker 3: A slight deterioration from Q4 to Q1, I think that's winter weather driven, as well as we just haven't seen the investments really take hold. We're hoping it's weather really starts to survive that we can see that improvement. I think the other piece for us is we've actually seen an improvement year over year and our end service product to our customers. So we're really excited about that. So even in disruptive times, we're able to improve our service product.

A slight deterioration from Q4 to Q1, I think thats winter weather driven as well as we just haven't seen the investments really take hold we are hoping as weather really starts to subside.

That we can see that improvement.

The other piece for US is we've actually seen an improvement year over year and our end service product to our customers. So we're really excited about that though even in disruptive times were able to improve our service product.

Speaker 3: So really, please, was that? I think was the question around margins and does that deteriorate or service improves? I don't see that at this time given the demand that is out there given the constraints in the driver market. And it's really with adversarial revenue potentially subsiding. At this point, we'd much rather be moving that volume. The opportunity cost is much higher. And so we think that'll be a good formula for off-going forward.

Really.

Pleased with that I think.

The question around margins and does that deteriorated service improves I don't see that at this time given the demand that is out there given the <unk>.

Constraints in the driver market.

It really with accessorial revenue potentially subsiding at this point, we'd much rather be moving that volume the opportunity cost is much higher and so we think that'll be a good formula for us going forward.

Speaker 4: yet no feel that that makes a lot of sense and really was more in the context of you know it seems like the business that the guidance isn't so much dependent on the improvement in rail service we certainly understand that the service component of it so that's helpful

Yes, no that makes a lot of sense and it really it was more in the context of.

It seems like the business the guidance isn't so much dependent on the improvement in rail service and we certainly understand that the service component of it. So that's helpful.

Speaker 4: I guess just for my follow up, how do we think about the 2020 guidance in the context of the 2025 guidance? And I know that 2025 wasn't supposed to be a straight shot, but when I look at the high end of your revenue guidance for 22 and the low end of your guidance for 25, I mean you're pretty close. Would your expectation be that things level off? Post-22 or is it something that you feel more confident in achieving the 25 targets maybe on the earlier side? Thanks.

I guess just for my follow up how do we think about the 2020 guidance in the context of the 2025 guidance and I know that 2025 wasn't supposed to be a straight shot but when I look at the high end of your revenue guidance for 'twenty, two and the low end of your guidance for 25, I mean, youre pretty close would your expectation be that things level off post <unk>.

Two or is it something that you feel more confident in achieving the 25 targets maybe on the earlier side. Thanks.

Speaker 5: No, I mean, we did give a range, though. I think, you know, the guy is gonna get a chunk of the way there. I mean, part of the way we're getting there is both organic, but also through the benefits of the acquisition of a chop tank, which I think, you know, we're gonna continue to do, so we can continue to make acquisitions like that. We would anticipate being towards the higher end of the range, like 2025. Okay.

No I mean, we did give a range I think.

Guide is going to get a big chunk of the way there I mean part of the way we're getting there is both organic but also through the benefits of the acquisition of <unk>.

We're going to continue to do so if we can continue to make acquisitions like that.

We'd anticipate being towards the higher end of the range by.

By 2025.

Okay. Thanks for the time.

Speaker 1: The next question comes from Alia to Alper from Kyle and your line is up.

And our next question comes from Elliot Alper from Cowen Your line is open.

Speaker 5: Great, thank you. So on the brokerage side of the business, a lot of the court you discuss some of the cross-dwelling opportunities for child bank. Can you discuss some of those wins in the quarter and kind of whether most of that low-enging fruit is materialized and kind of how we should think about the brokerage margins in 2022?

Great. Thank you so on the brokerage side of the business last quarter, you discussed some of the cross selling opportunities for Chubb tank can.

Can you discuss some of those wins in the quarter and kind of whether most of that low hanging fruit have materialized and kind of how we should think about the brokerage margins in 'twenty two.

Speaker 3: Sure, yeah, this is Phil. We are really excited about the Chaot Tank acquisition. It's been a great cultural fish thus far. They have a great team. We move with a lot of speed with that group in particular. And so that's been phenomenal. We've actually seen three record months from the Chaot Tank organization right out of the gate, which is phenomenal. And we want to continue to see that we're ahead of schedule on our cross-cell targets. But to me, we've only really scratched the surface of that. The only other interesting thing I'd share with you is that sometimes during an acquisition, you get a little nervous around shared costors, right? And how that will apply. We've actually...

Sure Yes.

So we are really excited about the <unk> acquisition, it's been a great cultural fit thus far.

Team, we move with a lot of speed with that group in particular, and so thats been phenomenal we've actually seen three record months from the Chop Bank organization right out of the gate, which is phenomenal and we want to continue to see that we're ahead of schedule on our cross sell targets, but to me, we've only really scratched the service surface of that.

I think the only other interesting thing I'd share with you is that sometimes during an acquisition you get a little nervous around shared customers and how that will play out we've actually seen a real positive come out of that where we have a joint relationship with those customers were actually able to create even more value not actually deteriorate.

Speaker 3: seeing a real positive come out of that where we have a joint relationship with those customers we're actually able to create even more value not actually deteriorate the existing relationship and so I'd say you know all in all we're really excited about the progress we're making and you know think there's a huge opportunity that we're really just getting started on so it's been exciting. I think only other people I'd share is the refrigerated market continues to have a significant amount of demand.

Existing relationship and so I'd say all in all we're really excited about the progress we're making.

There is a huge opportunity that we're really just getting started on it.

I think only other piece I'd share as the refrigerated market continues to have a significant amount of demand.

Speaker 3: And we're actually going to be investing in 550 incremental refrigerated containers this year to help support our selling into that market. The supporting existing chop-tank customers that also are existing hub customers building that real refrigerated product offering. So it's feeling very good about that as well.

And we're actually going to be investing in five.

550 incremental refrigerated containers this year to help support our selling into that market to supporting existing shop can't customers, but also our existing club customers building that real rich.

Frigerator product offering so we're feeling very good about that as well.

Okay and should we think about that margin structure of the brokerage business staying relatively the same this year.

Speaker 5: Okay, and should we think about that margin structure of the brokerage business thing, we're all totally the same this year?

Speaker 3: I think you'll see, uh, Shopting typically has had a lower gross margin percentage, based mainly because, uh, of moving higher revenue-grade spot shipments, but have that lower gross margin percentage. So you might see that come down, I think, but we will be consistently focused on getting that, uh, higher throughout the year. I think our existing brokerage between LCL and Trucco, you'll see that remain relatively similar, um, you know, depending on what your spot market does throughout the year, but our forecast is, you know, at least coming out of the game, we'll continue to see if some more sort of projector.

I think youll see chunky typically has had a lower gross margin percentage, mainly because of moving higher revenue per unit spot shipments that have that lower gross margin percentage. So you might see that come down I think but we will be consistently focused on getting that higher throughout the year I think our.

Existing brokerage between <unk> and truckload youll see that remain relatively similar.

Depending on what the spot market does throughout the year, but our forecast is at least coming out of the gate, you'll continue to see a similar sort of trajectory.

Okay, great. Thank you.

Speaker 7: Okay, great. Thank you.

Yes.

Speaker 1: zek85 Birdon did

And your next question comes from <unk> majors Susquehanna financial.

Thanks for taking my questions.

Speaker 8: into what were strong fundamental years before you certainly saw some conservatism in the initial outlook and you know I guess that argument could be male.

Into what were strong fundamental years before you certainly saw some conservatism in the initial outlook.

I guess that argument could be made on the back of.

What you just did for <unk> and the idea that not a lot of market conditions are changing near term could you talk about sort of the puts and takes where might there be some conservatism where might people risk getting ahead of themselves. So when we think about projecting out the next.

Speaker 8: that not a lot of market conditions are changing near term. Can you talk about sort of the puts in takes, where might there be some conservatism, where might people risk getting ahead of themselves when we think about projecting out the next...

Full quarters for your business. Thanks.

Speaker 5: Sure, yeah, I have to do that. You know, our forecast and we did give a range. It's meant to encompass kind of current market conditions with some cost and input cost inflation. You know, additional freight areas could come in areas like...

Sure Yeah happy to do that.

Our forecast and we did give a range.

It was meant to encompass kind of the current market conditions with some.

Cost input cost inflation.

Additional threat areas could could come in areas like.

Speaker 5: you know, stronger surcharge revenue in the back half of the year. We certainly are aiming to grow in the model volumes at a higher rate than mid-single digit. If there's continued tightness in the truckload market, that's going to obviously benefit our pricing. We also service is another area of potential upside, which would facilitate more truck to intermodal conversions. And then there could be additional strengths in the truck market, which would result in more games that sell for us.

Stronger surcharge revenue in the back half of the year.

Certainly are aiming to grow intermodal volumes at a higher rate in the mid single digit.

Continued tightness in the truckload market, that's going to obviously benefit.

Pricing.

Rail service is another area of potential upside, which would facilitate more truck to intermodal conversions.

And then there could be additional strength.

In the truck market in the used truck market, which would result in more gains on sale for us.

Speaker 5: And then of course, we're on the lookout for additional strategic acquisitions that could be another source of upside.

Then of course.

Look out for additional strategic acquisitions that could be another source of upside.

Speaker 5: You know, on the downside would be any weakness in consumer spending, if consumers, you know, ship are spending back as services. You know, there is a pretty big backlog of inventory that needs to be rebuilt. So we think we'll be a tailwind for a while, but if there's a sustained ship back as service that could be a negative. If there's a return of oversupply in the truckload market that would have way on price.

On the downside would be any.

Weakness in consumer spending if consumers.

Theyre spending back to services.

There is a pretty big backlog of inventory that needs to be rebuilt.

We think it will be a tailwind for a while but if there is a sustained shift back to services that could be.

Dave.

If there is a return of oversupply in the truckload market that would have way away on price.

And then just additional driver turnover, if we can't bring that and bring that down into 2022.

Speaker 5: And then, you know, just additional driver turnover, if we can't bring that down into 2022, you know, that could go the other way. Those would be the big pluses of minuses to those guys.

And that could go the other way those would be the big pluses and minuses to those segments.

Thank you for that do you expect anything fairly abnormal for seasonality this year.

Speaker 3: You know, coming out of the gate to start the year, we're seeing very strong demand. We don't foresee a change at this point from conversations with our customers and what we're seeing in the data. So feeling like market conditions will continue and which gives us confidence in the guidance. Thank you.

Coming out of the gate to start the year, we're seeing very strong demand.

Don't foresee a change at this point from conversations with our customers and what we're seeing in the data so yes.

Yes, feeling like market conditions will continue in <unk>.

<unk>.

Which gives us confidence in the guidance.

Thank you.

And our next question comes from Tom <unk> from UBS.

Speaker 3: Yeah, good good afternoon and congratulations and a really strong result.

Yes, good afternoon, and congratulations on a really strong results.

Speaker 9: I wanted to see if you could offer some thoughts on just the M&A backdrop. I mean, obviously you've got a lot of momentum in firepower with the ability to go and do more deals. Do you, you know, should we expect you to do something in 2022? You know, you think that's likely. And then also just, you know, you bought a really high quality brokerage company a lot of momentum there. Where would you, you know, where is the next place to look in terms of what might be a place you want to add in terms of businesses?

I wanted to see if you could offer some thoughts on just the M&A backdrop, I mean, obviously, you've got a lot of momentum in firepower with the ability to go and do more deals.

Should we expect you to do something in 2022.

You think that's likely.

And then also just you bought it.

It really high quality brokerage company and a lot of momentum there where would you where is the next place to look in terms of what might be a place you want to add in terms of businesses.

Speaker 5: Sure, yeah, I know we definitely expect to be active on the M&A front. We've got a very solid pipeline. We've got engagement from a lot of our business unit leaders. Yeah, we've had really good success. We are out just knocking on the doors of companies that we think fit our profile. And, you know, we spent a lot of time up for getting to know the management team and the ownership. And I think that's what really has led to the success that we've had recently with Chop Tank, with NFD, the commercial.

Sure, Yes, we definitely expect to be active on the M&A front, we've got a very solid pipeline. We've got engagement from a lot of our business unit leaders.

We've had really good success, where we are just knock on the doors of companies that we think that our profiling.

We spent a lot of time upfront getting to know the management team and the ownership and I think that's what really has led to the successes we've had recently with chop tank with NFC.

The commercial.

Speaker 5: Synergies that we're penned going out in diligence, you know, we're finding those are coming to fruition. We've got a great customer base with our existing business and they're willing to give us opportunities to sell new services to that. And so that will really inform our strategy going forward.

Synergies that we're penciling out in diligence, we're finding those are coming to fruition, we've got a great customer base with our existing business and they're willing to give us opportunities to sell new services to them. So that will really inform our strategy going forward.

Speaker 5: Chuck take with a great example of both adding scale to an existing business as well as adding a new capability. So we scaled up in brokerage and we now have a very very solid refrigerated transportation platform to build off of.

<unk> was a great example of both adding scale to an existing business as well as adding a new capability. So we scaled up in brokerage and have a very very solid refrigerated transportation platform to build off of.

Speaker 5: areas for targeting for future acquisition.

Areas for targeting for future acquisition.

Speaker 5: Really going to be non-asset based logistics providers. We have a great footprint with non-stop in the final mile space. We're on the big and bulky as an example. But what we don't really have today is the ability to do applying delivery installations. That would be an area of interest to us. Things like e-commerce fulfillment with our customer base being retail and CPG. We think there's a lot of opportunities there. That's another example of an area that we'll target for growth.

Really going to be non asset based logistics providers, we have a great footprint with non stop in the final mile space really around the big and bulky.

As an example, but we don't really have today is the ability to do appliance delivery and installation that would be an area of interest to us.

Things like e-commerce fulfillment.

With our customer base being retail and CPG, we think theres a lot of opportunity. There. That's another example of an area.

But we will we will target for growth.

Speaker 9: Okay, yep, great. I wanted to ask you one on the volume side as well. I guess can you give a little more perspective on the timing of the container add?

Okay great.

Wanted to ask you one on the volume side as well.

I guess can you give a little more perspective on the timing of the container ads.

Speaker 9: And then maybe just, you know, what should we really pay attention to in terms of the constraints that, you know, if they get better, you can do upside-down the volumes and are kind of, you know, important inputs. Is it, you know, your own DRAGE capacity? Is it rail terminal operation? What are kind of some of the key factors that feed into the intermodal volume output?

And then maybe just what should we really pay attention to in terms of the constraints that if they get better you can do upside into volumes and kind of important inputs is it your own drayage capacity is it.

Rail terminal operation what are kind of in some of the key factors that feed into the intermodal volume.

Output I'm.

Speaker 3: So we've really received all of our...

Sure.

<unk>.

It really received all of our two.

Speaker 3: 2021 orders at this point, we only had, you know, less than 5% kind of lead into the first part of the year. We'll have the remainder of the 2022 order really coming in throughout the year leading up and into peak season by the last deliveries coming around November .

2021 orders at this point, we only have less than 5% kind of bleed into the first part of the year.

Have the remainder of 2022 order really coming in throughout the year, leading up and into peak season.

<unk> deliveries come in around November .

Speaker 3: but it'll be a pretty even sort of trajectory and cadence throughout the year. I think if that obviously is gonna be a nice tailwind assuming we don't see any drops in service or turn times or any new COVID variants or anything like that that create staffing shortages.

But it'll be a pretty even sort of trajectory and cadence throughout throughout the year.

Thank you.

That obviously is going to be a nice tailwind, assuming we don't see any drops in service or turn times or any new.

Covid variance or anything like that that create.

Staffing shortages.

Speaker 3: So we would anticipate throughout the year you're going to see a better percentage growth. We did start with January down 6%, but we're up 3% on our volumes sequentially. So we think that's a nice trajectory. If we see that continue, as we start to overlap the shutdown you need to Pacific had during February of last year, we could see momentum start to carry out of the first quarter for growth and into the remainder of the year.

So we would anticipate throughout the year youre going to see a better percentage growth. We did start with January down, 6%, but were up 3% on our volume sequentially. So we think thats a nice trajectory if we see that continue as we start to overlap.

Shutdown Union Pacific had during February of last year, we could see momentum start to carry out of the first quarter for growth and into the remainder of the year.

Speaker 9: So on a monthly basis, maybe March, easy comp, you could actually potentially be up in March, something like that.

So on a monthly basis, maybe March easy comp you could actually potentially be up in March something like that.

Speaker 3: Yeah, great. Yes. And then service continues to improve like we think it will as North Hook's other and you see start to get staffing up and more chat fees online and our customers become more fluid. And we do as well. We think we're gonna see upside to that. So that growth trajectory, that volume percentage growth trajectory should be moving progressively upwards throughout the year.

Yes, great, Yes, and then service continues to improve like we think it will add.

Norfolk, Southern and <unk> start to get staffing up and more chassis online and our customers become more fluid than we do as well.

We're going to see upside to that so that growth trajectory that volume percentage growth trajectory should be moving progressed.

Regrettably upwards throughout the year.

Great. Okay. Thank you I appreciate it thanks Tom.

Speaker 1: The next question comes from Alice and Polnijak from Wells Fargo.

The next question comes from Alice Poloniex Wells Fargo.

Speaker 10: Hi, good evening. I just want to ask about CHOPTANK. It sounds like it's going better than you anticipated. Is there a way within the context of your revenue guidance in terms of what the contribution from CHORR versus the acquisitive growth would be for 22? Any color there?

Hi, good evening.

Just wanted to ask about <unk> it sounds like it's growing better than you anticipated is there a way within the context of your revenue guidance.

Terms of what the contribution from core versus the acquisitive growth would be for 'twenty two any color there.

Speaker 5: Sure, I can use creepy that. So at the midpoint, we're looking at about 19% growth in total. We would be at about 10% organically.

Sure.

You bet.

So at the midpoint, we're looking at about 19% growth in total.

We'd be at about 10% organically.

Speaker 10: And then just going back to the question on M&A, it sounds like a pretty active pipeline. Could you maybe talk your comfort level with leverage? It certainly seems like you have a lot of capacity today, but kind of where your comfort level would be within that leverage range. Just give them the active pipeline.

Got it and then just going back to the question on M&A It sounds like a pretty active pipeline could.

Could you maybe talk to your comfort level with leverage it certainly seems like you have a lot of capacity today, but kind of where your comfort level would be within that leverage range just given the active pipeline.

Speaker 5: Sure, yes. We're at about 0.3 time net leverage on an EBITDA basis today, which we think gives us a lot of flexibility to pursue. Investments both in capital expenditures, in the containers and tractors, but also to give us the capacity to do acquisition. We're comfortable going up kind of north of two times, maybe two and a half times EBITDA for the right deal. But we'd like to maintain our leverage closer to one time EBITDA over time.

Sure Yes, so we're at about three times net leverage on an EBITDA basis today, which we think gives us a lot of flexibility to pursue investments both in capital expenditures in the containers and tractors, but also to give us the capacity to do acquisitions.

We're comfortable going up kind of north of two times, maybe two five times EBITDA for the right deal, but we'd like to maintain our leverage closer to one times EBITDA over time.

Great. Thank you.

Welcome.

Speaker 1: And our next question comes to John Chapelle from Evacore ISI.

And our next question comes from Jon Chappell.

From Evercore ISI.

Thank you good afternoon.

Speaker 4: Phil, there's been a lot of focus in the industry, logistics and the growth across the entire industry. It's been pretty remarkable in the last couple quarters. Your revenue has made a little bit let in expectations, but your gross margin and logistics side up to 390 basis points is pretty huge. Are you trying to be a bit more disciplined with the onboarding of the customers on the your platform to focus a little bit more margin as opposed to just growing the top line of capacity.

Bill there's been a lot of focus in the industry.

<unk> and the growth across.

The entire industry has been pretty remarkable the last couple of quarters.

Your revenue was maybe a little bit lighter than expectations, but your gross margin and logistics side up 390 basis points.

Are you trying to be a bit more disciplined with the onboarding of customers onto your platform.

To focus a little bit more margin as opposed to just growing the top line as fast as we can.

Speaker 3: I know that's exactly right. I think we, when we look at our logistics segment, we have scale in the LPL and truckload space so we get to be selective.

No Thats exactly right I think we when we look at our logistics segment, we have scale in the <unk> and truckload space. So we get to be selective.

Due to our purchasing power that exist today, and we want to find customers that fit our profile that we want to be with us for the long term and that we can generate.

A strong return for the investment that we're making as well so yes.

Speaker 3: as well. So yes, we've been much more disciplined in our approach and I think that has allowed us to bring out the right business that we hope will be much stickier, you know, longer terms. Sometimes you see with some of those really high revenue, low profit, sorts of engagement that can, you know, be somewhat volatile and so we have been much more selective there and I think, you know, it's proving out to be beneficial for us. Okay, great. And then just for my follow up, I don't want to just keep parking on the short term here, but, you know, you're one of the last to report this quarter and, you know, we've heard about.

Yes, we've been much more disciplined in our approach.

And I think that has allowed us to bring on the right business that we hope will be much stickier.

Longer term, sometimes you see with some of those really high revenue low profit.

Sorts of engagements that can be.

Be somewhat volatile and so we have been much more selective there.

And I think it's proving out to be beneficial for us.

Speaker 4: Okay, great. And then just for my follow up, I don't want to.

Okay, Great and then just for my follow up.

Don't want to keep.

Speaker 4: you're one of the last to report this quarter and you know we've heard about stickouts by employees and shippers as well labor shortages, terrible weather, the volume obviously be showing up in the rail data and I think it was pretty interesting that Jeff Fed is like pitch-gross margin and the ETF to be pretty radical on a quarterly basis throughout the year.

Keep harping on the short term here, but you're one of the last to report this quarter and we've heard about.

Stick out by employees.

Shippers as well labor shortages terrible weather.

It obviously would be showing up in the rail data and yet I think it was pretty interesting that Jeff said like the gross margin and EPS to be pretty ratable on a quarterly basis throughout the year should we just think about as the big needle mover intermodal pricing will continue to be.

Speaker 4: Should we just think about as a big needle mover, in a modal pricing, we'll continue to kind of be what it was like in the second half of the year. It was huge, kind of 26 to 37% increases. And that kind of offsets a lot of these macro headwinds that you're facing in the early part. And the back half of the year is kind of really a more quote unquote normalized operational backdrop.

B what it was like in the second half of the year, that's huge and a 26% to 37% increases in that kind of offsets a lot of these macro headwinds that youre facing in the early part in the back half of the year.

Really a more quote unquote normalized operational backdrop.

Speaker 3: Sure, yeah, I think that's right. Yeah, we will see, we are seeing a strong start to bid season, you know, with end just to give you a lot of cadence around it. 44% of our business is in a modal, it can be repriced in Q1, 34% and Q2, and then 19% Q3. So that Q2 is actually a little heavier.

Sure, Yes, I think Thats right, yes, we will see we are seeing a strong start to bid season.

And just to give you a cadence around at 44% of our business in intermodal that can be repriced in Q1, 34% in Q2, and then 19% in Q3.

Q2 is actually a little heavier than is typical in years past and so given where pricing is currently and we forecast it is going to continue to be in.

Speaker 3: than is typical in years past. And so given where pricing is currently and we forecast is going to continue to be in the second quarter, that could be a little bit of upside for us. But there's a benefit to customers in that they want a locking capacity right now, right? And so, and also making these investments is in a allowable.

In the second quarter that could be a little bit of upside for us, but there is a benefit to customers and that they want to walking capacity right now right and so and US making these investments is going to allow us.

Speaker 3: really to do that. So I would anticipate you see a little bit more of a normalized peak season next year, but we also thought that that was going to occur this year. So if these issues and challenges and supply chain issues persist, you could continue to see these conditions and well throughout the year. Okay.

To do that so I would anticipate you'd see a little bit more of a normalized peak season next year, but we.

We also thought that that was going to occur this year. So.

Issues and challenges and supply chain issues persist you could continue to see these condition well throughout the year.

Okay. That's great. Thank you bill.

And your next question comes from Brian <unk> from J P. Morgan.

Speaker 1: The internet's question constant Brian Austin back from JP Morgan.

Speaker 11: Yeah, thanks. Good evening. Appreciate taking the question.

Yes, thanks, good evening.

I appreciate you taking the question.

Speaker 11: Maybe just to follow up on the pricing commentary, it sounds like shippers obviously pulling forward some of the contracts a little bit, trying to lock in capacity. Is there anything else that you would say is sort of different this time? Obviously quite a few things are different, but at least from on.

Maybe just to follow up on the on the pricing commentary it sounds like shippers, obviously pulling forward some of the contracts a little bit.

Trying to lock in capacity is there anything else that you would say is.

Sort of different this time I would see quite a few things are different but at least from a contractual perspective longer term agreements different different forms of pricing.

Speaker 11: contractual perspective, longer term agreements, different forms of pricing. How do you think that?

How do you think that this whole experience over the last couple of years will change or has changed how some of these transactions.

Speaker 11: This whole experience of the last couple of years will change or has changed how some of these transactions get done especially on the intermodal side.

Get done, especially on the intermodal side.

Speaker 3: No, I think that's exactly right. We're seeing a lot of customers be very interested in moving to more of a multi-year framework with, you know, fours and ceilings related to, you know, publicly available data. And those are contracts that we're comfortable with, you know, with the right customers. And we will continue to pursue those, especially with business that we define as day clothes or that network's beneficial. And so, you know, it might not be that we'll lock in an entire network with a customer, but we might say, okay, half the business is really good business for us that we feel comfortable with, you know, locking in these prices for a multi-year period. So, we are taking that approach and for customer, for a lot of customers, they're very interested in it as well. The other thing that we're seeing right now is a consolidation of providers, whether it's in brokerage or intermodal. And so, for the providers, we think like ourselves with, you know, our strategic customers that we've really stepped up for. We're going to see some benefits coming out of that and opportunities to continue to grow with our strategic accounts through that process.

I think thats exactly right, we're seeing a lot of customers be very interested in moving to a more of a multiyear framework with.

Floors and ceilings related too.

Publicly available data and those are <unk>.

Contracts that were comfortable with with.

The right customers and we will continue to pursue those especially with business that we define as base load or that network beneficial and so it might not be that will lock in an entire network with a customer, but we might say okay half. The business is really good business for us that we feel comfortable with locking in these prices for a multi year period. So we aren't.

Taking that approach and for customer for a lot of customers, they're very interested in it as well the other thing that we're seeing right now is a consolidation of providers, whether it's in brokerage or intermodal.

And so for the providers, we think like ourselves with our strategic customers that we have really stepped up for work.

Going to see some benefits coming out of that and opportunities to continue to grow with our strategic accounts through that process.

Speaker 11: Okay, great. Maybe just one quick fall up on that second one. Is that ESG part of the conversation at this point, at least in a more material way, that then it's been the past?

Okay, great maybe.

Maybe just one quick follow up on that and then second one is the ESG part of the conversation.

At this point at least in a more material way.

Than it's been in the past.

Speaker 3: Certainly, I think every supply chain team at a large, Fortune 500 company life, which our customer base is...

Certainly I think every supply chain team at a large fortune 500 company, which is our customer base is.

Speaker 3: is thinking about how can they contribute to the sustainability efforts of their company, and we provide them with a lot of data around carbon emission savings.

Thinking about how can they contribute to the sustainability efforts of their company and we provide them with a lot of data around carbon emissions savings.

What business could potentially convert to obtain.

Intermodal and that it's going to continue to be we think a story for several years to come.

We need to continue to get our service.

<unk> is the right level to fully take advantage of that I think the other piece that is going to continue to play into conversion to intermodal as fuel prices as well.

Speaker 3: is going to continue to play in to conversion dinner model as fuel prices as well. So if you see that continue to move up order, that could be another good tailwind that comes into conversion dinner model as well. So all those factors we think are going to continue to drive a nice conversion opportunity for the next year and we think beyond. And then can you just talk briefly about the IT spend within that $40 million total including the headquarters. What you focused on there is it's still transitioning over to Oracle anything integration-wise on chop tank. Maybe some of the bigger.

So.

If you see that continue to move upward that could be.

Other good tailwind that that comes into conversion to intermodal as well.

All those factors, we think are going to continue to drive a nice conversion opportunity for the next year and we think beyond.

Speaker 11: And then can you just talk briefly about the IT spend to within that $40 million total, including the headquarters? What you focused on there is it's still transitioning over to Oracle, anything integration-wise on Chop Tank. Maybe some of the bigger projects you're working on be helpful.

And then can you just talk briefly about the it spend within the $40 million total, including the headquarters what are you focused on there is it still transitioning over to Oracle anything integration wise on chop tank, maybe some of the bigger projects Youre working on behalf of <unk>.

Speaker 3: Yeah, so for us, and you know, as we've really gone to a bi-commodity, but built for differentiation approach, differentiating for our customers, our vendors, for our team members, we've really been focused on utilizing our satellite tracking to provide end-to-end visibility. We've done a great job of automating workflow, getting better intelligence to our teams and our drivers, so they can be optimal in their workflow. And it's one great initiative that I've seen really benefit us over the last year with our brokerage.

Yes, so for us we.

Really gone to a by commodity but build for differentiation approach differentiating for our customers our vendors for our team members. We've really been focused on utilizing our satellite tracking tracking to provide end to end visibility we've done a great job of automating workflow getting better intelligence to our teams and our drivers so they can be optimal in there.

Workflow I think one.

Initiative that ive seen really benefit us over the last year was with our within our brokerage.

Built to customize workflow management tool and we've seen an 18% improvement in productivity on a volume basis within that team over the past year. So a really impressive result.

We think.

And we're going to continue to make investments like that and we're doing that across the organization and so I think youre going to continue to see it become more and more efficient and more effective and responsive to our customers on top of that to your point, we got to do a great job in integrating our acquisitions I think we have done a phenomenal job so getting chop tank onto our ERP and integrated in with our <unk>.

Speaker 3: you know, chopped bank onto our ERP and integrated in with our human capital management. All that is going to be part of the work. And as we do more acquisitions, we're going to stay really on top of that and make sure that we integrate timely, but also very well. So those would be a lot of a big initiative that we're focused on. But I also just highlight within truck technology, we continue to assess our investment and electric trucks. I think that's a great opportunity. We're doing autonomous vehicle tasks. You know, a lot of really interesting things are out there from that perspective as well that are exciting and even just beyond, you know, the workflow management tools we have very hard as well. Okay, great. Appreciate so. Thank you.

Capital management, all of that is going to be part of the work and as we do more acquisitions, we're going to stay really on top of that and make sure that we integrate timely but also very well. So those would be a lot of the big initiatives that we're focused on.

Speaker 3: But I'd also to highlight within truck technology, we continue to assess our investment in electric trucks. I think that's a great opportunity. We're doing autonomous vehicle tests. A lot of really interesting things are out there from that perspective as well that are exciting and even just beyond the workflow management tools we have here at How's As Well.

But I'd also just highlight within truck technology, we continue to assess our investment in electric trucks, I think thats a great opportunity, we're doing autonomous vehicle test a lot of really interesting things.

Are out there from that perspective, as well that are are exciting even just beyond.

Workflow management tools, we have very hard as well.

Okay, Great I appreciate it Phil Thank you.

Speaker 1: The next question comes from Fadi, Charmone from BMO. You might as well put it. Alright, let's? Vs2021 start the??!

And your next question comes from <unk> <unk>.

From BMO your line is open.

Your line is on mute could you mute your phone.

Yes, hi, good afternoon.

Speaker 12: a contrast under results first of all. And thanks for the question. Can you remind us about the box turns that you have currently in the internal network and what would that look like in more normal time?

Congrats on the results first of all and thanks for the question.

Can you remind us about the box turns that you have currently.

Intermodal network and what would that look like.

In more normal times.

Speaker 3: Yeah, so for the full year in the fourth quarter, we're up about 10% year over year. We actually saw a decline sequentially from the third quarter to the fourth quarter of 3%.

Yes, so for the full year in the fourth quarter, we were up about 10% year over year, we actually saw a decline sequentially from the third quarter to the fourth quarter of 3%.

Speaker 3: You know, the year over year deterioration mostly was driven by rail service. There's a mixed component in there. I think you can see that our transcon volumes continue to outperform the remainder of our network. That elongates your transit a little bit, but that's not really a massive impact. It might be a percentage point or two.

The year over year deterioration, mostly was driven by rail service.

The mix component in there I think you can see that our transcon volumes continue to outperform the remainder of our network that elongate your transit a little bit, but that's not really the massive impact it might be a percentage point or two.

The sequential decline that was mostly driven by customer pool.

And unloading times to customers.

That makes sense that demand was up and staffing levels were coming down right and so we saw some some longer dwell on our customer pool. So I think if you look at normalized levels. There is a lot of upside here.

Speaker 3: look at normalized levels, there's a lot of upside here and could be as much as 15% on our turn times as we get back to more normalized service levels. It could be even higher than that. So we're excited to see that take place and think that as the year progresses we'll see that improvement take hold. The second question going back to the volume guide on the intermodal side, I mean if I look back a few years now, five, six years, it feels like we've gone through...

Could be.

Is 15% on our turn times.

We get back to more normalized surface level, it could be even higher than that so.

I'm excited to see that take place and I think that as the year progresses, we'll see that improvement take hold.

Speaker 12: Okay. And...

Okay.

Speaker 12: Second question going back to the volume guide on the intermodal side. I mean, if I look back a few years now, five, six years, it feels like we've gone through multiple cycles where civil prices were up or down and truck market was loose and tight. And throughout that volume, volume and intermodal have really struggled to grow. And here we are today with...

The second question going back to the.

Volume guide on the intermodal side.

If I look back a few years now five six years it feels like we've gone through multiple cycles, where steel prices were up or down.

Truck market was loose and tight and sort of what was that volume volume in intermodal have really struggled to grow and here we are today.

Speaker 12: kind of record saving for Intermoral versus Struckload. And yet the volume picture looks kind of, not all that impressive. Like what does need to happen on the Intermoral service product side to really start to see that structural growth of opportunity in Intermoral Playout?

Kind of record saving for intermodal versus truck load and yet the volume picture looks kind of.

Not all of that impressive.

What does need to happen on the intermodal service product side to really start to.

<unk>.

The structural growth opportunity in intermodal play out.

Speaker 3: Yeah, I think from a capacity commitment perspective, the intermodal industries there are tender acceptance rates.

Yeah, I think from a capacity commitment perspective, the intermodal industry is there are tender acceptance rates are.

Speaker 3: you know versus the truckload industry or you know which are have been in the high 70s low 80s you know typically intermodal were in the low to mid 90s from so the commitment to capacity i think is there what is not there uh... particularly in shorter haul lands right now is a consistent service product i don't think our customers are looking for more necessarily about fastest

Versus the truckload industry or which are have been in the high 70 percents low eighty's typically intermodal we're in the low to mid 90. So the commitment to capacity I think is there what is not there, particularly in shorter haul lanes right. Now is a consistent service product I don't think our COO.

Customers are looking for necessarily the fastest.

Speaker 3: uh... transit their okay uh... with you know two days extra but to capture the savings but it needs to be two days it can't be uh... you know seven to seven days longer one time and two days faster the next it has to be consistently you know two days forward the truck and so i think that um... on a consistent basis

Transit, they're okay with two days extra but to capture those savings, but it needs to be two days it can't be.

737 days longer one time in two days faster. The next it has to be consistently to date forward the truck and so I think that on a consistent basis.

Speaker 3: is what we need and I know we're all along with our partners very focused on delivering that. That's why I think you continue to see our Transcon business perform better than our local business as well. That is where you can more consistently capture that service and those savings versus the shorter length of haul where you have maybe less of a room for error.

Is what we need and I know, we're all along with our partners very focused on delivering that that's why I think you continue to see our transcon business performed better than our local business as well is that is where you can more consistently capture that service and those savings versus the shorter length of haul where you have maybe less.

<unk>.

Room for error.

Okay.

Thank you I appreciate it.

Speaker 1: Just as you're minded into the queue, please press star then one on your touch phone. Again, that star one, enter the queue. And our next question comes in, David, the Zula from Barclays. Your line is open.

And just as a reminder to enter the queue. Please press Star then one on your Touchtone phone.

Turning on to the queue.

And our next question comes from David.

From Barclays. Your line is open.

Yes.

Hey, congrats on the quarter and thanks for taking the question.

Speaker 6: Just wanted to ask, and you alluded a little bit to it in one of the previous answers about your use of rail-owned equipment. You talked about it in the East, but maybe can you just got a little bit more your use of rail-owned equipment during the quarter, or if any challenges that presented and what challenges and opportunities you might have for that in the coming year?

Just wanted to ask and you'd alluded a little bit to it and one of the previous answers about your use of rail owned equipment.

You talked about it in the east, but maybe can you just give us a little bit more use of railroad equipment during the quarter. What if any challenges are presented and what challenges and opportunities you might have for that in the coming year.

Speaker 3: Yeah, so that would be a part of the volume decline that you're seeing for us. Last year, we used, probably, we were about 93% of our business was done in our own fleet. This year, that's closer to 99. Mainly because we can better manage our own fleet, it's much less expensive when you have higher street well. And so we have really removed a lot of the rail network to under 1% of our volume is in rail boxes. So that has been a concerted effort and it's part of why you're seeing some of that volume decline out of year over year.

So that would be a part of the volume decline that youre seeing for us last year.

<unk> used probably.

We were about 93% of our business was done in our own fleet. This year, that's closer to 99, mainly because we can better manage our own fleet. It's much less expensive when you have higher sweep street, well and so we have really.

Removed a lot of the rail network to under 1% of our volume has been railroad boxes. So that has been a.

Concerted effort and is part of why you are seeing.

Some of that volume decline on a year over year basis.

Speaker 6: Great. And then as a follow up, I don't know if you have handy the sequential head count number for 4Q, but you're related to that. Because you didn't note, you know, labor as being a constraint of volume kind of anywhere throughout any of the businesses. So maybe, you know, touch a little bit about what you're doing in human capital to kind of, you know, keep the labor count off and kind of, you know, challenging labor time.

Great.

As a follow up I don't know if you have handy the.

Sequential.

That number for <unk>.

Related to that.

I guess you didn't note.

Labor as being a constraint to volume.

Anywhere throughout any of the businesses. So maybe you can touch a little bit about what youre doing in human capital to kind of.

Keith.

Labour count up and kind of challenging labor time.

Speaker 5: Sure, so at the end of the year, our head count was non-driver. Head count was 2,300. Last year, we were just under 2,000. So up by 300, but we get to add around 400 employees through the acquisition of chop.

Sure. So at the end of the year, our head count was non driver head count was 2300.

Last year, we were just under 2002 up by 300, but we did add around 400 employees through.

Through the acquisition of <unk>.

Speaker 3: And then just from a human capital perspective, I think we really value our culture. We have a great human resources team. We have great managers and we've really worked hard one to provide a really great environment for our teams so we can keep turnover at a minimum. But also make sure that we're giving them better and better tools so they can be more effective at their job and give them progress and get people progression opportunities as in their career. That's going to continue to be our focus. I don't think we would say that we're perfect and we always have opportunities to improve. We've experienced somewhat higher turnover but not anything that has impacted us.

And then just from a human capital perspective, I think.

We really value our culture, we have a great human resources team, we have great managers and we've really worked hard won.

To provide a really great environment for our teams. So we can keep turnover at a minimum but also.

Make sure that we're giving them better and better tools. So they can be more effective at their job and give them and get people.

Freshen opportunities within their career, that's going to continue to be our focus I don't think we would say that we're perfect.

And we always have opportunities to improve and so we've experienced somewhat higher turnover, but not anything that impacted us.

Speaker 3: And I think our whole organization has really rallied around the opportunity to service our customers and continue to grow.

And I think our whole organization has really rallied around the opportunity to service our customers and continuing to grow.

Thanks.

Speaker 1: And we have no further questions out in the callback over to Dave Yeager for final remarks.

And we have no further questions I'll turn the call back over to Dave Yeager for final remarks.

Speaker 8: Okay, well thank you for joining us for the fourth quarter of the day's call. As always, if you do have any additional questions, Jeff and Till and I would be available. Thank you.

Okay, well, thank you for joining us for the fourth quarter earnings call as always if you do have any additional questions.

Jeff and Phil and I would be available. Thank you.

Speaker 1: Thank you ladies and gentlemen, this concludes today's conference call. Thank you for participating. It may now disconnect.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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Speaker 1: Hello and welcome to the Hub Group 4th quarter 2021 earnings conference call. Dave Yeager, Hub CEO , Philly Yeager, Hub's President and Chief Operating Officer, and Jeff D. Martino, Hub's CFO are joining me in the call. At this time, all participants are in a list and only mode. A brief question and succession will file the formal presentation. In order for everyone to have an opportunity to participate, please limit your queries to one primary and one follow-up questions.

Hello, and welcome to the hub group fourth quarter 2021 earnings Conference call.

Dave Yeager hubs CEO , Phil Yeager hubs, President and Chief operating Officer, and Geoff Demartino hub CFO are joining me on the call at this time all participants are in a listen only mode.

Brief question and answer session will follow the formal presentation.

In order for everyone to have an opportunity to perhaps dissipate. Please limit your acquirers to one primary and one follow up question.

Speaker 1: Any for looking statements made near in 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 belief, expect, anticipate, and project, and variations of these words. Please review the cautionary statements.

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 belief expect.

We anticipate and project and variations of these words. Please review the cautionary statements in the release.

Speaker 1: In addition, you should refer to the disclosures in the company's form 10K and other SEC filings regarding factors that could cause actual results to differ materially from these projected in these four-looking favorites.

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 these 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.

Speaker 1: As a reminder, this conference has been recorded. It is now my pleasure to turn the call over your house, Dave Jager. You may now begin.

Speaker 3: Good afternoon, and thank you for participating in Hub Group's Fourth Corner earnings call.

Good afternoon, and thank you for participating in hub group's fourth quarter earnings call joining.

Speaker 3: Joining me today are Phil Yeager, Hubs President and Chief Operating Officer, and Jeff DiMartino, Hubs Chief Financial Officer.

Joining me today are Phil Yeager hubs, President and Chief operating officer, and Geoff Demartino hubs Chief Financial Officer.

Speaker 3: 50 years ago, my parents found it hungry. On this, the 50th anniversary were reporting record revenue and net income for the fourth quarter and for the full year.

50 years ago, My parents founded hub group.

On this statistic <unk> anniversary, we're reporting record revenue and net income for the fourth quarter and for the full year.

Speaker 8: Strong Freak Demand, coupled with the attractive value proposition of our services, has led to a record $4.2 billion in revenue and EPS of $2.48 for the quarter and $5.06 for the full year.

Strong freight demand coupled with the attractive value proposition of our services has led to a record $4 $2 billion in revenue and EPS of $2.48 for the quarter and $5 <unk> for the full year.

Speaker 8: We remain focused on providing value-added services by integrating our business with the needs of our customers.

We remain focused on providing value added services by integrating our business with the needs of our customers. We will continue to diversify our non asset based services, while focusing our capital investments on technology and growth in the intermodal business.

Speaker 8: We will continue to diversify our non-asset base services while focusing our capital investments on technology and growth in the automotive business.

Speaker 8: From a macro perspective, we expect positive economic conditions will continue to benefit our customers.

From a macro perspective, we expect positive economic conditions will continue to benefit our customers.

Speaker 8: We are very fortunate to work with customers who have been winners in today's economy.

We are very fortunate to work with customers who have been winners in today's economy.

Speaker 8: The macro outlook remains favorable with 4% GDP, strong retail sales, a declining unemployment rate, and strength and imports.

The macro outlook remains favorable with 4% GDP strong retail sales are declining unemployment rate and strengthen imports.

Speaker 8: In addition, retail inventory to sales continues to be at historic and low levels and our customers continue to tell us that their shelves need to be restocked.

In addition, retail inventory to sales continues to be at historically low levels and our customers continue to tell us that there shouldnt need to be restocked.

Speaker 8: On the supply side, the outlook for truckload capacity continues to be constrained due to a shortage of drivers, backloaf of imports, issues with truck production, rising insurance expenses, and driver regulatory changes.

On the supply side the outlook for truckload capacity continues to be constrained due to a shortage of drivers backlog of imports issues with truck production rising insurance expenses and driver of regulatory changes.

Speaker 8: We believe the 2022 will be similar to 2021. And as much as our prices will increase faster, then our cost as the economy continues to experience inflationary pressure. With that, I'll turn the call over to Phil to review our business.

We believe the 2022 will be similar to 2021 and as much as our prices will increase faster than our cost as the economy continues to experience inflationary pressure.

With that I'll turn the call over to Phil to review our business lines.

Thank you Dave.

Speaker 3: I wanted to start by thanking all of our key members across North America for all their hard work and commitment to our customers, which resulted in records financial performance and several awards for our service and sustainability efforts this year. I'll now discuss our service line.

To start by thanking all of our team members across North America for all their hard work and commitment to our customers, which resulted in record financial performance and several awards for our service and sustainability efforts this year.

I will now discuss our service line performance for the quarter.

Speaker 3: Intermodal revenue increased 25% in the quarter, despite a 9% volume decline after 11% growth last year.

Intermodal revenue increased 25% in the quarter, despite a 9% volume decline after 11% growth last year.

Speaker 3: Transcon volume was flat while local weapons declined 10% and local leads declined 14%.

<unk> volume was flat, while local whilst declined 10% in local east declined 14%.

Speaker 3: Gross margin of percentage of sales improved 960 basis points year over year, driven by improved yield management and network balance, which more than offset rising transportation costs.

Gross margin as a percentage of sales improved 960 basis points year over year, driven by improved yield management and network balance, which more than offset rising transportation costs.

Speaker 3: Networks will let it be declined in the quarter, both sequentially and year-over-year, as rail transit and street well remain elevated.

Network fluidity declined in the quarter, both sequentially and year over year as rail transit and street well remain elevated.

Speaker 3: We're continuing to focus on improving our productivity, while collaborating with our customers and rail partners to increase utilization of our leading capacity.

We're continuing to focus on improving our productivity, while collaborating with our customers and rail partners to increase utilization of our latent capacity.

Speaker 3: Looking ahead, we anticipate a return to stronger service as investments from Hub Group are rail partners and customers, drag greater throughput in our network.

Looking ahead, we anticipate a return to stronger services investments from hub group, our rail partners and customers drive greater throughput in our network.

Speaker 3: To the end remain strong and we plan to invest to support our customers by expanding our intermodal fleet by 6,550 units this year while continuing to grow our driver.

Demand remains strong and we plan to invest to support our customers by expanding our intermodal fleet by 6550 units this year, while continuing to grow our driver fleet.

Speaker 3: Dedicated revenue to client 8% in the quarter despite improvement in revenue per truck per day and reduced third-party usage, which led to a 30 basis point improvement in gross margin as a percentage of sales year over year.

Dedicated revenue declined 8% in the quarter despite improvement in revenue per truck per day, and reduced third party usage, which led to a 30 basis point improvement in gross margin as a percentage of sales year over year.

Speaker 3: We have improved our service offering and operational discipline and of a great pipeline of strong return opportunities and onboarding which we believe will lead to growth this year.

We have improved our service offering and operational discipline and have a great pipeline of strong return opportunities and Onboarding, which we believe will lead to growth this year.

Speaker 3: which is a revenue increased 13% year over year in the fourth quarter, driven by strengths and final mile and consolidation, which was offset by lots of counts from the prior year in our managed transportation offer.

Logistics revenue increased 13% year over year in the fourth quarter driven by strength in final mile and consolidation, which was offset by lost accounts for the prior year and our managed transportation offering.

Speaker 3: Gross margin is a percentage of sales increased 390 basis points year over year. At new business onboarding, the yield management improvements, the managed transportation in final mile, offset warehousing and transportation cost increases in consolidation.

Gross margin as a percentage of sales increased 390 basis points year over year as new business Onboarding yield management improvements in managed transportation and final mile offset warehousing and transportation cost increases in consolidation.

Speaker 3: We continue to have extremely strong demand for our services, given the dislocation from the global supply chain, and anticipate continued growth this year.

We continue to have extremely strong demand for our services given the dislocations in the global supply chain and anticipate continued growth this year.

Speaker 3: Broker revenue increased 112% year over year and 48% higher volume, due to the acquisition of Chaapetank as well as organic growth and our full truck load and LPL pollution.

Brokerage revenue increased 112% year over year, and 48% higher volume due to the acquisition of <unk> bank as well as organic growth in our full truckload <unk> solutions.

Speaker 3: Dr. Smarjan is a percentage of sales to climb 290 basis points year over year as we executed higher revenue per unit spot shipment, which comprise 51% of our volume in the quarter.

Gross margin as a percentage of sales declined 290 basis points year over year, as we executed higher revenue per unit spot shipments, which comprised 51% of our volume in the quarter.

Speaker 3: The acquisition of chop-pink has exceeded our expectations. We are winning with our customers and on track with our integration.

The acquisition of <unk> has exceeded our expectations, we are winning with our customers and on track with our integration plan.

Speaker 3: We're off to another strong start this year and see ample opportunity to leverage our expanded network, strengthen systems and Salesforce to drive growth through Cross Belt. With that, I will hand it over to Jeff to discuss our financial performance.

We're off to another strong start this year and see ample opportunity to leverage our expanded network strengthen systems and sales force to drive growth through cross selling.

With that I will hand, it over to Jeff to discuss our financial performance.

Thank you Phil Q.

Speaker 5: Q4 featured all-time record revenue and profitability levels wrote the quarter and the full year.

Q4 featured all time record revenue and profitability levels throughout the quarter and the full year.

Speaker 5: Revenue grew 32% in a quarter and 21% for the year.

Revenue grew 32% in the quarter and 21% for the year.

Speaker 5: Our yield management and cost recovery efforts led to record gross margin of 16.9% for the quarter and 14.2% for the year.

Our yield management and cost recovery effort led to record gross margin of 16, 9% for the quarter and 14, 2% for the year.

Speaker 5: Growth margin performance in our focus on operating efficiency led to operating income of $118 million for the quarter or 9.3% of revenue.

Gross margin performance and our focus on operating efficiency led to operating income of $118 million for the quarter or nine 3% of revenue.

Speaker 5: For the full year, our operating income with a record $238 million or 5.6% of revenue.

For the full year, our operating income was a record $238 million.

Or five 6% of revenue.

Speaker 5: Salaries and benefits increased from last year due to our recent acquisition, as well as higher incentive copication expense.

Salaries and benefits increased from last year due to our recent acquisition as well as higher incentive compensation expense.

Speaker 5: G&A declines compared to last year due to 10 million of dollars of gain on sale from the transportation equipment offset by higher expenses related to the acquisition.

G&A declined compared to last year due to $10 million of gain on sale from the transportation equipment.

Asset by higher expenses related to the acquisition.

Speaker 5: Our diluted earnings for share for the quarter was $2.48, then, which is nearly four times the prior year, highlighting the substantial operating leverage in our business.

Our diluted earnings per share for the quarter was $2 48.

Which is nearly four times the prior year, highlighting the substantial operating leverage in our business.

Speaker 5: We generated $152 million of EBITDA on the quarter and $359 million for the full year.

We generated $152 million of EBITDA in the quarter and $359 million for the full year.

Speaker 5: With cash of $150 million and net leverage of 0.3 times even done, we continue to have a substantial flexibility to invest in our business through capital expenditure and additional strategic acquisition.

With cash of $160 million and net leverage of three times EBITDA, we continue to have substantial flexibility to invest in our business through capital expenditures and additional strategic acquisitions.

Speaker 5: We have a bullish outlook for 2022. We continue to demand from our customers driven by fraud and macro trends, growth and consumer spending, and low inventory levels.

We have a bullish outlook for 2022 with continued demand from our customers driven by strong macro trends growth in consumer spending and low inventory level.

Speaker 5: We expect supply chain conditions will continue to be constrained and that our yield management and operational efficiencies will lead to further growth and earnings.

We expect supply chain condition will continue to be constrained and that our yield management and operational efficiencies will lead to further growth in earnings.

Speaker 5: For 2022, we are expecting EPF of between $5.90 to $6.30.

For 2022, we're expecting EPS of between $5 90 to $6 30.

Speaker 5: We expect to go revenue to approximately $5 billion, putting us well on our way to achieve our goal at 5.5 to 6.5 billion of revenue by 2025.

We expect to grow revenue to approximately $5 billion put.

Putting us well on our way to achieve our goal of five 5% to $6 5 billion of revenue by 2025.

Speaker 5: The expected intermodal volume will return to growth in 2022, supported by our container deliveries and improving rail service.

We expect intermodal volume will return to growth in 2022 supported by our container deliveries and improving rail service.

Speaker 5: Before Gatsbrook's margin is a percent of revenue of 13.9 to 14.3 for the year. As rate increases, surcharges and after-sorial revenues, offset higher cost for real transportation, third-party drainage and driver wage.

We forecast gross margin as a percent of revenue of 13, 9% to $14 three for the year as rate increases surcharges and accessorial revenue offset higher cost for rail transportation third party drayage and driver wages.

Speaker 5: For the year we expect cost and expenses of 425 to 445 million dollars.

For the year, we expect costs and expenses of $425 million to $445 million.

Speaker 5: We expect our earnings will be roughly similar for each of the quarters of 2022. As seasonal strength and yields in the back out is offset by rising transportation cost as the year progresses.

We expect our earnings will be roughly similar for each of the quarters of 2022.

As seasonal strength in yields in the back half is offset by rising transportation costs as the year progressed.

Speaker 5: Our capital expenditure forecast is $240-$270.00.

Our capital expenditure forecast of $240 million to $270 million.

Speaker 5: We have ordered 6,550 containers for 2022, which will result in net growth of 6,000 or 14% after retirements of older units. This comes on top of 8% growth in 2021.

We are already at 6550 containers for 2022.

Which will result in net growth of fixed.

Our 14% after retirements of older unit.

This comes on top of 8% growth in 2021.

Speaker 5: We also intend to take delivery of over 750 tractors, the majority of which are replacements for older models that have an attractive ROI with lower maintenance costs and improved fuel efficiency.

We also intend to take delivery of over 750 tractors. The majority of which are replacements for older model that have an attractive ROI with lower maintenance costs and improved fuel efficiency.

Speaker 5: We will also be finishing up a significant expansion of our high quarters campus in 2022. Another example of the investments we are making for our future. In 2021, we introduce our

We will also be finishing up a significant expansion of our headquarters campus. In 2022. Another example of the investments we are making for our future.

In 2021, and we introduced our long term revenue and margin targets.

Speaker 5: Our recent acquisitions of Chop Tank, NFC, and K-Stack, and the significant investments in our fleet, are illustrative of the types of strategic investments we will make in our business.

Our recent acquisitions of chop tank, NSP and case back and our significant investments in our fleet are illustrative of the types of strategic investments, we will make in our business.

Speaker 5: Adding scale will also introduce a new service operance with strong cross-cell potential. Jace back.

Adding scale, while also introducing new service offerings with strong cross sell potential.

Dave back to you for closing remarks.

Speaker 8: Thank you, Jeff. Needless to say, 2021 was a strong growth year for top.

Thank you, Jeff Needless to say 2021 was a strong growth year for hub.

Speaker 8: We believe 2022 has the same opportunity as we continue to expand our service offerings while investing in our core business bringing significant value to our clients. And with that, we'll open up the line for any questions. Thank you.

We believe 2022 has the same opportunity as we continue to expand our service offerings, while investing in our core business, bringing significant value to our clients and with that we'll open up the line for any questions.

Thank you we will now begin the question and answer session.

Speaker 1: If you have a question, please press star then one on your touchtone phone. If you wish to be removed like you, please press the pound sign or the hash key. If you're using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. And our first question comes in just in line for Steven's to align his open screen.

If you have a question. Please press Star then one on your Touchtone phone.

If you wish to be removed from the queue. Please press the pound sign.

If youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone and our first question comes from Justin Long from Stephens. Your line is open.

Speaker 9: Thanks and congrats on the results. I'm still in a little bit of shock after seeing this.

Thanks, and congrats on the results I am still a little bit of shock after seeing that.

Speaker 4: But maybe to kind of start with that point, if I think back to when you gave guidance in October versus these results today that came in roughly a dollar above what you were expecting and the street was expecting, can you just help us bridge the gap into...

But maybe to kind of start with that point, if I think back to when you gave guidance in October versus these results today that came in roughly a one dollar above what you were expecting and the street was expecting can you just help us bridge the gap to where the upside.

Speaker 4: to where the upside primarily came from. And I guess more importantly, can you talk about those drivers and what you feel like is sustainable going into 2022 versus anything that is maybe more transient?

Primarily came from and I guess more importantly can you talk about those drivers and what you feel like it's sustainable going into 2022 versus anything that is maybe more transient or one time.

Speaker 5: Sure, Justin, this is Jeff. Thank you for your comments there. Yeah, Q4 did exceed our expectation. We saw a sprinkling a couple of areas that cost our business.

Sure Justin This is Jeff. Thank you for your comment there, yes, Q4 did exceed our expectation we saw strength in a couple of areas across our business.

Speaker 5: certainly Intermodal, the impact of surchargers around the holidays, the impact of our yield management actions really did lead to higher than we anticipated when it came to the gross margin generated by Intermodal. In addition, we did bring in Shop Tank in the fourth quarter Shop Tank's performance did exceed our expectations as well.

Intermodal the.

The impact of.

Surcharges around the holidays, the impact of our yield management actions really did lead to.

Higher than we had anticipated when it came to the gross margin generated by intermodal. In addition, we did bring in chop tank in the fourth quarter chop tanks performance did exceed our expectations as well.

Speaker 5: And our logistics business has done a really good job of bringing up yield. The top line results have not been where we want them to be yet. We do expect that to improve next year, but they've really done a great job managing the gross margin side of the business there.

Our logistics business has done a really good job of.

Bringing up yield.

Top line results have not been where we want them to be yet we do expect that to improve next year, but they've really done a great job of managing the gross margin side of the business there.

Speaker 5: Below the line, we did up-perform our expectations, really based on strengths and gain on sale. So we were able to sell more units than we had anticipated at significantly higher gains for units. That really led to the up-performing.

Below the line, we did outperform our expectation really based on strength.

And gain on sale.

We're able to sell more units than we had anticipated at significantly higher gains per unit, so that really led to the.

Outperformance in Q4.

Speaker 5: Going in the next year, we do expect conditions will continue to remain like this in terms of freight demands and strain supply chain conditions. You anticipate we'll be able to build on our crates.

Now going into next year, we do expect conditions will continue to remain like just in terms of.

Freight demand.

Strained our supply chain conditions, we anticipate we'll be able to build on our prices.

Going into next year.

Speaker 5: We do have cost increases coming, significantly on the rail side, on the third party derailleur side. We expect we will continue to be competitive on the driver wage part of our business. We'll have increasing cost there during 2022.

We do have a cost increase is coming.

Significantly on the on the rail side on the third party Drayage side. We expect we will continue to be competitive on the driver wage part of our business, we will have increasing cost there during 2022.

Speaker 5: And then below the line, we do expect to have our typical merit increases.

And then below the line, we do expect to pay.

Have our typical merit increases.

Speaker 5: that will come into effect your infebruary as well as you know we do expect the use truck market will have some softening at some point in the year so we're not anticipating quite as strong about performance next year.

That will come into effect here in February .

As well as we do expect the used truck market will have some softening at some point in the year. So we're not anticipating quite a strong performance.

Next year again on sale.

Speaker 4: Okay, that's a helpful rundown and maybe it's my follow up. Anyway, we could get a little bit more color on the intermodal expectations that are getting baked in that the 2022 guidance. I know you said volume shouldn't grow, but could you give us some kind of order of magnitude on the growth you're expecting for intermodal volumes, maybe intermodal price and the trend something for middle hakking.

Okay. That's helpful rundown and maybe as my follow up any way, we could get a little bit more color on the intermodal expectations that are getting baked into the 2022 guidance I know you said volume shouldnt grow but.

Could you give us some kind of order of magnitude on the growth youre expecting for intermodal volumes, maybe intermodal price and the trend in accessorial.

Speaker 5: Sure, we are expecting a return to growth next year on the motor volume side, load a mid single digit.

Sure we are expecting a return to growth next year on the intermodal volume side low to mid single digits.

Speaker 5: Really driven by the container deliveries, you know, a lot of which we got in in Q4, and then we're starting to take deliveries right away in Q2 here in 2022, so that'll help with our volume. We expect rail service will continue to improve, that'll help create some capacity in our network to be able to handle that volume that we think will be there.

Driven by the container deliveries a lot of which we got in Q4, and then we're starting to take delivery right away in Q2 here.

In 2022, so that will help with our volume we expect rail service will continue to improve that will help create some capacity in our network to be able to handle that volume that we think will be there.

Speaker 5: And on the price side, we're expecting for the full year we'll realize mid single digit price will start off stronger in the first part of the year. And then the year-to-year increases will come down into the lowest single digits by the time we get towards the end of the year.

And on the price side, we're expecting for the full year.

We will realized mid single digit price will start off stronger in the first part of the year and then the year over year increases.

<unk> will come down into the low single digits by the time, we get towards the end of the year.

Okay. That's helpful. Thanks again.

Speaker 1: And next question, constant scot group for wolf research. Your line is up.

Welcome.

Next question comes from Scott Group from Wolfe Research Your line is open.

Speaker 6: Hey, thanks. Good afternoon, guys. So you said at the beginning that you think pricing out pays costs, but when I looked at the guidances for gross margins to be flatish year over year and maybe help us understand those two comments and maybe just along those lines, if you have thoughts on first half, first, second half gross margins in the guidance.

Hey, Thanks, good afternoon guys.

So you said at the beginning that you think pricing outpaced cost, but when I looked at.

The guidance is for gross margins to be flattish year over year maybe.

Help us understand those two comments and maybe just along those lines. If you have thoughts on first half versus second half gross margins in the guidance.

Speaker 5: Sure, so we do expect the margins will be roughly flat. We are going to cover our cost increases with price. But we do expect, you know, that the transportation cost you mentioned earlier are going to be increasing year by year. We'll be, you know, some of that will be more back half weighted as the year goes on. So we're going to, you know, Scott, you typically would see

Sure. So we do expect the margins will be roughly flat, we are going to cover our cost increases with price.

But we do expect that.

The transportation cost, we mentioned earlier are going to be increasing year over year there'll be some of that will be more back half weighted.

As the year goes on.

So Scott you typically would see.

Speaker 5: So charge and seasonal strength in the back half of the year. We do expect that but we expect that will be kind of offset by some of those transportation costs that rise throughout the course of the year.

Surcharge and seasonal strength in the back half of the year, we do expect that but we expect that it'll be kind of offset by some of those transportation costs that rise throughout the course of the year.

Yeah.

Speaker 13: So, what do you think that roughly means for first half or second half gross margin?

So what do you think that roughly means for first half versus second half gross margin.

Speaker 5: uh... across margain percent i think i think it's gonna be pretty consistent throughout the course of the year

Gross margin percent I think I think it's going to be pretty consistent throughout the course of the year.

Okay.

Speaker 13: And then on the volume guidance load amid single digit, I think if we're thinking about this right, the container counts gonna be up.

And then on the.

The volume guidance low to mid single digit I think if we're thinking about this right that the container count is going to be ups.

Speaker 13: Over 10% and something like you're assuming some improvement in

Over 10%.

It sounds like Youre, assuming some improvement in.

Speaker 13: service and then maybe some reduction in asses or else in applying improved fluidity. Why is the volume better?

Service and then maybe some reduction in accessorial.

<unk> improved fluidity why isn't the volume better.

Speaker 5: Well, the containers come in throughout the course of the year, so on a full year basis, we're expecting kind of that load emits to go.

Well the containers come in throughout the course of the year. So on a full year basis, we're expecting kind of that low to mid single.

Speaker 13: And then just last thing, maybe just what the latest you're seeing at the ports, if you're seeing any improvement and then your thoughts on the market share ships coming to UP this year next year and what that means for you guys. Thank you.

Okay, and then just last thing.

Maybe just the.

The latest you're seeing at the ports, if youre seeing any improvement and then.

Your thoughts on the market share shifts coming to this.

This year next year and what that means for you guys. Thank you.

Okay.

Speaker 8: This is Dave. You know, as far as some of the new entrants that are coming on to the Union Pacific, we've been competing with them for many, many years. And so we really don't foresee a significant competitive change.

Dave.

<unk>.

As far as <unk>.

Some of the the.

New entrants that are coming on to the Union Pacific we've been competing with them for many many years.

So we really don't foresee a significant competitive change I'd point out that hub is the largest intermodal partner on the GP. It back where we're twice the size of Schneider intermodal and five times the size of the night intermodal and we also have 40% more drivers that we have allocated.

Speaker 8: You know, I point out that hub is the largest intermodal parker on the UP.

Speaker 8: In fact, we're twice the size of Schneider Intermodal and five times the size of Niger Intermodal.

Speaker 8: And we also have 40% more drivers that we have allocated towards the intermodal than either of our competitors.

Towards the intermodal than either of our competitors.

Speaker 8: We have a great relationship with the U.T. And I think that a very positive note is that we have a long-term contract that features benefits to come with that kind of scale.

We have a great relationship with the U P.

And I think on a very positive note is that we have a long term contract with features benefits that come with that kind of scale.

Speaker 8: I would suggest you it's also on the positive side that UP is gearing up for the additional business by investing $600 million Capital in 2022 Targeting specifically chassis as well as terminals

I would suggest to you. It's also on the positive side. The <unk> is gearing up for the additional business by investing $600 million.

Our capital in 2022.

Targeting specifically chassis as well as terminals.

Speaker 8: So bottom line is we view these commercial to be basically a knit and neutral for hub and not a major competitive chain

So bottom line is we view these commercials.

To be basically a net neutral for hub and not a major competitive change.

Speaker 3: Yeah, this is still only the other thing I'd highlight is, you know, obviously with

This is the only other thing I'd highlight is.

Honestly with.

Speaker 3: You know, one of the other providers coming on to UCB aligned with the North Pole Southern that will give us maybe a little bit more density than the two other asap based providers that are aligned with UV and CSX. So we think, within that, we have a better reach, more density and we'll have more interline option that we'll provide a good service on the court.

One of the other providers coming onto <unk> being aligned with the Norfolk, Southern that'll give us maybe a little bit more density.

Then the two other asset based providers that are aligned with <unk>.

The effects.

So we think with that as we have a better reach more density.

And we'll have more interline option that will provide a good service on the port side of your question I think we are.

Speaker 3: side of your question, I think we are seeing a rapid improvement in congestion there, you know, demand for international or American Americans. Very strong, you know, we're seeing that in the import of our own containers.

<unk> seen a rapid improvement in congestion there.

Demand for international remains very strong.

We're seeing that in the import of our own containers.

Speaker 3: So, if we even see some improvements over the next few months, you're in Q2, Q3, you're already back in peak season again. So at this point, we don't see a massive improvement to poor congestion this year, and that should continue to provide opportunities for us to grow one with a 2023. Thank you guys.

So if we even see.

Some improvement over the next few months.

In Q2 Q3 are already back in peak season again at this point, we don't see a massive improvement to port congestion this year and that should continue to.

Provide opportunities for us to grow well into 2023.

Thank you guys appreciate it.

Kevin.

Speaker 1: And the next question comes from Todd Fowler from Teabank.

And your next question comes from Todd Fowler from Keybanc.

Speaker 5: Great, thanks and good evening. So I wanted to ask kind of your views on rail service and I guess in the context of how important I understand from the volume guidance and kind of the expectations that you're embedding improvement in rail service.

Hi, great Thanks, and good evening.

So I wanted to ask.

Kind of your views on rail service and I guess in the context of how important I understand from the volume guidance and kind of the expectations that you are embedding improvement in rail service, but when I look at the fourth quarter and I think about kind of the results that you're able to put up is the message that if rail service doesn't improve materially you can still kind of get to a similar answer and it's just a move.

Speaker 5: But when I look at the fourth quarter and I think about, you know, kind of the results that you're able to put up, you know, the message that a frail service doesn't improve materially, you can still kind of get to a similar answer and it's just a movement between volume and price and I guess how important you view your real service in the context of your guidance. I understand that it's important from a service perspective, but just from an outlook standpoint, how are you thinking about that?

Between volume and price and I guess, how important do you view Youll rail service in the context of your guidance I understand that's important from a service perspective, but just from an outlook standpoint.

How are you thinking about that.

Speaker 3: Yeah, you're absolutely right, Todd. We do want to see improved service long term. That's the right thing. That's gonna allow us to convert more business from over the road. I think as our customers get their inventory in better order, they're gonna look to expedite fewer shipments when I convert more data models. So having capacity and a better service product and a more consistent one available is really gonna help. We have seen, at least at this point,

Yes, you're absolutely right that we do want to see improved service long term debt.

The right thing that can allow us to convert more business from over the road I think as our customers get their <unk>.

Inventories in better order theyre going to look to expedite fewer shipments when a convert more to intermodal, so having capacity and a better service product and a more consistent available.

We're really going to help.

<unk> seen at least at this point.

Speaker 3: A slight deterioration from Q4 to Q1, I think that's winter weather driven, as well as we just haven't seen the investments really take hold. We're hoping it's weather really starts to survive that we can see that improvement. You know, I think the other piece for us is, we've actually seen an improvement year over year in our end service product to our customers. So we're really excited about that. So even in disruptive times, we're able to improve our service product.

A slight deterioration from Q4 to Q1, I think thats winter weather driven as well as we just haven't seen the investments really take hold we are hoping as weather really starts to subside.

We can see that improvement.

I think the other piece for US is we've actually seen an improvement year over year and our end service product to our customers. So we're really excited about that though even in disruptive times were able to improve our service product.

Speaker 3: So really, please, with that. I think the question around margins and does that deteriorate as service improves? I don't see that at this time given the demand that is out there given the constraints in the driver market. And it's really with adversarial revenue potentially subsiding. At this point, we'd much rather be moving that volume. The opportunity cost is much higher. And so we think that'll be a good formula for us going forward.

Really.

Pleased with that I think.

The question around margins and does that deteriorate a service improves I don't see that at this time given the demand that is out there given the <unk>.

Constraints in the driver market.

It really with accessorial revenue potentially subsiding at this point, we'd much rather be moving that volume the opportunity cost is much higher and so we think that'll be a good formula for us going forward.

Speaker 5: yet no feel that that makes a lot of sense and really was more in the context of you know it seems like the business that the guidance isn't so much dependent on the improvement in rail service we certainly understand that the service component of it so that's helpful

Yes, no that makes a lot of sense and it really it was more in the context of.

It seems like with the business the guidance isn't so much dependent on the improvement in rail service and we certainly understand that the service component of it. So that's helpful.

Speaker 5: I guess just for my follow up, you know, how do we think about the 2020 guidance in the context of the 2025 guidance? And I know that, you know, 2025 wasn't supposed to be a straight shot, but when I look at the high end of your revenue guidance for 22 and the low end of your guidance for 25, I mean, you're pretty close. Would your expectation be that, you know, things level off, you know, post-22, or is it something that you feel more confident in achieving the 25 targets maybe on the earlier side? Thanks.

I guess just for my follow up how do we think about the 2020 guidance in the context of the 2025 guidance and I know that 2025 wasn't supposed to be a straight shot but when I look at the high end of your revenue guidance for 'twenty, two and the low end of your guidance for 25, I mean, youre pretty close would your expectation be that things level off post <unk>.

Two or is it something that you feel more confident in achieving the 25 targets maybe on the earlier side. Thanks.

Speaker 5: No, I mean, we did give a range, though. I think the guy is going to get a chunk of the way there. I mean, part of the way we're getting there is both organic, but also through the benefits of the acquisition of a chop tank, which I think we're going to continue to do. So we can continue to make acquisitions like that. We would anticipate being towards the higher end of the range by 2025. OK.

No I mean, we did give a range I think.

Guide is going to get a big chunk of the way there I mean part of the way we're getting there is both organic but also through the benefits of the acquisition of <unk>.

We're going to continue to do so we can continue to make acquisitions like that we would anticipate being towards the higher end of the range by.

By 2025.

Okay. Thanks for the time.

Speaker 1: The next question comes from Aliah to Alper from Kyle and your line is up.

Thank you. The next question comes from Elliot Alper from Cowen Your line is open.

Speaker 5: Great, thank you. So on the brokerage side of the business, a lot of the court you discussed some of the cross-selling opportunities for child tank. Can you discuss some of those wins in the quarter and kind of whether most of that low-enging fruit is materialized and kind of how we should think about the brokerage margins in 22?

Great. Thank you so on the brokerage side of the business last quarter, you discussed some of the cross selling opportunities for Chubb tank can.

Can you discuss some of those wins in the quarter and kind of whether most of that low hanging fruit have materialized and kind of how we should think about the brokerage margins in 'twenty two.

Speaker 3: Sure, yeah, this is still, we are really excited about the Choptank acquisition. It's been a great cultural test thus far. They have a great team. We move with a lot of speed with that group in particular. And so that's been phenomenal. We've actually seen three record months from the Choptank organization right out of the gate, which is the phenomenal. And we want to continue to see that we're ahead of schedule on our cross-cell targets. But to me, we've only really scratched the surface of that. The only other interesting thing I'd share with you is that sometimes during an acquisition, you get a little nervous around shared customers, right? And how that'll apply. We've actually...

Sure Yes.

So we are really excited about the <unk> acquisition, it's been a great cultural fit thus far they are a great team, we move with a lot of speed with that group in particular, and so thats been phenomenal we've actually seen three record months from chop tank organization right out of the gate, which is phenomenal and we want to continue to see that we're ahead of.

Schedule on our cross sell targets, but to me, we've only really scratched the service surface of that I think the only other interesting thing I'd share with you is that.

During an acquisition you get a little nervous around shared customer strength and how that will play out we've actually seen a real positive come out of that where we have a joint relationship with those customers were actually able to create even more value not actually deteriorate the existing relationship and so I'd say all in all we're really excited about the.

Speaker 3: a real positive come out of that where we have a joint relationship with those customers we're actually able to create even more value not actually deteriorate the existing relationship and so I'd say you know all in all we're really excited about the progress we're making and you know think there's a huge opportunity that we're really just getting started on so it's been exciting I think only other pieces I'd share is the refrigerated market continues to have a significant amount of demand.

Progress we're making.

There is a huge opportunity that we're really just getting started on it.

I think only other piece I'd share as the refrigerated market continues to have a significant amount of demand.

Speaker 3: And we're actually going to be investing in 550 incremental refrigerated containers this year to help support our selling into that market. So supporting existing shop-saving customers, but also our existing hub customers building that real refrigerated product offering. So it's feeling very good about that.

And we're actually going to be investing in.

550 incremental refrigerated containers this year to help support our selling into that market to supporting existing shops paying customers, but also our existing hub customers building that real rich.

Frigerator product offerings, so feeling very good about that as well.

Speaker 5: Okay, and should we think about that margin structure of the brokerage business thing, we're all totally the same this year?

Okay and should we think about that margin structure of the brokerage business staying relatively the same this year.

Speaker 3: I think you'll see, chopped hay typically has had a lower gross margin per set inch based mainly because of moving higher revenue-grade spot shipments but have that lower gross margin percentage. So you might see that come down, I think, but we will be consistently focused on getting that higher throughout the year. I think our existing brokerage between LCL and Truccolo, you'll see that remain relatively similar. You know, depending on what your spot market does throughout the year, but our forecast is, you know, at least coming out of the gate will continue to see if some more sort of projector.

I think youll see cheesecake typically has had a lower gross margin percentage, mainly because of moving higher revenue per unit spot shipments that have that lower gross margin percentage. So you might see that come down I think but we will be consistently focused on getting that higher throughout the year I think our.

Existing brokerage between LCL in truckload Youll see that remain relatively similar.

Depending on what the stock market does throughout the year, but our forecast is at least coming out of the gate will continue to see a similar sort of trajectory.

Speaker 7: Okay, great. Thank you.

Okay, great. Thank you.

Yes.

Speaker 1: The next question comes from Biscami, Majors for the Squarhana Financial.

And your next question comes from <unk> majors with Susquehanna financial.

Thanks for taking my questions.

Speaker 8: into what were strong fundamental years before you certainly saw some conservatism in the initial outlook and you know I guess that argument could be made

Into what were strong fundamental years before you certainly saw some conservatism.

The initial outlook.

I guess that argument could be made on the back of.

What you just did for <unk> and the idea that not a lot of market conditions are changing near term could you talk about sort of the puts and takes where might there be some conservatism where might people risk getting ahead of themselves. So when we think about projecting out in the next.

Speaker 8: that not a lot of market conditions are changing near term. Can you talk about sort of the puts in takes? Where might there be second servitism? Where might people risk getting ahead of themselves when we think about projecting out the next serving, drinks or anything else? Since the transformable

Full quarters for your business. Thanks.

Speaker 5: Sure, yeah, I have to do that. You know, our forecast and we did give a range. You know, it's meant to encompass kind of current market conditions with some cost and input cost inflation.

Sure Yeah happy to do that.

Our forecast and we did give a range.

It was meant to encompass kind of the current market conditions with some cost input cost inflation.

Additional threat areas could could come in areas like.

Speaker 5: You know, stronger surcharge revenue in the back half of the year. We certainly are aiming to grow intermodal volumes at a higher rate than the single digit. If there's continued tightness in the truckload market, that's going to benefit our pricing. We all service in another area of potential upside, which would facilitate more truck to intermodal conversion.

Stronger surcharge revenue in the back half of the year.

We certainly are aiming to grow intermodal volumes at a higher rate in the mid single digit.

If theres continued tightness in the truckload market, that's going to benefit our pricing.

Rail service.

Other areas of potential upside, which would facilitate more truck intermodal conversions.

Speaker 5: And then there could be additional strength in the use truck market, which would result in more games I sell for us.

There could be additional strength.

In the truck and the used truck market, which would result in more gains on sale for us.

Speaker 5: And then of course, we're on the lookout for additional strategic acquisitions that could be an other source of outside.

Then of course, we're on.

On the lookout for additional strategic acquisitions that could be another source of upside.

Speaker 5: You know, on the downside would be any weakness in consumer spending, if consumers ship their spending back to services. You know, there is a pretty big backlog of inventory that needs to be rebuilt. So we think we'll be a tailwind for a while, but if there's a sustained ship back to service, that could be a negative. If there's a return of oversupply in the truck load market that would have way on price.

On the downside would be any.

Weakness in consumer spending if consumers.

They are spending back to services.

There is a pretty big backlog of inventory that needs to be rebuilt.

We think will be a tailwind for a while but if there is a sustained shift back to service that could be.

Negative.

If there isn't a return of oversupply in the truckload market that would have way away on price.

Speaker 5: And then, you know, just additional driver turnover, if we can't bring that down into 2022, you know, that could go the other way. Those would be the big pluses of minuses to those guys.

And then just additional driver turnover, if we can't bring that and bring that down into 2022.

I think there'll be other way those would be the big pluses and minuses to the segment.

Speaker 14: Thank you for that. Do you expect anything fairly abnormal for seasonality this year?

Thank you for that do you expect anything fairly abnormal for seasonality this year.

Speaker 3: You know, coming out of the gate to start the year, we're seeing very strong demand. We don't foresee a change at this point from conversations with our customers and what we're seeing in the data. So feeling like market conditions will continue and which gives us confidence in the guidance. Thank you.

Coming out of the gate to start the year, we're seeing very strong demand.

Don't see a change at this point from conversations with our customers on what we're seeing in the data.

Yes, feeling like market conditions will continue in <unk>.

Which gives us confidence in the guidance.

Thank you.

And your next question comes from Tom <unk> from UBS.

Speaker 9: Yeah, good afternoon and congratulations and a really strong result.

Yes, good afternoon, and congratulations on a really strong results.

Speaker 9: I wanted to see if you could offer some thoughts on just the M&A backdrop. I mean, obviously you've got a lot of momentum in firepower with the ability to go and do more deals. Do you, you know, should we expect you to do something in 2022? You know, you think that's likely. And then also just, you know, you bought a really high quality brokerage company, a lot of momentum there. Where would you, you know, where is the next place to look in terms of what might be a place you want to add in terms of businesses?

Hi.

I wanted to see if you could offer some thoughts on just the M&A backdrop, I mean, obviously, you've got a lot of momentum in firepower with the ability to go and do more deals.

Should we expect you to do something in 2022.

You think that's likely.

And then also just you bought it.

It really high quality brokerage company a lot of momentum there where would you where is the next place to look in terms of what might be a place you want to add in terms of businesses.

Speaker 5: Sure, yeah, we definitely expect to be active on the M&A front. We've got a very solid pipeline. We've got engagement from a lot of our business unit leaders. We've had really good success. We are out just knocking on the doors of companies that we think fit our profile. And we spent a lot of time up front getting to know the management team and the ownership. And I think that's what really has led to the success that we've had recently with Chop Tank, with NFD, the commercial.

Yes.

Sure, Yes, so we definitely expect to be active on the M&A front, we've got a very solid pipeline of that engagement from a lot of our business unit leaders.

We've had really good success when we are out just knock on the doors of companies that we think fit our profile.

We spent a lot of time upfront getting to know the management team and the ownership and I think that's what really has led to the successes we've had recently with chop tank with NFC.

The commercial.

Speaker 5: Synergies that we're peddling out in diligence, you know, we're finding those are coming to fruition. We've got a great customer base with our existing business and they're willing to give us opportunities to sell new services to that. And so that will really inform our strategy going forward.

Synergies that we're penciling out in diligence, we're finding those are coming to fruition, we've got a great customer base with our existing business and they're willing to give us opportunities to sell new services to that and so that will really inform our strategy going forward.

Speaker 5: Chuck take with a great example of both adding scale to an existing business as well as adding a new capability. So we scaled up in brokerage and you know have a very very solid refrigerated transportation platform to build off of.

<unk> was a great example of both adding scale to an existing business as well as adding a new capability. So we scaled up in brokerage and we now have a very very solid refrigerated transportation platform to build off of.

Speaker 5: areas for targeting for future acquisition.

Areas for targeting for future acquisition.

Speaker 5: Really going to be non-asset based logistics providers. We have a great footprint with non-stop in the final mile space. We're on the big and bulky as an example. But what we don't really have today is the ability to do applying delivery installations. That would be an area of interest to us. Things like e-commerce fulfillment with our customer base being retail and CPG. We think there's a lot of opportunities there. That's another example of an area that we'll target for growth.

Really going to be non asset based logistics providers, we have a great footprint with nonstop in the final mile space really around the big and bulky.

As an example, but we don't really have today is the ability to do appliance delivery and installation that would be an area of interest to us.

Things like e-commerce fulfillment.

With our customer base being retail and CPG, we think theres a lot of opportunity. There. That's another example of an area.

We'll target for growth.

Speaker 9: Okay, yep, great. I wanted to ask you one on the volume side as well. I guess can you give a little more perspective on the timing of the container add?

Okay great.

Wanted to ask you one on the volume side as well.

I guess can you give a little more perspective on the timing of the container ads.

Speaker 9: And then maybe just, you know, what should we really pay attention to in terms of the constraints that, you know, if they get better, you can do upside-down the volumes and are kind of, you know, important inputs. Is it, you know, your own DRAGE capacity? Is it rail terminal operation? What are kind of some of the key factors that feed into the intermodal volume output?

And then maybe just what should we really pay attention to in terms of the constraints that.

To get better you can do upside into volumes and kind of.

Important inputs is it your own drayage capacity is it.

Rail terminal operation what are kind of some of the key factors that feed into the intermodal volume.

Speaker 3: So we've really received all of our...

But.

Sure.

It really received all of our.

2021 orders at this point, we only have less than 5% kind of bleed into the first part of the year.

Speaker 3: to the first part of the year. We'll have the remainder of the 2022 order really coming in throughout the year leading up and into peak season by the last delivery is coming around November . But it'll be a pretty even sort of trajectory and cadence throughout throughout the year. I think if that obviously is gonna be a nice tailwind assuming we don't see any drops in service or turn times or any new COVID variants or anything like that that creates staffing shortages. So we would anticipate throughout the year you're gonna see a better percentage.

We'll have the remainder of 2022 order really coming in throughout the year, leading up and into peak season, the last deliveries come in.

Around November .

But it'll be a pretty even sort of trajectory and cadence throughout throughout the year.

Thank you.

That obviously is going to be a nice tailwind, assuming we don't see any drops in service or turn times or any new.

Covid variance or anything like that that create.

Speaker 3: So we would anticipate throughout the year, you're going to see a better percentage growth. We did start with January down 6%, but we're up 3% on our volumes sequentially. So we think that's a nice trajectory. If we see that continue, as we start to overlap, the shutdown unit Pacific had during February of last year, we could see momentum start to carry out of the first quarter for growth and into the remainder of the year.

Staffing shortages.

So we would anticipate throughout the year youre going to see a better percentage growth. We did start with January down, 6%, but were up 3% on our volumes sequentially. So we think that's a nice trajectory. If we see that continue as we start to overlap.

Shutdown Union Pacific had during February of last year, we could see momentum start to carry out of the first quarter for growth and into the remainder of the year.

Speaker 9: So on a monthly basis, maybe March, easy comp, you could actually potentially be up in March, something like that.

So on a monthly basis, maybe March easy comp you could actually potentially be up in March something like that.

Speaker 3: Yeah, great. Yes. And then service continues to improve like we think it will as North Book Southern and UC start to get staffing up and more chat fees online and our customers become more fluid. And we do as well. We think we're gonna see upside to that. So that growth trajectory, that volume percentage growth trajectory should be moving progressively upwards throughout the year.

Yes, great, Yes, and then service continues to improve like we think it will add.

Norfolk, Southern and <unk> start to get staffing up and more chassis to online and our customers become more fluid than we do as well.

We're going to see upside to that so that growth trajectory that volume percentage growth trajectory should be moving progressing.

Progressively upwards throughout the year.

Great. Okay. Thank you I appreciate it picks up.

Speaker 1: The next question comes from the Alice and Poloniac from Wells Fargo.

The next question comes from Allison <unk> from Wells Fargo.

Speaker 10: Hi, good evening. I just want to ask about CHOPTANK. It sounds like it's going better than you anticipated. Is there a way within the context of your revenue guidance in terms of what the contribution from CHORR versus the acquisitive growth would be for 22? Any color there?

Hi, good evening.

Just wanted to ask about chap tank it sounds like it's going better than you anticipated is there a way within the context of your revenue guidance in terms of what the contribution from core versus the acquisitive growth would be for 2002 any color there.

Speaker 5: Sure, I can use creepy that. So at the midpoint, we're looking at about 19% growth in total. We would be at about 10% organically.

Sure.

You bet.

So at the midpoint, we're looking at about 19% growth in total.

We'd be at about 10% organically.

Speaker 10: And then just going back to the question on M&A, it sounds like a pretty active pipeline. Could you maybe talk your comfort level with leverage? It certainly seems like you have a lot of capacity today, but kind of where your comfort level would be within that leverage range. Just give them the active pipeline.

Got it and then just going back to the question on M&A It sounds like a pretty active pipeline could.

Could you maybe talk to your comfort level with leverage it certainly seems like you have a lot of capacity today, but kind of where your comfort level would be within that leverage range just given the active pipeline.

Speaker 5: Sure, yes. We're at about 0.3 time net leverage on an EBITDA basis today, which we think gives us a lot of flexibility to pursue. And if that's both in capital expenditure, in the containers and trackers, but also to give us the capacity to do acquisition, we're comfortable going up kind of north of two times, maybe two and a half times EBITDA for the right deal. But we'd like to maintain our leverage closer to one time EBITDA over time.

Sure Yes, so we're at about three times net leverage on an EBITDA basis today, which we think gives us a lot of flexibility to pursue investments both in capital expenditures in the containers and trackers, but also to give us the capacity to do acquisitions.

We're comfortable going up kind of north of two times, maybe two five times EBITDA for the right deal, but we'd like to maintain our leverage closer to one times EBITDA overtime.

Great. Thank you.

Welcome.

Speaker 1: And our next question, constant John Chapelle from Evacore ISI.

And our next question comes from Jon Chappell from.

Evercore ISI.

Thank you good afternoon.

Speaker 4: Phil, there's been a lot of focus in the industry, on logistics and the growth across the entire industry. There's been pretty remarkable in the last couple quarters. Your revenue is maybe a little bit let it an expectations, but your gross margin and logistics side up through an 90 basis point which is pretty huge. Are you trying to be a bit more disciplined with the onboarding of the customers on the your platform to focus a little bit more margin as opposed to just going to top line as fast as you can?

Bill there's been a lot of focus in the.

Industry logistics and the growth across the entire industry has been pretty remarkable the last couple of quarters.

Your revenue was maybe a little bit later than expectations, but your gross margin in the logistics side up 390 basis points.

Are you trying to be a bit more disciplined with the onboarding of new customers onto your platform.

To focus a little bit more margin as opposed to just growing the top line as fast as you can.

Speaker 3: I know that's exactly right. I think when we look at our logistics segment, we have scale in the LPL and truckload space so we get to be selective.

No Thats exactly right I think we when we look at our logistics segment, we have scale in the <unk> and truckload space. So we get to be selective.

Due to our purchasing power that exist today, and we want to find customers that fit our profile that we want to be with us for the long term and that we can generate.

A strong return for the investment that we're making as well so yes.

Speaker 3: as well. So yes, we've been much more disciplined in our approach and I think that has allowed us to bring out the right business that we hope will be much stickier, you know, longer terms. Sometimes you see with some of those really high revenue, low profit sorts of engagements that can, you know, be somewhat volatile and so we have been much more selective there and I think, you know, it's proving out to be beneficial for us. Okay, great. And then just for my follow up, I don't want to keep carving on the short term here, but, you know, you're one of the last to report this quarter and, you know, we've heard about.

Yes, we've been much more disciplined in our approach.

And I think that has allowed us to bring on the right business that we hope will be much stickier longer term, sometimes you see with some of those really high revenue low profit.

Sorts of engagements that can be.

Be somewhat volatile and so we have been much more selective there.

And I think it's proven out to be beneficial for us.

Speaker 4: Okay, great. And then just for my power, I don't want to.

Okay, Great and then just for my follow up.

Speaker 4: You're one of the last to report this quarter and we've heard about stick outs by employees and shippers as well, labor shortages, terrible weather. The volume obviously would be showing up in the rail data. I think it was pretty interesting that Jeff said such gross margin and the EPF would be pretty radical on a quarterly basis throughout the year.

Don't want to keep.

Keep harping on the short term here, but you're one of the last to report this quarter and we've heard about.

Stick out by employees.

Shippers as well labor shortages terrible weather.

Obviously be showing up in the rail data and yet I think it was pretty interesting that Jeff said like the gross margin and.

EPS would be pretty ratable on a quarterly basis throughout the year should we just think about as the big needle mover intermodal pricing will continue to be.

Speaker 4: Should we just think about as a big needle mover, in a modal pricing, we'll continue to kind of be what it was like in the second half of the year. Those two, kind of 26 to 37% increases. And that kind of offsets a lot of these macro headwinds that you're facing in the early part. And in the back half of the year, it's kind of really a more, quote unquote, normalized operational backdrop.

See what it was like in the second half of the year, that's huge and a 26% to 37% increases in that kind of offset a lot of these macro headwinds that youre facing in the early part in the back half of the year is kind of really a more quote unquote normalized operational backdrop.

Speaker 3: Sure, yeah, I think that's right. Yeah, we will see, we are seeing a strong start to business in, you know, and just to give you a lot of cadence around it. 44% of our business in a modal is going to be repricing Q1, 34% and Q2 and then 19% Q3. So that Q2 is actually a little heavier than is typical in years past. And so given where pricing is currently and we forecast it's going to continue to be in the second quarter, that could be, you know, a little bit of upside for us. But there's a benefit to customers in that they want a locking capacity right now, right? And so and also maybe these investments is going to allow us.

Sure, Yes, I think Thats right, yes, we will see we are seeing a strong start Q bid season.

And just to give you a cadence around at 44% of our business in intermodal that can be repriced in Q1, 34% in Q2, and then 19% in Q3.

Q2 is actually a little heavier than is typical in years past and so given where pricing is currently and we forecast that's going to continue to be.

In the second quarter that could be a little bit of upside for us, but there is a benefit to customers and that they want to walking capacity right now right.

So and us making these investments is going to allow us.

Speaker 3: really to do that. So I would anticipate you see a little bit more of a normalized peak season next year, but you know we also thought that that was going to occur this year. So if these issues and challenges and supply chain issues persist, you know you could continue to see these conditions, you know, well throughout the year. Okay.

Really to do that so.

Would anticipate you'd see a little bit more of a normalized peak season next year, but.

We also thought that that was going to occur this year. So.

Issues and challenges and supply chain issues persist you could continue to see these conditions well throughout the year.

Okay. That's great. Thank you bill.

Speaker 1: And our next question, constant Brian Austin Beck from JP Morgan.

And your next question comes from Brian <unk> from Jpmorgan.

Speaker 11: Yeah, thanks. Good evening. Appreciate taking the question.

Yeah. Thanks, good evening.

Taking the question.

Speaker 11: Maybe just to follow up on the pricing commentary, it sounds like Shippers are obviously pulling forward from the contracts a little bit, trying to lock in capacity. Is there anything else that you would say is?

Maybe just to follow up on the on the pricing commentary it sounds like shippers, obviously pulling forward some of the contracts a little bit.

Trying to lock in capacity is there anything else that you would say is.

Speaker 11: You know, sort of different this time, I would see quite a few things are different, but at least from on.

Sort of different this time I would see quite a few things are different but at least from a contractual perspective longer term agreements different different forms of pricing. How do you think that this whole experience over the last couple of years will change or has changed how some of these transactions.

Speaker 11: contractual perspective, longer term agreements, different forms of pricing. How do you think that?

Speaker 11: This whole experience over the last couple of years will change or has changed how some of these transactions get done, especially on the intermodal side.

To get done, especially on the intermodal side.

Speaker 3: No, I think that's exactly right. We're seeing a lot of customers be very interested in moving to more of a multi-year framework with, you know, fors and ceilings related to, you know, publicly available data. And those are contracts that we're comfortable with, you know, with the right customers. And we will continue to pursue those, especially with business that we define as day clothes or that network beneficial. And so, you know, it might not be that we'll lock in an entire network with a customer, but we might say, okay, half the business is really good business for us that we feel comfortable with, you know, locking in these prices for a multi-year period. So, we are taking that approach and for customer, for a lot of customers, they're very interested in it as well. The other thing that we're seeing right now is a consolidation of providers, whether it's in brokerage or intermodal. And so, for the providers, we think like ourselves with, you know, our strategic customers that we've really stepped up for. We're going to see benefits coming out of that and opportunities to continue to grow with our strategic accounts through that process.

I think thats exactly right, we're seeing a lot of customers be very interested in moving to a more of a multiyear framework with.

Floors and ceilings related too.

Publicly available data and those are <unk>.

Contracts that were comfortable with.

The right customers and we will continue to pursue those especially with business that we define as base load or that network beneficial and so it might not be that will lock in an entire network with a customer, but we might say okay half. The business is really good business for us that we feel comfortable with locking in these prices for a multi year period. So we are.

Taking that approach and for customer for a lot of customers, they're very interested in it as well the other thing that we're seeing right now is a consolidation of providers, whether it's in brokerage or intermodal.

And so for the providers, we think like ourselves with our strategic customers that we have really stepped up for work.

To see some benefits coming out of that and opportunities to continue to grow with our strategic accounts through that process.

Yes.

Speaker 11: Okay, great. Maybe just one quick fall upon that. And that second one is that ESG, part of the conversation at this point, at least in a more material way, that then it's been in the past.

Okay, great maybe.

Maybe just one quick follow up on that and then second one is the ESG part of the conversation.

At this point at least in a more material way.

Then it has been in the past.

Speaker 3: Certainly, I think every supply chain team at a large Fortune 500 company life, which our customer base is thinking about how can they contribute to the sustainability efforts of their company, and we provide them with a lot of data around the carbon emission savings.

Certainly I think every supply chain team at a large fortune 500 company like which is our customer base is.

Is thinking about how can they contribute to the sustainability efforts of their company and we provide them with a lot of data around carbon emission savings.

Speaker 3: you know what business could potentially convert to intermodal and that you know it's going to continue to be we think a story for several years to come. You know we need to continue to get our service to the right level to fully take advantage of that. I think the other piece that is going to continue to play into conversion to intermodal is fuel prices as well. So if you see that continue to move upward that could be you know another good tailwind that comes into conversion to intermodal as well. So all those factors we think are going to continue to drive a nice conversion opportunity for the next year and we think beyond.

What business could potentially convert.

Intermodal in that.

Going to continue to be we think a story for several years to come.

We need to continue to get our service.

<unk> is the right level to fully take advantage of that I think the other piece that is going to continue to play in <unk> conversion to intermodal as fuel prices as well.

So if you see that continuing to move upward that could be.

They're good tailwind that that comes into conversion to intermodal as well.

All of those factors, we think are going to continue to drive a nice conversion opportunity for the next year and we think beyond.

Speaker 11: And then can you just talk briefly about the IT spend to within that $40 million total, including the headquarters? What you focused on there is it's still transitioning over to Oracle, anything integration-wise on Chop Tank. Maybe some of the bigger projects are working on the help.

And then can you just talk briefly about the it spend within the $40 million.

Total, including the headquarters what are you focused on there is it still transitioning over to Oracle anything integration wise on chop tank.

Maybe some of the bigger projects Youre working on would be helpful. Yes.

Speaker 3: Yeah, so for us, and you know, as we've really gone to a buy commodity, but built for differentiation approach, differentiating for our customers, our vendors, our team members, we've really been focused on utilizing our satellite tracking to provide end-to-end visibility. We've done a great job of automating workflow, getting better intelligence to our teams and our drivers, so they can be optimal in their workflow. And I think one great initiative that I've seen really benefit over the last year was within our brokerage.

Yes.

And we've really gone to a by commodity but built through differentiation approach differentiating for our customers our vendors for our team members. We've really been focused on utilizing our satellite tracking to provide end to end visibility we've done a great job of automating workflow getting better intelligence to our teams and our drivers to that.

Can be optimal in their workflow I think one.

Great initiative that Ive seen really benefit us over the last year with with our within our brokerage.

We built a customized workflow management tool and we've seen an 18% improvement in productivity on a volume basis within that team over the past year. So a really impressive result.

Inc.

And we're going to continue to make investments like that and we're doing that across the organization and so I think youre going to continue to see us become more and more efficient and more effective and responsive to our customers on top of that to your point, we got to do a great job in integrating our acquisitions I think we have done a phenomenal job so getting chop tank onto our ERP and integrated in with our <unk>.

Speaker 3: you know, chopped tank onto our ERP and integrated in with our human capital management. All of that is going to be part of the work. And as we do more acquisitions, we're going to stay really on top of that and make sure that we integrate timely, but also very well. So those would be a lot of the big initiatives that we're focused on. But I also just highlight within truck technology, we continue to assess our investment in electric trucks. I think that's a great opportunity. We're doing autonomous vehicle tests. You know, a lot of really interesting things are out there from that perspective as well that are exciting and even just beyond the workflow management tools we have very hard as well. Okay, great. Appreciate it, Phil. Thank you. Can the next question come to the body?

<unk> capital management, all of that is going to be part of the work and as we do more acquisitions, we're going to stay really on top of that and make sure that we integrate timely but also very well.

Those would be a lot of the big initiatives that we're focused on.

Speaker 3: But I also just highlight within truck technology, we continue to assess our investment in electric trucks. I think that's a great opportunity. We're doing autonomous vehicle tests. You know, a lot of really interesting things are out there from that perspective as well that are exciting and even just beyond, you know, the workflow management tools we have very hard as well.

But I would also just highlight within truck technology, we continue to assess our investment in electric trucks, I think thats a great opportunity, we're doing autonomous vehicle test a lot of really interesting things.

Are out there from that perspective, as well that are are exciting even just beyond.

The workflow management tools, we have very hard as well.

Okay, Great I appreciate it Phil Thank you.

Speaker 1: The next question comes from Fadi, Charmone from BMO. Your line is open. Let's open.

And your next question comes from <unk> <unk> Chairman from BMO. Your line is open.

Your line is on mute could you mute your phone.

Yes, hi, good afternoon.

Speaker 12: a congres hundred results first of all. And thanks for the question. Can you remind us about the box turns that you have currently in the internal network and what would that look like, you know, in more normal time?

Okay.

Congrats on the results first of all and thanks for the question.

Can you remind us about the box turns that you have currently and the intermodal network and what would that look like.

In more normal times.

Speaker 3: Yeah, so for the full year in the fourth quarter, we're up about 10% year over year. We actually saw a decline sequentially from the third quarter to the fourth quarter of 3%.

Yes, so for the full year in the fourth quarter were up about 10% year over year, we actually saw a decline sequentially from the third quarter to the fourth quarter of 3%.

Speaker 3: You know, the year over year deterioration mostly was driven by rail service. There's a mixed component in there. I think you can see that our transcon volumes continue to outperform the remainder of our network. That elongates your transit a little bit, but that's not really a massive impact. It might be a percentage point or two.

The year over year deterioration, mostly was driven by rail service, there's a mix component in there I think you can see that our transcon volumes continue to outperform the remainder of our network that elongate your transit a little bit, but that's not really the massive impact it might be a percentage point or two on the.

The sequential decline that was mostly driven by customer pool.

And unloading times to customers.

That makes sense that demand was up and staffing levels were coming down right and so we saw some some longer dwell and our customer pool. So I think if you look at normalized levels. There is a lot of upside here.

Speaker 3: work at normalize levels, there's a lot of upside here and could be as much as 15% on our turn times as we get back to more normalized service levels. It could be even higher than that. So we're excited to see that take place and think that as the year progresses we'll see that improvement take hold. a few years now, five, six years, it feels like we've gone through...

And could be as much as 15% on our turn times.

We get back to more normalized service level, it could be even higher than that so.

I'm excited to see that take place and I think that as the year progresses, we will see that improvement take hold.

Speaker 12: so Okay, and Uh, and

Okay and.

Speaker 12: Second question going back to the volume guide on the intermodal side. I mean, if I look back a few years now, five, six years, it feels like we've gone through multiple cycles where fill prices were up or down and truck market was loose and tight. And throughout that volume, volume and intermodal have really struggled to grow. And here we are today with...

The second question going back to the.

Volume guide on the intermodal side.

I look back a few years now five six years it feels like.

We've gone through multiple cycles, where fuel prices were up or down.

Truck market was losing faith in <unk> volume volume and into more of a have really struggled to grow and here we are today with.

Speaker 12: kind of record saving for Intermoral versus Struckload. And yet the volume picture looks kind of, not all that impressive. Like what does need to happen on the Intermoral service product side to really start to see that structural growth of opportunity in Intermoral Playout?

Kind of record saving for intermodal versus truck load and yet the volume picture looks.

But not all of that impressive.

What does need to happen on the intermodal service product side to really start to.

<unk>.

The structural growth opportunity in intermodal play out.

Speaker 3: Yeah, I think from a capacity commitment perspective, the intermodal industries there are tender acceptance rates.

Yes, I think from a capacity commitment perspective, the intermodal industry is there are tender acceptance rates are.

Speaker 3: versus the truckload industry, or, you know, which have been in the Pi 70 below 80s, you know, typically in a modal, we're in the blow to mid 90s. So the commitment to capacity, I think, is there. What is not there, particularly in shorter haul links right now, is a consistent service product. I don't think our customers are looking for, necessarily, as a facet.

Versus the truckload industry or which are have been in the high 70 percents low eighty's typically intermodal we're in the low to mid 90. So the commitment to capacity I think is there what is not there, particularly in shorter haul lanes right. Now is a consistent service product I don't think our cup.

<unk> are looking for necessarily at the fastest transit, they're okay with two days extra but to capture those savings, but it needs to be two days it can't be.

Speaker 3: uh... transit there are k uh... with you know two days extra but to capture the savings but it needs to be two days the can't be uh... you know seven to seven days longer one time and two days after the next it has to be consistently you know two days for the truck and so i think that uh... on a consistent basis

727 days longer one time in two days faster. The next it has to be consistently to date forward that truck and so I think that.

On a consistent basis.

Speaker 3: is what we need and I know we're all along with our partners very focused on delivering that. That's why I think you can see to see our Transcon business perform better than our local business as well, is that is where you can more consistently capture that service and those savings versus the shorter length of haul where you have maybe less of a room for error.

Is what we need and I know, we're all along with our partners very focused on delivering that that's why I think you continue to see our transcon business performed better than our local business as well is that is where you can more consistently capture that service and those savings versus the shorter length of haul where you have maybe.

Less of a room for error.

Okay.

Thank you I appreciate that.

Speaker 1: Just as you're minded into the queue, please press star then one on your touch phone. Again, that star one, enter the queue. And our next question comes in David Zula from Barclays. Your line is open.

And just as a reminder to enter the queue. Please press Star then one on your Touchtone phone.

Again, Thats star one to enter the queue and our next question comes from David.

From Barclays. Your line is open.

Hey, congrats on the quarter and thanks for taking my question.

Speaker 6: I just wanted to ask, and you alluded a little bit to it in one of the previous answers about your use of rail-owned equipment. You talked about it in the East, but maybe can you just got a little bit more your use of rail-owned equipment during the quarter, or if any challenges that presented and what challenges and opportunities you might have for that in the coming year?

Just wanted to ask and you'd alluded a little bit to it and one of the previous answers about your use of rail owned equipment.

You talked about it in the east, but maybe can you just give us a little bit more use of railroad equipment during the quarter, what if any challenges presented and what challenges and opportunities you might have for that.

Speaker 3: Yeah, so that would be a part of the volume decline that you're seeing for us. Last year, we used probably, we were about 93% of our business was done in our own fleet. This year, that's closer to 99. Mainly because we can better manage our own fleet, it's much less expensive when you have higher street well. And so we have really removed a lot of the rail networks to under 1% of our volume is in rail boxes. So that has been a concerted effort and it's part of why you're seeing some of that volume decline out of your area.

Yeah.

Yes, so that would be a part of the volume decline that youre seeing for us last year.

Used probably.

We were about 93% of our business was done in our own fleet. This year, that's closer to 99, mainly because we can better manage our own fleet. It's much less expensive when you have higher suite Street, well and so we have really.

Removed a lot of the rail network to under 1% of our volume has been railroad boxes. So that has been a concerted effort and it's part of why you are seeing.

Some of that volume decline on a year over year basis.

Speaker 6: As a follow up, I don't know if you have handy the sequential head count number for 4Q, but related to that, you didn't note labor as being a constraint of volume kind of anywhere throughout any of the businesses. So maybe you touch a little bit about what you're doing in human capital to kind of keep the labor count off in kind of challenging labor time.

Great.

As a follow up I don't know if you have handy the sequential headcount number for <unk>.

Related to that.

I guess you didn't note.

Labor is being <unk>.

Straight to volume.

Anywhere throughout any of the businesses, so maybe touch a little bit about what youre doing in human capital to kind of.

Keith.

Labour Count all Pan kind of challenging labor times.

Speaker 5: Sure, so at the end of the year, our headcount was non-driver. Headcount was 2,300. Last year, we were just under 2,000. So up by 300, but we get to add around 400 employees through the acquisition of PuckChop.

Sure. So at the end of the year, our head count was non driver head count was 2300.

Last year, we were just under 2000, so up by 300, but we did add around 400 employees through the acquisition of shopping.

Speaker 3: And then just from a human capital perspective, I think we really value our culture. We have a great human resources team. We have great managers and we've really worked hard. One, to provide a really great environment for our teams so we can keep turnover at a minimum. But also, make sure that we're giving them better and better tools so they can be more effective at their job and give them progress and get people progression opportunities in their career. That's going to continue to be our focus. I don't think we would say that we're perfect and we always have opportunities to improve. We've experienced somewhat higher turnover but not anything that has impacted us.

And then just from a human capital perspective, I think.

We really value our culture, we have a great human resources team, we have great managers and we've really worked hard won.

To provide a really a great environment for our teams. So we can keep turnover at a minimum but also.

Make sure that we're giving them better and better tools. So they can be more effective at their job and give them and get people progression opportunities within their career, that's going to continue to be our focus I don't think we would say that we're perfect.

And we always have opportunities to improve and so we've experienced somewhat higher turnover, but not anything that impacted us.

Speaker 3: And I think our whole organization has really rallied around the opportunities to service our customers and continue to grow.

And I think our whole organization has really rallied around the opportunity to service our customers and continuing to grow.

Thanks.

Speaker 1: And we have no further questions out in the call back over to Dave Yeager for final remarks.

And we have no further questions I'll turn the call back over to Dave Yeager for final remarks.

Speaker 8: Okay, well thank you for joining us for the fourth quarter of the news call. As always, if you do have any additional questions, Jeff and Till and I would be available. Thank you.

Okay, well, thank you for joining us for the fourth quarter earnings call as always if you do have any additional questions.

Jeff and Phil and I would be available. Thank you.

Speaker 1: Thank you ladies and gentlemen, this concludes today's conference call. Thank you for participating. It may now dismiss.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.