Q4 2023 Hub Group Inc Earnings Call

Operator: HUBG.com www.hubgroupinc.com Hello and welcome to the HUB Group fourth quarter 2023 earnings conference call. Phil Yeager, HUB's President and CEO, Brian Alexander, HUB's Chief Operating Officer, and Kevin Beth, HUB's CFO, are joining me on the call. At this time, all participants are in a listen-only mode.

Okay.

Okay.

Hello, and welcome to the hub group fourth quarter 2023 earnings Conference call.

Yoga hubs, President and CEO, Brian Alexander hubs, Chief operating Officer, and Kevin Best Hub CFO are joining me on the call.

At this time all participants are in a listen only mode.

Operator: A brief question and answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. Any forward-looking statements made during the course of the call or contained in the release represent the company's best good-faith judgment as to what may happen in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate, and project, and variations of these words. Please review the cautionary statements in the release.

A brief question and answer session will follow the formal presentation.

In order for everyone to have an opportunity to participate please limit your inquiries to one primary and one follow up question.

Any forward looking statements made during the course of the call or contained in the release represent the company's best good faith judgment as to what may happen in the future.

Eight minutes that are forward looking can be identified by the use of words, such as believe expect anticipate and project and variations of these words.

Please review the cautionary statements in the release. In addition, you should refer to the disclosures in the company's Form 10-K, and other SEC filings regarding factors that could cause actual results to differ materially from those projected in these forward looking statements.

Operator: In addition, you should refer to the disclosures in the company's Form 10-K and other SEC filings regarding factors that could cause actual results to differ materially from those projected in these forward-looking statements. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Phil Yeager.

As a reminder, this conference is being recorded it is now my pleasure to turn the call over to your host Phil Yeager you may now begin.

Phil Yeager: Good afternoon, and thank you for joining HUB Group's fourth quarter earnings call. Joining me today are Brian Alexander, HUB Group's Chief Operating Officer, and Kevin Bass, our Chief Financial Officer. I'm proud of the way our organization executed to support our customers and one another in 2023, while also delivering the second best financial performance in our company's history in a challenging year. We face difficult market conditions with higher inventory levels, excess capacity, and flowing imports. This led to challenging fundamentals in our more transactional service line.

Good afternoon, and thank you for joining hub group's fourth quarter earnings call. Joining me today are Brian Alexander Hub group's Chief operating officer, and Kevin Burke, Our Chief Financial Officer.

I'm proud of the way our organization executed to support our customers and one another in 2023, while also delivering the second best financial performance in our company's history and a challenging year.

We faced difficult market conditions with higher inventory level excess capacity and flowing import demand.

Despite the challenging fundamentals that are more transactional third one however, our execution of our strategy over the last several years of delivering world class service.

Phil Yeager: However, our execution of our strategy over the last several years of delivering world-class service, investing in equipment and technology to drive productivity, diversification of our service offerings to deepen our value to our customers, and maintaining cost discipline enabled us to successfully manage through those challenging conditions and deliver strong results. We completed several key strategic priorities this past year that will pay dividends for years to come. We improved our rail and chassis agreements, providing us with expanded reach and flexibility while enhancing our construction. We achieved a record level of share of our control grace, enabling improved service and costs. We continued our diversification strategy, closing an accretive acquisition that helps us build scale and capabilities in the big and bulky final mile space. And finally, we completed our capital allocation plan, delivering a clear growth and returns-oriented investment strategy.

Investing in equipment and technology to drive productivity diversification of our service offerings to deepen our value to our customers and maintaining cost discipline enabled us to successfully manage through the challenging condition and deliver strong results.

We completed several key strategic priorities back here that will pay dividends for years to come we.

We improved our rail and track the agreement, providing us with expanded reach and flexibility while enhancing our cost structure.

Our record level of share of our controlled great, enabling improved service and cost. We continued our diversification strategy closing at accretive acquisition that helps us build scale and capabilities from the big and bulky final mile space and finally, we completed our capital allocation plan, delivering a clear growth and returns oriented investment strategy.

Phil Yeager: These are just a few of the many strategic initiatives we executed on this past year, which we delivered while prioritizing our team and customers, positioning us for long-term success. We are leveraging the momentum at the end of last year to deliver for our customers and shareholders again in 2024. We believe that the current global supply chain disruption and the normalization of inventory levels will lead to increased shipping demand and West Coast imports, which, along with accelerating capacity exits, will progressively lead to improved industry fundamentals. In ICS, we have a great deal of momentum in bid season as we are providing significant savings versus trust while executing an excellent service product.

These are just a few of the many strategic initiatives, we executed on this past year, which we delivered while prioritizing our team and customers positioning us for long term success.

We are leveraging the momentum at the end of last year to deliver for our customers and shareholders again in 2024.

We believe that the current global supply chain disruption and the normalization of inventory levels will lead to increased shipping demand in west coast import, which along with accelerating capacity exit will progressively lead to improved industry fundamentals.

In Ics, we have a great deal momentum a good feedback as we are providing significant savings versus truck, while executing an excellent service product.

Phil Yeager: We believe that with our improvements in service and productivity, as well as our enhanced partnerships, we will be in a position to deliver strong volume growth this year. Our initial results have shown the quality of our value proposition, and we will continue our focus on enhanced balance, velocity, and productivity throughout this season. We've also driven incremental growth and dedicated onboarding new wins with existing customers based on our service, quality, and scale. We believe these factors will lead to improved performance in our ITS segment as the year progresses. In logistics, we are in the process of integrating our recent final mile acquisition and are excited about the initial results.

We believe that with our improvements in service and productivity as well as our enhanced partnership we will be in a position to deliver strong volume growth this year.

Our initial results have shown the quality of our value proposition and we will continue our focus on enhanced balanced velocity and productivity throughout with Peter.

We've also driven incremental growth in dedicated Onboarding, new wins with existing customers based on our service quality and scale.

We believe these factors will lead to improved performance in our Ics segment as the year progresses.

In logistics, we are in the process of integrating our recent final mile acquisition and are excited about the initial results we.

Phil Yeager: We are taking a back-to-up approach and finding significant cross-selling cost synergies that will allow us to accelerate growth in the business. In brokerage, after a strong year where we increased total volume count, we are seeing some signs of improvement in the market, which, along with our continued cross-selling, high quality service, and productivity enhancements, will lead to improved performance. Finally, within managed transportation and consolidation, our value proposition of service, technology, and savings is resonating with our customers.

We are taking it back to a approach and finally significant cross selling cost synergies that will allow us to accelerate growth in the business.

And brokerage after a strong year, where we increased total volume count we are seeing some signs of improvement in the market, which along with our continued cross selling high quality service and productivity enhancement will lead to improved performance.

Finally, we've been managed transportation and consolidation of our value proposition.

With technology and savings is resonating with our customers and we have a solid pipeline of new onboarding that will support growth in 2024.

Phil Yeager: And we have a solid pipeline of new onboarding that will support growth in 2024. Despite the challenging industry backdrop, we executed on our strategy and are positioned for continued long-term success. We're focused on having a great year in 2024 through delivering best-in-class service, investing in the business for the long term, maintaining our cost discipline, and deepening our value to our clients. This focus will position us as a provider of choice for our customers and will accelerate profitable growth as market conditions shift. With that, I will hand the call over to Brian to discuss our segmented results. Thank you, Phil.

Despite a challenging industry backdrop, we executed on our strategy and are positioned for continued long term success.

We are focused on having a great year in 2024 for delivering best in class service investing in the business for the long term, maintaining our cost discipline and deepening our value to our clients.

This focus will position us as a provider of choice for our customers and will accelerate profitable growth as market conditions get.

With that I will hand, the call over to Brian to discuss our segment results.

Thank you Bill I will now discuss our reportable segments, starting with intermodal and transportation solutions.

Brian Alexander: I will now discuss our reportable segments, starting with intermodal and transportation solutions. ITS revenue declined 28% in the fourth quarter, driven by softer intermodal volumes that declined 11.3%. Transcon volume was close to flat, local east volume declined 8%, and local west volume declined 17%.

Ics revenue declined 28% in the fourth quarter, driven by softer intermodal volume declined 11, 6%.

<unk> volume was close to flat local east volume declined 8% local west declined 17%.

Brian Alexander: While year-over-year volume declined in the fourth quarter, we drove a sequential transcon in local east volume. This momentum and shorter length of haul is a good early indicator of truckload volume converting back to intermodal. In addition, the subsequent improvement is showing the early results of the enhancements that we have made to the local east and our disciplined focus on margin per load day that will continue to drive TransCon brook. We continue to improve our cost structure in IPS, which drove a 30 basis point improvement in sequential operating income, excluding acquisition related fees. We continue to implement several cost controls that will accelerate in 2024 and better position us to compete while maintaining yield distance. From a cost perspective, our new rail agreements are moving with the market, and improved rail service has helped us better manage our equipment costs. In the West, we're implementing a new hub-controlled chassis program in the first quarter of 2024 that will improve our cost and service reliability.

While year over year volume decline in the fourth quarter, we drove sequential transcon and local east volume growth.

This momentum in shorter length of haul is a good early indicator of truckload volume converting back to intermodal.

In addition, there is the sequential improvement is showing the early results of the enhancements we've made to the local east and our disciplined focus on margin per load date that will continue to drive transcon growth.

We continue to improve our cost structure and Ips that drove a 30 basis point improvement in sequential operating income excluding acquisition related fees.

We continued to implement several cost controls that will accelerate in 2024 and better position us to compete while maintaining yield disciplines.

From a cost perspective, our new rail agreements are moving with the market and improved rail service has helped us better manage our equipment costs.

In the West we're implementing a new hub controlled chassis program in the first quarter of 2024 that will improve our cost and service reliability.

Brian Alexander: Our in-source dredge helped steady at 80% throughout Q4 compared to 69% in the previous year, and with improved driver productivity initiatives, we have the capability to further improve our cost per dredge as we grow volume in 2024. We're seeing a slow start to the year due to weather events that impacted January volume, but we are focused on returning to growth in intermodal this year, which will be driven by truckload conversions back to intermodal, inventory destocking, and normalization. Increased West Coast import and transload activity.

Our in source rate held steady at 80% throughout Q4 compared to 69% in the previous year and with improved driver productivity initiatives. We have the capability to further improve our cost per grade as we grow volume in 2024.

We're seeing a slow start to the year and weather events that impacted January volume, but we are focused on returning to growth in intermodal this year, which will be driven by truckload conversions back to intermodal inventory Destocking normalization decrease.

<unk> West coast important trans load activity.

Brian Alexander: Our adjustments to our good approach with a focus on regaining velocity and balance in our network and Improved Bid Realization. We feel confident in our timing and disciplined approach for the 2024 bid season and are already seeing incremental wins that will ramp up in late Q1 and early Q2. Our dedicated trucking team finished the year strong with a great growth story and yielded spans.

Our adjustments to our bid approach with a focus on regaining velocity and balanced in our network and improved bid realization.

We feel confident in our timing and disciplined approach for the 2020 for bid season and are already seeing incremental wins that will ramp in late Q1 and early Q2.

Our dedicated trucking team finished the year strong with a great growth story and yield expansion.

Brian Alexander: We are entering 2024 with a strong pipeline of organic and new customer opportunities. While the near-term ITS results are impacted by low volume, we are confident that our actions will position us for growth and deliver high levels of service for our customers. Sustainable Profitability. Now, turning to our logistics. I wanted to start by welcoming our new Final Mile team to the HUB. The integration into our existing final mile operation is well underway. We are now positioned as one of the top final mile providers with a diverse offering that now includes appliance deliveries in a larger network of locations. These locations now bring our hub network to 11 million square feet strategically placed in 75 locations to service our customer supply chain needs.

We are entering 2024, well positioned for further growth with a strong pipeline of organic new customer opportunities.

While the near term I guess results are impacted by low volume. We are confident that our actions will position us for growth and deliver high levels of service for our customers with sustainable profitability.

Now turning to our logistics segment.

Wanted to start by welcoming our new final mile theme to the hub group the integration into our existing final mile operation is well underway.

We are now positioned as one of the top final mile providers with a diverse offering that now includes appliance deliveries and a larger network of locations.

These locations now bring our hub network, so 11 million square feet strategically placed and 75 locations to service our customers supply chain needs.

Brian Alexander: We have a strong pipeline of crop selling opportunities that are quickly materializing into wind that will launch in early Q2. Our brokerage team continues to be an industry standout as they thrive through a challenging break year and grew volume while improving team member productivity. We have well-planned IT initiatives set to roll out in 2024 to further enhance our brokerage technology while we stay true to our hub values of innovating with a. 2024 is off to a good start for brokerage.

We have a strong pipeline of cross selling opportunities that are quickly materializing into when that will launch in early Q2.

Our brokerage team continues to be an industry standard as they thrive through a challenging freight year, we grew volume while improving member productivity.

We are well planned initiatives set to rollout in 2024 to further enhance our brokerage technology, while we stay true to our home values are innovating with a purpose.

2024 is off to a good start for brokerage and we are seeing early signs of smart pricing inflation that will support volume and yield expansion.

Brian Alexander: And we are seeing early signs of spot pricing inflation that will support volume and yield. With a long tail of HUB customers to cross sell, we are excited for our brokerage team to continue profitable growth in 2020. While we continue our logistics growth, we're also improving our costs as we leverage our close to $1 billion in LTL undervalue. This leverage improves our LTL volume power and creates density to support consolidations, which helped drive a 16% increase in our 4th quarter LTL volume. We are also continuing to enable our multi-purpose logistics locations to support our continued growth of our LTL, final mile, e-commerce, and warehouse solutions, while also supporting inbound and outbound multimodal hub volume to service our customers' supply chain.

With a long tail of customers to cross sell we are excited for our brokerage team to continued profitable growth in 2024.

While we continue our logistics growth, we're also improving our cost as we leverage our close to $1 billion in LPL under management.

This leverage improves our buying power and create density to support consolidations, which helped drive a 16% increase in our fourth quarter <unk> volume.

We are also continuing to enable our multipurpose logistics locations to support our continued growth of our LCL final mile E Commerce and warehouse solutions, while also supporting inbound and outbound multimodal hub volume to service our customers supply chain needs.

Kevin Beth: With that, I'll hand it over to Kevin to discuss our financial results. Thank you, Brian. Before I start with the results, just a quick reminder that the ETS amounts presented are after the two for one stock. Despite a continuing challenging freight market, HUBG generated revenue of $4.2 billion for the year and $1 billion for the quarter.

With that I'll hand, it over to Kevin to discuss our financial performance.

Thank you Brian before I start with the results just a quick reminder, that the ETF allowance prevented or after that two for one stock split.

Despite a continuing challenging freight market hub generated revenue of $4 2 million for the year and $1 billion for the quarter.

Kevin Beth: Our GAAP operating income margin for the full year was 5.1% and 3% for the quarter. During the quarter, we recorded $5.1 million, or $0.08 a share, of acquisition-related expenses. Without the acquisition-related expenses, the quarter operating margin was 3.5%.

Our GAAP operating income margin for the full year was five 1% and 3% for the quarter.

During the quarter, we incurred $5 1 million or <unk> 10 per share of acquisition related expenses.

Without the acquisition related expenses the quarter operating margin was three 5%.

Kevin Beth: The acquisition costs were allocated to both segments based on revenue, along with our standard corporate expenses. Without the acquisition-related expenses, ICF's margin was 2.6%, and the legislative segment was 4.4%. Our diluted earnings per share presented post-split for the quarter was $0.46 and $2.62 for the year.

Acquisition costs were allocated the bulk segment based on revenue along with our standard corporate expenses.

Without the acquisition related expenses Ics margin of two 6% in our logistics segment was four 4%.

Our diluted earnings per share prevented post split for the quarter was <unk> 46.

And $2 62 for the year adjusted.

Kevin Beth: Adjusting for the acquisition-related expense, ECF was $0.54 for the quarter and $2.68 for the year. In the fourth quarter, purchase transportation and warehousing costs decreased compared to the prior year due to lower volumes and cost management efforts. Salaries and benefits decreased from the prior year as our non-driver headcount decreased by 15%, and we had less incentive compensation expense. Appreciation and amortization expense increased as compared to the prior year due to growth-oriented investments in equipment and technology, as well as acquisitions. Insurance and claims costs decreased by $7.5 million due to improved claims experience. G&A costs increased by over $2 million due to the previously mentioned $5.1 million in acquisition-related expenses.

Adjusting for the acquisition related expense.

With 54 cents for the quarter and $2 68 for the year.

In the fourth quarter purchase transportation and warehousing costs decreased compared to prior year due to lower volumes and cost management effort.

Salaries and benefits decreased from prior year as our non driver head count decreased by 15% and we have less incentive compensation expense.

Depreciation and amortization expense increased as compared to prior year due to the growth oriented investments in equipment technology as well as acquisition.

Insurance and claims costs decreased by $7 $5 million due to improved claims experience.

G&A cost increased by over $2 million due to the previously mentioned $5 1 million in acquisition related expenses.

Kevin Beth: Gain on sale was minimal this quarter, whereas the prior year benefited from strong used truck prices, turning our focus to our balance sheet and capital allocation. Fourth quarter capital expenditures totaled $35 million, with a full year amount of $140 million. We purchased 21 million tractors during the quarter, 7 million containers, with the remaining 7 million related to technology projects and warehouse equipment. For 2024, we expect capital expenditures to be between $55 million and $75 million, as we have no additional container purchases planned and lower tractor replacement. We are expecting our typical technology capital spend to be in the $20 million range. We anticipate 2025 CAPEX to be in a similar range as 2024. During the quarter, we continued generating strong operating cash flow while deploying $262 million of cash for the strategic acquisition within our final mile business and an additional $26 million on stock buybacks at a weighted average price of $76 per share. For the full year, we purchased $143 million of stock at a weighted average price of $77 per share.

<unk> was minimal this quarter, whereas the prior year benefited from strong used truck pricing.

Turning our focus to our balance sheet and capital allocation.

Fourth quarter capital expenditures totaled $35 million with full year amount of $140 million.

That's a $21 million attractive during the quarter $7 million of container with the remaining $7 million related to technology projects and warehouse equipment.

For 2024, we expect capital expenditures to be between $55 million and $75 million as we have no additional container purchases planned.

And lower attractive replacement.

We are expecting that our typical technology capital spend to be in the $20 million range.

We anticipate 2025 capex.

<unk> ranks at the 2024.

During the quarter, we continued generating strong operating cash flow, while deploying $252 million of cash for the strategic acquisition within our final mile business and then an additional $26 million on stock buyback at a weighted average price of $76 per share.

For the full year, we purchased $143 million of stock at a weighted average price of $77 a share.

Kevin Beth: At the end of the year, we had cash on hand of approximately $187 million. Our net debt is $166 million, which is 0.4 times EBITDA. We are below our stated net debt to EBITDA range of 0.75 to 1.25 times and expect EBITDA less cash expenditures in 2024 to be greater than the $257 million generated in 2023. This shows HUB's cash resiliency as we expect cash earnings growth in a challenging freight environment. Additionally, we are confident in our ability to execute on our capital allocation plan, which includes paying our first dividend later this quarter, repurchasing more stock, and continuing to be active in M&A. After HUB's second highest annual EPS, we turn our attention to 2024. Our EPS guidance is $2 to $2.50 a share, with revenue guidance of $4.6 billion to $5 billion.

At the end of the year, we had cash on hand of approximately $187 million.

Our net debt is $156 million, which is <unk> four times EBITDA.

We are below our estimated net debt to EBITDA range of <unk> 75 to 125 time.

And expect EBITDA less cash expenditures.

Expenditure in 2024 be greater than the $257 million generated in 2023.

This shows hub cash resiliency as we expect cash earnings growth in a challenging freight environment. Additionally.

Additionally, we are confident in our ability to execute on our capital allocation plan, which includes paying our first dividend later this quarter.

<unk> seen more stock and continuing to be active in M&A.

After our second highest annual EPS, we turn our attention to 2024 are.

Our EPS guidance is $2 to $2.50 a share with revenue guidance of $4 6 billion to $5 billion.

Kevin Beth: A few things to note as we come out of 2023 and into 2024. The middle of the range assumes ICF volume growth of low double digits as OCR conversions occur based on continued strong rail service. Pricing in the first half of the year is assumed down, but then rebounding to low single-digit increases in the second half of the year as truckload capacity exits and a repricing of lower third-quarter contractual rates occur. There is upside potential in our guidance if retail inventory declines, leading to restocking demand and more typical shipping patterns, including the traditional intermodal peak season and surcharge revenue during the peak. Another market condition that would push results to In the logistics segment, we are assuming growth due to the addition of the Appliance Final Mile Business.

A few things to note as we come out of <unk> 23, and enter 2024.

The middle of the range assumes the ICF volume growth low double digits as OTR conversions occur based on continued strong railcar.

Pricing in the first half of the year is assumed down but then rebound in the low single digit increases in the second half of the year as truckload capacity exit and have repricing of lower third quarter contractual rates occur.

There is upside depends on our guidance at retail inventory decline.

Leaving to restocking demand and more typical second pattern, including traditional intermodal peak season surcharge revenue during the peak season.

Another market condition that would push results to the high end of guidance is intermodal volume growth driven by OTR conversion based on continued and sustained fabric level of improvement.

In our logistics segment, we are assuming growth due to the addition of the appliance final mile business.

Kevin Beth: Low to mid-double-digit growth in managed transportation driven by new customer wins and increased demand, as well as mid-single-digit growth for our consolidation and fulfillment and brokerage business. Additional guidance upside would result from the tightening of the truckload market with capacity leaving, resulting in increasing intermodal and truckload rates. For the 2024 guidance, we are assuming a normalized annual tax rate of 24% versus the lower 2023 tax rate of 20%. In 2023, HUB had very minimal incentive compensation expense.

Low to mid double digit growth in managed transportation, driven by new customer wins and increased demand as well as mid single digit growth for our consolidated and fulfillment and brokerage businesses.

Additional guidance upsides good results from the tightening on the truckload market with capacity exiting resulting in an increase in intermodal and truckload rate.

For the 2024 guidance, we are assuming a normalized annual tax rate of 24% versus the lower 2023 tax rate of 20%.

And 23 had very minimal incentive compensation expense the 'twenty 'twenty four guidance include a more normalized incentive compensation expense.

Kevin Beth: The 2024 guidance includes a more normalized incentive compensation expense. Another assumed headwind in the guidance is gain on sale. We assumed minimal gains in 2024. Our current average age of our tractor fleet is 2.6 years, which is within the lower range of our optimal replacement cycle.

Another assumed headwind and the guidance is gain on sale, we assumes minimal gains in 2024, our current average age of our tractor fleet with two six here, which is within the lower range of our optimal replacement cycle.

Kevin Beth: As such, we will be replacing fewer tractors than in previous years. Additionally, we are not seeing improvement in the used tractor market. Thus, we expect minimal gains as we replace older tractors.

As such we will be replacing less tractors and previous year. Additionally, we are now seeing improvement in the used tractor market, we expect minimal gains as we replace older tractor.

Kevin Beth: With these assumptions, we expect the challenges that we have experienced in the last few quarters to continue during the first half of 2024. In the second half of the year, with normal seasonality, we anticipate sequential quarterly earnings growth. We expect earnings in Q1 to be a step down from Q4 2023 due to normal seasonality and continued pressure on intermodal and short flow pricing and the return to a normalized tax rate. I do want to mention that normalizing our tax rate, incentive compensation expense, and the gain on sale of equipment would add back approximately 49 cents to our mid-range of the 2024 guidance, resulting in flat or slightly growing ETS in 2024. The change in the tax rate will have the largest impact from Q4 to Q1, as we had a low 3.3 tax rate in Q4 2023 and expect the tax rate in Q1 to return to approximately 24%.

With these assumptions, we expect challenges that we have experienced the last few quarter continuing during the first half of 2024.

In the second half of the year with normal seasonality, we anticipate sequential quarterly earnings growth.

We expect earnings in Q1 to be a step down from Q4 clients three due to normal seasonality and continued pressure on intermodal and truckload pricing.

And the return to a normalized tax rate.

I do want to mention that normalizing our tax rate incentive compensation expense and the gain on sale of equipment would add back approximately <unk> 49.

To our mid range at the 2024 guidance.

In a flat or slightly growing ETF in 2024.

The change in the tax rate will have the largest impact from Q4 to Q1 as we had the low three three pack rate in Q4, 2023 and expect the tax rate in Q1 to return to approximately 24%.

Operator: We expect the incentive compensation effect to grow during the year as our earnings grow. Finally, looking at our cash flow, HUB's cash EPS was $0.30 and $0.34 higher than our GAAP EPS in 2022 and 2023, respectively. We expect the spread to continue to grow in 2024. As generating cash is an important goal of management, we will be noting our cash ETS results going forward. This change is not the basis for guidance but to highlight HUB's cash earning power. With that, I'll turn it over to the operator to open the line to any questions. As a reminder, to ask a question, you will need to press star 1-1 on your telephone.

We expect the incentive compensation effects to grow during the year as our earnings growth.

Finally, looking at our cash flow positive cash EPS was <unk> 30, and 34 times higher than our GAAP EPS in 2022 and 2023, respectively.

We expect this spread to continue to grow in 2024.

As generating cash is an important goal of management, we will be noting our cash EPS results going forward.

This change is not the basis for guidance, but the highlight hub cash earning power.

With that I'll turn it over to the operator to open the lines to any questions.

As a reminder to ask a question you will need to press star one on your telephone again Thats Star one on your telephone to ask a question.

Scott H. Group: Again, that's Star 1-1 on your telephone to ask a question. Our first question comes from the line of Scott Group, Off Wolf Research. Please go ahead.

Our first question comes from the line of Scott Group.

If research. Please go ahead.

Scott H. Group: Hey, thanks, afternoon, guys. So I just want to get a little more color on sort of the near-term earnings expectations and just think about the cadence throughout the year.

Hey, Thanks afternoon, guys. So I just wanted to get a little more color on sort of the near term earnings expectations. I mean, just think about the cadence throughout the year, So youre, saying a stepped down from from Q4 should we.

Scott H. Group: So you're saying a step down from Q4. Should we, adjust for the tax trade and get to something in the, you know, 40s and then take it, then apply normal seasonality or not? Any color? I'm just trying to think about Q1, I guess, and then the sequential build from there.

Adjusted for the tax rate and get to something in the <unk>.

<unk> and then take it.

That apply normal seasonality or not any color on just how to think about Q1, I guess and then the sequential build from there.

Unnamed Speaker: Sure. Thanks, Scott, for the question. Yeah, definitely. You have a couple of headwinds that we'll run into here quickly in the first quarter. One is definitely the tax rate, going from 3.3 to a normalized 24. Additionally, we're going to have less interest income after spending $252 million on the acquisition. So those are certainly the two biggest things, I think, in the first quarter that, you know, really aren't under management control.

Sure. Thanks, Scott for the question, yes definitely.

You have a couple of headwinds that will run in through here quickly in the first quarter. One is definitely in the tax rate gone from the $3 three.

Normalized 24. Additionally, we're going to have less interest income after spending $262 million regarding.

After the Senate.

So those are certainly the two biggest things I think in the first quarter that really arent of management control.

Unnamed Speaker: In addition to that, we will have some offsetting, you know, respecting the start to seed margins return and get to at least, you know, the pre-adjusted or the post-adjusted numbers. Excuse me. And then as the year grows, we'll be seeing those price increases as well as volume increases that will sequentially increase CPS during the year. Yeah, I just wanted to ask Scott, I think obviously there's a bit of a tailwind here from the acquisition we just completed in December on a revenue basis. We're anticipating some sequential improvement in intermodal volumes. We saw them show up in January despite some weather issues.

In addition to that we will have some offsetting are expecting to start to see margins.

<unk> and <unk>.

The.

<unk> adjusted our that post adjusted number of excuse me.

<unk>.

And then as the year grows we'll be seeing those price increases as well as volume increases.

That will take.

Sequentially increase EPS during the year.

I'd just add Scott I think obviously, there's a bit of a tailwind here from the acquisition. We just completed in December from a revenue basis were anticipating some sequential improvement in intermodal volumes. We saw that show up in January despite some weather issues, but to Kevin's point operating margin percentage being relatively consistent with Q4.

Unnamed Speaker: But to Kevin's point, operating margin percentage being relatively consistent with Q4 on the adjusted basis and then the tax headwind are really kind of the big things to call out. Okay, and then so just right, so you're saying take the adjusted intermodal ITS margin of 2.6 and you think hold that fairly. Steady from Q4 to Q1. Yeah, yeah. And as you think about your rail contracts and what you're expecting for price, is an aggregate for the year the intermodal price cost a tailwind or a headwind? Yeah, this is Phil. I would say it's a tailwind.

The adjusted basis other than the tax headwind or really kind of the big things to call out.

Okay and then so just so you are saying take the adjusted.

Intermodal margin <unk> margin of two six and you think hold that fairly.

Steady from Q4 to Q1, yes.

Yes, yes.

Yes.

And as you think about your rail contracts and what Youre expecting for price.

In aggregate for the year is intermodal price cost a tailwind or a headwind.

Yes. This is Phil I would say, it's a tailwind.

Unnamed Speaker: You know, our new structure has certainly helped us through this more challenging environment, with the structure that moves up and down, obviously, with some of the challenges we've seen in the market. But it does have a bit of a lag effect. And I think that's important to call out. So as we see more stabilized pricing in the broader market, as well as an inflection positive, you'll see more flow through for HUB. I think Brian mentioned some really good things we're doing on the other side of the cost in implementing our new chassis program in the West. I think in Q4, we saw drage costs down 25% on a cost per drage basis. So we're doing a really nice job there, and then we're very focused on layering and growth, which will help really drive down our cost structure. And maybe just one last question.

Our new structure has certainly helped us.

But it's more challenging environment.

The structure that moves up and down.

Obviously with some of the challenges we've seen in the market.

It does have a bit of a lagging effect and I think that's important to call out so as we see more stabilized pricing in the broader market as well as an inflection positive youll see more flow through per hub I think Brian mentioned, some really good things we're doing on the other side the cost in implementing our new chassis program and the Wang.

I think in Q4, we saw great cost down 25% on a cost per day basis. So we're doing a really nice job. There and then we're very focused on layering in growth that will help really drive down our cost structure as well.

And maybe just last question. So you guys used to give us quarterly Opex guidance I guess, it's a bigger business now but.

Unnamed Speaker: So you guys used to give us quarterly OPEX guidance. I get it's a bigger business now, but, would you take a shot at trying to help us think about the course going forward? I don't, we're not prepared to do that using the individual segments, but I would say, again, we would be looking at increases, you know, first quarter, like I said, similar to the after-adjusted amounts, and then going back up to more standard with a little bit of growth into the second half of the year. Yeah, and I think headcount will stay relatively similar. We're going to have obviously merit-based increases, some increase in incentive compensation in Q1, and then, you know, gain on sale will be a little bit of a headwind from Q4 to Q1 as well. All right, thank you, guys. Thank you. Our next question comes from the line of John Chappell of Evercore. Your question, please, John.

Do you want to take a shot at trying to help us think about corn.

Going forward.

We're not prepared to do that.

You've in the individual.

<unk>.

But.

I would say again, we would be looking at increases.

First quarter like I said similar to the after adjusted amounts and then.

Going back up to more standard with a little bit of growth.

Into the second half of the year.

I think head count will stay relatively similar we're going to have obviously merit based increases.

Some increase in incentive compensation in Q1.

Gain on sale will be a little bit of a headwind Q4 to Q1 as well.

Alright, Thank you guys.

Okay.

Thank you.

Our next question.

Comes from the line Jon Chappell of Evercore. Your question. Please John.

Thank you.

Jonathan B. Chappell: Thank you. Phil, on the big year guidance ranges, the revenue number is substantially higher than street expectations, so there is a fair amount of upside there, but the EPS is actually lower. So I'm just curious on the margin cadence for this year. Is this strictly just the pricing weakness at intermodal in the first half of the year before things start to ramp up, or is there more of a structurally lower margin for the entire enterprise as you're diversifying your businesses, especially with growth in the logistics market?

So on the big Big year guidance ranges.

Our revenue number is substantially higher than street expectations. So a fair amount of upside there, but the EPS is actually lower so I'm just curious on the margin cadence for this year is this strictly just the pricing weakness at intermodal in the first half of the year before things start to ramp.

Or is there more of a structural lower margin for the entire enterprise as youre diversifying your business, especially with growth and logistics markets.

Phil Yeager: Sure, so I think what we've shown over the past year is that logistics margins are going to be relatively more stable. We think that there is upside within that as we see the brokerage market normalized, but we didn't really want to place a bet on exactly when that's going to occur. With an IITS, I think, you know, we've also stated that it is going to have some lower lows but also some higher highs and a little bit more fluctuation. We're currently at the lower end of that.

Sure. So I think what we've shown over the past year is logistics margins theyre going to be relatively more stable. We think that there is upside within that as we see the brokerage market normalize, but we didn't really want to place a bet on exactly when that's going to occur with NIH. Yes. I think we've also stated that it is going to have some lower lows, but also some higher.

I've been a little bit more fluctuation. We're currently in the lower end of that I believe that thats going to sequentially improve throughout the year. So I don't believe that we're at a structurally lower operating margin going forward.

Phil Yeager: I believe that that's going to sequentially improve throughout the year. So I don't believe that we're at a structurally lower operating margin going forward, but we're certainly navigating through some more challenging market conditions and wanted to be conservative in our approach. One item that we didn't include in the guidance is any share of purchases.

But we're certainly navigating through some of the more challenging market conditions and wanted to be conservative in our approach one item that we didn't include in the guidance is any share repurchases. Obviously, we have a $250 million authorization, which could be upside and we'll be opportunistic within that around capital deployment.

Brian Alexander: Obviously, we have a $250 million authorization, which could be upside and will be opportunistic within that around capital. Okay, that's helpful. And then probably for Brian, you know, I think it was last quarter, maybe two quarters ago, but probably last quarter, you said you'd maybe held the line on price a little bit longer at the expense of volume. And I feel like you've shifted there.

Okay. That's helpful and then probably for Brian I think it was last quarter, maybe two quarters ago, but probably last quarter.

Said, you'd maybe held the line on price a little bit longer at the expense of volume and I feel like you've shifted there you had some positive things to say about incremental wins and bid season is at that same policy you are sticking with now and maybe for the first six months of the year to try to get more volume on the network type of efficiency et cetera, the expensive price and when do you.

Brian Alexander: You had some positive things to say about incremental wins in bid season. Is that the same policy you're sticking with now? And maybe, you know, for the first six months of the year, to try to get more volume on the network to help with efficiency, etc., at the expense of price? And when do you kind of maybe expect a better balance between volume and price? Is that just purely market related? Sure, yeah, no. I appreciate that, John.

Maybe you expect a better balance volume and price is that just purely market related.

Sure Yeah, no I appreciate that John where we are getting the early wins in the bid season and what we're seeing is is that we're positioned well now to defend our incumbency.

Brian Alexander: We are getting the early winds of the bid season, and what we're seeing is that we're positioned well now to defend our incumbency, to capture more share, and get the over-the-road conversions that we needed to do. As I mentioned in the previous calls, we needed to make some structural adjustments to target balance and velocity, and I think seeing the bid realization and some of those inventory normalizations has helped us plan that demand and that forecast. But we saw transcon, I mentioned in the prepared remarks, the sequential growth there, and when we look at January over December, we saw 10% sequential growth in transcon, and that's really us focusing on margin per load day and seeing some of that spot inflation start to drive more of those over-the-road conversions, and it's the same thing in the local east. We saw sequential improvement there in the local east. In January, we saw that consistent and gain more momentum at about 10% over December, and that's a lot of capture from over-the-road conversions. So we think that we timed it well.

Capture more share and get the over the road conversions that we needed to do as I mentioned in the previous calls we needed to make some adjustments structurally to target balanced and velocity and I think seeing the bid realization and some of those inventory.

Normalization has helped us plan in demand in that forecast. So we saw <unk>.

Transcon I mentioned that in the prepared remarks sequential growth there and when we look at January over December we saw a 10% sequential growth in transcon, and that's really us focusing on margin per load day, and seeing some of that spot inflation start to drive more of those over the road conversions and it's the same thing in the local east we saw.

Sequential improvement there in the local east in January we saw that consistent in getting more momentum at about 10% over over December and and Thats a lot of capture from over the road conversions. So we think that we timed it well.

Brian Alexander: We had about 43% of our bids going live in Q1, and we positioned in Q4 to time it right, and then another 18% of those went live in Q2, and so that's going to drive a lot more of that volume and velocity that helps us cover the fixed expenses, but also stay disciplined on. Great. That's very helpful. Thank you, Brian.

We had a 43% of our bids going live in Q1, and we positioned in Q4 to time it right and then another 18% of those go live in Q2, and so that's going to drive a lot more of that volume and velocity that helps us cover the fixed expenses, but also staying disciplined on margins.

Great. That's very helpful. Thank you Brian Thanks, Phil.

Phil Yeager: Thanks, Phil. Thank you. Our next question comes from the line of Jason Seidl, of Cohen & Company. Please go ahead, Jason.

Thank you.

Our next question.

Comes from the line of Jason Seidl.

Of Cowen <unk> Company. Please go ahead Jason.

Jason H. Seidl: Thank you, operator. Good morning, gentlemen. A couple quick questions from me. You mentioned that there's going to be some cost controls that accelerate as we move through the year. Can you give us some more details and maybe tell us where you expect that to show up in the P&L? And also, on the container side, you said you're going to basically pause any more container purchases. Can you talk to us about where the fleet's at and what percent of the fleet is actually in use right now versus when it began? Yeah, this is Phil.

Thank you operator, good morning, gentlemen.

Couple of quick questions here for me you mentioned that there is going to be some cost controls that accelerate as we move through the year can you give us some more details and maybe tell us where you expect that to show up in the P&L and also on the container side, you said youre going to basically pause any more container purchases can you talk to us about where the fleets at and what percent of the fleet is actually.

And use right now versus a big part.

Phil Yeager: So from a container perspective, we have around 20% that's currently stacked. We're in the process of actually unstacking, as we've seen some momentum here, Brian mentioned some of the positive signs we've seen from December to January, and that's actually pre- some significant startups that we have over the next couple of weeks. So there's some unstacking, and we think that'll come down kind of sequentially throughout the But given the amount that we have stacked, as well as the improvement in utilization that we can drive, we don't see any need to add any additional containers at this point.

Yes. This is Phil so from a container perspective, we have around 20%. That's currently stack. We are in the process of actually on stacking as we've seen some momentum here Brian mentioned some of the positive side, we've seen December to January and Thats actually pre some significant startups that we have over the next couple of weeks. So there is some unstack and we think that all can come.

Down kind of sequentially throughout the quarter, but given the amount that we have back as well as the improvement in utilization that we can drive we don't see any need to add any additional containers at this point and it's obviously going to drive some pretty significant free cash flow generation for the year.

Phil Yeager: And it's obviously going to drive some pretty significant pre-cash flow generation for the year. On the cost side, and I'll let Brian and Kevin jump in here, we've done a really nice job of managing our overhead expenses, our headcounts down 15% on a year over year basis. And we'll be thoughtful around hiring and returning to growth there, but we want to make sure that we remain diligent as we've done a very nice job of resetting our cost structure for the current environment. I think we've also done a really nice job as well in reducing cost per gray and improving our purchasing.

Cost side and I'll, let Brian Kevin jump in here, we've done a really nice job on managing our overhead expenses, our head count's down 15% on a year over year basis.

We will be thoughtful around hiring and returning to growth there, but want to make sure that we remain diligent as we have done a very nice job in resetting our cost structure for the current environment.

I think we've also done a really nice job as well around reducing cost per dray and improving our purchasing I mentioned that was down 25% year over year in the fourth quarter, we'll see that trend continue not only as we in source more and get more productivity out of our drivers, but we're also going to continue to be very diligent around third party drayage costs and then Brian also mentioned.

Phil Yeager: I mentioned it was down 25% year over year in the fourth quarter; we'll see that trend continue not only as we insource more and get more productivity out of our drivers, but we're also going to continue to be very diligent around third-party grade costs. And then Brian also mentioned our new chassis agreement in the West; that's going to be very helpful from a margin perspective. And we'll start to see that really show up in the second quarter; it'll be kind of radically rolled out throughout the first quarter and start to show up there.

Our new chassis agreement in the Wap, that's going to be very helpful. From a margin perspective, and we will start to see that really show up in the second quarter, it'll be kind of radically rolled out throughout the first quarter and start to show up there and the last piece I would just highlight is rail cost.

Brian Alexander: And the last piece I would just highlight is rail costs; we'll likely see some benefits sequentially as we head through Q1, as well as into Q2. Yeah, I'll just add a piece specific to brokerage, right? We've seen the volume grow with them, and it's really an industry standout with what they've done. We're really proud of that. But they've also improved their productivity, their team productivity. We've got a good roadmap of IT initiatives that are set to roll out throughout the year that'll further enhance that productivity within our brokerage and help control that cost. That's a good color.

Likely see some benefits sequentially as we had for Q1 as well as into Q2.

Yes, I'll just add one piece on specific brokerage right. We've seen the volume grow with there and so it really industry standout with what they have done we're really proud of that but they are also improved.

Productivity of their team productivity, we've got a good roadmap of <unk>.

Initiatives that are set to rollout throughout the year that will further enhance the productivity within our brokerage and help control that cost.

Phil Yeager: If I can go back, Phil, to, you know, the 20% that you said you had stacked, and you said that number should come down, you know, with 43% of your bids going live in Q1 and 18% in Q2, what number should we expect to see by the end of 2Q on that 20%? Should it be down to like 15, or is it going to go below the, You know? That's a little unclear to me. I don't know exactly at this point. I would say 15% is probably a good measure.

Alright, thats good color if I can go back Phil.

The 20% that you said you have stacked and you said that that number should come down.

With 43% of your bids going live in Q1, and 18% in Q2 what number.

Should we see expect to see by the end of <unk> are about 20% should it be down to like 15 or could it go below that.

That's a little unclear to me I don't know exactly at this point I would say.

15% is probably a good measure, but I think our goal is to get an improved utilization at the same time right and so we're really focusing on our balance and trying to win the right.

Phil Yeager: But I think our goal is to get improved utilization at the same time, right? And so we're really focusing on balance and trying to win the right business that fits our network. It's a little tough for me to say exactly.

Our network.

And so a little tough for me to say exactly might have some temporary imbalances, where we increase repositioning costs, where we make a decision to stack.

Phil Yeager: We might have some temporary imbalances where we increase repositioning costs or we make a decision to stack or to unstack because we think the volume is going to be there longer term. So those are things we're weighing on a more tactical perspective. But it's a little difficult to say, but I would say likely you're talking about 15% or maybe a little bit under that. Sounds good.

On stack, because we think the volume is going to be there longer term. So those are things, we're weighing on a more tactical perspective, but.

So a little a little difficult to say, but I would say likely youre talking about 15% or maybe a little bit under that.

Jason H. Seidl: I appreciate your time. Thank you. Our next question comes from the line of Bruce Chan of Stiefel. Please go ahead, Bruce. Thanks, operator. And good afternoon, everyone.

Sounds good I appreciate the time.

Thank you.

Thank you.

Yeah.

Our next question.

Comes from the line of Bruce Chan of Stifel. Please go ahead Bruce.

Thanks, operator and.

Good afternoon, everyone.

Bruce Chan: Maybe just to follow up here on the revenue growth side, I'm not sure if I missed some of it, but it sounds like you're off to a pretty healthy start for the year on the volume side. You know, how should I think about kind of the cadence of, you know, load growth versus pricing growth and intermodal as we move through the year? The idea kind of that we're higher on the volume side, and maybe that subsides a little bit in the back half of the year, and then pricing accelerates there. So maybe just some commentary on how revenue growth progresses through the year. Yeah, yeah, Kevin mentioned that I think when you look at ITS, volume is likely going to be down again, year over year, in Q1, be up in Q2, and then accelerate as we have both new winds coming on, but also lower comparables in Q3 and Q4.

Maybe just a follow up here on the revenue growth side I'm not sure if I missed some of it but it sounds like youre off to a pretty healthy start for the year on the volume side, how should I think about the cadence of low growth versus pricing growth at intermodal as we move through the year is the idea that were higher on the volume side and maybe that's it.

<unk> is a little bit the back half of the year and then pricing accelerates there.

So maybe just some commentary on how revenue growth proceeds through the year.

Yes, Yes, Kevin mentioned I think when you look at Ics volume is likely going to be down again year over year in Q1 be up in Q2, and then accelerate as we have both new wins coming on but also lower comparable.

Bruce Chan: I think around that as well, we would certainly hope that in that kind of 31% that's coming out to bid in Q3, we're getting positive prices, which would be incremental. And then certainly, we'd hope if there's any normal seasonality in Q3 and Q4, you'd see some sort of surcharge revenue that's coming in there as well, that would certainly be upside to our revenue projection. I think the other piece that is built in there is onboarding within our logistics segment, which we have good visibility into, as well as the final mile acquisition is adding some significant revenue as well. So those components together really are leading to the revenue guide. Kevin or Brian, anything you'd add?

Q3, and Q4, I think around that as well, we would certainly hope that in that kind of 31% that's coming out a bit in Q3, we're getting positive price, which would be incremental and then certainly we would hope if theres any normal seasonality in Q3 Q4.

Some sort of surcharge revenue that's coming in there as well that would certainly be upside to our to our revenue projections.

The piece that is built in there is on boardings within our logistics segment that we have good visibility too.

As well as the final mile acquisition of adding significant revenue as well. So those components together really are leading to the revenue guide catheter, Brian anything yet, yes, I agree with Phil I think one thing to point out that.

Phil Yeager: Yeah, I agree with Phil. You know, I think one thing to point out for us is, you know, we definitely have some high comparables. We're looking at this year sort of as an exact slip of last year, where we started off with really high revenue amounts in ITS. And this year, you know, we're going to build back up to those as opposed to starting with them. And, you know, as the bids come about later in the year, we'll start to see that price increase year over year as those bids that went in the second half were priced at a lower amount. Okay, that's really helpful. And maybe just as a quick follow-up here, any comments on what you're seeing in terms of competitiveness in the marketplace? And I know you've got some boxes to unpack. Some of your peers have some boxes to unpack.

Definitely have some with some high comparables.

We're we're looking at this year sort of as an exact flip of last year.

It started off with really high revenue amounts.

In Ics and <unk>.

This year, we're going to build back up to those as opposed to starting with it.

And.

As the bid.

Come about that later in the year, we will start to see that price increase year over year as those bids.

Went in in the second half, we're priced at a lower amount to begin with.

Okay. That's really helpful. Maybe just as a quick follow up here any comments around what youre seeing in terms of competitiveness in the marketplace and I know you've got some boxes towards stack. Some of your peers have some boxes towards back. So maybe just what assumptions are built in from a pricing competitive standpoint here.

Phil Yeager: So maybe just what assumptions are built in from a pricing competitive standpoint into your assumptions for pricing this year? Sure, I'd say it's a competitive market, but we're very focused on our network needs and really driving that velocity and productivity and converting business from over the road. That's actually what we're probably seeing the majority of our wins are in the shorter length of haul, which might be a negative mixed impact on our revenue per load as the year progresses, but I think, at the same time, it's a positive for velocity and balance. So while it's competitive, you know, we're not going to unstack containers unless we're getting a return on that.

Assumptions for pricing this year.

Sure I'd say, it's a competitive market, but we're very focused on our network needs and really driving that velocity and productivity and converting business from over the road Thats actually what were probably seeing the majority of our wins has been the <unk>.

Shorter length of haul, which might be a negative mix impact to our revenue per load as the year progresses, but I think at the same time is a positive for velocity.

And balance so while it is competitive.

We're not going to unstack containers, unless we're getting a return on that.

And we still have a long way to go to get our fleet to running optimally and that the utilization levels.

They should be so there is capacity available even on the street today, but we also want to make sure we have ample capacity to support new Onboarding I'll make sure that those are seamless and that we're serving our customers appropriately as well.

Phil Yeager: And we still have a long way to go to get our fleet running optimally and at the utilization levels that they should be. So there's capacity available even on the street today, but we also want to make sure we have ample capacity to support new onboarding, make sure that those are seamless, and that we're serving our customers appropriately as well. That's great. Thanks for your time.

That's great. Thanks for the time.

Thank you again to ask a question. Please press star one on your telephone again Thats Star one one on your telephone to ask a question.

Bruce Chan: Thank you. Again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Our next question please standby.

Operator: Our next question. Please stand by. Our next question comes from the line of Brian Ossenbeck of J.P. Morgan. Please go ahead, Brian.

Our next question comes from the line of Brian Austin back of Jpmorgan. Please go ahead Brian.

Brian Ossenbeck: All right, thanks. Good evening, guys. Appreciate you taking the question. I just wanted to go back and make sure I understood the cadence again. Like, were you seeing contract renewals now at an earlier point? You were holding the line a little bit too hard on price, or is pricing, you know, down at this point? It sounds like maybe you're hoping for that to recover and turn positive on market recovery and maybe comps at the same time. So maybe you can just start there and kind of walk me through that again.

Alright. Thanks, guys. Appreciate you taking the question.

I just wanted to go back to make sure I understood.

The cadence again like what are you seeing contract renewals now familiar points you were holding the line a little bit too hard on.

<unk> is pricing.

Down.

At this point it sounds like maybe youre, hoping for that to recover in turn positive on market recovery and maybe comps at the same time. So maybe you can just start there and kind of walk me through that again.

Phil Yeager: Sure. And focusing on our incumbency, you know, we are seeing slightly lower renewal rates, I would say, and then what we're really trying to do is ensure that we're getting growth that is consistent with our network needs that helps drive that balance, helps reduce costs, and really spreads our fixed costs a little bit more effectively. And when you look at the latter part of the year, you know, Brian, that's where we mentioned that we held prices a little too long. And it's those contracts that are going to come due here in the second half, and we'll be able to price better and win more volume at that time. Right?

Sure and focusing on our incumbency, we are seeing slightly down renewals I would say and then what we're really trying to do it.

Ensure that we're getting growth that is consistent with our network needs that helped drive that balance help reduce costs and really spread our fixed costs, a little bit more effectively.

And when you look at the <unk>.

Latter part of the year.

Ian that's already mentioned that we.

We held price low too long in those contracts that are going to come due here in the second half and we will be able to.

Price better and.

Great.

Winning more volume at that time.

Alright. So then I guess I'm, just having a hard time with you've got prices, how too long in the back half of last year coming up this year.

Phil Yeager: So then I guess I'm just having a hard time with you've got prices so too high in the back half of last year coming up this year, when it flipped the other way, and you'd lose some on lose some more on price and get more in volume. Obviously, a lot can happen between now and then, but just wanted to make sure I understood what you were assuming, you know, in the outlook focused on. Yeah, maybe I can try and take it again.

Flip the other way and you'd lose some on lease some more on price and get get more on volume obviously, what can happen between now and then but just wanted to make sure I understood. What you were.

What you were assuming in the outlook focus on the mid point.

Yes, I can try to take it.

It's slightly down price in the current bid process, which is that 41% and 18% that are here in the first half right. So.

Phil Yeager: It's slightly down on price in the current bid process, which is that 41% and 18% that are here in the first half, right? So that's what we assumed on those renewals. And then we assumed slightly higher on Q3, Q4. And as we bring that on, you know, we would hope we would be hopeful that we are growing volumes during all those bids. And that is what we are seeing currently right now.

That's what we assumed on those renewals and then we assume slightly up on the Q3 Q4.

And as we bring that on.

We would hope we would be hopeful that we are growing volumes during all of those beds and that is what we are seeing currently right now if you're talking about 41% that is currently in bid we're seeing we're locking in our incumbency at that slightly down level, but then we're adding incremental volume, which as you know has a significant flow through for us.

Kevin Beth: If you talk about the 41% that is currently in bid, we are seeing that we're locking in our incumbency at that slightly lower level, but then we're adding incremental volume, which is, you know, has a significant flow through for us. And that's been the approach thus far. Obviously, we want the market to assist us, we want to see, you know, there is some stabilization in the spot market, but we haven't seen that necessarily translate into contract rates yet. But we're certainly hopeful we'll see the market really solidify and start to move upwards. And as you know, price is a large flow through for us and will certainly be as the market enables us to be going after rate as well. Yeah, I think one thing we didn't mention, this is Kevin, is on the upside of the guidance is the potential for some surcharges and then asset soils coming back. You know, that was really muted.

And that's been the approach thus far.

Yes, Lee we want the market to assess.

We want to see.

There is some stabilization in the spot market, we haven't seen that necessarily translate into contract rates, yet, but we're certainly hopeful we see the market really solidifies start to move upward and as you know prices.

Prices are large flow through for us and we will certainly be at.

The market enables us to be going after rate as well I think one thing we didn't mention this is Kevin.

<unk> is on the upside of the guidance.

So for some surcharges and an editorial is coming back that was really muted and in fact, there is no surcharge revenue that we experienced in 2023. So if we can get back to its standard.

Kevin Beth: In fact, there was no surcharge revenue that we experienced in 2023. So, you know, if we can get back to a standard environment, we think we'd be able to get some surcharge revenue in the second half of the year as well. And I would just highlight, I think we based that on discussions with a lot of our customers who are having some concerns around the East Coast labor challenges that may be existing as we enter what is typically the retail peak shipping season. And so I do think you'll see a little bit more diversification back to West Coast ports. Okay. I appreciate all that.

Environment, We think we would be able to get some surcharge revenue in the second half of the year as well.

I'll just highlight I think we baked that in discussions with a lot of our customer to our having some concerns around the east coast labor challenges that may be deemed as we enter what is typically retail peak shipping season, and so I do think you'll see a little bit more diversification back to west coast ports.

Okay I appreciate all that and just to.

Phil Yeager: And just to maybe follow up on the current market conditions, it sounds like things are actually pretty strong, relatively speaking, from December into January. I think Brian mentioned there are some signs of spot market strength, and clearly not as strong as you'd like. You just mentioned, Phil, but what are you seeing now that sort of gives you confidence in looking out for that back half recovery? Is it too early to say we've turned the corner? And then maybe specifically, since you talked about truckload conversion, just on rail service, are shippers really willing to commit meaningful volumes to that? Or is it just kind of waiting?

Maybe a follow up on the current market conditions. It sounds like things are actually.

Pretty strong relatively speaking from December into January I think Brian mentioned, there are some signs of spot market.

Spot market strengthen clearly not as strong as you'd like could you just mentioned Phil but what are you seeing now that sort of gives you confidence in looking out for that for that back half recovery is it too early to say we've turned the corner.

And then maybe specifically since you're talking about truckload conversion.

Just on rail service, our shippers really willing to commit meaningful volume to that or is it just kind of wait and see.

Brian Alexander: Yeah, sure. Sure, Brian. I'll start with the quality of the bids that we're getting. And Phil mentioned some of the conversations we're having with our shippers. They have a much better view with the normalized inventories of what their demands are going to be in each of the lanes and some of that seasonality that comes with it.

Yes, sure sure Brian I'll start with the quality of the bids that we're getting and Phil mentioned some of the dialogues, we're having with our shippers they have a much better view with a normalized inventories what their demands are going to be in each of the lanes and some of that seasonality that comes with it that helps us align with what what to execute to what the price to how to balance.

Brian Alexander: That helps us align with what to execute to, what the price to, how to balance our network. And so the quality of the bids is coming out really well. And so we mentioned some of the early wins in the bid season that have already started to materialize here. We saw the early signs of that in January.

Our network and so the quality of the bids are coming out really well and so we mentioned some of the early wins in the bid season that have already started to materialize here. We've seen early signs of that in January I mentioned some of the sequential growth that we've seen not just in intermodal, but also when we look at our brokerage sequential January over December was up 9% and up for <unk>.

Brian Alexander: I mentioned some of the sequential growth that we've seen, not just in intermodal, but also when we look at our brokerage. Sequential January over December was up 9% and up 4% year over year. And we think those are good indicators. And, within that brokerage piece and over the road, where we did see some spot price inflation, we'd like to see some more of that continue through the quarter. And we think it will as we start to see some of that spring restocking and as we go through March and into April. So I think that's a big part of it. As far as the rail Services, Brian, go we, you know, throughout 2023, we saw continuous quarter over quarter service improvements from both rail or both of our rail partners. And they're in a very good, good place.

Percent year over year, and we think those are good indicators and within that brokerage piece in over the road.

We did see some spot price inflation, we'd like to see some more of that continued through the quarter and we think it will as we start to see some of that spring restocking and as we go through.

March and into April So I think that's a big part of it as far as the rail services Brian.

Throughout 2023, we saw continuous quarter over quarter service improvements from both our both of our railcars.

They are at a very good good place there continuing that improvement that's compounding over the fourth quarter into this year I'd say in addition to the consistency that we've seen in the rail service. We're also seeing them be more nimble and quicker to respond to disruptions, whether it would be weather and they recover very quick so shippers are noticing.

Brian Alexander: They're continuing that improvement that's compounding over the fourth quarter into this year. I'd say, in addition to the consistency that we've seen in their rail service, we're also seeing them be more nimble and quicker to respond to disruptions, whether it be weather, and they recover very quickly. So shippers are noticing that as well and becoming more competent in those conversions.

That as well and becoming more confident in that in those conversions.

Thank you.

Using the most recent winter weather disruption of that rebound in service. So a very quick proof point for a lot of our customers that I think.

Many of our customers are thinking about how they want to lock in capacity right now as well and that there likely will be an inflection.

Brian Alexander: Yeah, I think we're using the most recent winter weather disruption in the rebound and service that was very quick as a proof point for a lot of our customers. And I think a lot of our customers are thinking about how they want to lock in capacity right now as well, and that there likely will be an inflection. At some point this year, I don't think anybody's calling for a change in the market.

At some point this year I don't think anybody's, calling a change in the market and that's not really built into our guidance, but we're certainly hopeful that we are seeing the positive trends that will lead to that.

Okay I appreciate all that thanks for your time.

Thank you.

Our next question.

Comes from the line of Bascom majors of Susquehanna. Please go ahead <unk>.

Phil Yeager: And that's not really built into our guidance, but we're certainly hopeful that we're seeing the positive trends that. Okay, I appreciate all that. Thanks for your time.

It sounds like the intermodal outlook for the second half Youre expecting.

Bascome Majors: Thank you. Our next question comes from the line of Bascome Majors of Susquehanna. Please go ahead, Bascome.

Slightly positive pricing.

Slightly favorable costs for a nice price cost spread.

Kevin Beth: It sounds like the intermodal outlook for the second half, you're expecting slightly positive pricing, you know, slightly favorable calls for a nice price call spread. I'm curious if the pricing comes in more neutral with cost for a kind of break even spread there. Do you still think the low end of your guidance could hold if that's what the second half gives us?

I'm curious if the pricing comes in more neutral with cost for kind of breakeven spread there do you still think the low end of your guidance could hold if that's what the second half gives us. Thank you.

Yes, absolutely.

We did not build that guidance with a large market improvement in mind as I mentioned, there is still upside factors as well in there around.

Kevin Beth: Thank you. Yeah, absolutely. I don't, we did not build this guidance with a large market improvement in mind. As I mentioned, there's some upside factors as well around shareholder purchases. And certainly, you know, if we don't see the market stabilized, we have levers we can pull to continue to improve our overall cost structure. So absolutely.

Share repurchases and certainly if.

If we need the market stabilized we have levers we can pull to continue to improve our overall cost structure. So absolutely, yes, I think the cost both.

The dynamic rail contract that we have.

Will help allow for that as well.

Kevin Beth: Yeah, I think the cost, both the dynamic rail contract that we have will help allow for that, Bascom, as well as, you know, our insourcing of the dredge and the new chassis agreement should all help to allow for hitting that low end of the guide. And in your prepared remarks, you talked about in recent years cash EPS being called 35 cents higher than reported EPS and, clearly, that goes up with the acquisition this year. Do you have a preliminary purchase price allocation sense of what that gap will be in 2024? Yeah, we think preliminary, you know, low teams is probably the additional amortization. Certainly, that's not done yet and probably won't be done till the end of the quarter. But yeah, that's our, I'm sorry, low teens. Do you mean like 10 to 15 cents or 10% of 35 cents? Oh, yeah, sorry. No, actually, I was speaking in actual dollars.

Our.

In sourcing of the drayage and the new chassis agreement offset help.

<unk> allow for for hitting that low end of the guidance.

And in your prepared remarks, you talked about in recent years cash EPS being call. It 35 higher than reported EPS.

You clearly that goes up with the acquisition. This year do you have a preliminary purchase price allocation sense of what that gap will be in 2024.

Yes, we think pre.

Preliminary.

Our low team is probably the additional amortization.

Certainly that's not done yet and probably won't be done for the end of the quarter, but that's our preliminary.

I am sorry, low teens do you mean like 10 to 15 or 10% of 35.

Yes, sorry.

Actually I was speaking.

Kevin Beth: So yeah, about 12-15 million of amortization, additional amortization, www.hubgroupinc.com www.hubg.com. Is that what you're looking for? I'm sorry, thank you for the time. Thank you. Our next question comes from the line of Brady Lears, of Steve question, please. Great. Okay, great. Thanks.

Yes.

Well $15 million.

Amortization at this high amortization expense from the acquisition.

Is that what Youre looking for.

I am sorry, thank you for the time.

Okay.

Thank you.

Our next question comes from the line.

Brady layers of Stephens your.

Your question please Brady.

Okay. Great. Thanks. This is Brad on for Justin I wanted to ask if you could share what your guidance is assuming for margins in logistics.

Operator: This is Brady speaking on behalf of Justin. I wanted to ask if you could share what your guidance is assuming for margins and logistics, and maybe if you could just share any color on the cadence of margins in that segment in one cue and then kind of as we move through the year. Sure, Brady.

Maybe if you could just share any color on the cadence of margins in that segment and <unk> and then kind of as we move through the year.

Kevin Beth: I think, you know, actually, similar to what we've been talking about with ICS, it's going to start off a little lower than we would certainly like it, just due to lower transactional volume. You know, the spot market and the brokerage pricing right now are a tough headwind to battle. But we're expecting that to increase as our contractual rates on the truck market improve. And also, as the final mile integration that happens, we, you know, we have a lot of upside there as well to help with the DOI of the logistics segment. Yes, I would think about it as adjusted operating margin percent from Q4 is probably relatively flattish to Q1, and then we would anticipate sequentially. Okay, great. Thanks. Very helpful.

Sure Greg I think.

Similar to what we've been talking about with Ips, it's going to start off.

A little lower.

Then we would certainly like it just due to lower transactional volume.

Stock market.

Brokerage pricing right now.

A tough headwind to the battle, but we're expecting that to increase as our contractual rates on the truck market improve.

Sure.

And also as the final mile.

When that happens we have a lot of upside there as well to help with that.

The logistics segment.

Yes, I would think about it.

<unk> operating margin percent for Q4 is probably relatively flattish to Q1, and then we would anticipate sequentially improving.

Okay, great. Thanks very helpful.

Brian Alexander: Then maybe you could just talk about the growth that you're assuming on an organic basis and logistics, and maybe any updated thoughts and kind of what you view as a normalized margin for the segment, including the recent acquisition. Sure. Yeah, this is Brian.

And then maybe you could just talk about the growth that you're assuming on an organic basis and logistics and maybe any updated thoughts on kind of what you view as a normalized margin for the segment, including the recent acquisition.

Sure. Yes. This is Brian I'll talk a little bit about that I think what we've seen obviously is in our logistics segment as our brokerage standard out and continuing to grow volume, we expect that volume to grow into the into the double digits low double digits. As we go into this year like I said, we've already seen that in January starting to materialize I think also within our brokerage.

Brian Alexander: I'll talk a little bit about that. I think what we've seen, obviously, in our logistics segment is our brokerage standing out and continuing to grow volume. We expect that volume to grow into the double digits, low double digits, as we go into this year. Like I said, we've already seen that in January starting to materialize.

Brian Alexander: I think also within our brokerage, what we're seeing is their ability to cross sell across all of HUB Group, and they're adding new logos, and then those logos are cross selling throughout logistics. Within our final mile, we've added those appliance capabilities, but we've also seen that cross sell pipeline open very quickly with materializing wins ready to onboard in Q2. So that'll be another good piece of that revenue stream, and then as we think about our network, which I've mentioned is 11 million square feet, that helps enable our cross selling and our growth with strong pipelines for that network, as well as our managed transport. I've also indicated, too, that as we've done this, we do see a higher retention rate of our customers.

What we're seeing is their ability to cross sell across all of hub group and they are adding new logos and then those logos are cross selling throughout logistics within our final mile. We've added those appliance capabilities, but we've also seen that cross sell pipeline open very quickly with materializing wins.

To onboard in Q2, so that'll be another good piece of that revenue stream and then as we think about our network, which I've mentioned is 11 million square feet that helps enable our cross selling and our growth was strong pipelines.

That network as well as our managed trends.

I've also indicated to as we've done this we do see a <unk>.

Higher retention rate of our customers, we see them being less price sensitive and in a higher rate of return with those solutions that we deliver across our logistics offerings. Yes, obviously, the highest growth rate would be a final out given the incremental revenue there.

Brian Alexander: We see them being less price sensitive and a higher rate of return on those solutions that we deliver across our logistics offerings. Obviously, the highest growth rate would be the final mile, just given the incremental revenues there. I would say following that would be managed transport, because we have some locked-in wins that are starting up actually in February, so we're excited about that. For brokerage, we didn't assume a massive amount of growth, just given we don't know exactly how the market's going to look, and then within consolidation, we said things would be a little bit more muted, but maybe just some organic growth and overall volume and velocity. So not anything massive, but actually up.

I would say following that would be managed trend because we have some locked in wind that are starting up actually in February. So we're excited about that brokerage we didn't assume a massive amount of growth just given we don't know exactly how the market is going to look at them with a consolidation, we said things would be a little bit more muted, but maybe just some organic.

Growth in overall volume and velocity so not anything.

Kevin Beth: Okay, great. Thanks, guys. I'll leave it there.

But actually up year over year.

Okay, great. Thanks, guys I'll leave it there.

Tom Wadewitz: Thank you. Our next question comes from the line of Thomas Wadewitz of UBS. Your question, please, Thomas. Yeah, good afternoon.

Thank you thanks, Eric.

Thank you.

Our next question.

It comes from the line of Thomas <unk> of <unk>.

Your question please Thomas.

Yes, good afternoon.

Phil Yeager: I wanted to ask a little bit about what's behind the optimism on volume growth and intermodal and just think about where this, you know, shippers are really kind of, interested in the conversion and the better backup on rail service gives you that momentum. Is it, you know, the share gain or the improved volume performance? Is that really at the expense of truck?

Wanted to ask a little bit about.

What's behind the optimism on volume growth and intermodal and just think about where.

Is this shippers are really kind of.

Interested in the conversion and a better backdrop on rail service gives you that momentum.

Is it this year.

Share gain or the improved volume performance is that really at the expensive truck or are you.

Phil Yeager: Or are you thinking about maybe competing better against some of the other intermodal players? Just some more perspective on the improvement in intermodal volume as we look at 24. Yeah, this is Phil.

Are you thinking about maybe competing better against some of the other intermodal players just some more perspective about the improvement in intermodal volume is look at 'twenty four.

Yeah. This is Phil.

Phil Yeager: We are very focused on, once again, finding the right business that's going to fit our network. But yeah, we are very focused on returning to growth. As we mentioned, we don't think Q1 is going to be positive year-over-year volume growth but that it will improve on growth rates as we go through the year. One reason is low comparables in the back half.

Very focused on what again, finding the right business, that's going to fit our network, but yes, we are very focused on returning to growth.

As we mentioned, we don't think Q1 is going to be a positive.

Year over year volume growth, but that it will improve on growth rates as we go through the year.

One is low comparables in the back half. So that's certainly an aspect of it but at the same time.

Phil Yeager: So that's certainly an aspect of it. But at the same time, it's discussions with our clients around incremental wins that we're actually receiving, and then their forecasts for the year as well. And with the service levels we're providing, we're winning a lot of awards and positioning ourselves to really take advantage of the market upswing here. And so it's a mix of comparables, confirmed wins, and then discussions with our customers around how they see their supply chains adapting throughout the year. Do you think it's more share gain from truck or competing better versus some of the other intermobile players?

Discussions with our clients around incremental wins that we're actually receiving and then therefore caps for the year as well and with the service levels. We're providing we're winning a lot of award then positioning ourselves too.

Really take advantage of the market upswing here so.

It's a mix of comparable confirmed wins and discussions with our customers around how they see their supply chain adapting throughout the year.

Do you think it's more share gains from truck or competing better versus some of the other intermodal players.

Phil Yeager: You know, we're targeting truck. I mean, we're winning a lot of short-haul business right now. Sometimes it's more challenging to tell exactly where the business comes from, but, you know, I think our main target is the truck.

We are targeting track I mean, we're winning a lot of short haul business right now.

It's more challenging to tell exactly where it comes from that but I think our main targeted strategy.

Phil Yeager: Right, right. Okay, that makes sense. One more.

Right right, Okay that makes sense.

Phil Yeager: You know, you've built a nice portfolio of services you can offer. You talked a little bit about cross-selling. What do you think is the kind of, you know, the best hook with the customer when you go in with something they really want and is helpful for cross-selling and perhaps an area that you might want to build out additional capability? Yes, we're able to really open the door with any customer based on our intermodal capabilities and our service reputation. I think that's certainly our way in. Once we're there, it's about finding the right solution for what their supply chain requires. It could be anything from something as simple as transactional brokerage to a consolidation program to a full outsourcing or just managing their LTL.

One more.

You've built a nice portfolio of services you can offer you talked a little bit about cross selling what do you think is the kind of the best hook with the customer when you go in something they really want.

And it is helpful for cross selling and perhaps in <unk>.

Are you that you might want to build out additional capability.

Yes, we're able to really open the door with with any customer based on our intermodal capabilities and our service reputation I think thats certainly our way in.

Once we're there it's about finding the right solution for what their supply chain requires that could be anything from something as simple as transactional brokerage UA consolidation program to a full outsource or just managing their LCL, we find that our managed transportation capabilities, we can come in with a.

Phil Yeager: We find that our managed transportation capabilities, especially given the inflation that has been taking place in the LTL market, with what we can do with consolidation and managing their LTL spend, is a very sticky and strong service offering. But when we combine that with our warehousing capabilities, it becomes even stickier, as Brian mentioned. So it really does depend on the customer and their specific supply chain. But when I think about where we're at now, I think we have the right set of capabilities. It's about building specializations and scale within them and finding the right cultural fits that will help us continue to drive that growth.

Especially given the inflation that has been taken place in the <unk> market with what we can do with consolidation in managing their <unk> spend is a very sticky and strong service offering.

But when we combine that with our warehousing capabilities become even stickier as Brian mentioned, so it really does depend on the customer and their specific supply chain, but when I think about where we're at now I think we have the right set of capabilities, it's about building specializations and scale within them.

And finding the right cultural fit that will help us continue to drive that growth. So.

Phil Yeager: So, you know, I think you'll see us continue to be active in non-asset logistics M&A but also be very thoughtful in our approach to adding to those core capabilities that we've developed. Okay, great. Thanks for the time. HUBG.

I think youll see us continue to be active in non asset logistics M&A.

But also be very thoughtful around our approach in.

And adding to those core capabilities that we've developed.

Okay, great. Thanks for the time.

Phil Yeager: Thank you. Our next question comes from the line of Ravi Shankar of Morgan Stanley. Please go ahead, Ravi. Hi, thanks. This is Christine McGarvey. I'm on behalf of Ravi Shankar.

Okay.

Thank you.

Our next question.

It comes from the line of Ravi Shanker of Morgan Stanley. Please go ahead Robby.

Alright. Thanks. This is Christine mcgarvey on for Ravi Shanker.

Christine McGarvey: I just wanted to take a step back a little bit. You guys issued some long-term targets a couple of years ago now, and it seems, you know, we're quickly approaching 2025. So maybe you can talk about kind of confidence and the path to some of those long-term targets. And if I can, maybe, you know, thoughts as we approach them, how you guys are thinking about kind of the next benchmarks that you guys are looking to benchmark again. Yeah, so we're not ready to publish any new targets yet.

Just wanted to take a step back a little bit you guys issued long term targets a couple of years ago now and.

We're quickly approaching 2025, so maybe you can talk about kind of confidence and path to some of those long term targets.

And if I can maybe talk to us.

Approach than how you guys are thinking about kind of the neck.

<unk> that you guys are looking at.

Thanks, Mark again.

Yes, so we're not ready to publish any new target certainly we're very focused on the 2025 targets with that.

Phil Yeager: Certainly, we're very focused on the 2025 target suite, and you know, we have some work to do on the revenue side. But I think our guidance shows that where we think we'll be is relatively consistent, and we'll have the opportunity to achieve that target. We operated this year and the prior year within and above the range on operating margins.

We have some work to do on the revenue side, but I think our guidance shows that.

There, we think will be is relatively consistent.

And what the opportunity to achieve that target.

We operated this year in the prior year within and above the range on operating margins I think our guidance is also within the range obviously and.

Phil Yeager: I think our guidance is also within the range, obviously. And we think that with a positive inflection in the market, we'll be, you know, well within that. So certainly, our focus is on achieving both of them. And we think both are very doable. Great, thanks. If I could squeeze in one more,

We think that with a positive inflection in the market, we'll be well within that.

So certainly our focus is on achieving both of them and we think both very doable.

Great. Thanks, if I could squeeze in one more.

Christine McGarvey: You've been talking about a bid on the call, but maybe to ask it a slightly different way. In your customer conversations thus far in bid season, you know, the over-the-road conversion, it seems, at least collectively, as a market, it's sometimes, you know, been harder to prove out than maybe hoped for. It sounds like there's some inflection here, you know, in those conversations.

It's been talked about a bit on the call, but maybe to ask it a slightly different way in your customer conversations thus far in bid do then.

The over the road conversion it seems.

Collectively the market at some time.

Harder to prove out then maybe hope for it sounds like there's some inflection here in this conversation.

Phil Yeager: You alluded to kind of rail service confidence coming back, but is there anything else in terms of customer priorities or what they're telling you that makes, you know, the over-the-road conversion a little, you know, more attractive here? Yeah. Yeah, I think our customers are looking for service. They're looking for consistency.

You alluded to kind of rail service confidence coming back but is there anything else in terms of customer priorities are what they are telling you that makes the over the road conversion a little more attractive here.

Yes, I think our customers are looking for service there.

They are looking for consistency there obviously looking for cost savings and they are looking to ensure that they have available capacity. When the market does have flattened I think intermodal is a great solution for all of that and as Brian mentioned earlier when inventory stabilize theres more of an opportunity to extend those transit, which also opens up.

Phil Yeager: They're obviously looking for cost savings, and they're looking to ensure that they have available capacity when the market does inflect, and I think Intermodal is a great solution for all of that. And, you know, as Brian mentioned earlier, when inventory is stabilized, there's more of an opportunity to extend those transits, which also opens up more Intermodal opportunities. So all that leads to some of that shorter length of haul, which we're seeing right now, start to flip over. Great. Thanks. I'll leave it there.

More intermodal opportunities to all of that leads to some of that shorter length of haul, which we're seeing right now start to flip over.

Great. Thanks, I'll leave it there I appreciate it thank.

David P. Yeager: I appreciate it. Thank you. Our next question comes from the line of David Zuzula of Barclays. Your question, please, Dave.

Thank you.

Thank you.

Our next question.

It comes from the line of <unk>.

<unk> Zulauf Barclays. Your question please.

Kevin Beth: Hey, good evening, and thanks for taking my question. I guess real quick, are you able to share the realized yield you were able to get on Intermodal for the quarter? Yeah, it was down 21%.

Hey, good evening and thanks for taking my question I.

Just real quick are you able to share the realized yields you are you able to get in intermodal for the quarter.

Yes, it was down 21% a couple of things to reference there was we had a fuel headwind as.

Phil Yeager: A couple of things to reference there were we had a fuel headwind, as well as overlapping accessorials and over $5 million of surcharge revenue from last year. So I think along with that, as I mentioned earlier, you're going to continue to see a little bit of a mixed impact as we bring on more shorter length of haul business. And that obviously impacted us in the fourth quarter as well.

As well as overlapping accessorial and over $5 million of surcharge revenue growth from last year or so.

I think along with that I had mentioned earlier youre going to continue to see a little bit of a mix impact as we bring on more shorter length of haul business from that obviously impacted us in the fourth quarter as well.

Phil Yeager: Thanks. Very helpful. I don't want to pick on too much of a scab that Brian had gone after, but just a little bit of understanding for us. On the way down, our perception was that you held the line on price maybe a little too long, and it cost you on the volume side.

Thanks very helpful.

I don't want to take too much of a scab that.

Brian had had gone after but.

Just a little bit of understanding for us.

On the way down our perception.

If you held the line on price, maybe a little too long.

And it cost you on the volume side.

Phil Yeager: Have you changed at all how you're thinking about pricing or anything you're looking at for pricing or algorithms or anything that will help you? You may be more preventing you from being not aggressive enough, I guess, on the upside and not taking advantage of a rapidly moving price? Yeah, yeah, we have. Absolutely not. We've changed our entire pricing organization and philosophy to be able to adjust to that. We have a new chief marketing officer doing an excellent job and making sure that we are winning in the market and able to go out and price to win. And that's what we've been doing thus far. So yeah, we've made some significant changes within the organization and to our approach, and we feel as though it's working. Yeah,

Have you changed at all how youre thinking about pricing or anything you're looking at for pricing or algorithms or anything that will help you.

Maybe be more.

Prevent you from being not aggressive enough I guess on the upside and not taking advantage of rapidly moving pricing market.

Yes, we have absolutely.

Changed our entire pricing organization and philosophy to be able to adjust to that we have a new chief marketing officers are doing an excellent job.

Making sure that we are winning in the market and able to go out and price to win and that's what we've been doing thus far so yes.

Yes, we've made some significant changes within the organization and.

And to our approach and feel as though it's working yeah.

Brian Alexander: And just to add to that as well as on price, too, it's also targeting what we go after to make sure that we're building the balance across our network, as well as the velocity and the areas where we need it. And that aligns with the cost takeouts that we've also been able to do within our intermodal operation. And last point I just added to Phil, I think right now is the timeframe where we lost that volume last year, right? So we are in the process of recapturing that, which is why we laid out in the guide that we were going to be down in Q1, but then start to see year over year growth. Thanks, super helpful.

And then just to add to that as well on price too. It's also targeting what we go after to make sure that we're building the balance across our network as well as the velocity in the areas, where we need it and that aligns with the cost takeout that we've also been able to do within our intermodal operation last point I'd. Just add is itself I think right now is the time frame, where we lost.

That volume last year right. So we are in the process of recapturing that which is why we laid out in the guide that we are going to be down in Q1, but then start to see year over year growth.

Thanks Super helpful. On the brokerage side could you give your thoughts on.

Brian Alexander: And then on the brokerage side, can we get your thoughts on bot versus contract, you know, how you're trying to set yourself up to be able to take advantage of a potentially positively inflecting market there, and you know, how you plan on handling customer relationships. Sure. Yeah, this is Brian.

Spot versus contract how youre trying to set yourself up to be able to take advantage of it.

Centrally positive Lee inflicting market, there and how you plan on handling customer relationships.

Brian Alexander: I'll touch on that. You know, when we finished out the year, we were 53% of our brokerage volume being contracted on the spot side. And I think what we've been able to do is take a lot of that volume that's coming in, and we're buying low on the spot and moving that into contracted so that we're able to secure that pricing, as pressure starts to come in through the later parts of this year, so that we maintain that lower cost of purchase transportation, and then we translate that back into the price that we give to our customers, which then creates more of that Thanks, Brent. And if I could just get a last clean up.

Sure. Yes. This is Brian I'll touch on that.

When we finished up the year, we were 53% of our brokerage volume being contracted 47 on the spot side and I think what we've been able to do is take a lot of that volume that's coming in and that we're buying low on the spot and move that into contracted so that we're able to secure that pricing as pressure starts to come in through the through the later parts.

This year, so that we maintain that lower cost of purchase transportation and then we translate that back into the price that we give to our customers, which then creates more of that volume. So we're structured really well with a good balance and a good strategy for that.

Thanks, Brian and then if I could just a last cleanup can I get the non driver employee count.

Kevin Beth: Can I get the non-driver employee? Yeah, the non-driver without a new final mile is 1900 versus 22 at the end of last HUBG.com. Thanks so much. Thank you. Our next question comes from the line of Allison Polnyak of Wells Fargo. Your question, please, Allison. Hi, good evening. Could you maybe talk to me about ITS margins, you know, as you're looking towards growth in the second half, any impact in terms of, or if you can quantify how unstacking the boxes would impact that margin in the second half? Is there a cost there and just any holding costs there near term to be mindful of? No, yeah, Allison. I think it's a very good question.

Yeah.

Non driver without new final mile is 1900 versus 22 at the end of last year.

8% decrease.

Thanks, so much.

Thank you.

Our next question.

Comes from the line of Allison Pontiac.

Wells Fargo. Your question. Please Allison.

Hi, good evening.

Maybe talk to your margins.

Youre looking towards growth in the second half any impact in terms of area. If you can quantify that.

Unpacking the boxes would impact that margin in the second half is there a cost there and just any holding costs. There are near term to be mindful of.

No.

Allison I think a very good question.

Allison Polnyak: But, you know, when we're unstacking, we're very much looking at it from a returns perspective, so we want to make sure that the business we're bringing out is going to be helpful to margins. So it shouldn't have a large impact in one quarter or another. Anything likely worth calling out where we might, you know, give you a little bit more is that repositioning costs are increasing. I think that would be a larger driver than any stacking costs. Yeah, I think one of the things we do pretty well is, you know, we stack close to the markets that we anticipate are going to have deficits. So now that allows us to react quickly, and there isn't a lot of cost to get those boxes revenue-producing as quickly as possible.

One word on stacking, we're very much looking at it from a returns perspective, so we want to make sure that the business. We're bringing on is going to be helpful to margin. So it shouldnt be a large impact in one quarter or another or anything likely worth calling out where we might.

Give you a little bit more repositioning.

Repositioning costs are increasing I think that would be a larger driver.

And then on stacking costs.

Yes, Alex I think one of the things, we do pretty well with that close to the markets that we anticipate are going to have a deficit. So now that allows us to react quickly.

There isn't a lot of cost to get those boxes.

Phil Yeager: Got it. And then, just in terms of M&A, maybe a little color on kind of where your pipeline stands. And you know, you just did the forward error in the process of that, just management capacity to handle features in M&A, just given your ability to do that on the financial side. Yeah, no, so yeah, we do have a strong pipeline. You know, we're very focused on kind of those core non-asset logistics areas, adding scale and specialization that bring, you know, a higher margin profile.

Revenue producing as quickly as possible.

Got it and then just in terms of M&A.

Maybe a little color on kind of where your pipeline stands and you just redeploy to her in the past.

That just management capacity to handle future M&A and just given your ability to do that on the financial side. Thanks.

Yes, so yes, we do have a strong pipeline.

We're very focused on kind of the core non asset logistics areas, adding scale and specialization that bring a higher margin profile than.

Phil Yeager: And yeah, we're continuing to look for opportunities. We want to be thoughtful. Obviously, priority one is being successful and getting back to growth and intermodal as well as successful integration of the final model acquisition. So those are the top two, but then certainly out looking for more. And as you mentioned, we have a significant gap.

Yes, we're continuing to look for opportunities we want to be thoughtful obviously priority one is being successful in getting back to growth in intermodal as well as a successful integration of the final mile acquisition. So those are the top two but then certainly out looking for more and as you mentioned, we have a significant capacity.

Phil Yeager: Great, thank you. Thank you. Thank you. I would now like to turn the conference back to Phil Yeager for his closing remarks. Sir.

Great. Thank you.

Thank you.

Thank you I would now like to turn the conference back to Phil Yeager for closing remarks, Sir.

Phil Yeager: Great, well, thank you for joining our call this evening. As always, if you have any questions, Kevin, Brian, and I are available, and we hope you have a great evening. Thank you again. This concludes today's conference call. Thank you for participating. You may now disconnect.

Great well. Thank you for joining our call. This evening as always if you have any questions, Kevin Brian and I are available and we hope you have a great evening. Thank you again.

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

Okay.

Okay.

[music].

Okay.

Yes.

Yes.

Okay.

[music].

Yes.

Okay.

Okay.

Okay.

[music].