Q2 2024 Hub Group Inc Earnings Call

Okay.

Operator: Hello, and welcome to the Hub Group second quarter 2024 earnings conference call. Phil Yeager, Hub President, Chief Executive Officer, and Vice Chairman, Brian Alexander, Chief Operating Officer, and Kevin Beth, Chief Financial Officer, are joining the call. At this time, all participants are in a listening mode.

Speaker Change: Hello, and welcome to the hub group's second quarter 2024 earnings conference call.

Speaker Change: Phil Yeager, our president she seems like the I'll start and Vice Chairman, Brian Alexander Chief Operating Officer, and Kevin <unk>, Chief Financial Officer are joining the call.

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

Operator: A brief question and answer session will follow the prepared remarks. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. Any forelooking 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 forelooking can be identified by the use of words such as believe, expect, anticipate, and project, and variations of these words.

A brief question and answer session will follow the prepared remarks.

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

Speaker Change: 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.

Speaker Change: Statements that are forward looking can be identified by the use of words, such as belief expect anticipate and project and variations of these words.

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

Speaker Change: 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.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: It's 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 second quarter earnings call. With me today are Brian Alexander, Hub Group's Chief Operating Officer, and Kevin Beth, our Chief Financial Officer. I wanted to start by thanking all of our team members across North America for their hard work and dedication to serving our country.

Phil Yeager: Good afternoon, and thank you for joining hub group's second quarter earnings call with me today are Brian Alexander Hub group's Chief operating officer, and Kevin <unk>, Our Chief Financial Officer.

Speaker Change: I wanted to start by thanking all of our team members across North America for their hard work and dedication to serving our customers.

Phil Yeager: The domestic crude market continues to be challenged with a highly competitive bid season, balanced demand, and excess supply of capacity. We've seen a more stabilized inventory environment, as well as incremental capacity attrition, and anticipate some peak season volatility on the West Coast due to solid import demand and potential East Coast labor disruption, which, along with our recent wins, should support strong volume performance through the remainder of the year. We've seen some signs of market tightness, but nothing that would denote a sustainable trend at this time.

Speaker Change: The domestic crude market has continued to be challenged with a highly competitive bid season balanced demand and excess supply of capacity.

Speaker Change: We've seen a more stabilized inventory environment as well as incremental capacity attrition and anticipate some peak season on the west coast due to solid import demand and potential east coast labor disruption, which along with our recent win should support strong volume performance through the remainder of the year.

Speaker Change: We've seen some signs of market tightness, but nothing that would denote a sustainable trend at this time.

Phil Yeager: Our customers continue to have options in selecting their providers, and we are supporting them with our full portfolio of services, strong cost and financial position, as well as our best-in-class service, which we believe will lead to improvements in growth and return. In Intermodal, we are providing record service levels along with a cost-competitive product leading to 8% volume growth in the second quarter. A few highlights that stand out are continued growth in the local east of 26% and in Mexico, which was up 60% year-over-year in the quarter, while we also grew our trans-town volume.

Speaker Change: Our customers continue to have options and collecting their providers and we are supporting them with our full portfolio of services strong cost and financial position as well as our best in class service, which we believe will lead to improvements in growth and return.

Speaker Change: In intermodal, we are providing record service levels, along with our cost competitive products, leading to 8% volume growth in the second quarter.

Speaker Change: A few highlights that stand out our continued growth in the local east of 26% and in Mexico, which was up 60% year over year in the quarter. While we also grew our transcon volumes.

Phil Yeager: Our margin per load day focused bid plan is enabling better balanced growth, which is leading to cost reductions in our drainage network and lowering empty repositioning costs. All of these initiatives are allowing us to win in this environment and position us for the future.

Speaker Change: Our margin per load. They focused bid plan is enabling better balanced growth, which is leading to cost reductions in our great network and lowering empty repositioning call al.

Speaker Change: All of these initiatives are allowing us to win in this environment and position us for the future.

Phil Yeager: We remain focused on serving our customers through their fluctuations in demand and reducing costs to drive ongoing growth. In Dedicated, we continue to see top-line momentum as we onboard a new site for existing customers. However, earnings performance in the quarter was impacted as we invested in serving our customers through their spring search.

Speaker Change: We remain focused on servicing our customers through their fluctuations in demand and reducing costs to drive ongoing growth.

Speaker Change: In dedicated we continued to see top line momentum as we onboard a new site for existing customers. However earnings performance in the quarter was impacted as we invested in servicing our customers through their spring search.

Phil Yeager: This investment, we believe, will support additional growth opportunities and retention of our customer base in the long term. Additionally, our brokerage team continues to drive growth in LTL to offset the challenges of the broader truckload environment. Despite the first volume decline we have seen in several quarters, we are confident in the performance of our team and our value proposition to our customers, which is leading to strong bid wins that will start in the near term.

Speaker Change: This investment we believe will support additional growth opportunities and retention of our customer base and the long term.

Speaker Change: Our brokerage team continued to drive growth and LPL to offset the challenges of the broader truckload environment.

Speaker Change: The first volume decline we've seen in several quarters, we are confident in the performance of our team and our value proposition to our customers, which is leading to strong bid wins that will be starting in the near term.

Phil Yeager: In our contractual logistics services, margins have been strong, consistent with our diversification strategy, and we are completing our integration of our final mile acquisition from last year. Our best-in-class final mile service offerings and cost optimization efforts are leading to new wins, which will be integrated during the second half of the year. In managed transportation, we are winning with new customers and full outsourcing and LTL management, helping them reduce costs and enhance control of their supply. Finally, within our consolidation network, we're focusing on optimizing our network to improve our service and cost and anticipate improvement in the months ahead. We continue to take action to position Hub Group for success.

Speaker Change: And our contractual logistics services margins have been strong consistent with our diversification strategy and we are completing our integration of our final mile acquisition from last year.

Speaker Change: Our best in class final mile service offering and cost optimization efforts are leading to new wave, which will onboard during the second half of the year.

Speaker Change: You mean of transportation, we are winning with new customers and full outsourcing and LPL management, helping them reduce cost and enhanced control of their supply chain.

Speaker Change: Finally within our consolidation network, we are focusing on optimizing our network to improve our service.

Speaker Change: And anticipate improvement in the months ahead.

Speaker Change: We continue to take actions to position <unk> for success, we are maintaining our focus on successfully navigating this challenging market through our disciplined operational and investment approach, while providing best in class service to our customers, which we believe will position us well for the market recovery and drive strong shareholder returns.

Phil Yeager: We are maintaining our focus on successfully navigating this challenging market through our disciplined operational and investment approach while providing best-in-class service to our customers, which we believe will position us well for the market recovery and drive strong shareholder return. Our diversification strategy has helped us deepen our value to our customers while stabilizing our margin profile, and we are continuing to successfully manage our costs across the organization. Finally, while results have been challenged given broader market conditions, we are in a phenomenal financial position with strong free cash flow generation, little net debt, and ample liquidity to continue to grow the acquisition and invest in our business while returning capital to shareholders through our dividend and ongoing share repurchase. With that, I will hand it over to Brian to discuss our operational results.

Speaker Change: Our diversification strategy has helped us deepen our value to our customers while stabilizing our margin profile and we are continuing to successfully manage our costs across the organization.

Speaker Change: Finally, while results have been challenged given broader market conditions, we are in a phenomenal financial position with strong free cash flow generation little net debt and ample liquidity to continue to grow via acquisition and invest in our business, while returning capital to shareholders through our dividend and ongoing share repurchases.

Speaker Change: With that I'll hand, it over to Brian to discuss our operational results.

Brian Alexander: Thank you, Phil, and the ITS Intermodal Volume Group. 8% year-over-year. On a sequential basis, second quarter volume growth was 12% over the first quarter, highlighting our momentum and implementation of new contracts. By region, Transcon volume was up 1% year-over-year. Local Lease Volume grew 26%, and Local West declined 3%.

Brian: Thank you, Phil and Ics intermodal volume grew 8% year over year.

Brian: On a sequential basis second quarter volume growth was 12% over the first quarter, highlighting our momentum and implementation of new contracts.

Brian: By region Transcon volume was up 1% year over year local east volume grew 26% and local west declined 3%.

Brian Alexander: The volume growth we are seeing is helping to improve driver productivity and network balance, as we improved driver productivity 15% year-over-year in the quarter and reduced empty repositioning costs by nearly 25%. With our continued focus on controlling costs, new contractual frameworks, and aligning bid strategy, we believe we are well positioned to support our customers' peak needs and for the eventual market uptake. We delivered top line growth in our dedicated business with an increase in revenue per tractor per day as we brought on new wins and drove efficiencies in our network. However, profitability was challenged with increased expenses to support strong demand from our customers.

Brian: The volume growth, we are seeing is helping to improve driver productivity and network balance as we improve driver productivity, 15% year over year in the quarter and reduce empty repositioning costs by nearly 25%.

Speaker Change: With our continued focus on controlling costs, new contractual frameworks and align bid strategy. We believe we are well positioned to support our customers' peak needs and for the eventual market upturn.

Brian: We delivered top line growth in our dedicated business with an increase in revenue per tractor per day as we brought on new wins and drove efficiencies in our network, but profitability was challenged with increased expenses to support strong demand from our customers.

Brian Alexander: Now turning to our logistics. We continue to be pleased with the growth and profit expansion of our logistics segment, with the second quarter earnings generating a 60 basis point improvement in operating margin over the first quarter. Revenue growth in our final mile business more than offset challenges in our brokerage, resulting in logistics revenue of $459 million, 1% higher than last year. Final Mile generated strong growth on both the top and bottom lines, with several new customer and organic implementations in the first half of 2024.

Brian: Now turning to our logistics segment.

Brian: We continue to be pleased with the growth and profit expansion of our logistics segment with the second quarter earnings generating a 60 basis point improvement in operating margin over the first quarter.

Brian: Revenue growth in our final mile business more than offset challenges in our brokerage business.

Brian: <unk> and logistics revenue of $459 million, 1% higher than last year.

Brian: Final mile generated strong growth on both the top and bottom line with several new customer inorganic implementations in the first half of 2024.

Brian Alexander: We expect this to continue with several confirmed wins to implement in the third quarter. Our successful integration is allowing us to leverage our combined non-asset-based operating model to improve our cost structure. Brokerage continues to benefit from our diverse mode offering across several sales. We have maintained our roughly 50-50 split between contract and spot market, allowing flexibility to respond to our customers' needs.

Brian: We expect this to continue with several confirmed wins to implement in the third quarter.

Brian: Our successful integration is allowing us to leverage our combined non asset based operating model to improve our cost structure.

Brian: Brokerage continues to benefit from our diverse mode operating across several sales channels.

Brian: We have maintained our roughly 50 50 split between contract and spot market, allowing flexibility to respond to our customers' needs.

Brian Alexander: Despite market headwinds, the team has made productivity strides, resulting in sequential improvement in revenue per load of more than 300 basis points when comparing the second quarter to the first quarter. Another bright spot is LTL, which generated several transactional in-contract wins in the first half of 2024, resulting in volume growth of 18% in the second quarter. In addition, we have several confirmed wins that have already started onboarding in the third quarter.

Brian: Despite market headwinds the team has made productivity strides, resulting in sequential improvement in revenue per load of more than 300 basis points when comparing the second quarter to the first quarter.

Brian: Another bright spot is LCL, which has generated several transactional and contract wins in the first half of 2024, resulting in volume growth of 18% in the second quarter.

Brian: In addition, we have several confirmed wins that have already started onboarding in the third quarter.

Brian Alexander: From a cost perspective, we've leveraged our technology to improve our loads per team member by 24% and have additional IT initiatives that we'll implement throughout the rest of 2024. Overall, Brokerage is well positioned for accelerating growth as market conditions improve. We also continue to invest in our network of national multi-purpose logistics facilities, with our largest location onboarding in the Northeast at the start of the third quarter.

Brian: From a cost perspective, we've leveraged our technology to improve our loads per team member by 24% and have additional initiatives that will implement throughout the rest of 2024.

Brian: Overall brokerage is well positioned for accelerated growth as market conditions improve.

Brian: We also continue to invest in our network of National multi purpose logistics facilities with our largest location onboarding in the northeast at the start of the third quarter.

Kevin Beth: We are successfully optimizing our network of locations, resulting in a quarter-over-quarter improvement of 411 basis points in warehouse utilization. We expect this improvement to accelerate in the third quarter as we expand our service footprint to better serve our customers. The Managed Transportation Team continues to grow as it onboards just under $60 million of new freight under management during the third quarter. This will give us increased purchasing power, along with additional optimization opportunities for our customers.

Brian: We are successfully optimizing our network of locations, resulting in a quarter over quarter improvement of 411 basis points and warehouse utilization and expect this improvement to accelerate in the third quarter as we expand our service footprint to better serve our customers.

Brian: The managed transportation team continues to grow as their onboarding, just under $60 million of new freight under management during the third quarter that will give us increased purchasing power along with additional optimization opportunities for our customers.

Kevin Beth: The integration and diversification of our non-asset-based logistics solutions is continuing to play out well, and we expect continued growth and margin in 2024. With that, I'll hand it over to Kevin to discuss our financial results. Thank you, Brian. I will now walk through our financial results for the second quarter before commenting on our outlook. We recorded revenue of $986 million for the second quarter. Revenue declined 5% compared to last year and was roughly in line with first quarter revenue of $999 million.

Brian: The integration and diversification of our non asset based logistics solutions is continuing to play out well and we expect continued growth and margin expansion in 2024.

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

Kevin Beth: ICS revenue was $561 million, which is down 9% from the prior year. Its higher intermodal volume was not enough to offset lower rates, lower fuel, and softer market conditions. Lower fuel revenue of approximately $5 million contributed to the decrease, as did lower asset oil revenue.

Kevin: Thank you, Brian I will now walk through our financial results for the second quarter before commenting on our outlook.

Kevin: Our reported revenue for the second quarter up $986 million.

Kevin: Revenue declined 5% compared to last year and are roughly in line with first quarter revenue of $999 million.

Speaker Change: Ics revenue was $561 million.

Kevin: Which was down 9% from prior year as higher intermodal volume was not enough to offset lower rate lower fuel and softer market conditions.

Kevin: Lower fuel revenue of approximately $5 million contributed to the decrease asset lower assets oil revenue Andrew.

Kevin: Intermodal volume was up 8% year over year.

Kevin Beth: Intermodal volume was up 8% year over year. Sequentially, second quarter ICS revenue grew 2% over first quarter revenue of $552 million, and volume was up 12% over Q1. The district's revenue was $459 million, an increase of 1% year over year, as a contribution from the final mile business more than offset lower revenue in our brokerage system. Moving down to P&L. Purchase transportation and warehousing costs decreased by $36 million in the prior year due to lower access oil costs, lower third-party expenses, and lower rail costs. Salaries and benefits were comparable to last year, despite the integration of the final mile acquisition, as we continue to manage overall headcount. Total legacy headcount, which excludes acquisition employees, drivers, and warehouse employees, declined by 7%.

Kevin: Sequentially second quarter Ics revenue grew 2% of our first quarter revenue of $552 million and volume was up 12% over Q1.

Kevin: Logistics revenue was $459 million.

Kevin: An increase of 1% year over year as the contribution of the final mile business more than offset lower revenue in our brokerage business.

Kevin: Moving down the P&L purchased transportation and warehousing costs decreased by $36 million in the prior year due to lower assets Oreo cost lower third party expenses and lower railcar.

Kevin: Salaries and benefits were comparable to last year. Despite the integration of the final mile acquisition as we continued to manage overall head count.

Kevin: Total legacy head count, which exclude after this employee drivers and warehouse employed declined by 7%.

Kevin Beth: Appreciation and amortization increased $2.4 million, or 40 basis points, due to intangible amortization related to the final mile acquisition. Insurance and claims increased by 20 basis points due to rising claim costs, which were mitigated by our ongoing improvements in safety and claims handling. G&A increased 20 basis points compared to the prior year, driven by costs associated with the final mile acquisition, partially offset by cost management efforts, and gain on sale of $400,000 in the quarter.

Kevin: Depreciation and amortization increased $2 4 million or 40 basis points due to intangible amortization related to the final mile acquisition.

Kevin: Insurance and claims increased by 20 basis points due to rising claim costs, which were mitigated by our ongoing improvements in safety and claims handling.

Kevin: G&A increased 20 basis points compared to prior year driven by costs associated with the final mile acquisition, partially offset by cost management efforts.

Kevin: Gain on sale, but $400000 in the quarter.

Kevin Beth: As a result, our operating income margin was 4% for the quarter, which is an increase of 30 basis points over the first quarter. ITS operating margin was 2.4%, in line with Q1's OI percentage of 2.4%, as we benefited from intermodal volume growth, dedicated margin expansion, and cost management efforts in the quarter. The logistics operating margin of 5.6% increased 60 basis points from the Q1 OI percentage of 5% due to strong results from the final mile offsetting a lower brokerage margin. Interest and expense and other income totaled $1.9 million, an increase of $1 million from last year. Although our debt balance decreased year over year, interest expense increased due to an increase in our average interest rate.

Kevin: As a result, our operating income margin was 4% for the quarter, which is an increase of 30 basis points over first quarter.

Kevin: Ips operating margin of two 4% in line with Q1 Oi percentage of two 4% as we benefited from intermodal volume growth dedicated margin expansion and cost management efforts in the quarter.

Kevin: Logistics operating margin of five 6% increased 60 basis points from the Q1 Oi percentage of 5% due to strong results from final mile offsetting a lower brokerage margin.

Kevin: Interest and expense and other income totaled $1 9 million.

Kevin: An increase of $1 million from last year.

Kevin: Although our debt balance decreased year over year interest expense increased due to an increase in our average interest rate.

Kevin Beth: Our tax rate was 22.8%, slightly higher than our Q1 rate of 21.5%. We expect our tax rates to sequentially increase as we move through the back half of the year due to the timing of stock-based compensation, tax refunds, and the closure of certain tax matters. Overall, Hub earned 47 cents per diluted share for the second quarter. Now, turning to our cash flow. Cash flow from operations for the first six months of 2024 was $150 million. Second quarter capital expenditures totaled $14 million and were down 22% from the first quarter.

Kevin: Our tax rate was 22, 8% slightly higher than our Q1 rate of 21, 5%.

Kevin: We expect our tax rate to sequentially increase as we move through the back half of the year due to timing of stock based compensation tax refund and the closure of certain tax matters.

Kevin: Overall other earned <unk> 47 per diluted share for the second quarter.

Kevin: Now turning to our cash flow.

Kevin: Cash flow from operations for the first six months of 2024 was $150 million.

Kevin: Second quarter capital expenditures totaled $14 million and was down 22% from the first quarter.

Kevin Beth: CapEx then included replacements for tractors that have reached their end of life, Warehouse Equipment Purchases, and Technology Projects. For the first half of the year, our capex was $31 million.

Kevin: Capex spend included replacements for tractors that have reached their end of life.

Kevin: Our house, the equipment purchases and technology projects.

Kevin: For the first half of the year, our Capex was $31 million.

Kevin Beth: We continue to expect full-year spend to be between $45 and $65 million, with Q3 and Q4 spending closer to the lower Q2 level. Our balance sheet and financial position remain strong. In the first six months of 2024, we returned $48 million to shareholders through dividend payments of $15 million and stock repurchases of $33 million. And we ended the quarter with cash on hand of $220 million and generated free cash flow of $119 million year-to-date. Net debt was $94 million, which is 0.3 times EBITDA, below our stated net debt to EBITDA range of 0.75 to 1.25 times.

Kevin: We continue to expect full year spend to be between 45 and $65 million with.

Kevin: With Q3, and Q4 spend closer to the lower Q2 level.

Kevin: Our balance sheet and financial position remained strong in the first six months of planned 24, we've returned $48 million to shareholders through dividend payments of $15 million.

Kevin: And stock repurchases of $33 million.

Kevin: And we ended the quarter with cash on hand of $220 million.

Kevin: And generated free cash flow of $119 million year to date.

Kevin: Net debt was $94 million.

Kevin: With a 0.3 times to EBITDA below our stated net debt to EBITDA range of <unk> 75 to one five times.

Kevin Beth: We continue to expect, even at less capex, for the full year 2024 to be greater than the $257 million generated in 2023, demonstrating Hub's cash resiliency as we expect cash earnings growth in a challenging freight environment. Additionally, we remain confident in our ability to execute on our capital allocation plan, which includes paying quarterly dividends, stock repurchases, and strategic acquisitions. Next, I will conclude my remarks with a few comments on our 2024 guidance. The macro environment remains challenging.

Kevin: We continue to expect EBITDA less capex for the full year 2024 to be greater than the $257 million generated in 2023, demonstrating hub cash resiliency as we expect cash to earnings growth in a challenging freight environment.

Kevin: Additionally, we remain confident in our ability to execute on our capital allocation plan, which includes paying quarterly dividends stock repurchases and strategic acquisitions.

Speaker Change: Next I will conclude my remarks with a few comments on our 2020 for guidance.

Kevin Beth: And while Hub performed well in the second quarter with intermodal volume growth as anticipated, we expect the competitive pricing environment to continue through the rest of 2024, impacting our intermodal and brokerage lines of business. Additionally, we believe that the market inflection point has shifted further out from our Q1 assumptions, impacting top line expectations and reducing the high end of our range. We expect full-year EPS in the range of $1.75 to $2.05 a share and revenue of $4 to $4.3 billion.

Speaker Change: The macro environment remains challenging and wildfire performed well in the second quarter with intermodal volume growth as anticipated, we expect the competitive pricing environment to continue through the rest of our client for impacting our intermodal and brokerage lines of businesses.

Speaker Change: We believe that the market inflection point has shifted further out from our Q1 assumption impacting top line expectation and reducing the high end of our range.

Speaker Change: We expect full year EPS in the range of $1 75 to $2 <unk> per share and revenue of four to $4 3 billion.

Kevin Beth: In our ITS segment for the full year, we continue to expect intermodal volume growth in the high single digits and price to be down mid-single digits for the full year. For Dedicated, we now expect revenue for the full year to be up low single digits, as recent wins are ramping up more slowly than originally anticipated. For the total logistics segment, we expect revenue to grow mid to high single digits for the full year.

Speaker Change: And our Ics segment for the full year, we continue to expect intermodal volume growth in the high single digits and price to be down mid singles for the full year.

Speaker Change: For dedicated we now expect revenue for the full year to be up low single digits and the <unk>.

Speaker Change: <unk> wins are ramping up more slowly than originally anticipated.

Speaker Change: For the total logistics segment, we expect revenue to grow mid to high single digits for the full year.

Kevin Beth: When excluding brokerage, we continue to expect low to mid-double-digit revenue growth. In brokerage, we continue to expect volume up low single digits and for pricing to remain challenged given overcapacity in the market. There continues to be upside potential in our guidance. If restocking demand is higher than anticipated, there is a more traditional intermodal peak season, and the market allows for surcharge revenue in the second half of the year.

Speaker Change: When excluding brokerage we continue to expect low to mid double digit revenue growth.

Speaker Change: And brokerage we continue to expect volume up low single digits and for pricing to remain challenged given overcapacity in the market.

Speaker Change: There continues to be upside depends on our guidance if restocking demand is higher than anticipated. There is a more traditional intermodal peak season and that market allows for surcharge revenue in the second half of the year.

Operator: Another market condition that would push results to the high end of guidance is truck conversions to intermodal, helping to increase intermodal volume growth and increase margin. We are well-positioned to capitalize on a market upturn, but higher intermodal and truckload rates and a tighter truckload market will drive higher demand for our services and improve financial results. As mentioned at the beginning of the year, we are facing some headwinds versus last year, including higher interest costs, the normalization of incentive compensation, our annual tax rate being closer to 24%, and minimal gains on sales.

Speaker Change: Another market condition that would push results to the high end of guidance is truck conversions to intermodal, helping to increase the intermodal volume growth and increased margin.

Speaker Change: We are well positioned to capitalize on a market upturn by higher intermodal and truckload rates and tighter truckload market will drive higher demand for our services and improved financial results.

Speaker Change: As mentioned at the beginning of the year, we are facing some headwinds versus last year, including higher interest costs, the normalization of incentive compensation, our annual tax rate being closer to 24% and minimal gain on sale.

Operator: This quarter, we updated assumptions to assume that the challenges that we have experienced the last few quarters will continue throughout the year. As we exit the first half of the year, we are pleased with our performance to date, with intermodal volumes growing, strong financial discipline, strong free cash flow generation, and a strong balance. With that, I'll turn it over to the operator to open the line to any questions. Thank you. I would also like to remind participants that this call is being recorded, and a replay will be available on the Hub Group website for 30 days. As a reminder, to ask a question, please press star 1-1 and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: This quarter, we updated assumption to assume that the challenges that we have experienced the last few quarters will continue throughout the year.

Speaker Change: As we exited the first half of the year. We are pleased with our performance to date with intermodal volumes growing strong financial discipline and strong free cash flow generation and a strong balance sheet.

Speaker Change: With that I'll turn it over to the operator to open the line to any questions.

Speaker Change: Thank you I would also like to remind participants that this call is being recorded and a replay will be available on the hub group website for 30 days.

Speaker Change: As a reminder to ask a question. Please press star one one and wait for your name to be announced.

Speaker Change: Withdraw your question. Please press star one again.

Scott Group: Our first question is from Scott Group of Wolf Research. Your question, please. Hey, thanks for an afternoon.

Speaker Change: Our first question is from Scott Group of Wolfe Research Your question. Please.

Phil Yeager: Can you just walk us through the monthly intermodal volumes and July volumes, and then I don't know if I'll miss it, but maybe just the overall volume and yield trend for intermodal in the quarter. Yeah, Scott, thanks. This is Phil. For April, volumes were up 12, May was up 9, June was up two, and then July was up 14% on a year over year basis. If you look at yield on a revenue per load basis, that was down 17% in the quarter. Price, which we've said would be down about mid-single digit for the full year, was obviously an impact. I think the other piece that we wanted to call out was mix-related.

Scott Group: Hey, Thanks afternoon can you just walk us through the monthly <unk>.

Scott Group: Intermodal volumes in July volumes, and then I don't know if I missed it just like just maybe just the overall volume and yield trend for intermodal in the quarter.

Speaker Change: Yes, Scott. Thanks This is Phil.

Speaker Change: For April volumes were up 12 May was up nine June was up too and then July was up 14% on a year over year basis.

Speaker Change: If you look at yield on a revenue per load basis.

Speaker Change: That was down 17% in the quarter.

Speaker Change: <unk>, which we said would be down about mid single digit for the full year was obviously an impact I think the other piece that we wanted to call out was mix related local east volume being up 26%. Obviously is a good thing, but has a negative mix impact from a revenue per load basis, and then second would be that through our bid strategy.

Phil Yeager: Local East volumes being up 26% obviously is a good thing, but it has a negative mixed impact from a revenue per load basis. And then, second, would be that through our bid strategy, we've really done a nice job, and Brian highlighted it in his prepared remarks, in filling in more backhaul freight, which is taking out empty repositioning expenses. Empty repos were down 25% on a year-over-year basis, but those loads also had a negative mixed impact on revenue per load.

Speaker Change: Really done a nice job in Brian highlighted it in his prepared remarks.

Speaker Change: Filling in more backhaul create which is taken out empty repositioning expenses empty repos were down 25% on a year over year basis, but those would also have a negative mix impact on revenue per load and then just lastly, fuel and accessorial as a headwind there as well.

Phil Yeager: And then just lastly, fuel and accessorial costs are a headwind there as well. And so that trend of the volume slowing throughout the quarter but then spiking in July, is that, is that, is that, a per day issue there? Is the market getting better in July with transloading? Is it?

Speaker Change: And so that trend of the volume slowing throughout the quarter, but then spiking in July is that is that is that.

Speaker Change: Are there is there like a per day.

Speaker Change: Issue there is that the market getting better in July with Trans loading is it.

Phil Yeager: Bids are happening, so you're winning a share. The volume trends are sort of lumpy, any color? Yeah, this is Phil.

Speaker Change: Bids happening so youre winning share.

Speaker Change: Volume trends are sort of lumpy any any color.

Phil Yeager: I would say, you know, we are seeing winds come online. That's certainly part of it in July. July started out a little slower, given the holiday that was a little more elongated, but in the last two weeks, we've really seen some nice improvement as some of the winds that we've gotten have really started to ramp up.

Speaker Change: Yes. This is Phil I would say we.

Speaker Change: <unk> seen wins come online Thats certainly part of it in July July started out a little slower given the holiday that was a little more elongated but in.

Phil Yeager: We're hoping to see that continue. We haven't realized those full wards yet, so we think that'll continue into August. I think part of it is also year-over-year comparables and then business days as well. Okay, and then just one more and then I'll pass it along.

Speaker Change: In the last two weeks, we've really seen some nice improvement at some of the wins that we've gotten it really started to ramp up we're hoping to see that continue we haven't realized the full word yet. So we think that will continue into August I think part of it is also year over year comparables in that business days as well.

Speaker Change: Okay, and then just one more and then I'll pass it along.

Kevin Beth: So I heard like the what gets you to the higher end of the guidance. If I just take the low end, it implies that three Q and four Q earnings are lower than Q2, which I don't think we've heard from anybody else in transports this earnings season that we could actually go down in the second half of the year. Can you just talk about what causes that and, you know, just any color there?

Speaker Change: I heard the.

Speaker Change: What gets you to the higher end of the guidance if I can.

Speaker Change: Just take the low end and.

Speaker Change: It implies that <unk> and <unk> earnings are lower than Q2, which I don't think we've heard from anybody else in transports. This earning season that we could actually go down in the second half of the year can you just talk about.

Speaker Change: What what causes that.

Speaker Change: And just any color there.

Kevin Beth: Yeah, guys, this is Kevin. Thank you for your question. You know, right now, we just feel that the market, both the macro and the freight market, is very hard to predict. You know, there's been some new information just this week that's come out on the macro side. But at the end of the day, you know, we think the freight market is very challenging.

Speaker Change: Yes, Scott this is Kevin Thank you for your question.

Kevin: Right now, we just feel that the market both the macro and the freight market is very hard to predict and theres been some new information just this week thats come out on the macro side.

Speaker Change: But at the end of the day, we think the freight market is very challenging it's a competitive bid season, we have excess capacity impacting intermodal and brokerage as you well know while we do expect strong volume growth, we are expecting pricing to remain low.

Kevin Beth: It's competitive this season, and we have excess capacity impacting intermodal and brokerage, as you well know. While we do expect strong volume growth, we are expecting pricing to remain low with pricing inflection moving into 2025. So you know, we just thought it'd be a conservative route to adjust the guidance.

Speaker Change: With pricing inflection moving into 2025, so we just thought it would be a conservative route that to adjust the guidance. Yes. This is Phil I would just add and I think.

Phil Yeager: Yeah, this is Phil. I just want to add that at the midpoint, which is where I would point you, we do anticipate earnings growth first half to second half. I think ICS revenue is going to be up on more volume, Q2 to Q3. We think we'll see a little bit of a sequential dip in operating margins and ideas, mostly due to a lag on rail price reductions, but also the volume realization that we were just I would highlight, first, that we've got a lot of new wins that are going to be ramping up. But second, we've got some really nice cost reductions that we're putting in place. So I would point you more to the midpoint.

Phil Yeager: At the midpoint.

Phil Yeager: Is where I would point you.

Speaker Change: We do anticipate earnings growth first half to second half.

Speaker Change: Revenue is going to be up on more volume Q2 to Q3, we think we'll see a little bit of a sequential dip in operating margins in Ics, mostly due to a lag on rail price reductions, but also the volume realization that were we were just mentioning on logistics first half to second half.

Speaker Change: Anticipated sequential revenue growth and operating margin growth.

Speaker Change: I would highlight first we've got a lot of new wins that are going to be ramping up but second we've got some really nice cost reductions that were putting in place. So I would point you more to the midpoint I think that's our best view of the market as it exists today, which as I mentioned would imply.

Phil Yeager: I think that's our best view of the market as it exists today, which, as I mentioned, would imply sequential earnings growth. And the last piece I would just highlight is the free cash flow generation being up year over year. Thank you, guys. Our next question comes from Bruce Chan of Stiefel. Yeah, thanks. And good afternoon, everyone.

Speaker Change: Sequential earnings growth and last piece I would just highlight is the free cash flow generation being up on a year over year basis.

Speaker Change: Thank you guys.

Speaker Change: Our next question comes from Bruce Chan of Stifel.

Brian Alexander: Maybe just to, you know, take a look at the positive sides of the print here, you know, final miles, and I'm wondering if you can help us maybe just sift through, www.hub.com The Bulletproof Executive 2013, Top Line Appreciation, how much from Legacy OR how much is coming from FAFSA. Sure. Yeah, Bruce, this is Brian.

Bruce Chan: Yes. Thanks.

Bruce Chan: Good afternoon, everyone.

Speaker Change: Just to take a look at some of the positive sides of the print here.

Anil miles: Anil miles looking pretty good and <unk>.

Speaker Change: Wondering if you can help us maybe just sift through some of the moving parts a bit there, especially in terms of the profitability and I know you mentioned some business wins, there, but how much of that underlying performance is coming from.

Speaker Change: Top line.

Speaker Change: Depreciation how much from legacy or improvement.

Speaker Change: How much is coming from faster than expected synergies.

Brian Alexander: I'll take that one. Yeah, we've been really pleased with the integration of our final mile acquisition, and it's complemented, obviously, our previous position in final mile. And on top of the top-line wins that we've been able to get by adding new logos, we've also been able to cross-sell a lot of organically and continue to grow there. And that's really driven a lot of the top line. As far as costs are concerned, when we put the two models together, we've been able to leverage a best-of-breed approach to each of the overlapping geographies and be able to find efficiencies to drive up our yield there.

Speaker Change: Our business sure Bruce This is Brian I'll take that one yes, we've been really pleased with the integration of our final mile acquisition and its complemented honestly our previous position in final mile and.

Speaker Change: On top of the topline wins that <unk> been able to get by adding new logos. We've also been able to cross sell a lot of organic can continue to grow there and that's really driven a lot of the top line as far as the cost perspective, when we put the two models together, we've been able to leverage a best of approach to each of the overlapping geographies and be able.

Brian Alexander: I think we are, we still have more runway, and we'll see that play out in Q3 and Q4 in that, and it's going to continue to position us to win both on price as well as service and capabilities in the final. I appreciate that. If I could just follow up on that runway comment, you know, when you think about how far you are through that integration process. About halfway, how much more is there?

Speaker Change: To find efficiencies to drive up our yield there.

Speaker Change: We are we still have more runway and it will see play out in Q3 and Q4 in that and it's going to continue to position us to win both on price as well as service and capabilities in the final mile.

Speaker Change: Okay I appreciate that if I could just follow up on that runway comment when you think about how far you are through that integration process.

Speaker Change: About halfway how much more is there to go.

Brian Alexander: Yeah, I would say we're a little more than halfway on the cost efficiencies, but on the pipeline growth and the continued cross-selling, we're going to see that continue well into 2025, as we continue to stretch our stride in new ways there. Great, appreciate that call. Our next question comes from Bascome Majors of Susquehanna Financial Group. Thanks for taking my questions.

Speaker Change: Yes, I would say, we're a little more than halfway on the cost efficiencies, but on the pipeline growth and the continued cross selling we're going to see that continue well into 2025 as we as we continue to stretch our stride in new ways there.

Speaker Change: Great I appreciate the color.

Speaker Change: Our next question.

Bascom Majors: Comes from Bascom majors of Susquehanna Financial group.

Phil Yeager: As we look to the peak season, how are you feeling about the potential for some of the surcharges that, in a better year, can drive a decent 4Q lift for your business? And when will you know what the state of play is on that as we get deeper into the calendar? Yeah, Bascom. This is Phil.

Bascom Majors: Thanks for taking my questions as we look to the peak season.

Speaker Change: How are you feeling about the potential for some of the surcharges that in a better year can drive a decent <unk> lift for your business and you know what the state of play is on that as we get deeper into the calendar.

Phil Yeager: I think, you know, our conversations with customers are kind of varied around their demand right now. I would say there's a lot that are very positive and saying we're going to see a nice sequential inflection and a very strong peak. You know, we've got others that are saying demand will remain pretty, pretty similar. So customer discussions, I would say, are a little bit mixed, but it's good to see some positive signs there.

Speaker Change: Yes, and this is.

Speaker Change: Bill I think our conversations with customers there are kind of varied around their demand right. Now I would say there is a lot but are very positive and saying, we're going to see a nice sequential and collection in a very strong peak.

Speaker Change: We've got others that are saying demand will remain pretty pretty similar so.

Speaker Change: Customer discussions I would say a little bit mixed but good to see some positive signs in there I would say as I take a step back youre seeing that import demand continued to be strong yet the east coast labor disruption all of that points to diversions to the west coast, probably more trans loading in domestic intermodal opportunities. So.

Phil Yeager: I would say, as I take a step back, you're seeing that import demand continues to be strong. You have the East Coast labor disruption, all that points to diversions to the West Coast, probably more transloading and domestic intermodal opportunities. So, you know, I think we're seeing the signs that there will be a peak. How robust that's going to be and whether it points to surcharge revenue, I would say we'll know in the next few weeks. It's a little early to tell, but I think likely around the end of August, after Labor Day, you'll likely have a pretty clear picture.

Speaker Change: I think we're.

Speaker Change: We're seeing the signs that there will be a peak how robust that is going to be and whether it points to surcharge revenue I would say, we'll know in the next few weeks here.

Speaker Change: A little early to tell I think likely around the end of August after labor day likely have a pretty clear picture. We're anticipating in September October we will really be the kind of typical seasonality bumps but.

Phil Yeager: We're anticipating September and October will really be the kind of typical seasonality bumps, but a little early to tell at this point. But I would tell you, at least from a macro and from customer conversations, we're seeing some positive signs. Thank you for that. And as we get into next year, What are the conditions that you think will ultimately drive your ability or lack thereof to price the Intermodal Portfolio up more meaningfully? You know, is it peak season?

Speaker Change: Little early to tell at this point, but I would tell you at least from a macro and from a customer conversations we're seeing some positive signs.

Bascom Majors: Thank you for that and as we get into next year.

Speaker Change: What are the conditions that you think will ultimately drive your ability or lack thereof to price the intermodal portfolio up more meaningfully in.

Phil Yeager: Is it just what's happening in truckload when we get to spring? Just, you know, what are the levers or market indicators that you and we need to see to get more confident in a price-driven lift out of the profit situation that we're in today? Thank you.

Speaker Change: Is it peak season is it just what's happening in truckload when we get to spring.

Speaker Change: One of the levers or market indicators that you and we need to see to get more confident in our price driven lift out of the profit situation that we're in today. Thank you.

Phil Yeager: Sure, I think it's a little early to give a 2025 guide or call. I think, you know, we're certainly hopeful for a positive inflection. You know, I think we are seeing demand improve. We've done well in the bid season to drive more velocity into our network and get it more utilized. We're seeing capacity attrition. A strong peak would certainly help.

Speaker Change: Sure I think it's a little early to give a 2025.

Speaker Change: <unk> call I think.

Speaker Change: We're certainly hopeful for a positive inflection.

Speaker Change: I think we are seeing demand improve we've done well in bid season to drive more velocity into our network and get it more utilized we're seeing capacity attrition a strong peak would certainly help.

Phil Yeager: You know, I like what we're seeing in the spot market, where there's more volatility right now, and then contract pricing is remaining pretty flat sequentially. We're not really seeing any deterioration there. So, that's always a good sign.

Speaker Change: I like what we're seeing in the spot market, where there's more volatility right now in a contract pricing has remained pretty flat sequentially. We're not really seeing any deterioration there. So thats always a good sign so I think the fundamentals are getting into place we need to see demand continue to improve our capacity.

Phil Yeager: So, I think the fundamentals are getting into place. We need to see demand continue to improve and capacity continue to go out. But at the same time, we're going to constantly be assessing our network and making sure that we're maximizing our margin per load day, constantly having conversations with our customers around their demand and shifts in that, and what that could do to our network and needs we might have around pricing or additional volume to offset challenges.

Speaker Change: To exit but at the same time, we're going to constantly be assessing our network and making sure that we're maximizing our margin Carlo de constantly having conversations with our customers around their demand.

Speaker Change: And shifts in that and what that could do to our network and needs, we might have around pricing or additional volume to offset challenges but.

Phil Yeager: But hopefully, we'll see the trends that we're seeing currently continue and at a more rapid clip, and that would frame up well for a positive 2025. Yeah, I'd just like to add, you know, that there are really two, you know, market recovery and brokerage pricing are certainly two of the data points that we're looking to get into our model before we're, we're willing to give any guidance on 2025. So it's not until the end of the year that we'll see how that progresses, and we'll be able to make a determination there.

Speaker Change: Hopefully we will see the trends that we're seeing currently continue and at a more rapid clip and that wood frame up well for a positive 2025, yes, I'd just like to add there is early to market recovery and brokerage pricing are certainly two of the data points that we're looking to get into our model before we're willing to give.

Phil Yeager: But we do believe we position ourselves well for the eventual market upturn, as we're focusing both on service and cost efficiencies, as well as the volume growth that we've already achieved. As you think about your strategy into next year, how do you balance container utilization versus pricing power in the existing business? Yeah, this is Phil.

Speaker Change: Any guidance on 2025, so no longer in the year that.

Speaker Change: We'll see how that progresses, then we'll be able to make a determination there, but we do believe we position ourselves well for the eventual market upturn as we're focusing both on service and cost efficiencies as well as the volume growth that we are providing theme.

Speaker Change: Okay.

Speaker Change: As you think about your strategy into next year, how do you balance.

Speaker Change: Painter utilization versus pricing power on the existing business.

Phil Yeager: We are getting improvements in utilization. We saw a 14% improvement year over year from this year to this quarter and last year, and a 7% sequential improvement. So we are getting better. We still have room to run on just what we have out in the fleet right now.

Speaker Change: Yes. This is Phil we're getting improvements in utilization, we saw a 14% improvement year over year from this year to this quarter last year and a 7% sequential improvement. So we are getting better we still have room to run on just what we have out in the fleet right now.

Speaker Change: Pricing is a far larger lever for earnings power than volume for us and so if we see the opportunity to begin to raise rates. We will certainly do so I think.

Phil Yeager: Pricing is a far larger lever for earning power than volume for us, and so if we see the opportunity to begin to raise rates, we will certainly do so. I think, you know, we're doing the right things to position us to be able to take rates up. As we get that velocity back into the network, we think that's the right move for right now. And if market conditions change and give us more pricing power, we'll certainly be looking to participate in that. Thank you. Our next question comes from Thomas Wadewitz of UBS. Yeah, good afternoon.

Speaker Change: We're doing the right things to position us to be able to take rates up.

Speaker Change: As we get that velocity back into the network.

Speaker Change: We think thats the right move for right now and.

Speaker Change: Market conditions change and gives us more pricing power will certainly be looking to participate in that.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Thomas <unk> of UBS.

Phil Yeager: Wanted to see if you could offer some perspective on that mix of volume in intermodal, you know, pretty heavy on growth in the east. Is that changing as you've got some of the other contracts coming on in July? So I don't know if you can offer any thoughts on what that volume mix looks like in July. Yeah, this is Phil. I would tell you it's pretty similar.

Thomas: Yes, good afternoon.

Speaker Change: Wanted to see if you could offer some perspective on that mix of volume in intermodal.

Speaker Change: Pretty heavy on growth in the east is that changing as you've got some of the other contracts coming on in July. So I don't know if you can offer directionally some thoughts on what that volume mix looks like in July.

Phil Yeager: We continue to see a lot of momentum in the east, but part of that is lower comparable, and we're overlapping that at this point in time. But we will see a return to improvement in the western portion of the network. Transcon continues to hold up well.

Speaker Change: Yes. This is Phil I would tell you it's pretty similar we continue to see a lot of momentum in the east now part of that is lower comparable.

Speaker Change: And we're overlapping that at this point in time.

Speaker Change: But we will see a return to improvement in the <unk>.

Speaker Change: Western portion of the network Transcon continues to hold up well thats been a really strong point in our network really through the entire downturn in the market here, but we are anticipating a sequential improvement in the third quarter and west coast volume.

Phil Yeager: That's been a really strong point in our network really through the entire downturn in the market here. But we are anticipating sequential improvement in the third quarter in West Coast volumes, as well as that continuing really through the remainder of the year. But local east will continue to carry the majority on a percentage basis.

Speaker Change: As well as that continuing really through the remainder of the year, but local east will continue to carry.

Speaker Change: The majority on a percentage basis.

Phil Yeager: Okay, yeah, thank you for that. And then, how do you think about the stickiness of the business that you win? You've done a nice job winning share this year and really, you know, pretty strong volumes against a soft rate backdrop. I'm wondering if that, I don't know if the East is primarily from truck or from other intermodal players, but how do you think about your ability to keep that volume as you go into next year?

Speaker Change: Okay, Yes, thank you for that and then.

Speaker Change: How do you think about the stickiness of business to to win you've done a nice job winning share this year and really.

Speaker Change: Pretty strong volumes against a soft freight backdrop.

Speaker Change: I'm wondering is that I don't know if the east is primarily from truck or from other intermodal players, but how do you think about your ability to.

Phil Yeager: And then, presumably, you want to price it up and make more money on it. But I guess, you know, how do you think about the ability to keep that and avoid, you know, next time around giving some of the volume back when you try to price it up? Sure, yeah, this is Phil again. We do think the majority of that volume has come from truck. There are many specific examples where we know that we lost that business to truck, and we're able to convert it back because of the great service that we're giving. I would really highlight that as where we're winning.

Speaker Change: Keep that volume as you go into next year, and then presumably you want to price it up and make more money on it but I.

Speaker Change: I guess, how do you how do you think about the ability to keep that and avoid next time around you gave some of the volume back when you try to price it up.

Speaker Change: Sure. Yes. This is Phil again.

Speaker Change: Do you think the majority of that volume has come from truck. There. Many specific examples where we know that we lost that business to track and we are able to convert it back because of the great service that we're giving I would really highlight that ads, where we're winning.

Speaker Change: Our service product and Norfolk Southern right now, it's the best that I've seen in my tenure at hub.

Speaker Change: I think with that gives them the price differential we're seeing versus contract rates right now, which is about 20% truckload versus intermodal.

Speaker Change: I think in that length of haul I think we're in a very good position to retain that business, one because of that cost differential, but two because of the service product.

Speaker Change: Think that creates a lot more stickiness at this point in time, our customers are also just looking to derisk their capacity sources at this point I think there is concern that the market is beginning to shift.

Phil Yeager: Our customers are also just looking to de-risk their capacity sources at this point. I think there is concern that the market is beginning to shift, and people want to lock that capacity in, and you're far less likely to be market tested if you're performing at a high-level service. I'll just add to that, Tom. This is Brian.

Speaker Change: And people want to lock that capacity in and you are far less likely to be market tested if youre performing at a high level service one.

Brian Alexander: I think in the comments of retaining our customers in their volume, we're also cross-selling them into other services, which allows that to become more sticky. And so with that transactional volume, we're also offering them the ability to forward deploy their inventory, position that inventory throughout our warehousing network, bring them into our final mile network, offer them diversified brokerage mode offerings, and as well as our managed trans cost solutions. And I think LTL has been a big part of that too.

Speaker Change: I will just add to that too Tom This is Brian I think in the comments of retaining our customers and their volume. We're also cross selling them into other services, which allows us to become more sticky and so with that transactional volume. We're also offering them the ability to forward deploy their inventory position on inventory throughout our warehousing network, bringing them into our final mile network.

Speaker Change: For them diversify brokerage.

Speaker Change: <unk> offerings as well as our managed trans cost solutions, and I think <unk> been a big part of that too we've seen that grow and that's a big part of how we're going to be retaining that volume.

Brian Alexander: We've seen that grow, and that's a big part of how we're going to be retaining that volume. Great. Yeah, that makes a lot of sense to try to tie them into the other products. I appreciate the time.

Tom: Great, Yes that makes a lot of sense to try to tie them into the other products I. Appreciate the time. Thank you. Thank.

Phil Yeager: Thank you. Our next question comes from Christopher Kuhn of The Benchmark Company. Yeah, hi, good afternoon.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Christopher Combe of the benchmark company.

Christopher Kuhn: Thanks for taking my question. We heard earlier today about some increasing transloading activity. I don't know if you guys are seeing that. Just wonder if you have a comment.

Christopher Combe: Yes, hi, good afternoon. Thanks for taking my question, we heard earlier today about some increasing.

Christopher Combe: Trans loading activity.

Christopher Combe: I know if you guys are seeing that just wondering if you have a comment there.

Phil Yeager: Yeah, so I would say we are seeing that, but it's a little early to tell how robust that could be leading into peak season. But we certainly are seeing that during the quarter, even our outbound Southern California volumes are up 5% year over year, and our inbound was actually up 7% year over year, which is a really good cost offset for us and reduces a lot of our empty repositioning costs.

Speaker Change: Yes, so I would say we are seeing that.

Speaker Change: It's a little early to tell how robust that could be in leading into peak season, but we certainly are seeing that during the quarter, even our outbound southern California volumes were up 5% year over year, our inbound was actually up 7% year over year, which is a really good cost to offset for us in reducing a lot of our empty repositioning costs, but we are.

Phil Yeager: But we are seeing sequential demand improvement. We've also done quite well in some of the RFPs that drive a lot of West Coast volume. And so we are seeing incremental transload volume. We're hopeful that that's a sign of a strong peak, and we'll certainly have more to say as that develops, and also on the acquisition front. Any areas you'd be looking at going forward? Do you need to sort of integrate the...

Speaker Change: We're seeing sequential demand improvement, we've also done quite well in some of the Rfps that drive a lot of west coast volume and so we are seeing incremental trans load volume. We're hopeful that that's a sign of a strong peak and we'll certainly have more to say as that develops.

Speaker Change: And also on the acquisition front.

Speaker Change: Any areas you'd be looking at going forward do you need to sort of integrate.

Phil Yeager: Final model acquisition fully first before looking somewhere else. What's the time frame there that we should be thinking about? Yeah, this is Phil again.

Speaker Change: Final mile acquisition fully first before looking somewhere else whats the timeframe there should be thinking about.

Phil Yeager: I think we've done a really nice job on the integration there. Through the vast majority of our Synergy Capture, we've done a lot of really good work on integrating systems and our platform. So we feel good about the opportunity we have to go out and do more acquisitions. We think we have the right set of service offerings.

Speaker Change: Yes. This is Phil again, I think we've done a really nice job on the integration there were.

Speaker Change: Through the vast majority of our synergy capture we've done a lot of really good work on integrating systems in our platform. So we feel good about the opportunity we have to go out and do more acquisitions. We think we have the right set of service offerings. It's now about how do we add scale and differentiation.

Speaker Change: <unk> to those service offerings, and we are seeing more opportunities come to market, especially businesses that have performed well through the downturn and obviously, we have the financial flexibility to go out and execute an acquisition that if if we find the right fit and we're certainly exploring that right now and we'd be hopeful to complete.

Phil Yeager: It's now about how we add scale and differentiation to those service offerings. And we are seeing more opportunities come to market, especially businesses that have performed well through this downturn. And obviously, we have the financial flexibility to go out and execute an acquisition if we find the right fit, and we're certainly exploring that right now. And we'd be hopeful to complete something this year. Yeah, Chris, this is Kevin.

Kevin Beth: I was just gonna say that, you know, following up on those comments, yes, the balance sheet is certainly ready for acquisition. So we've been out, you know, pounding the streets, and hopefully, we'll be able to get a deal here and use some of that excess cash that we have. The leverage ratio being where it is, we're much lower than our range. So, you know, we'd like to put that cash to work via that. Thanks for your time.

Speaker Change: And this year.

Speaker Change: Chris This is Kevin I was just going to say that following up on Bill's comments, yes. The balance sheet is certainly ready for acquisition. So we've been out.

Chris: I found on the streets, and hopefully we will be able to get a deal here and use some of that excess cash that we have the leverage ratio being where it is were much lower than our range. So I would like to put that cash to work via the acquisition.

Christopher Kuhn: Appreciate it. Our next question comes from Elliot Alper of TD Cowen. All right, thank you. This is Elliot on behalf of Jason Seidl.

Speaker Change: Great. Thanks for the time appreciate it.

Speaker Change: Okay.

Speaker Change: Our next question comes from Elliot Alper of TD Cowen.

Elliot Alper: Maybe coming back to the guidance. So if we take the midpoint calls for dollars of earnings in the back half of the year, can you help frame the earnings cadence? You see, there's been a lot of discussion about a pull forward and peak. Curious if you're seeing that all and if we should factor it into any earnings cadence in the back half of the year. Yeah, thank you for the question. You know, certainly, the guidance we're given just half of the year; we're not given individual quarters.

Speaker Change: Yeah.

Elliot Alper: Alright. Thank you just a valued on for Jason Seidl.

Speaker Change: Maybe coming back to the guidance. So if we take the midpoint calls for.

Speaker Change: Dollar of earnings in the back half of the year can you help frame.

Speaker Change: The earnings cadence you see.

Speaker Change: Theres been a lot of discussion about a poll for any peak curious if youre seeing at all and if we should factor that in to any earnings cadence in the back half of the year.

Kevin Beth: And I think that's a little bit because we're a little unsure as well if that will be pulled forward. But you know, we are expecting the second half to be up mid to single digits when it comes to revenue, larger than the first half, as well as larger than last year. That's going to be driven by intermodal and logistics. For intermodal, we expect the margins to be modestly down, based on the assumptions of the timing of our realized price with a fully implemented volume now, as well as the timing lag on the rail adjustments and cost benefits from the higher volume. Great, thanks.

Speaker Change: Yes. Thank you for the question.

Speaker Change: Certainly.

Speaker Change: The guidance for a given just the half of the year.

Speaker Change: Given in each individual quarter, and I think thats, a little bit because we're a little unsure as well that will be put forward.

Speaker Change: But we are expecting second half to be up mid to single digits. When it comes to revenue.

Speaker Change: Larger than first half as well as larger than last year.

Speaker Change: Estimate driven by intermodal and logistics benefiting from the seasonality and volume growth that we're experiencing.

Speaker Change: The Oi side, we're expecting a little step up certainly logistics up strong as Brian mentioned, we have some cost cut out that were working on and we expect a nice oi increase on the logistic logistics side excuse me.

Speaker Change: For intermodal, we expect that margins to be modestly down based on the assumptions of the timing of our realized price with a fully in a minute implemented volume now as well as timing lag on the rail adjustments and cost benefits from the higher volume.

Phil Yeager: And then I believe you said volumes in Mexico were up 60% in the quarter. Is this a meaningful contributor to earnings for you guys? Or how should we think about the size of this business or what it could grow into? Yeah, this is Phil.

Speaker Change: Okay, great. Thanks, and then I.

Speaker Change: Believe you said volumes in Mexico were up 60% in the quarter.

Speaker Change: Is this a meaningful contributor to earnings for you guys or how should we think about the size of this business or what it could grow into.

Phil Yeager: I would say it's not currently something that would be a meaningful driver of earnings. But what I would tell you is our customers and their vendors are investing there significantly, and we are very aligned with our partner Union Pacific on driving growth there.

Speaker Change: Yes. This is Phil I would say it.

Phil Yeager: Its not currently something that would be a meaningful driver of earnings, but what I would tell you is our customers and their vendors are investing there significantly.

Speaker Change: We are very aligned with our partner Union Pacific on driving growth. There, we're very focused on automotive customers. Both our retail clients consumer products. We think there are significant opportunities for growth.

Phil Yeager: We're very focused on automotive customers, both our retail clients, and consumer products. We think there are significant opportunities for growth. So right now, not something that we would say is a huge driver of our intermodal business one way or another, but is becoming more and more important, and we believe will be a driver of growth for us for the foreseeable. Thank you, guys. Our next question comes from Daniel Ambrose of Stevens. Hey, good evening, guys.

Speaker Change: So right now not something that we would say is the huge driver of our intermodal business, one way or another but is becoming more and more important that we believe will be a driver of growth for us for the foreseeable future.

Speaker Change: Thank you guys.

Daniel <unk>: Our next question comes from Daniel <unk> of Stephens.

Daniel: Hey, good evening guys. Thanks for taking my questions.

Daniel Ambrose: Thanks for taking our questions. So I want to start on the dedicated side. I think you mentioned you won some business, but profitability was softer because you invested in disservice for a spring surge. Curious if you could just provide some color quantifying what those investments were and then quantifying the headwind of profitability they were in the second quarter. Yeah, sure.

Daniel <unk>: So I wanted to start on the dedicated side I think you mentioned you won some business, but profitability was softer could you invested into service for spring <unk> curious if you could provide some color quantifying what those investments were and then quantifying the headwind to profitability. They were in the second quarter.

Brian Alexander: You know, we were good to see the new wins that we had come online and then see some seasonal improvement in volumes. It was really a spring surge for some of our retail clients. I think the challenge was that we were ramping up hiring and then saw an increase in demand, which forced us to go out to third parties to support their high service sensitivity business and make sure that we were providing them with the service levels that they expected.

Daniel: Yes sure.

Speaker Change: It was good to see the new wins that we have come online.

Daniel: And then see some seasonal improvement in volumes there was really a spring surge for some of our retail clients.

Speaker Change: I think the challenge was we were ramping up hiring and then saw an increase in demand, which forced us to go out to third parties to support their high service sensitivity business and make sure that we were providing them with the service levels that they expected. That's obviously, a higher cost service option than our own.

Brian Alexander: That's obviously a higher cost service option than our own capacity, and that's what led to the margin deterioration. Within the dedicated business, it was probably a mid single 100 basis point impact. We don't see that going forward. Dedicated is a smaller portion of the ITS segment, obviously not as large as intermodal, but it certainly was a headwind in the quarter, but one that we don't anticipate seeing ahead.

Speaker Change: <unk> and Thats, what led to the margin deterioration.

Speaker Change: Within.

Speaker Change: The dedicated business.

Speaker Change: Probably mid single 100 basis point impact.

Speaker Change: We don't see that going forward dedicated as a smaller portion of the Ics segment, obviously, not as large as intermodal, but it certainly was a headwind in the quarter, but one that we don't anticipate seeing.

Brian Alexander: And so as we think about the ITS margin step down for the back half, that cost headwind goes away, it's just intermodal margins need to step that much lower, that'll drag it down. Any way to help quantify kind of how you're thinking about the step down in ITS margins? Yeah, not material, just, you know, in previous calls, we've talked about a little steps up. And, you know, we think it's going to be a little more difficult to achieve that.

Speaker Change: Got it and so as we think about the Ics margin step down for the back half that cost headwind goes away. It's just intermodal margins needed step how much lower that will drag down any way to help quantify kind of how youre thinking about the step down in Ics margins.

Speaker Change: Yes, no not material.

Speaker Change: I think in previous calls we've talked about a little stepped up.

Speaker Change: We think it can be a little more difficult to achieve that.

Brian Alexander: Yeah, I think, I think it's volume realization in the quarter, right, we've got some really nice new wins that are coming on. And then we've highlighted, in the past, the lag effects that we have on rail price reductions. And once we have those in, plus the volume being realized, that's where we think Q4 would likely be a step up from Q3, but Q3, a slight decline. And then we have the last one for us.

Speaker Change: Yes, I think I think its volume.

Speaker Change: Elevation in the quarter and we've got some really nice new wins that are coming on and then we've highlighted I think in the past the lag effects that we have on rail price reductions and once we have those in Clos the volume being realized that's where we think Q4 would likely be a step up from Q3, but Q3, a slight decline for Q2.

Speaker Change: Great and then a last one for US you mentioned logistics revenue should increase sequentially. We've heard some other brokers talking about brokerage trends slowing in July just curious, which part of logistics you see improving as move through the back half of the year.

Brian Alexander: You mentioned logistics revenue should increase sequentially. We've heard some other brokers talking about brokerage trends slowing in July. Just curious which part of logistics you see improving as we move to the back half of the year. Thanks. Sure, yeah, I'll take that one. This is Brian.

Brian Alexander: Yeah, I think we, you know, Phil called out some of our wins that we've had within logistics, which includes our managed trans contract business, as well as our final mile. Those, you know, those, when we integrated that in, we saw that pipeline and new opportunities coming in really fast. And so we're excited to have those on board and drive up a lot of revenue. I think from a brokerage perspective, you know, after having five consecutive quarters of volume growth, we had our first one where we didn't have volume growth; it was down modestly.

Bryan: Sure, Yes, I'll take that one this is Bryan I think bill called out some of our wins that we've had within that within logistics that includes our managed trans contract business as well as our final mile. Those those when we integrated that and we saw that pipeline of new opportunities coming in really fast and so we're excited to have those onboard and drive up a lot of the revenue.

Speaker Change: I think from a brokerage perspective after having five consecutive quarters of volume growth. We had our first one where we didn't have volume growth that was down modestly, but what we did see is margin expansion quarter over quarter of about 100 basis points, but we've got a really good strong start in the third quarter with brokerage with volume in July up.

Brian Alexander: But what we did see was margin expansion quarter over quarter of about 100 basis points. But we've got a really good, strong start in the third quarter with brokerage, with volume in July up 10% year over year, and we're maintaining that yield expansion. So that's what's got us excited about what we can do in the logistics. Great. Thanks for all the color.

Speaker Change: 10% year over year, and we're maintaining that yield expansion. So that's what's got US excited about what we can do in the logistics space.

Speaker Change: Great. Thanks for all the color best of luck guys.

Daniel Ambrose: Best of luck, guys. Our next question comes from Brian Ossenbeck of J.P. Morgan. Hey, good afternoon.

Speaker Change: Our next question comes from Brian <unk> of Jpmorgan.

Brian Ossenbeck: Thanks for taking the question. I just wanted to see how the network was running when you did a bunch of stuff. I guess I call it share gains or repositioning. Help Healing the Network, Rebalancing the Network, rather with getting that significant growth in the local. Maybe you can elaborate a little bit on what that's done for you in terms of efficiency and productivity. And if there's a bit more to go on here, coming up on some comps that will affect that, but it was a pretty big move, so just wanted to see how that turned out.

Speaker Change: Hey, good afternoon, thanks for taking the question.

Brian: Just wanted to see how.

Speaker Change: The network was running.

Speaker Change: You've done a bunch of the I guess call it.

Speaker Change: Share gains or repositioning.

Speaker Change: Hope healing the network rebalancing network, rather with getting that significant growth in the local east.

Speaker Change: Maybe you can elaborate a little bit on what thats done for you in terms of.

Speaker Change: Efficiency productivity.

Speaker Change: And if there is a bit more to go in and you're coming up on some comps that will affect that but.

Speaker Change: It was a pretty big move so just wanted to see how that turned out.

Brian Ossenbeck: Yeah, service levels have been very strong. So that is certainly a benefit to us. As Brian mentioned in his prepared remarks, we were able to take down empty repositioning costs by about 25% year over year. And one of the good things there is productivity being up 15%.

Speaker Change: Yes.

Speaker Change: Self service levels have been very strong so that is certainly a benefit to us.

Speaker Change: As Brian mentioned in his prepared remarks, we were able to take down empty repositioning cost about 25% year over year, our cost per drag came down about 13% one of the good things there is productivity being up 15%.

Speaker Change: While our share of grayish declined about 600 basis points to 73%, we did that with 15% fewer drivers. So we.

Speaker Change: We think.

Speaker Change: We have some opportunities to add some drivers in a few markets to Phil Phil back that capacity and get our share back closer to 80%.

Speaker Change: We have some idle equipment that we're looking to redeploy.

Speaker Change: Within our drayage network as well as into dedicated configurations, but.

Speaker Change: We think that those cost containment opportunities will continue and as these new wins come on its network friendly freight. So it will continue to benefit our productivity on the street as well as our network design and reduce repositioning cost greater.

Brian Alexander: And, you know, while our share of drayage declined about 600 basis points down to 73%, we did that with 15% fewer trucks to benefit our productivity on the street as well as our network design and reduce repositioning costs further. And I think you mentioned it earlier, but is it a 20% discount in the east when it comes to rail? Just want to hear a little bit more about how, with a loose truck market in the east, how you're able to make that accretive, I guess, on your operating income per box day market.

Speaker Change: And I think I mentioned earlier, but as it is at a 20% discount in the east when it comes to <unk>.

Speaker Change: Just wondering a little bit more about how with it.

Speaker Change: Loose truck market.

Speaker Change: In the east how youre able to.

Speaker Change: Make that.

Speaker Change: Accretive I guess on your operating income per per box stay model.

Brian Alexander: Yeah, you know, we continue to focus on margin per load day, as you mentioned, and the Eastern Network is far higher velocity. So the, you know, we're moving boxes in the triangle very quickly. They're getting margin within those moves, and it takes out those empty repositioning costs.

Speaker Change: We continue to focus on margin Colo data you mentioned.

Speaker Change: The eastern network is far higher velocity so.

Speaker Change: We're moving boxes into the triangle very quickly.

Speaker Change: We're getting margin within within those moves and it takes out those empty repositioning cost. So it really does drive a nice margin per load data in an environment like this where margins can get a little skinnier on a per day basis. Its a higher return on investment that maybe some of those longer haul but still have.

Brian Alexander: So it really does drive a nice margin per load day. In an environment like this, where margins can get a little skinnier on a per day basis, it's a higher return investment than maybe some of those longer hauls that still have lower margins. So we think that the East is a great place to continue to grow right now, and we're very committed to that. The differential is, we think, about 20%. You look contract to contract, about 30%, if you look at some of the longer lengths of haul. So the conversion opportunities are there.

Speaker Change: Margin. So we think that the east is a great place to continue to grow right now we're very committed to that.

Speaker Change: Differential as we think about 20% you look contract to contract about 30%. If you look at some of the longer length of haul.

Speaker Change: So the conversion opportunities are there.

Speaker Change: And once again, we're providing really good service, which is giving us the.

Speaker Change: Buy in from our customers to continue to convert from over the road.

Brian Alexander: And once again, we're providing really good service, which is giving us the buy-in from our customers to continue to convert from over the road. And then, on the rail contract, you mentioned a little bit of a lag here. It'll pick up again in the fourth quarter. Have you experienced any tailwind?

Speaker Change: And then one last one on the rail contract you mentioned, it's a little bit of a lag here I will pick up again in the fourth quarter have you experienced any tail winds.

Phil Yeager: I guess in the first half of the year and how should we think about going into 2025, you know, if we see sort of the broader freight market stay where it is and not really improve a whole lot in the first half? Sure, yeah, this is Phil.

Speaker Change: And then I guess in the first half of the year and how should we think about this going into 2025.

Speaker Change: If you see sort of the broader freight market stay where it is and not really improve a whole lot in the first half I guess of 25%.

Phil Yeager: So yes, it has been a benefit to us through our rail contracts have been a benefit to us through the first half of the year, and we continue to have some resetting on a quarterly basis. However, there is a lag effect associated with that. So that lag effect would continue when we see price inflect. So we get that when price is going down, it does lag and move a little bit slower. But as the price is going up, it will lag and move slower.

Speaker Change: Sure. Yes. This is Phil so yes, it has been a benefit to us through our rail contracts have been a benefit to us through the first half of the year.

Speaker Change: And continue to have some resetting on a quarterly basis.

Speaker Change: There is a lag effect associated with that so that lag effect would continue if when we see pricing flat. So you get the when prices going down it does lag and move a little bit slower, but as prices going up it will lag and move slower. So there is a margin expansion opportunity that comes as pricing shifts.

Phil Yeager: So there's a margin expansion opportunity that comes as pricing shifts, which goes once again to our desire to see the market move with stronger fundamentals. And we know that price is a far stronger driver of profitability, returns, and volume. And so we're certainly hoping to see that opportunity come to fruition. Okay, great.

Speaker Change: <unk> once again to our desire to see the market move with stronger fundamentals and we know that prices are far stronger driver of profitability and returns than volume and so we're certainly hoping to see that opportunity come to fruition soon.

Phil Yeager: Thank you, Phil. Our next question comes from David Zazula of Barclays. Your line is now open. Hey, thanks for squeezing me in.

Speaker Change: Okay, great. Thank you Phil.

Speaker Change: Our next question comes from David <unk> of Barclays. Your line is now open.

David Zazula: If I could ask a little bit about the brokerage side, specifically with respect to revenue losses, and you're keeping the spot contract at 50-50, you know, was that maybe like a tactical to strategic move? Did you potentially, I'm wondering, maybe turn down some contractual loads that were available with the expectation that you might see them, you know, come back in a different environment later in the year? Yeah, sure, Dave. This is Brian.

David: Hey, Thanks for squeezing me in.

David: If I could ask a little bit about the brokerage side.

David: Specifically with respect to revenue losses, and you're keeping the spot contract at 50 50.

Speaker Change: That may be like a tactical just strategic move.

Speaker Change: Did you potentially I'm wondering maybe turned down some contractual loads that were available with the expectation that you might see them come.

David: Back in a different food environment later in the year.

Brian Alexander: I'll, I'll take that one. But yeah, I think you're, I think you're going along the right lines. What we did see was a volume decline in Q2, and some of that was our decision on where we needed to make some yield decisions. And that's where we're seeing it improve. And where we had that 100 basis point improvement quarter over quarter. And we're seeing that carry through as well. Volume wise, we're 50-50. From a revenue perspective on the spot, it's, it's less than 50. And it's weighted a little bit more towards the contract. But those are, that's the way we're thinking about it.

David: Sure. Dave This is Brian I'll take that one, but yes, I think youre I think youre going along the right lines, what we did see as the volume decline in Q2, and some of that was our decision on where we needed to make some yield decisions.

Speaker Change: And Thats, where were seeing it improve and where we had that 100 basis point improvement quarter over quarter, and we're seeing that carry through as well volume wise were 50 <unk> from a revenue perspective on the spot it's less than 50, and it's weighted a little bit more towards contract, but those are that's the way we're thinking about it I think overall in brokerage we.

Brian Alexander: I think overall, in brokerage, we continue to be pleased with our progress on where we're at, how we face the headwinds, we're providing a superior service product, we're providing diversified modes for our customers, we're cross-selling those, we're leveraging our spend to buy down our purchase transportation, and we're being very methodical about how we approach technology in this space. And we, I called out the efficiency that we've had and the loads per team member, and we're going to see that continue to expand as we roll out more technology. Very helpful. It was great to hear the color you had on the new business wins in Dedicated.

David: And to be pleased with our progress on on where were at how we face the headwinds were providing a superior service product, we're providing the diversified moves for our customers. We're cross selling those we're leveraging our spend to <unk>.

David: Buy down our purchase transportation and we're being very methodical about how we approach technology in this space and we called out the efficiency that we've had in loans per team member and we're going to see that continue to expand as we rollout more technology initiatives.

Speaker Change: Very helpful. It was great to hear the color you had on the new business wins in dedicated.

David Zazula: If I could just ask, with existing customers, how is retention coming, and how are your conversations going with those customers, you know, here in the back? Yeah, so our retention has been very strong. You know, we've certainly had some RFPs that we've had to participate in and defend in competence, but I think we've done a very nice job there.

Speaker Change: Just ask on with existing customers, how has the retention coming and how your conversations coming with those customers here in the back half.

Speaker Change: Yeah. This is Phil our retention has been very strong.

Phil Yeager: We certainly had some rfps that we've had to participate in independent competency, but I think we've done a very nice job. There. Some customers are exploring portions of their fleet moving into a one way, but we haven't seen many contract much contract churn most of our customers are looking to renew them.

Phil Yeager: Some customers are exploring portions of their fleet moving to one way, but we haven't seen many contract, much contract churn. Most of our customers are looking to renew and, you know, it's very high service sensitivity freight, so they don't want a disruption to that high service sensitivity business. And so, yes, our retention levels have been very strong. We want to continue that, and we think that gives us the best opportunity to keep growing with the right customers and the right contractual framework. Thanks, Phil. And then, Kevin, if I could just squeeze in a quick one in.

Phil Yeager: It's very high service sensitivity create so they don't want a disruption to that high service sensitivity business and so yes, our retention levels have been very strong and we want to continue that and we think that gives us the best opportunity to keep growing with the right customers and the right contractual frameworks as well.

Kevin Beth: I see the color on the legacy headcount in the release. Do you have the just the combined non-driver headcount number or the sequential number? Um, yeah, so as mentioned, it was down 7% year over year. So the number for that, the legacy headcount was 1846 at the end of the quarter. And just add a couple hundred for the acquisition on top of that.

Phil Yeager: And then Kevin if I can just squeeze a quick one and then see the color on the legacy of head count in the release do you have the just the combined non driver headcount number.

Phil Yeager: Number.

Speaker Change: Yes.

Kevin: You mentioned it was down 7%.

Speaker Change: Sure.

Speaker Change: Year over year.

Speaker Change: The number for that the legacy head count was $18 46 at the end of the quarter.

Speaker Change: And just add a couple of hundred on for the acquisition on top of that.

Kevin Beth: Yes, that would be correct. And I would just highlight on the headcount side. I know we sit down 7% on a year over year basis, but we've actually seen a 28% decline from our peak, which was in 2022. I think the team's done a great job of finding opportunities for efficiency through technology deployment and changes in workflow. So, you know, everybody here is very focused on efficiency and how we can do more. It was awesome.

Speaker Change: Yes that would be.

Speaker Change: Correct.

Speaker Change: I would just highlight on the head count side, I know, we said down 7% on a year over year basis, but.

Speaker Change: We've actually seen a 28% decline from our peak, which was in 2022 I think the team has done a great job of finding opportunities for efficiency through technology deployment and changes in workflow. So.

Speaker Change: Everybody here is very focused on efficiency and how we can do more.

Speaker Change: Thanks for the color.

David Zazula: Thanks for the call. Our next question comes from Ravi Shankar of Morgan Stanley. Thanks, everyone.

Speaker Change: Our next question comes from Ravi Shanker of Morgan Stanley.

Ravi Shankar: I think we've heard from a couple of your peers in the brokerage side that they're seeing somewhat of a shift from asset-light to asset-based operators from shippers. I was wondering if you guys are seeing something similar and kind of what kind of approach shippers might take to the upcycle in the brokerage business? Yeah, sure. Yeah, Robbie, this is Brian. I'll take that one.

Ravi Shanker: Thanks Scott.

Speaker Change: Yes, I think we've heard of a couple of the peers in the brokerage side that youre seeing somewhat of a shift from asset light asset base is operators from shippers wondering if you guys are seeing something similar on kind of what kind of approach.

Speaker Change: It might take to the.

Speaker Change: Upcycle in the brokerage business.

Brian Alexander: I think what we've seen, and Phil called it out, too, in his comments, too, but in the spot market, we have seen a lot more volatility, and our shippers have seen that as well. We are seeing them drive more of a shift toward contracts. I think they've seen the bottom of spot pricing, and they want to secure instability with more contract pricing. We haven't seen that move more towards asset providers.

Speaker Change: Yes sure Yes, Ravi this is Bryan I'll take that one I think what we've seen in Phil called it out too.

Speaker Change: His comments too, but in the spot market, we have seen a lot more volatility in our shippers have seen that as well we are seeing them drive more of a shift towards contract I think <unk> seen the bottom of the spot pricing and they want to secure instability with more contract pricing, we haven't seen that move more towards <unk>.

Brian Alexander: I think they like the flexibility that the non-asset piece can bring to the table. I think that's where we offer our customers a unique solution where, you know, if they do want to move more towards dedicated volume, or they want to lock in on longer-term contract pricing, or mode shift into intermodal or LTL, we're able to really work with them and offer those types of solutions. And we find that they're less price sensitive and much stickier when we do. Yeah, I would just highlight that we think it's very important to have a contract footprint with many customers, as that gives you opportunities in the spot market when you see that activity.

Speaker Change: Asset providers I think they like the flexibility that the non asset.

Speaker Change: <unk> can bring to the table I think thats, where we offer our customers a unique solution of where they do want to move more towards dedicated volume or they want to lock in on longer term contract pricing or mode shift into intermodal or LCL, we're able to really work with them and offer those types of solutions when we file.

Speaker Change: That they are less price sensitive and much stickier when we do so.

Speaker Change: Yes, I would just highlight I think we think it's very important to have a contract footprint with many customers as that gives you the opportunities in the spot market. When you see that activity I would also just highlight that we are seeing more project opportunities come our way right now, which is a positive as well those still.

Brian Alexander: I would also just highlight that we are seeing more project opportunities come our way right now, which is a positive as well. Those still shift generally more toward brokers, I think, given the flexibility and ability to surge. So we think our strategy of locking in contracts, making sure we get those opportunities as we see market shifts is the right one, and it's certainly been playing out in our volume performance. And we hope to see that continuous margin performance again.

Speaker Change: I'll shift generally more toward brokers I think given the flexibility and ability to Serge so we.

Speaker Change: We think our strategy of locking in contracts, making sure we get those opportunities as we see market shifts is the right one and it's certainly been playing out in our volume performance and we hope to see that continue with margin performance as well.

Brian Alexander: Understandable, that makes sense. And maybe as a follow-up, I think you guys had mentioned in your prepared remarks that you saw some increased expenses to support new customer wins. Were those just normal launch costs, or was there anything unexpected or one-off there? Yeah, that was mostly related to dedicated.

Speaker Change: Understood that makes sense and maybe as a follow up.

Speaker Change: As I've mentioned in prepared remarks that you saw some increased expenses to support new customer wins.

Speaker Change: Just normal launch costs or was there anything unexpected or a one off there.

Phil Yeager: We, it was startup costs initially. And then we needed to, given the ramp timeline that we had, and we were a little short of driver capacity, we needed to bring in outside third-party capacity to support the high service demand that we had. And so it was really an investment in that business.

Speaker Change: Yes that was mostly related to dedicated.

Speaker Change: Startup costs initially.

Speaker Change: And then we needed to given the ramp timeline that we had and we were a little short on driver capacity, we need to bring in outside third party capacity to support the high service demand that we had and so it's really an investment in that business and so in our view hopefully helps and retention.

Speaker Change: And further growth opportunities with those customers.

Speaker Change: Understood. Thank you.

Phil Yeager: And so, in our view, hopefully helps in retention and further growth opportunities with those customers. Understandable. Thank you. Our next question comes from John Chappell of Evercore ISI. Thank you. Good afternoon. This is Jon Chappell.

Speaker Change: Our next question comes from Jon Chappell of Evercore ISI.

John Chappell: So, two quick ones, follow-ups. I think it's kind of beating around the bush a little bit on the shape of the second half. If we take the midpoint of the new guidance range and some of the commentary about the fourth quarter most likely being better on a peak, does that mean the 3Q looks very similar to 2Q with more of the tail in 4Q, or is there a sequential kind of glide up from this 47 cent starting point? Yeah, I would say that your second comment is most appropriate. A little glide up, you know, slowly but surely, get there.

Jon Chappell: Thank you good afternoon, Jon Chapelle.

Jon Chappell: Two quick one follow ups, I think kind of beating around the bush little bit on the shape of the second half, but if we take the midpoint of the new guidance range.

Jon Chappell: The commentary about the fourth quarter, most likely being better on a peak does that mean that <unk> looks very similar to <unk> with more of the tail end of <unk> or is there a sequential kind of glide up.

Speaker Change: From this 47 starting point.

Speaker Change: Yes, I would say that I think your second comment is most appropriate to look.

Speaker Change: Slide up.

Speaker Change: Slowly but surely.

Kevin Beth: You know, I think as we bring in the volume that we're expecting, as we see the peak season start, whether that's pulled a little forward or more than the natural seasonality that we're used to. But either way, that would be the expected. Okay, thanks, Kevin. And then, Phillip, and Brian, just on duration of the contract, have you been able to take any shorter duration as this recession has been kind of long in the tooth here, whereas, if you see an inflection on volume or spot, you can maybe see it in the revenue per load a lot quicker?

Speaker Change: Get there.

Speaker Change: As we bring on the volume that we're expecting.

Speaker Change: As we see the peak season start.

Speaker Change: Whether that holds a little forward or more than the natural seasonality that we're used to but either way that would be the expectation.

Brian: Okay. Thanks, Kevin and then fill it Brian just on duration of contracts have you been able to take any shorter duration. As this recession has been kind of long in the tooth here, whereas if you see it.

Kevin Beth: Or is the bid season that you've just gone through, kind of baked in now through the first half of next year, so any inflection in price would really be kind of a second half, 25 event? Yeah, this is Phil. I would say we're going to constantly be assessing our network. We're doing that right now.

Speaker Change: <unk> on volume or spot you can maybe see it in the revenue per load a lot quicker or is the bid season that you've just gone through kind of baked in now through the first half of next year. So any inflection in price it would be really kind of a second half 'twenty five of them.

Phil Yeager: And so we're always discussing with our customers network needs, but also what fits or might not on an ongoing basis, even with contractual business, because we want to have an open dialogue with our customers. So, in our view, it's a constant evolution of our network, making sure that we're maximizing that margin per load day based on market conditions. And so we'll keep that dialogue as the market shifts and certainly want to honor our contracts and agreements but also have an open dialogue with our clients. Thanks, Phil.

Speaker Change: Yes. This is Phil I would say, we're going to constantly be assessing our network, we're doing that right now.

Phil Yeager: So we're always discussing with our customers' network needs, but also what fits or might not on an ongoing basis, even with contractual business strike because we want to have an open dialogue with our customers. So.

Speaker Change: In our view.

Speaker Change: Constant evolution of our network, making sure that we're maximizing that margin per load data based on market conditions, and so we will keep that dialogue as the as the market shifts and certainly want to honor our contracts and agreements that also have open dialogue with our clients.

Beth: Thanks Beth.

Phil Yeager: Our last question comes from Scott Group of Wolf Research. Hey guys, thanks for the follow-up. So this dynamic with the rail pricing lag, I'm just wondering if it's any different in the East or the West or basically kind of the same? Similar framework. Yeah, I mean, I wouldn't go into much depth on that.

Speaker Change: Our last question comes from Scott Group of Wolfe Research.

Scott Group: Hey, guys. Thanks for the follow up.

Scott Group: So this dynamic with the rail pricing lag I'm, just wondering is it any different than the east or the or the western basically kind of the same.

Scott Group: I would say a very, very similar framework. Okay, and I mean, I'm kind of asking the idea that, you know, you made a comment, Phil, midway through the video, price is a lot more important than volume, which we've seen in your model over a long period of time. I'm just kind of wondering, are local lease volumes up 26%? Have we overshot? Right, with our approach to bid season, do we need to... give up some volume in order to get some price and get a better balance to get these margins? I don't think so.

Speaker Change: Similar framework.

Speaker Change: I wouldn't go into much depth around that.

Speaker Change: Very similar frameworks.

Speaker Change: Okay, and I mean, I'm kind of asking the idea of that.

Speaker Change: You made a comment Phil.

Phil Yeager: Midway through that.

Phil Yeager: This is a lot more important than volume, which we've.

Phil Yeager: Seen in your model over a long period of time I just I'm just kind of wondering is our local these volumes up 26% if we overshot.

Speaker Change: Right with our approach to bid season, do we need to.

Speaker Change: You give up some volume in order to get some price and get a better balance to get these margins higher.

Phil Yeager: I think we highlighted, you know, one, margins were flat sequentially. I know we're highlighting that there will be some, you know, potential challenges in the third quarter sequentially, but the fourth quarter, we're anticipating, is kind of back to similar levels. So I would say we're reducing costs, we're, you know, improving velocity in the network, and we're positioning for the market upturn. So, you know, at this point, I wouldn't say there's any pivot that's required.

Speaker Change: I don't think so I think we highlighted one margins were flat sequentially I know, we're highlighting that there will be some potential.

Speaker Change: Challenging.

Speaker Change: The third quarter sequentially, but fourth quarter, we're anticipating that it's kind of back to similar levels. So.

Speaker Change: I would say, we're reducing costs were improving velocity in the network, we're positioning for the market upturn.

Speaker Change: So at this point I wouldn't say, there's any pivot that's required we feel good about the strategy we've deployed.

Phil Yeager: We feel good about the strategy we've deployed, and obviously, we're going to constantly be assessing, based on market conditions, can we do better? But at this point, we feel like we've executed the right strategy. Thank you guys. I appreciate it. I would now like to turn the conference back to Phil Yeager for closing remarks. Great. Well, thank you for joining us this evening. And, as always, Kevin, Brian, and I are available for any questions.

Speaker Change: Obviously, we're going to constantly be assessing with market conditions can we do better but at this point, we feel like we've executed the right strategy.

Speaker Change: Okay.

Speaker Change: Thank you guys appreciate it.

Phil Yeager: Thank you, and have a good evening. Ladies and gentlemen, this concludes today's conference call with Hub Group, Inc. Thank you for joining. You may now disconnect. Thomas Wadewitz, Jason Seidl, Brian Ossenbeck, Kevin Beth, Thomas Schwartz, Ken Heoxter, Hub Group Inc. Thomas Schwartz, Jason Seidl, Brian Ossenbeck, Kevin Beth, Thomas Schwartz, Ken Heoxter, Hub Group Inc.

Speaker Change: I would now like to turn the conference back to Phil Yeager for closing remarks.

Phil Yeager: Great well, thank you for joining us this evening.

Speaker Change: Kevin and Brian and I are available for any questions. Thank you and have a good evening.

Speaker Change: Ladies and gentlemen, this concludes today's conference call with hub group incorporated. Thank you for joining you may now disconnect.

Speaker Change: Yeah.

Phil Yeager: Okay.

Phil Yeager: [music].

Phil Yeager: Okay.

Phil Yeager: [music].

Phil Yeager: Yes.

Phil Yeager: Okay.

Phil Yeager: Yes.

Phil Yeager: Okay.

Phil Yeager: [music].

Phil Yeager: Okay.

Phil Yeager: Yes.

Phil Yeager: Sure.

Phil Yeager: Okay.

Phil Yeager: Okay.

Phil Yeager: Yes.

Phil Yeager: Okay.