Q1 2025 Hub Group Inc Earnings Call

May 8, 2025

Boston and treasurer are joining the call.

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

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

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

Statements made on this call and in other reference documents on our website that are not historical facts are forward looking statements. These forward looking statements are not guarantees of future performance and involve risks uncertainties and other factors that might cause actual results to the perf.

Performance of hub group to differ materially from those expressed or implied by this discussion and therefore should be viewed with caution.

Okay.

Speaker Change: Hello, and welcome to the hub group's first quarter 2025 earnings conference call.

Further information on the risks that may affect hub group's business is included in filings with the SEC, which are on our website.

Kevin Burke: Our hubs, President and Chief Executive Officer, and Vice Chairman and Kevin Burke, Chief Financial Officer, and Treasurer are joining the call.

In addition on today's call non-GAAP financial measures will be used reconciliations between GAAP and non-GAAP financial measures are included in our earnings release and quarterly earnings presentation. As a reminder, this conference is being recorded it is now my pleasure to turn the call over to your host go Yeager you may now begin.

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

Kevin Burke: A question and answer session will follow the prepared remarks.

Kevin Burke: In order for everyone to have an opportunity to participate please limit your inquiries to one primary and we'll follow up question.

go Yeager: Good afternoon, and welcome to hub group's first quarter earnings call. Joining me today is Kevin hub group's Chief Financial Officer, Garrett Holland, Our senior Vice President of Investor Relations.

Kevin Burke: Statements made on this call and in other reference documents on our website that are not historical facts are forward looking statements. These forward looking statements are not guarantees of future performance and involve risks uncertainties and other factors that might cause actual results to the.

go Yeager: I would like to start by thanking our thousands of team members across North America for their efforts to support our customers and our hub group family through this dynamic market.

Kevin Burke: Performance of hub group to differ materially from those expressed or implied by this discussion and therefore should be viewed with caution.

go Yeager: These efforts drove a 40 basis point improvement in operating margins during the quarter.

Kevin Burke: Further information on the risks that may affect hub group's business is included in filings with the SEC, which are on our website.

go Yeager: Setting us up for success, both in the current market and long term.

Kevin Burke: In addition on today's call non-GAAP financial measures will be used reconciliations between GAAP and non-GAAP financial measures are included in our earnings release and quarterly earnings presentation. As a reminder, this conference is being recorded it is now my pleasure to turn the call over to your host. So Yeager you may now begin.

go Yeager: Our customers have taken different approaches to managing through the implementation of tariffs with the majority taking a wait and see approach while others pull forward inventory depending on their end markets prototypes and origin other finished goods.

go Yeager: It remains unclear what the near and long term impact will be as many of our customers have diversified their vendor base and supply chain to ensure fluidity through these potential disruption.

So Yeager: Good afternoon, and welcome to hub group's first quarter earnings call. Joining me today is Kevin back hub group's Chief Financial Officer, Garrett Holland, Our senior Vice President of Investor Relations.

go Yeager: However, this has also created an increased focus for our customers to drive savings in their supply chain, which is supporting over the road conversions to intermodal and increasing the pipeline for a consolidation and managed transportation solutions.

So Yeager: I would like to start by thanking our thousands of team members across North America for their efforts to support our customers and our hundred family through this dynamic market.

go Yeager: There will likely be a near term impact of import volumes to the west coast, but the magnitude remains uncertain as our volumes have remained steady.

So Yeager: These efforts drove a 40 basis point improvement in operating margins during the quarter and are setting us up for success, both in the current market and long term.

go Yeager: We are closely monitoring the situation, while staying in constant communication with our clients on their needs.

So Yeager: Our customers have taken different approaches to managing through the implementation of tariffs with the majority taking a wait and see approach while others pulled forward inventory depending on their end markets product types and origin other finished goods.

go Yeager: Through the current turbulence in global trade, we are focusing on what we can control winning profitable growth across all of our segments by leveraging our great service.

go Yeager: Decreasing costs through our newly implemented $40 million cost reduction program.

Thanks, Brian.

go Yeager: And maintaining our strong balance sheet, the lower long term leverage target, giving us flexibility to invest in our business returning capital to shareholders, which totaled $21 million in the quarter identify strategic acquisition opportunities and preserve our strong culture and team.

So Yeager: However, this is also created in an increased focus for our customers to drive savings in their supply chain, which is supporting over-the-road conversions to intermodal, and increasing the pipeline for our consolidation and manage transportation solutions. Thank you very much.

go Yeager: I will now discuss our business results, starting with Ics, where we delivered an 8% increase in year over year operating margin due to improvements in dedicated operation higher intermodal volumes and also joint venture.

So Yeager: It will likely be a near-term impact in court volumes to the left coast, but the magnitude remains uncertain as our volumes have remained steady [inaudible]

So Yeager: We are closely monitoring the situation while staying in constant communication with our clients on their needs.

go Yeager: Margin improvement was partially offset by slightly lower revenue driven by declines in dedicated volume due to lower demand as well as small lot sites and lower intermodal revenue per load.

So Yeager: Through this current turbulence in global trade, we are focusing on where we can control. We need profitable growth across all of our segments by leveraging our great service.

go Yeager: Intermodal volumes increased 8% year over year due to bid wins, a pull forward of inventory and benefit from the IPO transaction.

So Yeager: Decreasing costs through our newly implemented $40 million cost reduction program.

go Yeager: Local east volumes increased 13% local west increased 5% and transcon shipments were down 1% year over year, while we had significant volume growth in Mexico through organic expansion and our joint venture.

So Yeager: and maintaining our strong balance sheet below our long-term leverage target, giving us flexibility to invest in our business, returning capital to shareholders which total $21 million in the quarter, identifies strategic acquisition opportunities, and preserve our strong culture and team.

go Yeager: Revenue decreased due to a 12% decline in revenue per load, which was impacted by fuel mix and price.

So Yeager: I will now discuss our business results starting with ITS, where we delivered an 8% increase in your-of-your-operative margin due to improvements in dedicated operations, higher intermodal volumes and the ASO joint venture.

go Yeager: We are executing well in bid season, onboarding wins, with a mix of new and existing customers and network beneficial land due to our excellent service.

go Yeager: We are closely monitoring award compliance and although shipping patterns have been more erratic, we're seeing improvements as we onboard New awards.

So Yeager: This margin improvement was partially accessed by slightly lower revenue, driven by decline and dedicated volume due to lower demand, as well as small off sites and lower intermodal

go Yeager: During the quarter, we reduced insurance expense increased earnings were straight percentage drove better container utilization and empty repositioning costs, while cost per drag and driver productivity remained relatively flat year over year.

So Yeager: Intermodal volumes increase 8% year-over-year due to bid wins, a poll forwarded inventory, and benefit from the AOPSO transaction.

go Yeager: We have further actions in place to enhance these operational areas and anticipate further improvement in the quarters ahead.

So Yeager: Local East volumes increased 13 percent, local West increased 5 percent and Transcans shipments were down 1 percent year over year, while we had significant volume growth in Mexico through organic expansion and our joint venture

go Yeager: In dedicated we are operating in a competitive environment and while we have had losses of smaller sites to one way truckload.

go Yeager: A strong renewal rates and new wins, we are on boarding.

So Yeager: Revenue decreased due to a 12% decline in revenue per load, which was impacted by fuel mix and products.

go Yeager: We improved our revenue per truck per day by 9% year over year in the quarter and are focused on delivering value to our customers through our strong service levels and cost reduction.

So Yeager: We are executing well in bed season, onboarding winds with a mix of new and existing customers and networked beneficial lanes due to our excellent service.

go Yeager: And logistics, our operating margin percentage improved 70 basis points year over year due to improved efficiency in our facilities as well as the completion of the network alignment initiative, but was offset by lower margins in our brokerage.

So Yeager: We are closely monitoring award compliance, and although shipping patterns have been more erratic, we are seeing improvements as we honoured new awards.

So Yeager: During the quarter, we reduced insurance expense, increased earn source draker percentage, drove a better container utilization, and empty re-positioning costs while cost for drake and drag recruit activity remained relatively flat year over year.

go Yeager: We experienced a larger decline in revenue and brokerage due to limited spot market opportunities and declining rates as well as the negative mix.

go Yeager: This was offset by better relative performance in our contractual logistics offerings.

So Yeager: We have further actions in place to enhance these operational areas and anticipate further improvement in the quarters ahead.

go Yeager: Brokerage volume declined 9% year over year with a 10% decline in revenue per load, which was primarily driven by lower fuel price and mix.

So Yeager: In dedicated, we are operating in a competitive environment, and while we have had walkers of smaller sites to one-way truckload, we have had a strong renewal rate and new wins we are onboarding.

go Yeager: <unk> offering is performing well, helping to drive sequential margin improvement from the fourth quarter.

go Yeager: We also reduced negative margin shipments by 210 basis points year over year.

So Yeager: We improved our revenue per truck per day by 9% year by year in the quarter and are focused on delivering value to our customers through our strong service levels and cost reductions.

go Yeager: And our winning with new and existing customers in bid season, while reducing our purchase transportation costs.

go Yeager: And our managed solutions, we delivered operating margin percentage improvement in all of our services the largest being in CFS. Following the implementation of operational efficiency enhancements and our network alignment initiative completion.

So Yeager: and LeChip Tips are operating margin percentage improved 70 basis points year by year due to improved efficiency in our facilities, as well as the completion of the network alignment initiative, which was offset by lower margins in our brokerage.

go Yeager: This has led to an 1100 basis point improvement in warehouse utilization year over year.

So Yeager: We experienced a larger decline in revenue of brokerage through the limited spot market opportunities and declining rates as well as a negative mix.

go Yeager: We are focused on growth across all of our offerings and improving our cost basis through productivity enhancements and we have a strong pipeline as we leverage our scale and service to compete and win in the market.

So Yeager: This is offset by better relative performance in our contractual logistics offering.

So Yeager: Brokerage volume declined 9% year over year with a 10% decline in revenue per load, which was primarily driven by lower fuel price and mix.

go Yeager: With that I'll hand, it over to Kevin to discuss our financial results.

So Yeager: Our <unk> offering is performing well, helping to drive sequential margin improvement from the fourth quarter.

Kevin: Thank you Phil I will walk through our financial results before commenting on our outlook.

This was offset by better relative performance in our contractual logistics offering.

So Yeager: We also reduced negative margin shipments by 210 basis points year over year.

Kevin: Our reported revenue for the first quarter was $915 million.

Brokerage volume declined 9% year over year with a 10% decline in revenue per load, which was primarily driven by lower fuel price and mix.

So Yeager: We are winning with new and existing customers in bid season, while reducing our purchase transportation costs.

Kevin: Revenue decreased by 8% compared to last year and was in line with fourth quarter revenue.

So Yeager: And our managed solutions, we delivered operating margin percentage improvement in all of our services the largest being in CFS. Following the implementation of operational efficiency enhancements and our network alignment initiatives completion.

Kevin: ICF revenue was $530 million.

Our <unk> offering is performing well, helping to drive sequential margin improvement from the fourth quarter.

Kevin: Which was down 4% from prior year revenue of $552 million.

We also reduced negative margin shipments by 210 basis points year over year.

Kevin: As the intermodal volume growth of 8% was offset by lower intermodal revenue per load due to a change in mix and slightly lower dedicated revenue in the quarter.

We are winning with new and existing customers in bid season, while reducing our purchase transportation costs.

So Yeager: This has led to an 1100 basis point improvement in warehouse utilization year over year.

So Yeager: We are focused on growth across all of our offerings and improving our cost basis through productivity enhancements and we have a strong pipeline as we leverage our scale and service to compete and win in the market.

And our managed solutions, we delivered operating margin percentage improvement in all of our services the largest being in CFS. Following the implementation of operational efficiency enhancements and our network alignment initiative completion.

Kevin: Additionally, lower fuel revenue of approximately $11 million negatively impacted the topline.

Kevin: Logistics segment revenue was $411 million compared to $480 million in the prior year due to lower volume and revenue per load in our brokerage business exiting of unprofitable business in CFS and seasonal softness in our managed transportation and final mile lines of business.

So Yeager: With that I will hand, it over to Kevin to discuss our financial results.

This has led to an 1100 basis point improvement in warehouse utilization year over year.

So Yeager: Thank you Bill I will walk through our financial results before commenting on our outlook.

We are focused on growth across all of our offerings and improving our cost basis in productivity enhancements and we have a strong pipeline as we leverage our scale and service to compete and win in the market.

So Yeager: Our reported revenue for the first quarter was $915 million.

So Yeager: Revenue decreased by 8% compared to last year and was in line with fourth quarter revenue.

Kevin: Lower fuel revenue of $14 million in the quarter also contributed to the decrease.

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

Moving down the P&L.

So Yeager: ICF revenue was $530 million.

Kevin: For the quarter purchased transportation and warehousing costs were $658 million.

Thank you Phil I will walk through our financial results before commenting on our outlook.

So Yeager: Which was down 4% from prior year revenue of $552 million.

Kevin: A decrease of $82 million from the prior year due to strong cost control as well as lower rail and warehouse expenses.

Our reported revenue for the first quarter was $915 million.

So Yeager: As the intermodal volume growth of 8% was offset by lower intermodal revenue per load due to a change in mix and slightly lower dedicated revenue in the quarter.

Revenue decreased by 8% compared to last year and was in line with fourth quarter revenue.

Kevin: This results in a 220 basis point improvement on a percent of revenue basis, when compared to Q1 of 2024.

So Yeager: Additionally, lower fuel revenue of approximately $11 million negatively impacted the topline.

Ics revenue was $530 million.

Which was down 4% from prior year's revenue of $552 million as the intermodal volume growth of 8% was offset by lower intermodal revenue per load due to a change in mix and slightly lower dedicated revenue in the quarter.

Kevin: Salaries and benefits of $149 million.

So Yeager: Our logistics segment revenue was $411 million compared to $480 million in the prior year due to lower volume and revenue per load in our brokerage business exiting of unprofitable business in CFS and seasonal softness in our managed transportation and final mile lines of business.

Kevin: For $5 million higher than the prior year due to additional employee drivers and warehouse team members and the <unk> transaction.

Kevin: Total legacy head count, which excludes acquisition employed driver and warehouse employees was lower than last year by 7% as we continued to manage head count across the organization.

Additionally, lower fuel revenue of approximately $11 million negatively impacted the topline.

So Yeager: Lower fuel revenue of $14 million in the quarter also contributed to the decrease.

Our logistics segment revenue was $411 million compared to $480 million in the prior year due to lower volume and revenue per load in our brokerage business exiting of unprofitable business in CFS and seasonal softness in our managed transportation and final mile lines of business.

So Yeager: Moving down the P&L for the quarter purchase transportation and warehousing costs were $658 million.

Kevin: Depreciation and amortization decreased $6 million over Q1, 2024 due to our updated useful life assumption.

So Yeager: A decrease of $82 million from the prior year due to strong cost control as well as lower rail and warehouse expenses.

Kevin: Insurance and claims expense decreased by $2 million as we continue to see our safety focus and training programs to pay dividend.

Lower fuel revenue of $14 million in the quarter also contributed to the decrease.

So Yeager: This resulted in a 220 basis point improvement on a percent of revenue basis, when compared to Q1 of 2024.

Kevin: Even after the <unk> transaction last quarter, our cost controls allowed our general and administrative expenses to remain in line with prior year.

Moving down the P&L for the quarter purchase transportation and warehousing costs were $658 million.

So Yeager: Salaries and benefits of $149 million.

A decrease of $82 million from the prior year due to strong cost controls as well as lower rail and warehouse expenses.

Kevin: As a result, our operating income increased year over year with an operating income margin of four 1% for the quarter, an increase of 40 basis points over the prior year.

So Yeager: Our $5 million higher than the prior year due to additional employee drivers and warehouse team member and the <unk> transaction.

This results in a 220 basis point improvement on a percent of revenue basis, when compared to Q1 of 2024.

So Yeager: Total legacy head count, which excludes acquisition employed driver and warehouse employer is lower than last year by 7% as we continue to manage head count across the organization.

Kevin: ICF quarterly operating margin was two 7% a 30 basis point improvement over prior year.

Salaries and benefits of $149 million.

Kevin: First quarter logistics operating margin was five 7% a 70 basis point improvement over Q1 2024.

$5 million higher than the prior year due to additional employee drivers and warehouse team members and the <unk> transaction.

So Yeager: Depreciation and amortization decreased $6 million over Q1, 2024 due to our updated useful life assumption.

Kevin: EBITDA was $85 million in the first quarter overall.

Total legacy head count, which excludes acquisition employed drivers and warehouse employees was lower than last year by 7% as we continue to manage head count across the organization.

Kevin: Overall, <unk> and Etfs are 44 in the first quarter in line with Q1 2024.

So Yeager: And Jonathan claims expense decreased by $2 million as we continue to see our safety focus and training programs to pay dividend.

Kevin: Now turning to our cash flow cash flow from operations for the first three months of 2025 was $70 million.

So Yeager: Even after the <unk> transaction last quarter, our cost controls allowed our general and administrative expenses to remain in line with prior year.

Depreciation and amortization decreased $6 million over Q1, 2024 due to our updated useful life assumption.

Kevin: First quarter capital expenditure totaled $19 million with the majority of spend related to tractor replacements, but technology, making up the remainder of the segment.

So Yeager: As a result, our operating income increased year over year with an operating income margin of four 1% for the quarter, an increase of 40 basis points over the prior year.

Insurance and claims expense decreased by $2 million as we continue to see our safety focus and training programs to pay dividend.

Kevin: Our balance sheet and financial position remained strong through the first quarter, we returned $21 million to shareholders through dividends and stock repurchases as we purchased $14 million of shares and issued our quarterly dividend of $12.05 per share.

Even after the <unk> transaction last quarter, our cost controls allowed our general and administration expenses to remain in line with prior year.

So Yeager: ICF quarterly operating margin was two 7% a 30 basis point improvement over prior year first quarter logistics operating margin was five 7%.

As a result, our operating income increased year over year with an operating income margin of four 1% for the quarter, an increase of 40 basis points over the prior year.

Kevin: Net debt was $140 million.

So Yeager: 70 basis point improvement over Q1 2024.

Kevin: Which is 0.4 times EBITDA below our stated net debt of EBITDA range of <unk> 75 times to 125 times.

So Yeager: EBITDA was $85 million in the first quarter overall.

ICF quarterly operating margin was two 7% a 30 basis point improvement over prior year.

So Yeager: Overall, however, our under an EPS of <unk> 44 in the first quarter in line with Q1 2024.

Kevin: EBITDA less capex was $65 million from the first quarter we.

First quarter logistics operating margin was five 7% a 70 basis point improvement over Q1 2024.

So Yeager: Now turning to our cash flow cash flow from operations for the first three months of 2025 with $70 million.

Kevin: We are pleased with our cash EPS of <unk> 55.

Kevin: The spread between EPS and cash EPS was <unk> 11 for the quarter.

So Yeager: First quarter capital expenditure totaled $19 million, but the majority of spend related to the tractor replacements with technology, making up the remainder of the segment.

EBITDA was $85 million in the first quarter.

Kevin: And we ended the quarter with $141 million of cash.

Overall, <unk> and Etfs are 44 in the first quarter in line with Q1 2024.

Kevin: Turning to our 2025 guidance, we expect full year EPS in the range of $1 75 to $2 25 and.

So Yeager: Our balance sheet and financial position remained strong through the first quarter, we returned $21 million to shareholders through dividends and stock repurchases as we purchased $14 million of shares and issued a quarterly dividend of $12.05 per share.

Now turning to our cash flow cash flow from operations for the first three months of 2025 was $70 million.

Kevin: And revenue to be between $3 6 billion.

First quarter capital expenditures totaled $19 million with the majority of spend related to tractor replacements with technology, making up the remainder of the spend.

Kevin: But 4 billion for the full year.

Kevin: <unk>, an effective tax rate of approximately 24%.

So Yeager: Net debt was $140 million.

Kevin: We also expect capital expenditures in the range of $40 million to $50 million as we focus on replacement protractor that have reached their end of life and technology projects.

So Yeager: Which is 0.4 times EBITDA below our stated net debt of EBITDA range of <unk> 75 times to one five times.

Our balance sheet and financial position remained strong through the first quarter, we returned $21 million to shareholders through dividends and stock repurchases as we purchased $14 million of shares and issued our quarterly dividend of $12.05 per share.

Kevin: We do not plan to purchase containers in 2005.

So Yeager: EBITDA less capex was $65 million from the first quarter we.

Kevin: Our assumptions at the high end of the range include either a short west coast slowdown of China imports or a strong bounce back of demand in the west coast, leading to a third of volume in the back half of the year that allows for increased pricing for peak season surcharges.

So Yeager: We are pleased with our cast EPS of <unk> 55.

Net debt was $140 million.

So Yeager: The spread between EPS and cash EPS was <unk> 11 for the quarter.

Which is 0.4 times to EBITDA below our stated net debt of EBITDA range of <unk> 75 times to 125 times.

So Yeager: And we ended the quarter with $141 million of cash.

So Yeager: Turning to our 2025 guidance, we expect full year EPS in the range of $1 75 to $2 25 and.

Kevin: The low end of the range would be due to an extended slowdown in China and for <unk>, the weakening of consumer spending.

EBITDA less capex was $65 million in the first quarter we.

We are pleased with our cash EPS of <unk> 55.

Kevin: The decrease in volume and margin dollars will be partially offset by further cost management efforts.

So Yeager: And revenue to be between $3 6 billion.

The spread between EPS and cash EPS was <unk> 11 for the quarter.

So Yeager: At $4 billion for the full year.

Kevin: The assumptions in the middle of the range contemplate a volume decrease in the second half of the second quarter due to our customer's change in shipping patterns to combat tariff with a return to directional seasonality in the third quarter as consumer strength hold.

And we ended the quarter with $141 million of cash.

So Yeager: We project, an effective tax rate of approximately 24%.

Turning to our 2025 guidance, we expect full year EPS in the range of $1 75 to $2 25 and.

So Yeager: Also expect capital expenditures in the range of $40 million to $50 million as we focus on replacement per tractor that have reached their end of life and technology projects.

And revenue to be between $3 6 billion.

Kevin: Recently, we should recognize additional cost saving benefits through the year as the team remains committed to disciplined expense management.

So Yeager: We do not plan to purchase containers and quantified Bob.

But 4 billion for the full year.

<unk>, an effective tax rate of approximately 24%.

So Yeager: Our assumptions at the high end of the range include either a short west coast slowdown of China imports or a strong bounce back of demand in the west coast.

We also expect capital expenditures in the range of $40 million to $50 million as we focus on replacement for tractors that have reached their end of life and technology projects.

Kevin: For the Ips segment, we expect pricing to be relatively flat for the remainder of the year as we continue to focus on network needs and new customer acquisition.

So Yeager: Leading to a third of volume in the back half of the year and allows for increased pricing our peak season surcharges.

Kevin: We think there is upside should we see a bounce back of volume, which would allow for peak season surcharges and pricing increases.

We do not plan to purchase containers in 2005.

So Yeager: The low end of the range would be due to an extended slowdown in China and for <unk>, the weakening of consumer spending.

Our assumptions at the high end of the range include either a short west coast slowdown of China imports or a strong bounce back of demand in the west coast, leading to a surge of volume in the back half of the year that allows for increased pricing for peak season surcharges.

Due to the expected second quarter slowdown, we expect sequential operating results to be flat to down from first quarter than we would expect to be back to normal seasonal operating income pattern.

So Yeager: The decrease in volume and margin dollars will be partially offset by further cost management efforts.

So Yeager: The assumptions in the middle of the range contemplate a volume decrease in the second half of the second quarter due to our customers' changing shipping pattern to combat tariff with a return to the directional seasonality in the third quarter as consumers Frank called <unk>.

Kevin: We expect dedicated revenues to be less in 2024, as new customers are not enough to offset lost customer and demand softness.

The low end of the range would be due to an extended slowdown in China imports and or the weakening of consumer spending.

Kevin: For logistics, excluding our brokerage business, we expect some general softness in demand, but there should be some mitigating factors affecting revenue.

The decrease in volume and margin dollars will be partially offset by further cost management efforts.

So Yeager: Finally, we should recognize that there is some cost saving benefit through the year as the team remains committed to disciplined expense management.

The assumptions in the middle of the range contemplate a volume decrease in the second half of the second quarter due to our customers' changing shipping pattern to combat tariff with a return to directional seasonality in the third quarter as consumer strength hold.

Kevin: And our warehouse business, if we experienced lower transportation revenue, we expect to see an increase in storage revenue and in our final mile and managed transportation business. We have a good pipeline with its onboard it could offset slower shipping from current customer.

So Yeager: For the Ips segment, we expect pricing to be relatively flat for the remainder of the year as we continue to focus on network needs and new customer acquisition.

So Yeager: We think there is upside should we see a bounce back of volume, which would allow for peak season surcharges and pricing increases.

Italy, we should recognize additional cost savings and benefits through the year as the team remains committed to disciplined expense management.

Kevin: For brokerage, we expect volume for the remainder of the year to be flat to down from current volume results with pricing to continue at current levels.

So Yeager: Due to the expected second quarter slowdown, we expect sequential operating result to be flat to down from first quarter than we would expect to be back to normal seasonal operating income pattern.

For the Ips segment, we expect pricing to be relatively flat for the remainder of the year as we continue to focus on network needs and new customer acquisition.

Kevin: As potential upside if we see a pronounced bounce back and inventory restocking.

Kevin: We continue to manage what we can control and our cost savings initiatives have resulted in improved profitability.

We think there is upside should we see a bounce back of volume, which would allow for peak season surcharges and pricing increases.

So Yeager: We expect dedicated revenues to be less than <unk> 24, as new customers are not enough to offset lost customer and demand softness.

Kevin: We are pleased with the progress the team has made us the operating income percentage increased in both segments Ics with 30 basis points and logistics was 70 basis points of growth.

Due to the expected second quarter slowdown, we expect sequential operating results to be flat to down from first quarter than we would expect to be back to normal seasonal operating income pattern.

So Yeager: For logistic, excluding our brokerage business, we expect from general softness in EMEA, but there should be some mitigating factors affecting revenue.

Kevin: Resulting in a 1% increase in consolidated operating income or growth of 40 basis points on a percent to revenue basis.

So Yeager: And our warehouse business, if we experienced lower transportation revenue, we expect to see an increase in storage revenue and in our final mile and managed transportation business. We have a good pipeline with if onboard it could offset slower shipping from current customer.

We expect dedicated revenue to be less in 2024, new customers are not enough to offset lost customer and demand softness.

Kevin: We also reported Q1 intermodal volume growth of 8% free cash flow of $51 million.

The logistics, excluding our brokerage business, we expect some general softness in demand, but there should be some mitigating factors affecting revenue.

Kevin: And cash EPS of <unk> 55.

So Yeager: For brokerage, we expect volume for the remainder of the year to be flat to down from current volume results with pricing to continue at current level.

Kevin: As we manage through this unpredictable environment our longer term strategy continues to guide us.

And our warehouse business, if we experienced lower transportation revenue, we expect to see an increase in storage revenue and in our final mile and managed transportation business, we have a good pipeline, which if onboard it could offset slower shipping from current customers.

Kevin: We remain focused on managing our people costs, reducing discretionary spending and driving down transportation costs.

So Yeager: Business has potential upside if we see a pronounced bounce back and inventory restocking.

So Yeager: We continue to manage what we can control and our cost savings initiatives have resulted in improved profitability.

Kevin: At the same time, our strong balance sheet allows us to make value add acquisition.

For brokerage, we expect volume for the remainder of the year to be flat to down from current volume results with pricing to continue at current levels.

Kevin: As I have noted in the past.

So Yeager: We are pleased with the progress the team has made that the operating income percentage increased in both segments Ics with 30 basis points and logistics was 70 basis points of growth.

Kevin: <unk> and strategic changes, we've made to our business, including our focus on yield management asset utilization and operating expense efficiency and investing in an asset light logistics offerings have significantly improved profitability predictability free cash flow and returns.

As potential upside if we see a pronounced bounce back and inventory restocking.

So Yeager: Resulting in a 1% increase in consolidated operating income or growth of 40 basis points on a percent to revenue basis. We.

We continue to manage what we can control and our cost savings initiatives have resulted in improved profitability.

We are pleased with the progress the team has made us the operating income percentage increased in both segments Ics with 30 basis points and logistics was 70 basis points of the growth.

So Yeager: We also reported Q1 intermodal volume growth of 8% free cash flow of 51 million and.

Kevin: We believe these strategic changes allow hub group to be successful in a variety of macroeconomic environment.

So Yeager: And cash EPS of <unk> 55.

So Yeager: As we manage through this unpredictable environment our longer term strategy continues to guide US we remain focused on managing our people cost, reducing discretionary spending and driving down transportation costs.

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

Resulting in a 1% increase in consolidated operating income or growth of 40 basis points on a percent to revenue basis.

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.

We also reported Q1 intermodal volume growth of 8% free cash flow of $51 million and cash EPS of <unk> 55.

So Yeager: At the same time, our strong balance sheet allows us to make value add acquisition.

Speaker Change: To ask a question. Please press star one on your telephone and wait for your name to be announced.

Kevin Burke: As we manage through this unpredictable environment our longer term strategy continues to guide US we remain focused on managing our people cost, reducing discretionary spending and driving down transportation costs at.

So Yeager: As I have noted in the past the important strategic changes, we have made to our business, including our focus on yield management asset utilization and operating expense efficiency and investing in an asset light logistics offering has significantly improved profitability predictability free cash flow.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Okay.

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

Kevin Burke: At the same time, our strong balance sheet allows us to make value add acquisition.

Speaker Change: Hey, Thanks afternoon, guys. So can you just talk about what percentage of intermodal is tied to west coast ports, and then maybe I think in the past you would give us monthly trends, maybe just give us the monthly trends and what April was and then I know this is a bunch.

Kevin Burke: As I have noted in the past.

So Yeager: And returns.

Kevin Burke: <unk> strategic changes, we have made to our business, including our focus on yield management asset utilization and operating expense efficiency and investing in an asset light logistics offering has significantly improved profitability predictability free cash flow and returns.

So Yeager: We believe these strategic changes allow hub group to be successful in a variety of macroeconomic environment.

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

Speaker Change: But sort of in the same vein, but it feels like this important classes starting this week, so just what you're expecting to happen to your volumes going forward.

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.

Kevin Burke: We believe these strategic changes allow hub group to be successful in a variety of macroeconomic environment.

Speaker Change: Ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: Sure Yes.

Speaker Change: So I'll start.

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

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Yes.

Speaker Change: Volume I'll start with volume trends January was up 18 February was up one March was up 7% and then April was up six.

Speaker Change: Please standby, while we compile the Q&A roster.

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: Okay.

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

Speaker Change: Thus far in May we haven't seen the slowdown.

Speaker Change: To ask a question. Please press star one on your telephone and wait for your name to be announced.

Scott: Hey, Thanks afternoon, guys. So can you just talk about what percentage of intermodal is tied to west coast ports, and then maybe I think in the past you'd give us monthly trends, maybe just give us the monthly trends and what April was and then I know that the <unk>.

Speaker Change: That has done has been much anticipated but.

Speaker Change: At this point not showing up in our data, we think thats going to be varied by customer and how much. They pulled forward how much seasonal product they have how much diversification in there.

Speaker Change: Your question. Please press star one again.

So Yeager: Please standby, while we compile the Q&A roster.

So Yeager: Okay.

So Yeager: Our first question is from Scott Group Wolfe Research LLC Your question. Please.

Speaker Change: The strategy that <unk> been able to execute on.

Speaker Change: As far as exposure with China about 25% of our West coast volumes port related 30% of that coming from China.

Scott: But all sort of in the same vein, but it feels like those important classes. Starting this week. So just what you're expecting to happen to your volumes going forward.

Speaker Change: We are obviously anticipating that slowdown.

Speaker Change: Once again will vary by customer, but we're also going to have opportunities to reduce costs or empty repositioning costs are going to go down we're going to in source more of our drayage as Kevin mentioned in the prepared remarks, our storage revenue in warehouse utilization will improve so.

Scott: Sure Yes.

Scott: So I'll start.

Scott: So volume I will start with volume trends January we've up 18 February was up one March was up seven and then April was up six.

So Yeager: But sort of in the same vein, but it feels like this important cliffs is starting this week. So just what you're expecting to happen to your volumes going forward.

Scott: Thus far in May we haven't seen the slowdown.

Speaker Change: We're certainly monitoring it closely but once again haven't seen an impact at this point.

Scott: That has been has been much anticipated but.

So Yeager: Sure Yes.

So Yeager: So I'll start.

Scott: At this point not showing up in our data, we think thats going to be varying by customer and how much. They pulled forward how much seasonal product they have how much diversification in there.

Speaker Change: And is what's like the typical lag from when it shows up at a port to when it shows up in your volume.

So Yeager: So volume I'll start with volume trends January was up 18 February was up one March was up seven and then April was up six.

Speaker Change: Do you have a sense is there like is there a lot of.

Scott: <unk> strategy that <unk> been able to execute on the.

So Yeager: Thus far in May we haven't seen the slowdown.

Speaker Change: Freight at the ports are near the ports in warehouses that theres still like that was built up sort of like you still have volume to move even if there's not a lot of new stuff coming into the ports is that possibly happening.

Scott: As far as exposure with China about 25% of our West coast volumes court related to 30% of that come in from China.

So Yeager: That is obviously much anticipated but.

So Yeager: At this point not showing up in our data, we think thats going to be varying by customer and how much. They pulled forward how much seasonal products. They have how much diversification in their sourcing.

Scott: We are obviously anticipating that slowdown.

Speaker Change: Yes.

Speaker Change: I agree with you I think it takes a few weeks.

Scott: Once again will vary by customer, but we're also going to have opportunities to reduce costs are empty repositioning costs are going to go down we're going to in source more of our dredge as Kevin mentioned in the prepared remarks, our storage revenue in warehouse utilization will improve so we're certainly monitoring it closely but once again haven't seen it.

Speaker Change: We haven't seen that show up yet, but yes indications are there is still a good amount of warehouses and still clearing through.

So Yeager: Sourcing strategy that <unk> been able to execute on.

So Yeager: Far as exposure with China about 25% of our West coast volumes port related 30% of that coming from China.

Speaker Change: Report infrastructure, so guesswork, but we're staying very close with our customers on it and once again, it's going to vary by customer and by end market and by product type and so it really is.

Kevin Burke: We are obviously anticipating that slowdown once again will vary by customer, but we're also going to have opportunities to reduce costs or empty repositioning costs are going to go down we're going to in source more of our drayage as Kevin mentioned in the prepared remarks, our storage revenue and warehouse utilization will improve.

Scott: At this point.

Speaker Change: Ah vary by customer and so.

Speaker Change: And is what's like the typical lag from when it shows up at a port to when it shows up in your volume do you have a sense is there like is there a lot of.

Speaker Change: So we're having to stay very close to it.

Speaker Change: Really watch those day to day week to week award compliance is at forecast from our clients.

Speaker Change: Okay helpful. And then last one I'll just I'll pass it off any update you can give us just on.

Speaker Change: Freight at the ports are near the ports in warehouses that theyre still like that was built up sort of like you still have volume to move even if there's not a lot of new stuff coming into the ports is that possibly happening.

So Yeager: So we're certainly monitoring it closely but once again haven't seen an impact at this point.

Speaker Change: Bid season, and what kind of pricing youre seeing.

Speaker Change: And is what's like the typical lag from when it shows up at a port to when it shows up in your volume do you have a sense is there like is there a lot of.

Speaker Change: Yes, yes, I would say, it's competitive but certainly not a rational.

Speaker Change: Yes.

Speaker Change: I'd agree with you I think it takes a few weeks.

Speaker Change: If you look at Q1, there was actually a pull forward of bids we had about 48% of our business get bid in Q1, which we think was.

Speaker Change: We haven't seen that show up yet, but the indications are there is still a good amount of warehouses and still clearing through.

So Yeager: Freight at the ports are near the ports in warehouses that theres still like that was built up sort of like you still have volume to move even if there's not a lot of new stuff coming into the ports.

Speaker Change: Actually advantageous for intermodal truckload carriers came out with a little bit more aggression on rate that let our customers I think to look at the cost differential as well as the service product, we're delivering in intermodal and push a little bit more conversion than they may have otherwise.

Speaker Change: The port infrastructure, so guesswork, but we're staying very close with our customers on it and once again, it's going to vary by customer and by end market and by product type and so it really is.

So Yeager: That possibly happening.

So Yeager: Yes, I would agree with you I think it takes a few weeks and we haven't seen that show up yet, but yes indications are there is still a good amount of warehouses and still clearing through.

Speaker Change: By customer and so.

Speaker Change: So we're having to stay very close some gaps.

Speaker Change: Q2, 38% of our business is getting built out I would say, it's been a little bit more aggressive which is leading us to.

Speaker Change: Really watch those day to day week to week award compliance is at forecast from our clients.

So Yeager: Port infrastructure, so guesswork, but we're staying very close with our customers on it and once again, it's going to vary by customer and by end market and by product type and so it really is.

Speaker Change: Really say, we think flattish on pricing for the full year, but we've executed our bid plan, we've done really well in backhaul lanes and an efficient business for our drivers were growing well in the east and in Mexico and also with our temperature controlled product. We've added 50, new logos, thus far through bid season, So really pleased with those result.

Speaker Change: Okay helpful. And then last one I'll just I'll pass it off any update you can give us just on.

Speaker Change: Bid season, and what kind of pricing youre seeing.

So Yeager: Vary by customer and.

So Yeager: So we're having to stay very close.

Speaker Change: Yes, yes, I would say, it's competitive but certainly not a rational.

So Yeager: Really watch those day to day week to week award compliance is at.

Speaker Change: If you look at Q1, there was actually a pull forward of bids we had about 48% of our business get bid in Q1, which we think will.

So Yeager: <unk> forecast from our clients.

Speaker Change: Okay helpful. And then last one I'll just I'll pass it off any update you can give us just on.

Speaker Change: And I think the focus for us is keep delivering a great service product keep reducing costs. So we can compete and win and we will be in a good position as we see volumes normalize.

So Yeager: Bid season, and what kind of pricing you're seeing in <unk>.

So Yeager: Yes, yes, I would say, it's competitive but certainly not a rational.

Speaker Change: And Scott this is Kevin.

Speaker Change: Sure.

So Yeager: If you look at Q1, there was actually a pull forward of bids we had about 48% of our business get bid in Q1, which we think was actually advantageous for intermodal truckload carriers came out with a little bit more aggression on rate that let our customers I think to look at the cost differential as well as the service product, we're delivering in intermodal and push.

Speaker Change: Our normal cadence on bids and about 30% to 35% in first quarter and about 35% in second quarter. So you can see that that pull forward that bill.

Speaker Change: Q2, 38% of our business is getting bit out I would say, it's been a little bit more aggressive which is leading us to.

Speaker Change: Talking about.

Speaker Change: Really we think flattish on pricing for the full year, but we've executed our bid plan, we've done really well in backhaul lanes and efficient business for our drivers were growing well in the east and in Mexico and also with our temperature controlled product. We've added 50, new logos, thus far through bid season. So we're really pleased with those results.

Speaker Change: Thank you guys appreciate it.

Speaker Change: Yes.

Speaker Change: Our next question comes from back from majors of Susquehanna Financial Group.

So Yeager: A little bit more conversion than they may have otherwise.

So Yeager: Q2, 38% of our business is getting bit out I would say, it's been a little bit more aggressive which is leading us to.

Speaker Change: Okay. Thanks for taking my questions.

Speaker Change: Maybe adding a little more qualitative commentary to that.

So Yeager: Really say, we think flattish on pricing for the full year, but we've executed our bid plan, we've done really well in backhaul lanes and an efficient business for our drivers were growing well in the east and in Mexico, and also with our temperature controlled product.

Speaker Change: Can you walk through how your conversations with your largest customers which are.

The largest retailers with a sophisticated ways to deal with this situation how has that evolved over the last seven weeks.

Speaker Change: And Scott this is Kevin.

Speaker Change: Sure.

So Yeager: Added 50, new logos, thus far through bid season, so really pleased with those results and I think the focus for US is keep delivering a great service product keep reducing costs. So we can compete and win and we will be in a good position as we see volumes normalize.

Speaker Change: No.

Speaker Change: Yes.

Speaker Change: Are your forecast and the kind of high end low end scenarios of revenue that you've talked about tied to what they're they're sharing with you for their forecast.

Speaker Change: Our normal cadence on bids and about 30% to 35% in first quarter and about 35% in the second quarter. So as you can see that that bid cohort that bill.

Speaker Change: Trying to understand.

Speaker Change: Talking about.

Speaker Change: How quickly this is moving and how much visibility you think you would do or don't have at this point. Thank you.

Speaker Change: Thank you guys appreciate it thank.

So Yeager: And Scott this is Kevin.

Speaker Change: Thank you.

So Yeager: Or.

Bascom Majors: Our next question comes from Bascom majors of Susquehanna Financial group.

Speaker Change: Sure. Yes. This is Phil I think we do anticipate a drop in import demand in the second half of the second quarter I think the scenarios or potential outcomes. We're trying to lay out our if we see a quick rebound and things snap back really quickly and we're getting surcharges then youre at that high end of the <unk>.

So Yeager: Yes.

So Yeager: Our normal cadence on bids is about 30% to 35% in first quarter and about 35% in second quarter. So you can see that that pull forward that.

Bascom Majors: Okay. Thanks for taking my questions.

Speaker Change: Maybe adding a little more qualitative commentary to that can.

So Yeager: Talking about.

Speaker Change: Can you walk through how your conversations with your largest customers which are.

So Yeager: Thank you guys appreciate it thank.

So Yeager: Thank you.

Speaker Change: Our next question comes from back from majors of Susquehanna Financial Group.

Speaker Change: Range that we gave you if it's really prolonged and you started to see it impacts the consumer you could be at that low end and based on what we know there is probably somewhere in the middle that things will land and so that's kind of the midpoint of the range and it's based on what we're seeing with our customers. The discussions we've had with them.

Speaker Change: The largest retailers with a sophisticated ways to deal with this situation how has that evolved over the last six seven weeks.

Speaker Change: Okay. Thanks for taking my questions.

Speaker Change: Maybe adding a little more qualitative commentary to that can.

Speaker Change: Are your forecast and the kind of high end low end scenarios of revenue that you talked about.

Speaker Change: Can you walk through how your conversations with your largest customers which are.

Speaker Change: Tied to what they're they're sharing with you for their forecast.

Speaker Change: There is some pull forward thats occurred certainly when you look at our January volumes up 18% there was certainly pull forward but.

So Yeager: The largest retailers with a sophisticated ways to deal with this situation how has that evolved over the last six seven weeks.

Speaker Change: Trying to understand.

Speaker Change: How quickly this is moving and how much visibility you think you would do or don't have at this point. Thank you.

Speaker Change: But not a not where inventories are overstocked at this point and there is also a whole lot of seasonal shifting that needs to occur that hasnt taken place yet so our customers. Many had already been proactive in diversifying their supply chains and vendor base.

So Yeager: Are your forecast and the kind of high end low end scenarios of revenue that you talked about.

So Yeager: Tied to what they're they're sharing with you for their forecast.

So Yeager: Trying to understand.

So Yeager: How quickly this is moving and how much visibility you think you would do or don't have at this point. Thank you.

Speaker Change: Others are reacting more in real time, so I would tell you. It's also quite buried in how people have managed through it those that were more concentrated on Chinese imports pulled forward to those that didn't or taking that wait and see approach and so really has been a mix.

Phil: Sure. Yes. This is Phil I think we do anticipate a drop in import demand in the second half of the second quarter I think the scenarios or potential outcomes. We're trying to lay out our if we see a quick rebound and things snap back really quickly and we're getting surcharges then youre at that high end of the <unk>.

Speaker Change: <unk>.

Speaker Change: Once again, we are watching it closely and this is based the guidance is really based on those variety of potential outcomes and informed by the discussions we're having with our customers and what we anticipate happening.

Speaker Change: Based on what we're seeing with our customers. The discussions we've had with them. There is some pull forward. That's occurred certainly when you look at our January volumes up 18% there was certainly pull forward.

So Yeager: Range that we gave you if it's really prolonged and you started to see it impacts the consumer you could be at that low end and based on what we know there is probably somewhere in the middle that things will land and so that's kind of the midpoint of the range.

Speaker Change: But not a not where inventories are overstocked at this point and Theres also a whole lot of seasonal shifting that needs to occur that hasnt taken place yet so our customers. Many had already been proactive in diversifying their supply chains and vendor base.

Vasquez with Kevin I'll, just add certainly were taken as many data points as we can get our hands on when we're coming up with our scenario.

So Yeager: Based on what we're seeing with our customers. The discussions we've had with them. There is some pull forward thats occurred certainly when you look at our January volumes up 18% there was certainly pull forward.

Speaker Change: Yes that factor than what we're hearing from customers, but also.

Speaker Change: We're reading and whats available publicly at the last thing I'd add is the primary impact at least in the near term would be Ics or intermodal or other businesses are going to be somewhat more resilient through this our managed transportation business is not as important heavy.

Speaker Change: Others are reacting more in real time, so I would tell you. It's also quite varied and how people have managed through it those that were more concentrated on Chinese import cold forward, those that didn't or taking that wait and see approach and so really has been a mix.

So Yeager: But not a not where inventories are overstocked at this point and there is also a whole lot of seasonal shipping that needs to occur that hasnt taken place yet so our customers. Many had already been proactive in diversifying their supply chains and vendor base.

Speaker Change: Our warehousing business is going to see an influx of storage demand likely in a.

Speaker Change: <unk>.

Speaker Change: Once again, we're watching it closely and this is based the guidance is really based on those variety of potential outcomes and informed by the discussions we're having with our customers and what we anticipate happening fast.

So Yeager: Others are reacting more in real time, so I would tell you. It's also quite carried in how people have managed through it those that were more concentrated on Chinese imports pulled forward to those that didn't or taking that wait and see approach and so really has been a mix.

Speaker Change: We have some offsets and obviously, we're doing a good job managing cost to ensure we're in a good position.

Speaker Change: Finally, the one thing I would add is this really gives hubs that opportunity to work with our customers and show them that we can save them money.

Speaker Change: <unk>, it's Kevin I'll, just add certainly were taken as many data points as we can get our hands on when we're coming up with our scenario.

Speaker Change: And come up with better transportation spend.

So Yeager: <unk>.

Speaker Change: To really meet their needs. So that is an opportunity that we're trying to take advantage of as well.

So Yeager: Once again, we're watching it closely and this is based the guidance is really based on those variety of potential outcomes and informed by the discussions we're having with our customers and what we anticipate happening.

Speaker Change: Yes that factor than what we're hearing from customers, but also we're reading and whats available publicly at the last thing I'd add is the primary impact at least in the near term would be Ikea aster intermodal. Our other businesses are going to be somewhat more resilient through this our managed transportation business is not.

Speaker Change: And if we work backwards from the holidays through this uncertainty and just think about retail inventory needing to move in line and hit store shelves by.

So Yeager: <unk>, it's Kevin I'll, just add certainly were taken as many data points as we can get our hands on when we're coming up with our scenarios. So.

Speaker Change: November early December when do you think that.

So Yeager: That factor than what we're hearing from customers, but also.

Speaker Change: Import happy our warehousing business is going to see an influx of storage demand likely and so we have some offsets and obviously, we're doing a good job managing cost to ensure we're in a good position.

Speaker Change: You'll have the visibility in those decisions on how to manage through this will be made by those customers.

So Yeager: We're reading and what's available publicly.

So Yeager: One thing I'd add is the primary impact at least in the near term would be Ics or intermodal or other businesses are going to be somewhat more resilient through this our managed transportation business is not as important heavy our warehousing business is going to see an influx of storage demand likely in.

Speaker Change: Yes, I think there is certainly an air pocket of freight that's coming.

Speaker Change: Finally, the one thing I would add is that certainly gives hubs that opportunity to work with our customers and show them that we can save them money and come up with better transportation spend.

Speaker Change: I think there is going to be some replacement of that from other origin point there once again, the seasonal items back to school Halloween.

Speaker Change: T really meet their needs. So that is an opportunity that we're trying to take advantage of it as well.

Speaker Change: That are going to need to be brought in or youre going to Miss sales and then.

So Yeager: We have some offsets and obviously, we're doing a good job managing cost to ensure we're in a good position.

Speaker Change: For the holidays, you typically see Q3 be our strongest shipping quarter August late August September and October are normally our strongest shipping months, so to get that product you really seen those decisions in the July timeframe June late June early July and we.

Speaker Change: And if we work backwards from the holidays through this uncertainty and just think about retail inventory needed to to move in line and hit store shelves by.

So Yeager: Finally, the one thing I would add is that certainly gives hubs that opportunity to work with our customers and show them that we can save them money.

So Yeager: And come up with better transportation spend.

So Yeager: To really meet their needs. So that is an opportunity that we're trying to take advantage of as well.

Speaker Change: November early December when do you think that.

Speaker Change: Youll have the visibility in those decisions on how to manage through this will be made by those customers.

Speaker Change: Should hopefully start to see it in the data at that point I think if theres clarity around trade.

So Yeager: If we work backwards from the holidays through this uncertainty and just think about retail inventory needing to move in line and hit store shelves by.

Speaker Change: Yes.

Speaker Change: People are the consumers remaining resilient and people are going to ship and once again inventories just haven't been overly built in a lot of the segments that we operate in so.

Speaker Change: I think there is certainly an air pocket of freight that's coming.

So Yeager: November early December when do you think that.

Speaker Change: I think there is going to be some replacement of that from other origin point there once again, the seasonal items back to school Halloween.

So Yeager: Youll have the visibility on those decisions on how to manage to this will be made by those customers.

We're keeping a close eye on it though and we will certainly continue to stay very close to our customers.

Speaker Change: That are going to need to be brought in or youre going to Miss sales and then.

Speaker Change: Thank you all.

Speaker Change: Yes, I think Theres, certainly an air pocket of freight that's coming.

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

Speaker Change: Inc. For the holidays, you typically see Q3 be our strongest shipping quarter August late August September and then October are normally our strongest shipping months. So to get that product you are really seeing those decisions in the July timeframe June late June early July and we.

Speaker Change: Yes, thanks, operator, and good afternoon, everyone.

So Yeager: I think there is going to be some replacement of that from other origin point there once again, the seasonal items back to school Halloween.

Speaker Change: Kevin you talked about some of the additional levers that you can pull on to offset some of the pressure off the environment kind of trends towards the <unk> side of the outlook and that was certainly helpful.

Speaker Change: That are going to need to be brought in or youre going to Miss sales and then.

Speaker Change: Specific to high powered last year, I think you talked about head.

So Yeager: For the holidays, you typically see Q3 be our strongest shipping quarter August late August September and October are normally our strongest shipping months to get that product you really seen those decisions in the July timeframe June late June early July and we.

Speaker Change: Should hopefully start to see it in the data at that point I think theres clarity around trade.

Speaker Change: Head count being down about I don't want to say, 3%.

Speaker Change: Where was head count this quarter.

Speaker Change: People are the consumers remaining resilient and people are going to ship and once again inventories just haven't been overly built in a lot of the segments that we operate in so we're keeping a close eye on it though and we will certainly continue to stay very close to our customers.

Speaker Change: If you think about potential deterioration in the market, where can that number sort of go too.

Speaker Change: Yes, so I'll start so head count was down 7%.

Speaker Change: I mentioned in my prepared remarks, we have about $40 million of costs that we're executing on half of that.

So Yeager: Should hopefully start to see it in the data at that point I think if theres clarity around trade.

Speaker Change: Implemented really at the time of the call. So you start to see that kind of back half of Q2 and more materially in the third quarter and we'll implement the remainder of the year progresses with two thirds of that about is purchase transportation drayage truckload LPL as well as temporary labor in the warehouses and the other third is more salaries and benefits weighted with the.

Speaker Change: Thank you all.

Speaker Change: A reduction in head count and not not back filling roles that are.

Or are necessary, but we're also doing a really nice job.

Operator: Chairman, and Kevin Beth, Chief Financial Officer and Treasurer, are joining the call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the prepared remarks.

Made some significant reductions in our outsource flavor there as well so.

Chan of Stifel.

Yes, thanks, operator, and good afternoon, everyone.

Speaker Change: Once again, we're controlling what we can.

Speaker Change: We want to be in a position where.

Ken you talked about some of the additional levers that you can pull on to offset some of the pressure off the environment kind of trends towards the <unk> side of the outlook and that was certainly helpful specific.

Operator: In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. Statements made on this call and in other reference documents on our website that are not historical facts are forward-looking statements.

Speaker Change: We can support our customers as we see a rebound in demand as well. So we're certainly being thoughtful in our approach around it but obviously the opportunities to reduce costs as well, yes, just to add that we're also have some of our technology implementations are paying off we're seeing some reduced spend in our outsource.

Specific to headcount last year, I think you've talked about head.

Head count being down about I don't want to say, 3%.

Operator: for more information. The performance of Hub Group to differ materially from those expressed or implied by this discussion, and therefore should be viewed with caution.

Where was head count this quarter and if you think about potential deterioration in the market where can that number sort of go too.

Speaker Change: Support systems that we needed for some legacy.

Yes, so I'll start so head count was down 7%.

Speaker Change: As well as the consulting on the IP spend is coming down as well so.

I mentioned in my prepared remarks, we have about $40 million of cost out that we're executing on half of that.

Operator: Further information on the risks that may affect Hub Group's business is included in the followings of the SEC, which are on our website.

Speaker Change: We have pretty much every facet, we've looked under and were finding things that are allowing us to decrease cost and as Phil mentioned.

Implemented is really at the time of the call. So you start to see that kind of back half of Q2 and more materially in the third quarter and we'll implement the remainder of the year progresses with two thirds of that about is purchase transportation drayage truckload LPL as well as temporary labor in the warehouses. The other third is more salaries and benefits weighted with the.

Operator: An addition on today's call, non-GAAP financial measures will be used. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release and quarterly earnings presentation.

Speaker Change: Several of those programs have already been implemented other ones are being implemented as we speak and so we'll see some of that benefit to grow as the year progresses.

Operator: As a reminder, this conference is being recorded.

Phil Yeager: It is now my pleasure to turn the call over to your host, Phil Yeager. You may now begin.

Speaker Change: These improvements are on top of.

Speaker Change: The reductions we made in the network alignment initiative.

Reduction in head count and not not back filling roles that are necessary, but we're also doing a really nice job.

Phil Yeager: Good afternoon, and welcome to Hub Group's first quarter earnings call.

Speaker Change: And I think the team has done a great job in reducing empty repositioning costs, which were down 17% year over year in the quarter and then we.

Phil Yeager: Joining me today is Kevin Beth, Hub Group's Chief Financial Officer, and Garrett Holland, our Senior Vice President of Investor Relations. I'd like to start by thanking our thousands of team members across North America for their efforts to support our customers and our Hub Group family through this dynamic market. These efforts drove a 40-basis point improvement in operating margins during the quarter and are setting us up for success both in the current market and long term. Our customers have taken different approaches to managing through the implementation of tariffs, with the majority taking a wait-and-see approach, while others pulled forward inventory depending on their end markets, product types, and origin of their finished goods.

Some significant reductions in our outsourced labor there as well so.

Once again, we're controlling what we can.

Speaker Change: We've also been reducing insurance expense.

We want to be in a position where.

Speaker Change: Team has done a great job in reducing accident frequency and severity and so that Hudson tailwind as well.

We can support our customers as we see a rebound in demand as well. So we're certainly being thoughtful in our approach around it but obviously the opportunities to reduce costs as well, yes, just to add there.

Speaker Change: Okay. That's super helpful color and then maybe just for the follow up.

We're also have.

Speaker Change: Looking for some updates on yes. So in terms of business trends I know you mentioned that the.

Some of our technology implementations are paying off we're seeing some reduced spend in our outsource.

Speaker Change: Mexican volumes they are pretty strong.

Support systems that we needed for some legacy.

Any evidence of sourcing shifts there yet and if you think about M&A, we've talked about that a lot in the past, but specific to Mexico do you feel like Theres still opportunity to kind of fortify your presence there or do you think that you're pretty well built out.

As well as the consulting on the IP spend is coming down as well so.

Phil Yeager: It remains unclear what the near and long-term impacts will be as many of our customers have diversified their vendor-based and supply chains to ensure fluidity through these potential disruptions. However, this has also created an increased focus for our customers to drive savings in their supply chain, which is supporting over-the-road conversions to intermodal and increasing the pipeline for our consolidation and managed transportation solution. There will likely be a near-term impact to import volumes to the West Coast, but the magnitude remains uncertain as our volumes have remained steady. We are closely monitoring the situation while staying in constant communication with our clients on their needs.

We have pretty much every facet, we've looked under and were finding things that are allowing us to decrease cost and as Phil mentioned.

Speaker Change: Yes, I would say also it's been a fantastic joint venture and we've been off to a great start.

Several of those programs have already been implemented other ones are being implemented as we speak.

Speaker Change: Volumes were about <unk> on a year over year basis, and we're cross selling really well have some significant opportunities we're working on with our rail partners.

We will see some that benefits grow as the year progresses.

These improvements are on top of.

The reductions we made in the network alignment initiative.

Speaker Change: It's very exciting we have seen erratic shipping patterns with some of the news around.

And I think the team has done a great job in reducing empty repositioning costs, which were down 17% year over year in the quarter and then.

Speaker Change: Tariffs being on and off so I think the more we get clarity there the better but for the time being.

We have also been reducing insurance expense team.

Speaker Change: Most of our customers are back to normal shipping and we're seeing increases in volume just on an organic basis.

Phil Yeager: Through this current turbulence in global trade, we are focusing on what we can control, winning profitable growth across all of our segments by leveraging our great service. Decreasing costs through our newly implemented $40 million cost reduction program.

Team has done a great job in reducing accident frequency and severity and so that has been a tailwind as well.

Speaker Change: Even before some of the cross selling in <unk>.

Speaker Change: Obviously, just the upside from having a ASO in our numbers. We are continuing to look at acquisition opportunities. We have a really good pipeline right now some really interesting opportunities I do think adding more solutions to support our customers in Mexico over time will be the right approach and so we're certainly going to be opportunistic within that we also have a lot.

Okay. That's super helpful color and then maybe just for the follow up.

Phil Yeager: And maintaining our strong balance sheet below our long-term leverage target, giving us flexibility to invest in our business, return capital to shareholders, which totaled $21 million in the quarter, identify strategic acquisition opportunities, and preserve our strong culture and I will now discuss our business results starting with ITX, where we delivered an 8% increase in year-over-year operating margin due to improvements in dedicated operations, higher intermodal volumes, and the EASO joint venture. This margin improvement was partially offset by slightly lower revenue driven by declines in dedicated volume due to lower demand, as well as small loss sites and lower intermodal revenue per load.

You know looking for some updates on also in terms of business trends I know you mentioned that the.

Mexican volumes there are pretty strong.

Speaker Change: Interesting opportunities in the states right now that will help us continue to build scale and differentiation in the existing service lines. So lot of good opportunities.

Yes, I would say also it's been a fantastic joint venture we've been off to a great start our volumes were about forex on a year over year basis, and we're cross selling really well.

Speaker Change: That's great. Thank you.

Our next question comes from the line of Kenneth car with TD Cowen.

Jason Seidl: Hi, Thanks. This is on for Jason Seidl.

Speaker Change: I guess I guess, just one on the surcharges.

Some significant opportunities, we're working on with our rail partners and us.

Speaker Change: Yes, Youre guide originally called for modest peak season, surcharges kind of preempting that pull forward.

Phil Yeager: Intermodal volumes increased 8% year-over-year due to bid wins, a pull forward of inventory, and benefit from the AIATSO transaction. Local east volumes increased 13%, local west increased 5%, and transcontinent shipments were down 1% year over year, while we had significant volume growth in Mexico through organic expansion and our joint ventures. Revenue decreased due to a 12% decline in revenue per load, which was impacted by fuel mix and price. We are executing well in bid season, onboarding wins with a mix of new and existing customers and network beneficial lanes due to our excellent service. We are closely monitoring award compliance, and although shipping patterns have been more erratic, we are seeing improvements as we onboard new awards.

It's very exciting we have seen erratic shipping patterns with some of the news around.

Speaker Change: We're still expecting that kind of in the base case, and maybe secondly on the high end.

Tariffs being on and off so I think the more we get clarity there the better but for the time being.

Speaker Change: Assuming we see surcharges, maybe earlier in the year than usual if this air pocket kind of give us a way to a big influx.

Most of our customers are back to normal shipping and we're seeing increases in volume just on an organic basis.

Speaker Change: Sure. Yes. This is Kevin I'll take that one.

Even before some of the cross selling in.

Speaker Change: To answer your question on surcharges. The base case, there is none incorporated in the base case.

Obviously, just the upside from having a ASO in our numbers. We are continuing to look at acquisition opportunities. We have a really good pipeline right now some really interesting opportunities.

Speaker Change: And the Bull case, yes, surcharges are contemplated not to the level that we saw last year of $5 5 million.

I do think adding more solutions to support our customers in Mexico over time will be the right approach and so we're certainly going to be opportunistic within that we also have a lot of interesting opportunities in that space right now that will help us continue to build scale and differentiation in the existing service lines. So lot of good opportunities.

Speaker Change: The timing of it is really in question I think thats really one of the big things that.

Phil Yeager: During the quarter, we reduced insurance expense, increased our in-source dray percentage, drove better container utilization and empty repositioning costs, while cost per dray and driver productivity remained relatively flat year-over-year. We have further actions in place to enhance these operational areas and anticipate further improvement in the quarters ahead. In Dedicated, we are operating in a competitive environment, and while we have had losses of smaller sites to one-way truckload, we've had a strong renewal rate and new wins we are onboarding. We improved our revenue per day by 9% year-over-year in the quarter and are focused on delivering value to our customers through our strong service levels and cost reduction.

Speaker Change: Is unknown at this time that depending on when if tariffs change or.

Speaker Change: Phil spoke about earlier, if that restocking really comes at a certain time that is probably when we would see the surcharges, but without knowing what's going to happen with tariffs, it's really hard to predict when that would happen.

That's great. Thank you.

Our next question comes from the line of Kenneth <unk> with TD Cowen.

Hi, Thanks. This is on for Jason Seidl.

I guess I guess, just one on the on surcharges.

Speaker Change: Okay, that's pretty helpful.

And so your guide originally called for modest peak season surcharges kind of preempting that pull forward or are we still expecting that kind of in the base case and maybe secondly on the high end or are you assuming we see surcharges maybe earlier in the year than usual this air pocket kind of gives way to a big influx.

Speaker Change: And then maybe just another clarification I mean, you said it was it was advantageous that big chunk of beta.

Speaker Change: Pulled into <unk>.

Speaker Change: Is that indicating that the intermodal pricing environment sort of deteriorated into <unk> and that we need some kind of stabilization in the second half to get to the flat year on year.

Speaker Change: No no no I think what we were seeing that the initial onset of bid season was more aggressive truckload pricing trying to push rates up.

Phil Yeager: In the tip tips, our operating margin percentage improved 70 basis points year-over-year due to improved efficiency in our facilities, as well as the completion of the network alignment initiative, but was offset by lower margins in our brokers. We experienced a larger decline in revenue at brokerage due to limited spot market opportunities and declining rates as well as a negative mix. This was offset by better relative performance in our contractual logistics offering. Brokerage volume declined 9% year over year with a 10% decline in revenue per load, which was primarily driven by lower fuel price and mix.

Sure. Yes. This is Kevin I'll take that one.

To answer the question on surcharges. The base case, there is none incorporated in the base case.

Certainly.

Speaker Change: And intermodal was remaining similar.

And the Bull case, yes, surcharges are contemplated not to the level that we saw last year of $5 5 million.

Speaker Change: Similar to what we talked about taking some rate and had all but still very aggressive in backhaul.

Speaker Change: What we've seen now in the second portion of bid season is just more truckload competition. So not really any change in the intermodal space, it's been more or less opportunities for near term conversion just given some of the pricing that we're seeing from truckload carriers, but but we're still.

But the timing of it is really in question I think that's really one of the big things that.

Is unknown at this time.

Matt.

Pending on when if tariffs change or.

Phil Yeager: Our LTL offering is performing well, helping to drive sequential margin improvement from the fourth quarter. We also reduce negative margin shipments by 210 basis points year-over-year. and are winning with new and existing customers in bid season while reducing our purchase transportation costs. In our managed solutions, we delivered operating margin percentage improvement in all of our services, the largest being in CFS following the implementation of operational efficiency enhancements and our network alignment initiative completion. This has led to an 1,100 basis point improvement in warehouse utilization year over year. We are focused on growth across all of our offerings and improving our cost basis through productivity enhancements, and we have a strong pipeline as we leverage our scale and service to compete and win in the market.

Still look about earlier, if that restocking really comes at a certain time that is probably when we would see the surcharges, but without knowing what's going to happen with tariffs, it's really hard to predict when that would happen.

Speaker Change: Winning in the market I mean, we have a really good spread versus truck right now around 30% in aggregate.

Speaker Change: We have a really good value proposition with service.

Speaker Change: The thing is our customers are recognizing that if the consumer holds there is going to be some significant shipping demand in the back half.

Okay, that's pretty helpful.

And then maybe just another clarification I mean, you said it was it was advantageous that big chunk of that.

Speaker Change: So they want to make sure they are locking in that capacity and intermodal is obviously, a good opportunity one to reduce cost in the supply chain, but to make sure they're locking in capacity. If there is a search.

Pulled into <unk>.

That is that indicating that the intermodal pricing environment sort of deteriorated into <unk> and that we need some kind of stabilization in the second half to get to the flat year on year.

No no no I think what we were seeing that the initial onset of bid season was more aggressive truckload pricing trying to push rates up.

Speaker Change: Okay, that's great and maybe if I can squeeze one in on dedicated.

Speaker Change: How many bid season do you think it'll take to kind of get rates.

Speaker Change: Our previous high watermarks.

Intermodal was remaining.

Kevin Beth: With that, I will hand it over to Kevin to discuss our financial results. Thank you, Phil. I will walk through our financial results before commenting on our outlook. Our recorded revenue for the first quarter was $915 million. Revenue decreased by 8% compared to last year and was in line with fourth quarter revenue. ITF revenue was $530 million, which is down 4% from prior year's revenue of $552 million, as intermodal volume growth of 8% was offset by lower intermodal revenue per load due to a change in mix, and slightly lower dedicated revenue in the quarter. Additionally, lower fuel revenue of approximately $11 million negatively impacted the top line.

Speaker Change: Previous cycle any thoughts on that.

Speaker Change: Yes, so dedicated is multiyear contracts. So we're constantly having renewals every year right now, it's a little bit more competitive with one way the rates are typically based off of driver pay with <unk>.

Similar to what we talked about taking some rate and had all still very aggressive in backhaul.

What we've seen now in the second portion of bid season is just more truckload competition. So not really any change in the intermodal space, it's been more or less opportunities for near term conversion just given some of the pricing that we're seeing from truckload carriers, but but we're still.

Speaker Change: Fixed and variable portion.

Speaker Change: And while it has been somewhat more aggressive I mean, we're still doing a really good job on renewals.

Speaker Change: We've done a lot of self help on controlling costs and improving our operating performance, which is really supporting those improved margins on a year over year basis. So.

Winning in the market I mean, we have a really good spread versus truck right now around 30% in aggregate.

Speaker Change: We feel as though there is still opportunities regardless of what's going on with rate.

We have a really good value proposition with service.

The thing is our customers are recognizing that if the consumer hole there is going to be some significant shipping demand in the in the back half.

Speaker Change: And we will constantly every year be renewing contracts and wages are going up we will be taking rates up and vice versa. So right now, though obviously a competitive environment, but we're holding our own really well with strong renewals strong service levels.

Kevin Beth: The logistics segment revenue was $411 million, compared to $480 million in the prior year, due to lower volume and revenue per load in our brokerage business, exiting of unprofitable business and CFS, and seasonal softness in our van's transportation and final mile lines of business. Lower fuel revenue of $14 million in the quarter also contributed to the decrease. Moving down the P&L, for the quarter, purchase transportation and warehousing costs were $658 million, a decrease of $82 million from the prior year due to strong cost controls, as well as lower rail and warehouse expenses. This results in a 220 basis point improvement on a percent of revenue basis when compared to Q1 of 2024.

So they want to make sure they are locking in that capacity and intermodal obviously, a good opportunity one to reduce cost in the supply chain, but to make sure. They are locked in capacity. If there is a search.

Speaker Change: We are being proactive with our customers and identifying efficiency opportunities.

Okay, that's great and maybe if I can squeeze one in on dedicated.

Speaker Change: Alright, thanks for the time.

How many bid season do you think it'll take to kind of get rates.

Speaker Change: Yeah.

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

The previous high watermarks.

Speaker Change: Evercore ISI.

Previous cycle any thoughts on that.

Speaker Change: Okay.

Yes, it's a dedicated multi year contracts to we're constantly having renewals every year right now, it's a little bit more competitive with one way the rates are typically based off of driver pay with.

Speaker Change: Thank you good afternoon.

Kevin: Kevin I'm, just trying to put a pin on some of these things, which I understand are difficult to put a pin on just given the uncertainty but in the.

Kevin: Guidance in February looking for high single digit intermodal volume growth and low single digit pricing increases.

Fixed and variable portion.

And while it's been somewhat more aggressive I mean, we're still doing a really good job on renewals and we've done a lot of self help on controlling costs and improving our operating performance which is.

Kevin: Given what you said for the midpoint today volume decreases in the second half of <unk> returned to directional seasonality Ics pricing flat for the rest of the year, what would that translate to for full year intermodal volume growth and pricing.

Kevin Beth: Salaries and benefits of $149 million were $5 million higher than the prior year due to additional employee drivers and warehouse team members and the EASU transactions. Total legacy headcount, which excludes acquisition employees, drivers, and warehouse employees, is lower than last year by 7% as we continue to manage headcount across the organization. Appreciation and amortization decreased $6 million over Q1 2024 due to our updated Useful Life Assumption. Insurance and claims expense decreased by $2 million as we continue to see our safety focus and training programs pay dividends. Even after the IASU transaction last quarter, our cost controls allowed our general and administration expenses to remain in line with prior years.

Supporting those improved margins on a year over year basis. So.

We feel as though there is still opportunities regardless of what's going on with rate.

Kevin: Yes. Thank you Jonathan for the question yes.

And we will constantly every year be renewing contracts and wages are going up will be taking rates up and vice versa right now, though obviously a competitive environment, but we're holding our own really well with strong renewals strong service levels, and we are being proactive with our customers and identifying.

Kevin: Not.

Speaker Change: Due to the varying scenarios that we really came up with and the uncertainty we're not providing full year forecasted volume numbers at this time.

Speaker Change: Like you said, we do anticipate a slowdown here in the second half of this quarter.

Speaker Change: Without having some visibility into when that with last could come back and how strong that is we're not providing those those amounts at this time.

Kevin Burke: Yeah.

Kevin Burke: Alright, thanks for the time.

Kevin Burke: Yeah.

Kevin Burke: Our next question comes from Jonathan <unk> of Evercore ISI.

Speaker Change: Okay that makes sense.

Kevin Burke: Okay.

Kevin Beth: As a result, our operating income increased year over year, with an operating income margin of 4.1% for the quarter, an increase of 40 basis points over the prior year. ICF quarterly operating margin was 2.7%, a 30 basis point improvement over prior year. The first quarter logistics operating margin was 5.7%, a 70 basis point improvement over Q1 2024. EBITDA was $85 million in the first quarter. Overall, Hub earned an ETS of 44 cents in the first quarter, in line with Q1 2024.

Speaker Change: The pricing side, if it were to be flat from today would that be.

Kevin Burke: Thank you good afternoon.

Kevin Burke: Kevin I'm, just trying to put a pin on some of these things, which I understand are difficult to put a pin on just given the uncertainty but.

Speaker Change: Would that still be positive year over year in the second half or would that be kind of closer to flat year over year.

Kevin Burke: Guidance in February looking for high single digit intermodal volume growth and low single digit pricing increases.

Speaker Change: Yes.

Speaker Change: It would be pretty close to flat for year over year and like Bill said, we do have.

Kevin Burke: Given what you said for the midpoint.

Speaker Change: Good visibility to that with the bids being pulled forward. So it will be dependent on how the mix ends up being and that is again, making sure how compliance.

Kevin Burke: Day.

Kevin Burke: Volume decreases in the second half of <unk> turned a directional seasonality.

Kevin Burke: Yes pricing flat for the rest of the year, what would that translate to for full year, our intermodal volume growth and pricing.

Speaker Change: Customers are with what they're what they're telling us and sticking to their actual guide.

Jonathan: Yeah. Thank you Jonathan for the question Yeah, we're not.

Kevin Beth: Now, turning to our cash flow. Cash flow from operations for the first three months of 2025 was $70 million. First quarter capital expenditure totaled $19 million, with the majority of spend related to tractor replacements, with technology making up the remainder of the spend. Our balance sheet and financial position remain strong. Through the first quarter, we returned $21 million to shareholders through dividends and stock repurchases as we purchased $14 million of shares and issued our quarterly dividend of 12.5 cents per share. Net debt was $140 million, which is 0.4 times EBITDA, below our stated net debt of EBITDA range of 0.75 times to 1.25 times.

Kevin Burke: Due to the varying scenarios of that.

Speaker Change: Break that they originally projected.

Speaker Change: We really came up with and the uncertainty we're not providing full year forecasted volume numbers at this time.

Speaker Change: Okay that makes sense, one just quick last follow up.

Speaker Change: Again, and you were looking for a normalization of incentive comp, which I think you would expect it to be a headwind you talked about all the great things you're doing on the cost side.

Speaker Change: Like you said, we do anticipate a slowdown here in the second half of this quarter, but it's just without having some visibility into when that whiplash could come back and how strong that is you don't want we're not providing those those amounts at this time.

Speaker Change: Dialed down a bit as well or do you still kind of expect the same incentive comp headwind year over year $25 24.

Yes, I think overall, we still expect some headwinds there, but it has been muted a little bit now with the change in the actual head count itself.

So Yeager: Okay that makes sense and on the pricing side, if it were to be flat from today would that be.

Speaker Change: Would that still be positive year over year in the second half or would that be kind of closer to flat year over year.

Kevin: Got it appreciate it Kevin Thank you.

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

So Yeager: Yes.

Kevin Beth: Even the Lovecraft Act was $65 million in the first quarter. We are pleased with our cash EPS of $0.55. The spread between EPS and CAHPS EPS was $0.11 for the quarter, and we ended the quarter with $141 million of CAHPS.

So Yeager: Pretty close to flat for year over year.

So Yeager: And because you know like Phil said, we do have.

Brian: Hey, good afternoon.

So Yeager: Good visibility to that with the bids being pulled forward. So it will be dependent on how the mix ends up being.

Speaker Change: Thanks for taking the question.

Brian: Let me just.

Brian: Another question on the network intermodal network.

Utilization of its sort of a balance overall it sounded like you had some pretty good production and empty repositioning costs, but.

So Yeager: And that is again, making sure how compliant.

Kevin Beth: Turning to our 2025 guidance, we expect full-year EPS in the range of $1.75 to $2.25, and revenue to be between $3.6 billion to $4 billion for the full year. We project an effective tax break of approximately 24%. We also expect capital expenditures in the range of $40 to $50 million as we focus on replacement for tractors that have reached their end of life and technology projects. We do not plan to purchase containers in 2025. Our assumptions at the high end of the range include either a short West Coast slowdown of China imports or a strong bounce back of demand in the West Coast, leading to a surge of volume in the back half of the year that allows for increased pricing or peak season surcharge.

So Yeager: Customers are with what they're what they're telling us and sticking to their actual.

Brian: Maybe you can elaborate a little bit more on that do you still see pockets that are maybe a little bit less dense than than you would like or were you able to address those during bid season.

So Yeager: Right.

So Yeager: Break that they originally projected.

So Yeager: Okay that makes sense, one just quick last follow up.

So Yeager: Again.

Brian: Yes, yes, no. We are pleased with the progress on empty repos, even with that January a pull forward of freight.

So Yeager: You were looking for a normalization of incentive comp, which I think you would expect it to be a headwind you talked about all the great things you're doing on the cost side.

Brian: Reducing <unk>.

Brian: Repo cost, 17%, we felt like with a really good outcome for us and that was due to those bid win and creating better balanced and velocity.

So Yeager: Is that dialed down a bit as well or do you still kind of expect the same incentive comp headwind year over year 25, or <unk> 24.

So Yeager: Yes, I think overall, we still expect some headwind there.

Brian: We're pleased with that and we think we've continued to execute well in bids on the targeted lane.

So Yeager: But it has been muted a little bit now with the change in the actual head count itself.

Brian: We will likely see a step down just with the unknown.

So Yeager: Yeah.

Kevin Burke: Got it appreciate it Kevin Thank you.

Speaker Change: How far west coast volumes drop with the <unk>.

Kevin Beth: The low end of the range would be due to an extended slowdown in China imports and or the weakening of consumer spending. The decrease in volume and margin dollars would be partially offset by further cost management efforts. The assumptions in the middle of the range contemplate a volume decrease in the second half of the second quarter due to our customers' changing shipping pattern to combat tariff with a return to directional seasonality in a third quarter as consumer strength holds. Additionally, we should recognize additional cost-saving benefits through the year as the team remains committed to disciplined expense management.

Brian: <unk> Air pocket, but.

Kevin Burke: Our next question comes from Brian <unk> of Jpmorgan.

Brian: So we will see another step down just due to less demand off the west coast, but.

Speaker Change: Hey, good afternoon. Thanks.

Brian: I think we're controlling what we can control and long term you just don't want to be filling in those backhaul lanes. So we've done a good job with that.

So Yeager: Thanks for taking the question so let.

So Yeager: Let me just.

So Yeager: Broader question on the network intermodal network in the <unk>.

Brian: The growth in the east is going to continue to create more balance of velocity there.

So Yeager: Utilization of it and sort of a balance overall it sounded like you had some pretty good production and empty repositioning costs, but maybe you can elaborate a little bit more on that do you still see pockets that are maybe a little bit less dense than than you would like or were you able to address those during bid season.

Brian: Times in total were about 4% better on a year over year basis. So we're pleased with that as well and so we're getting more out of what we have on the street, we need to keep that momentum, but yes.

Brian: Yes.

Brian: About continuing to win in the right lanes, and we're going out and executing on that.

Kevin Beth: For the IPS segment, we expect pricing to be relatively flat for the remainder of the year as we continue to focus on network needs and new customer acquisitions. We think there is upside should we see a bounce back of volume, which would allow for peak season surcharges and pricing increases. Due to the expected second quarter slowdown, we expect sequential operating results to be flashed down from first quarter. Then we would expect to be back to normal seasonal operating income pattern. We expect dedicated revenues to be less than 2024 as new customers are not enough to offset lost customers and demand softness.

So Yeager: Yes, yes.

So Yeager: We are pleased with the progress on empty repos, even with that January a pull forward of Craig.

Brian: And it sounds like rail services.

Brian: Arming pretty well, despite the volatility and the uncertainty based on the comments on the <unk>.

So Yeager: Reducing our.

So Yeager: Repo cost, 17%, we felt like a really good outcome for us and that was due to those bid wins and creating better balance and velocity.

Brian: Turn times and how is that translating to truckload conversion it sounds like the spreads pretty favorable, but I'm assuming rail services.

Brian: A big part of that conversation to.

So Yeager: We're pleased with that and we think we've continued to execute well in bids on the targeted lane will likely see a step down just with the unknown knows how far west coast volume drop with it.

Brian: Absolutely a rail service has been really phenomenal and resilient in both of our partners are performing very well.

Brian: I think.

Brian: As you think about what could potentially happen with more of a.

So Yeager: EMCORE Air pocket, but.

Kevin Beth: For logistics, excluding our brokerage business, we expect some general softness in demand, but there should be some mitigating factors affecting revenue. In our warehouse business, if we experience lower transportation revenue, we expect to see an increase in storage revenue, and in our final mile and managed transportation business, we have a good pipeline, which, if onboarded, could offset slower shipping from current customers. For Wilfridge, we expect volume for the remainder of the year to be flat to down from current volume results, with pricing to continue at current levels. The business has potential upsides if we see a pronounced bounce back in inventory restock.

Brian: A surge in import demand.

So Yeager: So we'll see another step down just due to less demand off the west coast, but.

Brian: Feel far more confident in our ability to manage that surge in intermodal network and we were in the past just given the resilience of the operating models of our rail partners. So we're excited about that and staying with US I think we certainly learned a lot through.

Speaker Change: I think we're controlling what we can control and long term you still want to be filling in those backhaul lanes. So we've done a good job with that.

So Yeager: The growth in the east is going to continue to create more balance with velocity there.

Through the last few years and build more resilience into our service product as well so we feel very good about.

So Yeager: Turn times in total were about 4% better on a year over year basis. So we're pleased with that as well and so we're getting more out of what we have on the street, we need to keep that momentum but yeah.

Brian: Managing that for our customers and but once again rail service has been really strong.

So Yeager: Yes.

So Yeager: About continuing to win in the right lanes in and we're going out and executing on that.

Speaker Change: Let's follow up on the same sort of topic, what do you do you feel about snack boxes and where they are.

Kevin Beth: We continue to manage what we can control, and our cost savings initiatives have resulted in improved profitability. We are pleased with the progress the team has made with the operating income percentage increase in both segments, ICS with 30 basis points, and logistics with 70 basis points of growth, resulting in a 1% increase in consolidated operating income or growth of 40 basis points on a percent to revenue basis. We also reported Q1 intermodal volume growth of 8%, pre-cast flow of $51 million, and cast EPS of $0.55.

Brian: We have seen some pretty big.

So Yeager: And it sounds like rail services <unk>.

Brian: Big differences in the growth in different regions. So.

So Yeager: Performing pretty well, despite the volatility and the uncertainty based on the comments on the.

Speaker Change: So I guess, maybe an update in terms of just general positioning for your boxes.

Speaker Change: Now I'll turn times and how is that translating to truckload conversion it sounds like the spreads pretty favorable, but I'm, assuming rail services, a big part of that conversation to have.

Speaker Change: Other equipment and dream and what's the current percentage stacked.

Speaker Change: If you can give that yeah, we have somewhere around 20, approximately 20% to 25% of our boxes stacked at this moment in time, we think we have about 35% incremental capacity before we'd have to.

So Yeager: Absolutely a rail service has been really phenomenal and resilient in both of our partners are performing very well.

So Yeager: Thank you.

So Yeager: As you think about what could potentially happen with more of a.

Speaker Change: It really put any capital into containers. So we have a long way to go.

So Yeager: A surge in import demand.

So Yeager: Feel far more confident in our ability to manage that surge in intermodal network and we were in the past just given the resilience of the operating models of our railcar group. So we're excited about that and the same with US I think we certainly learned a lot through.

Kevin Beth: As we manage through this unpredictable environment, our longer-term strategy continues to guide us. We remain focused on managing our people costs, reducing discretionary spending, and driving down transportation costs. At the same time, a strong balance sheet allows us to make value-added acquisitions. As I have noted in the past, the important strategic changes we have made to our business, including our focus on yield management, asset utilization, and operating expense efficiency, and investing in asset-light logistics offerings, have significantly improved profitability, predictability, free cash flow, and return. We believe these strategic changes allow Hub Group to be successful in a variety of macroeconomic environments.

Speaker Change: Did improve our.

Speaker Change: Interest rate percentage by about 400 basis points sequentially, we've done a really nice job here in the second quarter. Thus far so we should see another step up on and towards straight percentage.

Speaker Change: And we're doing targeted hiring but really just getting more utility out of our existing team and so we feel good about.

So Yeager: Through the last few years and build more resiliency into our service product as well so we feel very good about.

Speaker Change: The momentum there and.

So Yeager: Managing that for our customers and but once again rail service has been really strong.

Speaker Change: I think we have plenty of capacity in the trades on the street, we're doing a really good job.

So Yeager: Last follow up on the same sort of topic, what do you how do you feel about the stack boxes and where they are.

Speaker Change: A lot of good work by the team.

Speaker Change: Okay. Thank you Phil I appreciate it.

Speaker Change: We have seen some pretty big differences in the growth and in different regions.

Speaker Change: Our next question comes from Thomas Flatwoods of UBS.

Speaker Change: So I guess, maybe an update in terms of just general positioning for boxes.

Speaker Change: Other equipment and dream and what's the current percentage stacked.

Thomas Flatwoods: Yes, good afternoon.

I wanted to ask you I know, there's not a lot of visibility on volume right. Then you kind of gave us some of the parameters for how to think about that are high level.

Operator: With that, I'll turn it over to the operator to open the lines 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.

So Yeager: If you can give that thanks, yeah, yeah, we have somewhere around 20, approximately 20% to 25% of our boxes stacked at this moment in time, we think we have about 35% incremental capacity before we'd have to.

Speaker Change: If we said well for <unk>.

Speaker Change: And kind of sequentially would you what's your kind of base case for <unk> intermodal volumes versus <unk> April sounds like it looked pretty good but you think full quarters down or may be kind of flat factoring in some softening later in the quarter, how would you think about that.

Operator: To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

So Yeager: It really put any capital into containers. So we have a long way to go.

So Yeager: Did improve our.

So Yeager: Interest rate percentage by about 400 basis points sequentially, we've done a really nice job here in the second quarter. Thus far so we should see another step up on tour straight percentage.

Scott Group: Our first question is from Scott Group of Wolfe Research, LLC. Your question, please. Hey, thanks. Afternoon, guys.

Phil: Yes. This is Phil I think.

Phil: It's a little unclear, what the drop will be and the timing of it.

Phil: And we're doing targeted hiring but really just getting more utility out of our existing team and so we feel good about.

Scott Group: So can you just talk about what percentage of intermodal is tied to West Coast ports? And then maybe I think in the past, you give us monthly trends, maybe just give us the monthly trend. what April was. And then I know this is a bunch, but all sort of in the same vein.

Phil: If it if we're still plenty being trans loaded and so in warehouses, that's going to delay that drop once again, we haven't seen it in our numbers yet so if it's three weeks out I would tell you we're still anticipating.

So Yeager: The momentum there and I think we have plenty of capacity in the trades on the street, we're doing a really good job.

Phil: Volumes being up a bit.

So Yeager: A lot of good work by the team.

Phil: In the next two weeks.

Scott Group: But, you know, it feels like this import cliff is starting this week. So just what you're expecting to happen to your volumes going forward. Sure, yeah. So I'll start. So volume, I'll start with volume trends. January was up 18, February was up one, March was up seven, and then April was up six. Thus far in May, we haven't seen the slowdown that is obviously much anticipated. But, you know, at this point, not showing up in our data. We think that's going to be varying by customer and how much they've pulled forward, how much seasonal product they have, how much diversification in their sourcing strategy they've been able to execute on.

Phil: Okay. Thank you Phil I appreciate it.

Phil: It could vary but at this point I would tell you, we're still anticipating volume growth for the quarter, but.

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

Phil: But.

Phil: It really does depend on how large that drop is and what the timing is as well.

So Yeager: Yes, good afternoon.

Speaker Change: Wanted to ask you I know, there's not a lot of visibility on volume right. Then you kind of gave me some of the parameters for how to think about that are high level.

Speaker Change: Okay, and so your volume growth sequentially or year over year.

Phil: I would say year over year sequentially is probably unlikely I would guess, but once again.

So Yeager: If we said well for two Q.

Speaker Change: And kind of sequentially would you what's your kind of base case for QQ intermodal volumes versus <unk>, you know April sounds like it looked pretty good but you think full quarters down or may be kind of flat factoring in some softening later in the quarter, how would you think about that.

Phil: Hard to know.

Phil: We're in the second week of June and we still have product flowing then.

Phil: We're going to be up and.

Phil: I think at the same time, we tried to give an indication of the exposure we have to China imports I think our customers have diversified their supply chain.

Phil: 25% of our West coast volumes are our port related and 30% of that is China.

So Yeager: Yes. This is Phil I think.

Phil Yeager: As far as exposure with China, about 25% of our West Coast volume is port related, 30% of that, you know, coming from China. We are obviously anticipating that slowdown, you know, once again, will vary by customer. But we're also going to have opportunities to reduce costs, RMT repositioning costs are going to go down, we're going to insource more of our drainage, as Kevin mentioned in the prepared remarks, our storage revenue and warehouse utilization will improve. So we're certainly monitoring it closely. But once again, haven't seen an impact at this point.

So Yeager: It's a little unclear, what the drop will be and the timing of it.

It shouldnt be a outsized impact and we've done really well with growth in Mexico and growth in the local east.

So Yeager: If it if we're still plenty being trans loaded and so in warehouses, that's going to delay that drop once again, we haven't seen it in our numbers yet so if it's three weeks out I would tell you we're still anticipating.

Phil: Those should be some offsets.

Phil: To that important demand drop.

Phil: Right Okay.

So Yeager: Volumes being up.

Phil: I wanted to also ask you a bit about how youre thinking about Etfs and logistics operating margins looking forward.

So Yeager: In the next two weeks.

So Yeager: It could vary but but at this point I would tell you, we're still anticipating volume growth for the quarter, but.

Phil: Do you think you think kind of stable I mean, I know <unk> got the wrinkle with the.

Scott Group: And is, what's like the typical lag from when it shows up at a port to when it shows up in your volume? And do you have a sense, is there like a, is there a lot of , and David.

So Yeager: But it really does depend on how large that drop is and what the timing is as well.

Phil: And some weakening in volume, but how do you think about where we go from kind of $2 seven and $5 seven in <unk> and what might be some key levers to potentially see improvement also off the <unk> level.

Speaker Change: Okay, and so your volume growth sequentially or year over year.

So Yeager: I would say year over year sequentially is probably unlikely I would guess, but once again it's.

Scott Group: I'm curious about the port infrastructure. Is there a lot of new stuff coming into the ports? Is that possibly happening? Yeah, yeah. I would agree with you. I think it takes a few weeks. And we haven't seen that show up yet. But, yes, indications are there's still a good amount of warehouses and still clearing through the port infrastructure. So, yes. But we're staying very close with our customers on it. And, once again, it's going to vary by customer and by end market and by product type. And so, you know, it really is a varied booth by customer.

Phil: Sure.

Kevin: Tom This is Kevin.

So Yeager: Hard to know if it were.

Speaker Change: We don't provide quarterly guidance on this but what I will tell you is.

So Yeager: During the second week of June and we still have product flowing and then we're going to be up in.

Speaker Change: Again, it depends on that timing and if there is that fall off.

So Yeager: At the same time, we tried to give an indication of the exposure we have to China imports I think our customers have diversified their supply chains.

Speaker Change: But without that we would expect to see the directional normal seasonal increases that you would see in third and fourth quarter.

So Yeager: If 25% of our West coast volumes are our port related and 30% of that is China.

So Yeager: It shouldn't be a outsized impact and we've done really well with growth in Mexico and growth in the local east so there should be some offset.

Speaker Change: For both Ics and for logistics and I think right now the second quarter is a little bit more up in the air.

Scott Group: And so we're having to stay very close and just really watch those day-to-day week-to-week award compliances and forecasts from our clients.

Speaker Change: There really is the fall off that everyone's talking about with the imports and that may be sequentially down.

So Yeager: To that important demand drop.

Right Okay.

So Yeager: Wanted to also ask you a bit about how youre thinking about Etfs and logistics operating margins looking forward.

Scott Group: helpful.

Scott Group: And then last one, I'll just I'll pass it off any update you can give us just on bid season and what kind of pricing you're seeing. Yeah, yeah. You know, I would say it's competitive, but certainly not irrational. You know, if you look at Q1, there was actually a pull forward of bids. We had about 48% of our business get bid in Q1, which we think was actually advantageous for intermodal truckloads. Carriers came out with a little bit more aggression on rates. That led our customers, I think, to look at the cost differential as well as the service products we're delivering in intermodal and push, you know, a little bit more conversion than they may have otherwise.

Speaker Change: Okay, so probably versus <unk>, some improvement in second half, but less clear for for <unk>.

So Yeager: Do you think you'd see kind of stable I mean, I know <unk> got the wrinkle with the.

Speaker Change: Yes, yes.

Speaker Change: Yes.

Speaker Change: And again those cost items that we talked about the $40 million of different projects that we have theyre going to be they're going to be kicking in and I think we'll be able to help even if there is some muted volume in the second half, especially maybe at the beginning.

So Yeager: And some weakening in volume, but how do you think about where we go from you just kind of $2 seven and $5 seven Q1and what might be some key levers to potentially see improvement also off the <unk> level.

Speaker Change: July.

So Yeager: Sure.

Tom: Tom This is Kevin.

Speaker Change: Okay, maybe one last one and I'll hand, it off but what are you. What do you think about the kind of the key lever for intermodal margin improvement you used to run at a lot higher level and it feels like it's just been the big weighed on truckload and intermodal has just been excess capacity and difficulty getting getting rate is that is that really the thing you've just got to get it.

So Yeager: We don't provide quarterly guidance on this but what I will tell you is.

So Yeager: Again, it depends on that I mean, and if there is that falloff.

Phil Yeager: In Q2, 38% of our business is getting bid out. I would say it's been a little bit more aggressive, which is leading us to really say, you know, we think flattish on pricing for the full year, but we've executed our bid plan. We've done really well in backhaul lanes and efficient business for our drivers. We're growing well in the east and in Mexico, and also with our temperature-controlled products. We've added 50 new logos thus far through bid season, so really pleased with those results. And, you know, I think the focus for us is keep delivering a great service product, keep reducing costs so we can compete and win, and we'll be in a good position as we see volume normalize.

So Yeager: Right.

So Yeager: With without that we would expect to see the directional normal seasonal increases that you would see in third and fourth quarter.

Speaker Change: <unk> rate environment, and the net debt intermodal margin improves a fair bit or what's kind of the key lever.

So Yeager: For both Ics and for logistics, you know I think right now.

Speaker Change: Look a little further out.

So Yeager: <unk> quarter is a little bit more up in the air.

Phil: Yes. This is Phil.

Speaker Change: I don't.

So Yeager: There really is the fall off that everyone's talking about with the imports and.

Speaker Change: Really recall when we were running at a much higher margin I think we've actually done a great job improving the trough to trough margin profile and actually more than more than doubling it.

So Yeager: And that may be sequentially down.

So Yeager: Okay, so probably versus <unk>, some improvement in second half, but less clear for for <unk>.

Speaker Change: I feel like we actually have done a great job, we did run higher in Covid, when our boxes were being used for storage.

Kevin Beth: And Scott, this is Kevin just for Our normal cadence on bids is about 30-35% in first quarter and about 35% in second quarter. So you can see that bid pull forward that Bill was talking about.

Yep.

So Yeager: Yeah.

So Yeager: Again, those cost items that we talked about the $40 million of different projects that we have theyre going to be they're going to be kicking in and you know I think we will be able to help even if there is some muted volume.

Speaker Change: Yes, so I guess that would be the time, where it was higher but at the same time I think we do need more velocity in the network.

Speaker Change: That's priority one we need to continue to in source more drayage, which right now we're running over 80%. We've got our chassis programs in place, we've got variable rate and our rail contracts.

So Yeager: Can have especially maybe at the beginning.

Scott Group: Thank you guys. Appreciate it.

So Yeager: July.

Bascome Majors: Our next question comes from Bascome Majors of Susquehanna Financial. Thanks for taking my questions. may be adding a little more qualitative commentary to that.

So Yeager: Okay.

So Yeager: One last one and I'll hand, it off but what do you what do you think about the kind of the key lever for intermodal margin improvement you used to run at a lot higher level and it feels like it's just been you know the big weighed on truckload and intermodal has just been excess capacity and difficulty getting getting rate is that is that really the thing you've just gotta get a stronger rate environment, and then that that intermodal March.

Speaker Change: Yes, I mean, I still think mid.

Speaker Change: Mid cycle. This is a mid mid single digit operating margin business in that 5% to 6% range and as you get to the peak of a cycle it could be much higher than that but.

Bascome Majors: Can you walk through how your conversations with your largest customers, which are. with sophisticated ways to deal with this situation. Are your forecasts in the kind of high-end, low-end scenarios or revenue that you talked about, tied to what they're sharing with you for their forecast? I'm just trying to understand, you know, how quickly this is moving and how much visibility you think you do or don't have at this point.

Speaker Change: So demand would certainly help but I think we've done a really good job controlling what we can control and improving the margins of the business.

So Yeager: Improves a fair bit or.

Speaker Change: What's kind of the key lever.

Speaker Change: Certainly price moves the lever.

So Yeager: And look a little further out.

Speaker Change: Easier than volume does but.

Phil: Yes. This is Phil.

So Yeager: I don't know.

Speaker Change: That day is going to come and I think we're ready for that growth opportunity.

Speaker Change: Okay, Alright makes sense, thanks for the time.

Christopher <unk>: Our next question comes from Christopher <unk> of the benchmark company.

Speaker Change: I feel like we've actually done a great job, we did run higher in Covid, when our boxes were being used for storage.

Christopher <unk>: Yes, hi, good afternoon. Thanks for taking my questions guys appreciate it.

Bascome Majors: Thank you.

Phil Yeager: Sure, yeah, this is Phil. So I think, you know, we do anticipate a drop in import demand in the second half of the second quarter. I think the scenarios or potential outcomes we're trying to lay out are, you know, if we see a quick rebound, and things snap back really quickly, and we're getting surcharges, then you're at that high end of the range that we gave you. If it's really prolonged, and you start to see it impact the consumer, you could be at that low end. And based on what we know, you know, there's probably somewhere in the middle that things will land.

Speaker Change: Can we just go back to the logistics margins I mean, they were up 70 basis points. The brokerage business still seems like a pretty big drag on that.

Speaker Change: Yeah, So I guess that would be the time, where it was higher but at the same time I think we do need more velocity in the network.

Speaker Change: Are the other businesses within that improving margins or is that all just the actions you took last year and what is the underlying margin in that business now that.

So Yeager: That's priority one we need to continue to in source more drayage, which right now we're running over 80%. We've got our chassis programs in place you've got variable rate in our rail contracts.

Speaker Change: That you've done a pretty good job, despite the brokerage being being a drag.

So Yeager: Yes, I mean, I still think mid.

So Yeager: Mid cycle. This is a mid mid single digit operating margin business in that 5% to 6% range and as you get to the peak of a cycle you know it could be much higher than that but.

Speaker Change: You for the question, Yes, we do agree we think we've done a very nice job improving the margins of 70 basis points.

Phil Yeager: And so, you know, that's kind of the midpoint of the range. And based on, you know, what we're seeing with our customers, the discussions we've had with them, there is some pull forward that's occurred, certainly. I mean, you look at our January volumes of 18%, there was certainly pull forward, but not enough where inventories are overstocked at this point. And there's also a whole lot of seasonal shipping that needs to occur that hasn't taken place yet. So our customers, many had already been proactive in diversifying their supply chains and vendor base, and others are reacting more in real time.

In this environment.

Speaker Change: Pretty strong.

Speaker Change: If you look at it on a year over year basis, there was a drag from the brokerage offsetting some of the improvements we made in particular in the consolidation business, where we've done a much better job on managing our labor expenses, improving customer retention level, improving service and then obviously aligning our.

So Yeager: So demand would certainly help but I think we've done a really good job controlling what we can control and improving the margin.

Speaker Change: Yeah, certainly price moves the lever.

So Yeager: Easier than mine does but.

So Yeager: That day is going to come and I think we're ready for that growth opportunity.

Speaker Change: Space to our needs and we have some upside for growth and that should certainly be helped.

Speaker Change: Okay, Alright makes sense, thanks for the time.

Speaker Change: With some of the storage needs of our customers, but yes, we're continuing to drive improvement in our managed transportation business in final mile is flawless and warehousing.

Christopher <unk>: Our next question comes from Christopher <unk> of the benchmark company.

Phil Yeager: So it's also quite varied in how people have managed through it, those that were more concentrated on Chinese imports, pulled forward, those that didn't are taking that wait and see approach. And so really has been a mix. But, you know, we're once again, we're watching it closely.

Speaker Change: Yes, hi, good afternoon. Thanks for taking my questions guys appreciate it.

Speaker Change: I think on the brokerage it has been a headwind we have done a nice job reducing our negative.

Speaker Change: Can we just go back to the logistics margins I mean, they were up 70 basis points. The brokerage business still seems like a pretty big drag on that I mean, all the other businesses within that improving margins or was that all just the actions you took last year and what is the underlying margin in that business now that job.

Speaker Change: Margin loads that was down 200 over 200 basis points in the quarter, our productivity continues to improve.

Phil Yeager: And, and this is based, the guidance is really based on those variety of And the last thing I'd add is the primary impact, at least in the near term, would be ICS or intermodal. Our other businesses are going to be somewhat more resilient through this, our managed transportation business is not as import heavy. Our warehousing business is going to see an influx of storage demand likely. And so we, we have some offsets. And obviously, we're doing a good job managing costs to ensure we're in a good position.

Speaker Change: But with the limited spot market opportunities that have been out there.

Speaker Change: Kept a lid on that on the margin profile, although we're still profitable within that segment, but.

Speaker Change: You've done a pretty good job, despite the brokerage up being being a drag.

Speaker Change: No I appreciate the question on and I think we are doing a good job managing our costs, there, but also bringing on new profitable wins and.

So Yeager: Thank you for the question Yeah, we are.

So Yeager: We do agree we think we've done a very nice job improving the margins of 70 basis points.

Speaker Change: We see more margin upside ahead.

So Yeager: In this environment.

So Yeager: Pretty strong.

Speaker Change: Yes, that's helpful and just to your last comment Todd we Havent heard that maybe some shippers are keeping to.

So Yeager: If you look at it on a year over year basis, there was a drag from the brokerage offsetting some of the improvements we made in particular in the consolidation business, where we've done a much better job on managing our labor expenses, improving customer retention level, improving service and then obviously aligning our.

Speaker Change: Keeping inventory and containers I don't know if youre seeing that but just curious as to whether that might be something you might see in the next quarter or two.

Speaker Change: We haven't seen that yet.

Speaker Change: And.

Speaker Change: I think there may be some customers who owed.

So Yeager: Our space to our needs and we have some upside for growth and that should certainly be helped.

Speaker Change: Do it on the.

Speaker Change: Pull forward, we haven't seen it at that at that level yet but.

So Yeager: With some of the storage needs of our customers, but we're continuing to drive improvement in our managed transportation business in final mile is flawless and warehousing.

Speaker Change: But certainly something we'll watch but not we haven't seen that at this time.

Phil Yeager: And finally, the one thing I would add is, you know, this really gives hubs that opportunity to work with our customers and show them that we can save them money and come up with better transportation spend to really meet their needs. So you know, that is an opportunity that we're trying to take advantage of as well.

Speaker Change: I appreciate it thanks.

So Yeager: I think on the brokerage it has been a headwind we have done a nice job of reducing our negative margin loads that was down 200 over 200 basis points in the quarter, our productivity continues to improve.

Speaker Change: Thank you.

Speaker Change: Our last question comes from David Chancellor of Barclays.

David Chancellor: Hey, Thanks for taking my question.

Speaker Change: Kevin.

So Yeager: But with the limited spot market opportunities that have been out there kind of kept a lid on the on the margin profile, although we're still profitable within that segment, but no.

Speaker Change: Lowering of the Capex Guide Wonder if you could give some color on that I think you had said you already we're not putting anything into containers. This year. So what are you cutting what areas are you kind of looking at it just come down the capex for the year.

Bascome Majors: If we work backwards from the holidays to this uncertainty, and just think about retail inventory needing to move inland and hit store shelves by. November, early December. When do you think that You'll have the visibility in those decisions on how to manage this will be made by those customers. Yeah, you know, I think there's certainly an air pocket of freight that's coming. You know, I think there is going to be some replacement of that from other origin points. There, once again, are the seasonal items back to school, you know, Halloween, that are going to need to be brought in, or you're going to miss sales.

Speaker Change: No I appreciate it.

Speaker Change: Question on and I think we are doing a good job managing our costs, there, but also bringing out a nice profitable wins and.

Speaker Change: Sure Yes. Thank you for the question yes.

Speaker Change: The changes in the Capex as we noted I went from 50 to 70 was the original we're now down in the 40 to 50, it really reflects less fleet investment and steady upgrades in this environment.

Speaker Change: See more margin upside ahead.

Speaker Change: Yeah, No that's helpful and just to your last comment Todd we have heard that maybe some shippers are keeping up and.

Speaker Change: Keeping inventory and containers I don't know if youre seeing that but just curious as to whether that might be something you might see in the next quarter or two.

Speaker Change: We're continuing to have no additional.

Speaker Change: Container investments.

Speaker Change: No change on our IP fronts.

Speaker Change: We haven't seen that yet.

Speaker Change: The projects that we had anticipated our we're still planning on it and moving forward with.

Speaker Change: And.

Speaker Change: I think there may be some customers who are overdo it on.

One of the things that we were able to do is really find some solutions to be able to use some of our equipment down in Mexico.

Bascome Majors: And then, you know, I think, for the holidays, you know, you typically see Q3 be our strongest shipping quarter, August, late August to September, and then October are normally our strongest shipping month. So to get that product, you know, you're really seeing those decisions in the July timeframe, late June, early July, and, you know, we should hopefully start to see it in the data at that point. I think if there's clarity around trade, you know, people are, the consumers remain in resilient and people are going to ship and, once again, inventories just haven't been overly built in a lot of the segments that we operate in.

Scott: Pull forward, we haven't seen it at that at that level yet but.

Scott: But certainly something we'll watch.

Speaker Change: So that was.

Scott: But not we haven't seen that at this time.

Speaker Change: Opportunity that allowed us to decrease that spend as well.

Scott: I appreciate it thanks. Thank you.

Speaker Change: Our last question comes from David Joshua of Barclays.

Speaker Change: Awesome and then on dedicated customer retention.

Speaker Change: Mentioned it is an issue and I think it had been an issue in the past.

Hey, Thanks for taking my question.

Kevin Burke: Kevin noticed.

Speaker Change: That is accelerating.

Kevin Burke: Lowering of the Capex Guide Wonder if you could give some color on that I think you'd said you already we're not putting anything into containers. This year. So what are you cutting what areas are you kind of looking out to trim down the capex for the year.

Speaker Change: It's something you are more concerned about now in the back half is there something that duty unstable environment, just it's harder to get customers to re sign contracts.

Speaker Change: Yes, So I think the science that we lost were pretty small and mostly turn it over to one way truckload.

Bascome Majors: So we're keeping a close eye on it, though, and we'll certainly continue to stay very close to our customers.

Scott: Sure Yes. Thank you for the question yes.

Scott: Yes, the changes in the Capex as you noted I went from 50 to 70 was the original we're now down in the 40 to 50, it really reflects less fleet investment and steady upgrades in this environment.

Speaker Change: So our retention levels are still around 90%. If you look at us on a contract basis and on a percent of revenue would be even higher than that just given its smaller site. So we.

Bascome Majors: Thank you all.

Bruce Chan: Our next question comes from Bruce Chan of Stiefel. Yeah, thanks, operator. And good afternoon, everyone. Kevin, you know, you talked about some of the additional levers that you can pull on to offset some of the pressure of the environment, you know, kind of trends towards the bearer side of the outlook. And that was certainly helpful. Specific to headcount, you know, last year, I think you talked about headcount being down about, I want to say 3%. Where was headcount this quarter? And you know, if you think about potential deterioration in the market, where can that number in a sort of go?

Scott: We're continuing to have no additional.

Speaker Change: We feel as though we're in a good spot, we're providing really good service levels and being proactive on identifying efficiency opportunities in.

Scott: Container investment.

Scott: No change on our IP fronts.

Scott: The projects that we had anticipated our we're still planning on it and moving forward with them really one of the things that we were able to do is really find some solutions to be able to use some of our equipment down in Mexico.

Speaker Change: As I mentioned, we have some some new onboarding, we're bringing on with actually some new and existing customers.

Speaker Change: I think.

Speaker Change: We're doing a good job managing that business with good operational controls, we just need to continue to execute them.

Scott: So that was.

Speaker Change: We'll be in good shape and I think when you look down the road and this is going to be an opportunity for growth in those one way rates change, we're going to bounce back on with our dedicated solutions.

Scott: Opportunity that allowed us to decrease that spend as well.

Kevin Beth: Yeah, so I'll start. So headcount was down 7%. As I mentioned in my preparative remarks, we have about $40 million of cost cuts that we're executing on, half of that's been implemented really at the time of the call. So you start to see that kind of back half of Q2 and more materially in the third quarter, and we'll implement the remainder of the year progressive. So two-thirds of that is purchase transportation, so dredge, truckload, LTL, as well as temporary labor in the warehouses. The other third is more salaries and benefits weighted with the reduction in headcount, not backfilling roles that are necessary.

Scott: Awesome and then on dedicated customer retention.

Speaker Change: When some contracts that way.

Scott: Mentioned it is an issue and I think it had been an issue in the past is it something that is accelerating.

Speaker Change: You're bringing in some new customers or additional volume with additional customers.

Scott: Something you're more concerned about now in the back half is there something that.

Speaker Change: As the end market profile of dedicated changing at all or are there some types of customers, where it's easier to get them to look at dedicated now versus a year ago or two years ago.

Speaker Change: Did he unstable environment, just it's harder to get customers to re sign contracts.

Speaker Change: Yeah. So I think the science that we lost were pretty small and mostly.

Speaker Change: Yes, most of our.

Speaker Change: Turn it over to one way truckload.

Speaker Change: Dedicated businesses retail centric in the.

Speaker Change: So our retention levels are still around 90%. If you look at just on a contract basis and on a percent of revenue would be even higher than that just given its smaller site. So we.

Speaker Change: But we also have a strong actually industrial.

Kevin Beth: But we're also doing a really nice job and have made some significant reductions in our outsource labor there as well. So once again, we're controlling what we can. We want to be in a where we can support our customers as we see a rebound in demand as well. So we're certainly being thoughtful in our approach around it, but obviously see opportunities to reduce costs.

Speaker Change: Set of customers and a few consumer products as well and so the new wins are mostly in the retail and consumer side with companies that are performing very well through the turbulence in global trade and see a need to lock in high service capacity. So.

Speaker Change: We feel as though we're in a good spot, we're providing really good service level and being proactive on identifying efficiency opportunities in.

Speaker Change: As I mentioned, we have some new onboarding, we're bringing on with actually some new and existing customers.

Speaker Change: The Windsor in areas, where we have density so our ability to surge with them should be should be pretty strong. So we feel real good.

Kevin Beth: Yeah, just to add that, you know, we're also have some of our technology implementations are paying off. We're seeing some reduced spend in our outsourced support systems that we needed for some legacy IT, as well as the consulting on the IP spend is coming down as well. So we have pretty much every facet, you know, we've looked under and we're finding things that are allowing us to decrease costs. And as Phil mentioned, you know, several of those programs have already been implemented. Other ones are being implemented as we speak. And so, you know, we'll see some of that benefits grow as the year progresses.

Speaker Change: You know I think.

Speaker Change: We're doing a good job managing that business with good operational controls, we just need to continue to execute them.

Speaker Change: Good wins and good network lanes with good customers.

Speaker Change: We'll be in good shape and I think when you look down the road you know this is going to be an opportunity for growth on those one way rates change, we're going to bounce back on with our dedicated solution.

Speaker Change: Thanks, Scott and thanks, Paul appreciate it thank.

Speaker Change: Thank you.

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

Speaker Change: Great well. Thank you everybody for joining our first quarter earnings call. This morning.

Speaker Change: Win win some contracts that way.

Speaker Change: This afternoon, and as always Kevin and I are available for any questions. You may have thank you and have a good evening.

Speaker Change: You're bringing in some new customers or additional volume with the additional customers.

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

Kevin Beth: And these improvements are on top of the reductions we made in the network alignment initiative. And, you know, I think the team has done a great job in reducing empty repositioning costs, which were down 17% year over year in the quarter. And then, you know, we've also been reducing insurance expense. Team's done a great job in reducing accident frequency and severity. And so that has been, you know, a tailwind.

Speaker Change: Yes, most of them are.

Speaker Change: Dedicated businesses retail centric in the.

Speaker Change: But we also have a strong actually industrial.

Speaker Change: Out of customers and a few consumer product as well and so the new wins are mostly in the retail and consumer side with companies that are performing very well through the turbulence in global trade and see a need to lock in high service capacity.

Speaker Change: Got it.

Speaker Change: The Windsor in areas, where we have density so our ability to surge with them should be should be pretty strong. So we feel real good wins and good network lanes with good customers.

Speaker Change: Thanks, Scott and thanks, Tom appreciate it.

Speaker Change: Thank you.

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

Phil Yeager: Great well. Thank you everybody for joining our first quarter earnings call. This morning.

Speaker Change: This afternoon, and as always Kevin and I are available for any questions. You may have thank you and have a good evening.

Phil Yeager: Yeah, you know, I would say EASO has been a fantastic joint venture, and we've been off to a great start. Our volumes were about 4x on a year-over-year basis, and we're cross-selling really well. Had some significant opportunities we're working on with our rail partners. And, you know, it's very exciting. We have seen erratic shipping patterns with some of the news around, you know, tariffs being on and off. So I think the more we get clarity there, the better. But for the time being, you know, most of our customers are back to normal shipping, and we're seeing increases in volume just on an organic basis, even before some of the cross-selling and obviously just the upside from having EASO in our numbers.

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

Speaker Change: [music].

Bascom Majors: Okay.

Bascom Majors: [music].

Speaker Change: Okay.

Speaker Change: [music].

Phil Yeager: We are continuing to look at acquisition opportunities. We have a really good pipeline right now, some really interesting opportunities. I do think, you know, adding more solutions to support our customers in Mexico over time will be the right approach. And so we're certainly going to be opportunistic within that. We also have a lot of interesting opportunities in the states right now that'll help us continue to build scale and differentiation in these existing service lines. So a lot of good opportunities.

Speaker Change: Yes.

Speaker Change: Mhm.

Speaker Change: [music].

Uday Kanipkar: Our next question comes from the line of Uday Kanipkar with TD Kala. Hi, thanks.

Uday Kanipkar: This is Odeon for Jason Seidel. I guess just one on surcharges. Your guide originally called for modest peak season surcharges, kind of preempting the pull forward. Are we still expecting that kind of in the base case? And maybe secondly, on the high end, are you assuming we see surcharges maybe earlier in the year than usual if this air pocket kind of gives way to a big influx?

Speaker Change: Yes.

Speaker Change: [music].

Kevin Beth: Sure, yeah, this is Kevin. I'll take that one. To answer the question on surcharges, the base case, there is none incorporated in the base case. Certainly, in the full case, yeah, surcharges are contemplated, not to the level that we saw last year of 5.5 million. But the timing of it is really in question. I think that's really, you know, one of the big things that is unknown at this time, you know, that depending on when if tariffs change or, you know, as Phil spoke about earlier, if that restocking really comes at a certain time, that is probably when we would see the surcharges.

Speaker Change: Yes.

Speaker Change: [music].

Uday Kanipkar: But, you know, without knowing what's going to happen with tariffs, it's really hard to predict when that would happen. Okay, that's that's that's pretty helpful.

Speaker Change: Yeah.

Speaker Change: [music].

Kevin Beth: And then and then maybe just another clarification. I mean, you said it was it was advantageous that that, you know, big chunk of bid got got pulled into one queue. Is that is that indicating that the intermodal pricing environment sort of deteriorated into two queue and that we need some kind of stabilization in the second half to get to the flat? No, no, yeah, no, I think what we were seeing at the initial onset of bid season was more aggressive truckload pricing, trying to push rates up, and intermodal was remaining, you know, similar to what we talked about, taking some rate and head halts, but still very aggressive in back halts.

Speaker Change: Okay.

Speaker Change: Yes.

Kevin Beth: What we've seen now in the second portion of bid season is just more truckload competition. So, not really any change in the intermodal space. It's been more, or I guess less, opportunities for near-term conversion, just given some of the pricing that we're seeing from truckload carriers, but we're still winning in the market. I mean, we have a really good spread versus truck right now, around 30% in aggregate, and we have a really good value proposition with service. I think the other thing is, you know, our customers are recognizing that if the consumer holds, there is going to be some significant shipping demand in the back half, and so they want to make sure they're locking in that capacity, and intermodal is obviously a good opportunity, one, to reduce costs in the supply chain, but two, make sure they're locking in capacity if there's a surge.

Uday Kanipkar: Okay, that's great.

Uday Kanipkar: Maybe if I can squeeze one on dedicated, I mean, how many bid seasons do you think it'll take to kind of get rates to kind of, you know, the previous high watermark? in the previous cycle. Any thoughts on that? Yeah, so Dedicated is a multi-year contract, so we're constantly having renewals every year. Right now, it's a little bit more competitive with OneWay. The rates are typically based off of driver pay with a fixed and variable portion. And, you know, while it's been somewhat more aggressive, and we're still doing a really good job on renewals, and we've done a lot of self-help on controlling costs and improving our operating performance, which is really supporting those improved margins on a year-over-year basis.

Uday Kanipkar: So, you know, we feel as though there's still opportunities, regardless of what's going on with rate, and we'll constantly, you know, every year be renewing contracts, and if wages are going up, we'll be, you know, taking rates up and vice versa. So right now, though, obviously a competitive environment, but we're holding our own really well with strong renewals, strong service levels, and, you know, we are being proactive with our customers and identifying efficiency. All right, thanks for the time.

Jonathan Chappell: Our next question comes from Jonathan Chappell of Abercore ISI.

Jonathan Chappell: Thank you.

Jonathan Chappell: Good afternoon. Kevin, just trying to put a pin on some of these things, which I understand are difficult to put a pin on, just given the uncertainty, but in the guidance in February, looking for high single-digit intermodal volume growth and low single-digit pricing increases. Given what you said for the midpoint today, volume decreases in the second half of 2Q, return to directional seasonality, ITS pricing flat for the rest of the year, what would that translate to for full-year intermodal volume growth and pricing?

Kevin Beth: Yeah, thank you, Jonathan, for the question. Yeah, you know, we're not, due to the varying scenarios that, you know, we really came up with, and the uncertainty, we're not providing full year forecasted volume numbers at this time. You know, like you said, we do anticipate a slowdown here in the second half of this quarter. But just, you know, without having some visibility into, you know, when that whiplash could come back and how strong that is, you know, we're not providing those amounts this time.

Jonathan Chappell: Okay, that makes sense. On the pricing side, if it were to be flat from today, would that still be positive year-rear in the second half, or would that be kind of closer to flat year-rear? Yeah, that would be pretty close to flat for year over year. And, you know, like Phil said, you know, we do have Good visibility to that with the bid being pulled forward. So it will be dependent on how the mix ends up being, and that is, again, making sure how compliant customers are with what they're telling us and sticking to their actual guide of freight that they originally projected.

Jonathan Chappell: Okay, that makes sense. One just quick last follow-up. Again, and Fab, you were looking for a normalization of incentive comp, which I think you would expect it to be a headwind. You talked about all the great things you're doing on the cost side. Is that dialed down a bit as well, or do you still kind of expect the same incentive comp headwind year over year, 25 versus 24? Yeah, I think overall, we still expect some headwind there. But you know, it is being muted a little bit now with the change in the actual headcount itself.

Jonathan Chappell: Got it. Appreciate it, Kevin.

Brian Ossenbeck: Thank you.

Brian Ossenbeck: Our next question comes from Brian Ossenbeck of J.P. Morgan. Hey, afternoon. Thanks for taking the question. So, maybe just a broader question on the network, intermodal network and... Utilization of it and sort of the balance overall. It sounded like you had some pretty good reduction in empty. Costs. But maybe you can elaborate a little bit more on that. Do you still see pockets that are maybe a little bit less dense than you would like? Were you able to address those during bid Yeah, yeah, no, we are pleased with the progress on empty RICOs, even with that January pull forward upgrade, you know, reducing RICO cost 17% we felt like was a really good outcome for us.

Phil Yeager: And that was due to those bid wins and creating better balance and velocity. And so, you know, we're, we're pleased with that. I think we've continued to execute well in bids on the targeted lane. You know, we'll likely see a step down just with, you know, the unknown of how far, you know, West Coast volumes drop with this import air pocket. But so we'll see another step down just due to less demand off the West Coast. But, you know, I think we're controlling what we can control and long term, you still want to be filling in those backhaul lanes.

Phil Yeager: So we've done a good job with that. The growth in the East is going to continue to create more balance and velocity there. Turn times in total were about 4% better on a year-over-year basis. So, you know, we're pleased with that as well. And so we're getting more out of what we have on the street. We need to keep that momentum. But yeah, you know, it's about continuing to win in the right lanes and we're going out and executing. And it sounds like rail services. All performing pretty well, despite the volatility and the uncertainty based on the comments.

Phil Yeager: Transcripts provided by Transcription Outsourcing, LLC. a big part of that conversation. Absolutely, our rail service has been really phenomenal and resilient. Both of our partners are performing very well. You know, I think, you know, as you as you think about what could potentially happen with more of a surge in import demand, I feel far more confident in our ability to manage that surge as an intermodal network than we were in the past, just given the resilience of the operating models of our rail partners. So we're excited about that. And same with us. I think we've certainly learned a lot through the last few years and build more resilience into our service product as well.

Phil Yeager: So we feel very good about managing that for our customers. But once again, rail service has been really strong.

Phil Yeager: Last follow-up on the same sort of topic, what do you feel about stack boxes and where they are given we have seen some pretty big differences in the growth in different regions? So I guess maybe an update in terms of just general positioning for boxes. and other equipment in DRAE. What's the current percentage stack? Yeah, we have somewhere around 20, approximately 20-25% of our boxes stacked at this moment in time. We think we have about 35% incremental capacity before we'd have to really put any capital into containers, so we have a long way to go.

Thomas Wadewitz: We did improve our in-source trade percentage by about 400 basis points sequentially. We've done a really nice job here in the second quarter thus far, so we should see another step up on in-source trade percentage, and we're doing targeted hiring, but really just getting more utility out of our existing team, and so we feel good about the momentum there, and I think we have plenty of capacity, and on the street, we're doing a really good job. A lot of good work by the team. Okay. Thank you, Phil. Appreciate it.

Thomas Wadewitz: Our next question comes from Thomas Wadewitz of UBS. Yeah, good afternoon. What I wanted to ask you, I know there's not a lot of visibility on volume, right? And you kind of gave us some of the parameters for how to think about that or high level. If we said, well, for 2Q, and kind of sequentially, would you, you know, what's your kind of base case for 2Q intermodal volumes versus 1Q? You know, April sounds like it looked pretty good, but you think full quarter is down or maybe kind of flat, factoring in some softening later in the quarter?

Thomas Wadewitz: How would you think? About that? Yeah, so I think, you know, it's a little unclear what the drop will be in the timing of it. If we're still plenty being transloaded and still in warehouses, you know, that's going to delay that drop. You know, once again, we haven't seen it in our numbers yet. So if it's three weeks out, I would tell you, you know, we're still anticipating, you know, volumes being up. If it's, you know, in the next two weeks, then that could vary. But at this point, I would tell you, we're still anticipating volume growth, you know, for the quarter.

Thomas Wadewitz: But, but, you know, it really does depend on how large that drop is and what what the timing is, as well. Okay, and so you have volume growth sequentially or year over year? I would say year over year. Sequentially, it's probably unlikely, I would guess. But, you know, once again, it's hard to know. If we're in the second week of June, and we still have product flowing, you know, then, you know, we're going to be up. And, you know, I think, at the same time, we tried to give an indication of the exposure we have to China imports.

Thomas Wadewitz: I mean, you know, our customers have diversified their supply chains. And, you know, if 25% of our West Coast volumes are port related, and 30% of that is China, you know, it's, it's, it's, it's shouldn't be an outsized impact. And we've done really well with growth in Mexico and growth in the local East. So those should be some offsets to that import demand drop. Right, okay.

Kevin Beth: Wanted to also ask you a bit about how you're thinking about ITS and logistics operating margins looking forward. Do you think you think kind of stable? I mean, I know 2Q has got the wrinkle with the some weakening in volume, but how do you think about where we go from, you know, kind of 2.7 and 5.7 in 1Q and what might be some key levers to potentially see improvement off those off the 1Q level? Sure, Thomas, Kevin, you know, we don't provide for your guidance on this, but you know, what I will tell you is, you know, again, it depends on that timing and if there is that fall off.

Kevin Beth: Okay, so probably versus 1Q some improvement in second half, but less clear for for 2Q. Yeah, yeah. Yep. Yeah, you know, and again, as you know, those cost items that we talked about the $40 million of different projects that we have, you know, they're going to be, they're going to be kicking in. And, you know, I think we'll be able to help, even if there is some muted volume in the second half, especially maybe the beginning of July.

Kevin Beth: Okay, maybe one last one, I'll hand it off. But what do you what do you think about the kind of the key lever for intermodal margin improvement? You know, you used to run at a lot higher level. And I feel like it's just been you know, the big weight on truckload and intermodal has just been, you know, excess capacity and difficulty getting getting rate. Is that is that really the thing? You just got to get a stronger rate environment? And then that that intermodal margin improves a fair bit? Or, you know, what, what's the key lever?

Kevin Beth: If you look a little, you know, further out? Yeah, so I mean, you know, I don't really recall when we were running at a much higher margin. I think we've actually done a great job improving the trough to trough margin profile, and actually more than more than doubling it. So yeah, I feel like we've actually done a great job. We did run higher in COVID when our boxes were being used for storage. But yeah, so I guess that would be the time where it was higher. But at the same time, I think we do need more velocity in the network.

Kevin Beth: That's, that's priority one, we need to continue to insource more drainage, which right now we're running over 80%. We've got our taxi programs in place, we've got variable rate in our rail contract. So yes, I mean, I still think mid cycle, you know, this is a mid single digit operating margin business in that five to 6% range. And as you get to the to the peak of a cycle, you know, it could be much higher than that. But so demand would certainly help. But I think we've done a really good job controlling what we can control and improving the margins of the business.

Thomas Wadewitz: Certainly, Price moves the lever easier than mine does, but that day is going to come, and I think we're ready for that growth opportunity. Okay.

Thomas Wadewitz: All right. Makes sense. Thanks for the time.

Christopher Kuhn: Our next question comes from Christopher Kuhn of the Benchmark Company. Hi, good afternoon. Thanks for taking my questions, guys. Appreciate it.

Christopher Kuhn: Can we just go back to the logistics margins? I mean, they were up 70 basis points. The brokerage business still seems like a pretty big drag on that. I mean, are the other businesses within that improving margins or is that all just the actions you took last year? And what is the underlying margin in that business now that you've done a pretty good despite the brokerage being a drag? Yeah, thank you for the question. Yeah, we do agree. We think we've done a very nice job improving the margins. The 70 basis points in this environment was pretty strong.

Christopher Kuhn: If you look at it on a year-over-year basis, there was a drag from the brokerage offsetting some of the improvements we made in particular in the consolidation business where we've done a much better job on managing our labor expenses, improving customer retention level, improving service, and then obviously aligning our space to our needs. And we have some upside for growth, and that should certainly be helped with some of the storage needs of our customers. But yes, we're continuing to drive improvement in our managed transportation business and final mile as well as in warehousing. I think on the brokerage, it has been a headwind.

Phil Yeager: We have done a nice job reducing our negative margin loads. I was down over 200 basis points in the quarter. Our productivity continues to improve. But with the limited spot market opportunities that have been out there, it kind of kept a lid on the margin profile, though we're still profitable within that segment. But no, I appreciate the question on it. I think we are doing a good job managing our costs there, but also bringing on nice new profitable wins and see more margin upside ahead.

Christopher Kuhn: Yeah, no, that's helpful.

Christopher Kuhn: And just your last comment, Phil, we have heard that maybe some shippers are keeping, keeping inventory in containers. I don't know if you're seeing that, but just curious as to whether that might be something you might see in the next quarter or two. You know, we haven't seen that yet. And I think, you know, there may be some customers who overdo it on pull forward. We haven't seen it at that at that level yet. But certainly something we'll watch. But not we haven't seen that as a I appreciate it. Thanks.

David Zazula: Our last question comes from David Zazula of Barclays. Hey, thanks for taking my question. Kevin, notice the lowering of the CapEx guide. I wonder if you could give some color on that. I think you'd said you already were not putting anything into containers this year. So what are you cutting? What areas are you kind of looking at to trim down the CapEx for these?

Kevin Beth: Sure, yes, thank you for the question. Yeah, the changes in the CAFX, as you noted, went from 50 to 70 with the original, we're now down to 40 to 50. It really reflects less fleet investment and steady upgrades in this environment. You know, we're continuing to have no additional container investment. The no change on our IT front, you know, the project that we had anticipated, we're still planning on it and moving forward with. Really, one of the things that we were able to do is really find some solutions to be able to use some of our equipment down in Mexico.

Kevin Beth: So, you know, that was an opportunity that allowed us to decrease that spend as well.

David Zazula: Awesome.

Phil Yeager: And then on dedicated customer retention, I mean, you mentioned it, it is an issue. And I think it had been an issue in the past. Is it something that is accelerating? Is it something you're more concerned about now in the back half? Is this something that, you know, due to the unstable environment, just it's harder to get customers to resign contracts?

Phil Yeager: Yeah, this is Phil. I think, you know, the sites that we lost were pretty small and mostly turned over to one-way truckload. And, you know, so our retention levels are still around 90%. If you look at just on a contract basis, the amount of percent of revenue would be even higher than that, just given it's smaller sites. So, you know, we feel as though, you know, we're in a good spot, we're providing really good service levels and being proactive on identifying efficiency opportunities. And, you know, as I mentioned, we have some new onboardings we're bringing on with actually some new and existing customers.

Phil Yeager: So, you know, I think We're doing a good job managing that business. We have good operational controls, we just need to continue to execute and will be in good shape. And I think when you look down the road, you know, this is going to be an opportunity for growth. You know, when those one-way rates change, you know, we're going to be able to pounce back on with our dedicated solutions and, you know, hopefully win some contracts that way.

Phil Yeager: With you bringing in some new customers or you know additional volume with the additional customers, is the end market profile of dedicated changing at all? Are there you know some types of customers where it's easier to get them to look at dedicated now versus a year ago or two years ago? Yeah, most of our dedicated business is retail centric, but we also have a strong, actually, industrial set of customers and a few consumer products as well. And so, you know, the new wins are mostly in the retail and consumer side, you know, with companies that are performing very well through this turbulence in global trade and, you know, see a need to lock in high service capacity.

Phil Yeager: So it's and the wins are in areas where we have density. So our ability to surge with them should be should be pretty strong. So we feel good wins and good network lanes, good customers.

Phil Yeager: Thanks, Scott, and thanks, Phil. Appreciate it. Thank you.

Phil Yeager: I would now like to turn the conference back to Phil Yeager for closing remarks. Great. Well, thank you everybody for joining our first quarter earnings call this morning, or this afternoon. And as always, Kevin and I are available for any questions you might have.

Operator: Thank you and have a good evening.

Operator: Ladies and gentlemen, this concludes today's conference call with Hub Group. Thank you for joining. You may now disconnect.

Q1 2025 Hub Group Inc Earnings Call

Request a DemoDemo

HUBG

Hub Group

Earnings