Hub Group, Inc. Reports Fourth Quarter and Full Year 2022 Results

Highlights:

• Diluted earnings per share (EPS) of $2.42 for the quarter, and $10.64 for the full year which is growth of 110%
• Full year revenue of $5.3 billion, up 26%, with double-digit growth in all business lines; Fourth quarter revenue of $1.3 billion
• Quarterly operating income of $104 million (8.1% of revenue) driven by diversification of our business and focus on transportation cost containment, yield management and operating efficiency
• Ended the quarter with cash and cash equivalents of $287 million
  
• Introduced 2023 outlook, with expected revenue of $5.2-$5.4 billion and diluted EPS of $7.00-$8.00
  

OAK BROOK, Ill., Feb. 02, 2023 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2022 net income of $79 million, and diluted earnings per share of $2.42. Net income for fourth quarter 2021 was $84 million, or $2.48 per diluted share. Full year 2022 net income was $357 million, or $10.64 per diluted share.

"Hub Group had a record year in 2022, delivering 26% revenue growth while more than doubling our earnings per share. We grew ITS to over $3 billion in revenue and grew both Brokerage and Logistics to $1 billion in revenue, while we supported our customers with high service levels and innovative supply chain solutions. Our strategy of service line diversification, and our focus on transportation cost containment, yield improvement and operating efficiency led to a significant increase in profitability. Market conditions softened during the quarter, but we anticipate demand will return by mid-2023. We remain focused on managing our costs and capital structure, while supporting our customers with great service and investing for growth to drive success in a variety of market conditions," said Phil Yeager, Hub Group's President and Chief Executive Officer.

Fourth Quarter and Full Year 2022 Results

Revenue for the fourth quarter of 2022 increased by 2% to $1.3 billion compared to fourth quarter 2021. Full year 2022 revenue was $5.3 billion, up 26% as compared to 2021. Gross margin for the quarter was 15.9% of revenue, with operating income of $104 million (8.1% of revenue). EBITDA (non-GAAP)¹ for the quarter was $148 million.

Fourth quarter Intermodal and Transportation Solutions ("ITS") revenue increased 5% to $802 million, while full year revenue grew to $3.3 billion. Intermodal revenue per load for the quarter increased 19% and volume decreased 12% as compared to prior year. Volume for the quarter was impacted by softer demand conditions as retailers' inventory levels improved from the lows seen in 2021, which impacted demand for our services. ITS gross margin decreased compared to the prior year due to lower volume, higher transportation and equipment costs, and lower surcharges, partially offset by higher pricing and accessorial revenue.

Fourth quarter Logistics revenue increased 9% to $245 million due to organic growth with existing customers, and revenue from recently acquired TAGG Logistics, LLC ("TAGG"), partially offset by exited customers. Revenue for the full year increased 11% to $989 million. Fourth quarter gross margin increased due to growth with existing customers, new business onboardings, yield management initiatives and the contribution from TAGG, partially offset by higher warehousing and transportation costs.

Full year Truck Brokerage revenue grew 52% to $1.0 billion due to growth in revenue per load and the acquisition of Choptank but declined 11% in the fourth quarter to $238 million as higher transaction volumes were more than offset by lower revenue per load. Gross margin for the quarter decreased relative to fourth quarter 2021 due to lower revenue per load, partially offset by lower costs for purchased transportation.

Costs and expenses increased to $100 million in the fourth quarter of 2022 due to incremental operating costs from TAGG, higher expenses for outside services, and lower gains on the sale of equipment as compared to prior year, partially offset by lower compensation expense.

Capital expenditures for the fourth quarter of 2022 totaled $61 million. As of December 31, 2022, we had cash and cash equivalents of $287 million.

2023 Outlook

We expect our 2023 diluted earnings per share will range from $7.00 to $8.00. We estimate revenue will range from $5.2 to $5.4 billion, and that gross margin as a percentage of revenue will range from 14.5% to 15.0%. We estimate our costs and expenses will range from $420 to $440 million for the year. We project our effective tax rate for the year will be 24-25%. We expect capital expenditures for containers, tractors, warehousing equipment and technology will range from $170 to $190 million.

Non-GAAP Financial Measure

In this press release, we present EBITDA, a non-GAAP financial measure of profitability defined as earnings before interest, taxes, depreciation, and amortization. As required by the rules of the Securities and Exchange Commission ("SEC"), we have provided herein a reconciliation of this non-GAAP financial measure to Net Income, the most directly comparable measure under GAAP. Management believes that EBITDA provides relevant and useful information, which is used by our management as well as by many analysts, investors and competitors in our industry. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company's profitability for the periods presented. EBITDA should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and is not necessarily comparable to non-GAAP measures that may be presented by other companies.

CONFERENCE CALL

Hub Group, Inc. will hold a conference call at 5:00 p.m. Eastern Time on February 2, 2023, to discuss our fourth quarter 2022 results.

Hosting the conference call will be Phil Yeager, President and CEO. Also participating on the call will be Brian Alexander, Chief Operating Officer, and Geoff DeMartino, Executive Vice President, Chief Financial Officer and Treasurer.

This call is being webcast and can be accessed through the Investors link on Hub Group's web site at www.hubgroup.com. The webcast is listen-only. Those interested in participating in the question and answer session should follow the telephone dial-in instructions below.

To participate in the conference call by telephone, please pre-register at https://register.vevent.com/register/BI0e495bb799694c1cb3763152fcd01ebf to receive the dial-in number and unique PIN. On the day of the call, dial in approximately ten minutes prior to the scheduled call time and enter the unique participant PIN received during registration. The call will be limited to 60 minutes, including questions and answers. An audio replay will be available through the Investors link on the Company's web site at www.hubgroup.com. This replay will be available for 30 days.

CERTAIN FORWARD-LOOKING STATEMENTS: Statements in this press release that are not historical may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. Forward-looking statements are inherently uncertain and subject to risks, uncertainties and other factors that might cause the actual performance of Hub Group, Inc. to differ materially from those expressed or implied by this discussion and, therefore, should be viewed with caution. All forward-looking statements and information are provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally may be identified by the use of forward-looking terminology such as "trends", "assumptions", "target", "guidance", "outlook", "opportunity", "future", "plans", "goals", "objectives", "expects", "anticipate", "expected", "may", "will", "would", "could", "intend", "believe", "potential", "projected", "estimate" (or the negative or derivative of each of these terms), or similar words, and include our statements regarding our outlook, profit improvement initiatives and capital expenditures. These statements are based on Hub Group's current beliefs and expectations of future events or future results, and involve risks and uncertainties that are difficult to predict and subject to change. Factors that could cause actual results to differ materially include, among other things, general or regional economic conditions, including inflation and changes in trade policy; the effect of the ongoing COVID-19 pandemic (including any spikes, outbreaks or variants of the virus) and any future government actions taken in response to the pandemic, on our business operations and general economic and financial market conditions; governmental or regulatory requirements affecting tax, wage and hour matters, health and safety, labor and employment, insurance or other areas; shipping and intermodal costs and prices, the integration of acquisitions and expenses relating thereto; driver shortages; the amount and timing of strategic investments or divestitures by Hub Group; the failure to implement and integrate critical information technology systems; cyber security incidents; and retail and other customers encountering adverse economic conditions. Further information on these factors and other risks that may affect the Hub Group's business is included in filings it makes with the SEC from time to time, including but not limited to those discussed under the "Risk Factors" section in Hub Group's Form 10-K for the fiscal year ended December 31, 2021, and other filings with the SEC and in other investor communications of Hub Group from time to time. Hub Group assumes no obligation to update any such forward-looking statements.

SOURCE: Hub Group, Inc.

CONTACT: Geoff DeMartino of Hub Group, Inc., [phone]

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
			Three Months Ended December 31,
				2022						2021
						% of						% of
			Amount			Revenue			Amount			Revenue
Revenue			$	1,285,503		100.0	%		$	1,256,403		100.0	%
Transportation costs				1,081,086		84.1	%			1,043,671		83.1	%
	Gross margin			204,417		15.9	%			212,732		16.9	%
Costs and expenses:
	Salaries and benefits			62,422		4.9	%			70,544		5.6	%
	General and administrative			25,684		2.0	%			13,418		1.1	%
	Depreciation and amortization			12,024		0.9	%			11,185		0.9	%
		Total costs and expenses		100,130		7.8	%			95,147		7.6	%
Operating income				104,287		8.1	%			117,585		9.3	%
Other income (expense):
	Interest expense			(1,381	)	-0.1	%			(1,747	)	-0.1	%
	Other, net			315		0.0	%			137		0.0	%
		Total other expense, net		(1,066	)	-0.1	%			(1,610	)	-0.1	%
Income before provision for income taxes				103,221		8.0	%			115,975		9.2	%
Provision for income taxes				23,947		1.9	%			31,661		2.5	%
Net income			$	79,274					$	84,314
Earnings per share
	Basic		$	2.45					$	2.52
	Diluted		$	2.42					$	2.48
Basic weighted average number of shares outstanding				32,397						33,456
Diluted weighted average number of shares outstanding				32,815						33,983

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
			Twelve Months Ended December 31,
				2022						2021
						% of						% of
			Amount			Revenue			Amount			Revenue
Revenue			$	5,340,490		100.0	%		$	4,232,383		100.0	%
Transportation costs				4,450,985		83.3	%			3,632,743		85.8	%
	Gross margin			889,505		16.7	%			599,640		14.2	%
Costs and expenses:
	Salaries and benefits			264,891		5.0	%			247,240		5.9	%
	General and administrative			103,933		1.9	%			76,476		1.8	%
	Depreciation and amortization			45,960		0.9	%			37,467		0.9	%
		Total costs and expenses		414,784		7.8	%			361,183		8.6	%
Operating income				474,721		8.9	%			238,457		5.6	%
Other income (expense):
	Interest expense			(6,632	)	-0.1	%			(7,302	)	-0.2	%
	Other, net			(131	)	-0.0	%			(245	)	-0.0	%
		Total other expense, net		(6,763	)	-0.1	%			(7,547	)	-0.2	%
Income before provision for income taxes				467,958		8.8	%			230,910		5.5	%
Provision for income taxes				111,010		2.1	%			59,436		1.4	%
Net income			$	356,948					$	171,474
Earnings per share
	Basic		$	10.75					$	5.13
	Diluted		$	10.64					$	5.06
Basic weighted average number of shares outstanding				33,209						33,434
Diluted weighted average number of shares outstanding				33,559						33,892

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
					December 31,				December 31,
						2022				2021
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents			$	286,642			$	159,784
		Accounts receivable trade, net				716,190				701,512
		Accounts receivable other				3,967				3,022
		Prepaid taxes				16,987				2,191
		Prepaid expenses and other current assets				32,914				27,779
				TOTAL CURRENT ASSETS		1,056,700				894,288
	Restricted investments					18,065				24,256
	Property and equipment, net					783,683				681,451
	Right-of-use assets - operating leases					102,114				44,036
	Right-of-use assets - financing leases					1,194				1,252
	Other intangibles, net					197,386				196,672
	Goodwill					629,402				576,913
	Other assets					21,537				18,426
				TOTAL ASSETS	$	2,810,081			$	2,437,294
LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade			$	344,751			$	424,923
		Accounts payable other				15,563				12,493
		Accrued payroll				66,669				56,938
		Accrued other				132,324				82,827
		Lease liability - operating leases				29,547				11,364
		Lease liability - financing leases				1,175				1,251
		Current portion of long term debt				101,741				97,273
				TOTAL CURRENT LIABILITIES		691,770				687,069
	Long term debt					240,724				177,479
	Non-current liabilities					43,505				41,572
	Lease liability - operating leases					78,557				34,916
	Deferred taxes					155,923				155,944
	STOCKHOLDERS' EQUITY:
		Preferred stock, $.01 par value; 2,000,000 shares authorized;
			no shares issued or outstanding in 2022 and 2021.			-				-
		Common stock
			Class A: $.01 par value; 97,337,700 shares authorized; 41,312,185 shares issued
				in 2022 and 41,224,792 shares issued in 2021; 32,646,621 shares
				outstanding in 2022 and 33,907,734 shares outstanding in 2021.		413				412
			Class B: $.01 par value; 662,300 shares authorized;
				574,903 shares issued and outstanding in 2022 and 662,296 shares issued and		6				7
				outstanding in 2021.
		Additional paid-in capital				208,165				189,256
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306				(15,458	)			(15,458	)
		Retained earnings				1,781,582				1,424,634
		Accumulated other comprehensive loss				(214	)			(207	)
		Treasury stock; at cost, 8,665,564 shares in 2022
			and 7,317,058 shares in 2021			(374,892	)			(258,330	)
			TOTAL STOCKHOLDERS' EQUITY			1,599,602				1,340,314
				TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,810,081			$	2,437,294

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
					Twelve Months Ended December 31,
						2022				2021
Cash flows from operating activities:
	Net income				$	356,948			$	171,474
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization			153,726				130,629
			Impairment of ROU asset			5,874				-
			Deferred taxes			4,448				(3,992	)
			Compensation expense related to share-based compensation plans			20,426				20,056
			Gain on sale of assets			(24,176	)			(19,173	)
	Changes in operating assets and liabilities:
			Restricted investments			6,191				(903	)
			Accounts receivable, net			8,298				(115,568	)
			Prepaid taxes			(14,796	)			(856	)
			Prepaid expenses and other current assets			(3,111	)			(647	)
			Other assets			(4,231	)			(2,883	)
			Accounts payable			(89,103	)			78,448
			Accrued expenses			57,613				9,686
			Non-current liabilities			(19,944	)			(13,436	)
				Net cash provided by operating activities		458,163				252,835
Cash flows from investing activities:
	Proceeds from sale of equipment					42,929				45,177
	Purchases of property and equipment					(219,140	)			(132,952	)
	Cash used in acquisitions					(102,661	)			(122,360	)
				Net cash used in investing activities		(278,872	)			(210,135	)
Cash flows from financing activities:
	Proceeds from issuance of debt					179,195				112,001
	Repayments of long term debt					(111,482	)			(107,608	)
	Purchase of treasury stock					(75,000	)			-
	Purchase of treasury stock from related party					(34,767	)			-
	Stock withheld for payments of withholding taxes					(8,312	)			(9,123	)
	Finance lease payments					(2,093	)			(2,682	)
				Net cash used in financing activities		(52,459	)			(7,412	)
	Effect of exchange rate changes on cash and cash equivalents					26				(10	)
Net increase in cash and cash equivalents						126,858				35,278
Cash and cash equivalents beginning of period						159,784				124,506
Cash and cash equivalents end of period					$	286,642			$	159,784

HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
	Three Months						Twelve Months
	Ended December 31,						Ended December 31,
		2022			2021			2022			2021
Intermodal and transportation solutions	$	802,268		$	764,292		$	3,301,835		$	2,656,128
Logistics		244,998			223,767			988,922			887,388
Truck brokerage		238,237			268,344			1,049,733			688,867
Total revenue	$	1,285,503		$	1,256,403		$	5,340,490		$	4,232,383

RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
	Three Months
	Ended December 31,
							Change				Change
		2022			2021		$				%
Net income	$	79,274		$	84,314		$	(5,040	)		-6.0	%
Interest expense		1,381			1,747			(366	)		-21.0	%
Depreciation and amortization		43,313			34,670			8,643			24.9	%
Provision for income taxes		23,947			31,661			(7,714	)		-24.4	%
EBITDA	$	147,915		$	152,392		$	(4,477	)		-2.9	%

RECONCILIATION OF NET INCOME TO EBITDA (1)
(in thousands)
(unaudited)
	Twelve Months
	Ended December 31,
							Change				Change
		2022			2021		$				%
Net income	$	356,948		$	171,474		$	185,474			108.2	%
Interest expense		6,632			7,302			(670	)		-9.2	%
Depreciation and amortization		153,726			130,629			23,097			17.7	%
Provision for income taxes		111,010			59,436			51,574			86.8	%
EBITDA	$	628,316		$	368,841		$	259,475			70.3	%

(1) See the "Non-GAAP Financial Measure" section of this release for the definition of EBITDA and a discussion of this non-GAAP financial measure.