Hub Group, Inc. Reports First Quarter 2021 Results

Highlights:

• Strong freight market conditions and continued growth with strategic customers led to 10% revenue growth in the quarter despite weather challenges in February

• Revenue growth and focus on operating efficiency resulted in first quarter net income of $17 million or $0.51 of diluted earnings per share

• Generated EBITDA (non-GAAP)¹ of $56 million in the quarter, with over $226 million in cash and cash equivalents at quarter end

• Celebrated our 50^th anniversary on April 19th

OAK BROOK, Ill., May 05, 2021 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced first quarter 2021 net income of $17.2 million, or diluted earnings per share of $0.51. Net income for first quarter 2020 was $13.2 million, or $0.40 per diluted share.

“Strong freight market conditions, growth with our strategic customers, and our focus on providing a world-class customer experience resulted in 10% revenue growth in the quarter. Hub Group is well positioned for 2021 and beyond due to demand in the marketplace for high service levels and cost-effective solutions. In April we celebrated our 50^th anniversary, and I want to thank all who have been part of this outstanding accomplishment, including our customers, employees, drivers, vendors, and carriers. We are excited about the future and look forward to the next 50 years,” said Dave Yeager, Hub Group’s Chairman and Chief Executive Officer.

Q1 2021 Results

Revenue for the first quarter of 2021 increased by 10% to $920 million compared with $839 million for the first quarter of 2020. Operating income for the quarter was $24 million versus $20 million for the first quarter of 2020. Revenue growth in the first quarter, combined with our ongoing focus on cost control, led to EBITDA¹ (non-GAAP) of $56 million.

First quarter intermodal revenue increased 6% to $506 million due to a 2% increase in volume and a 4% increase in revenue per load. We estimate that winter storms impacted our volume growth by approximately 600 basis points. Intermodal gross margin declined compared to the prior year due to increased purchased transportation costs, the impact of winter storms and higher equipment repositioning costs, partially offset by volume growth and higher prices.

First quarter logistics revenue increased 8% to $217 million due to growth of our retail supplier solutions services and the addition of NonstopDelivery (“NSD”), partially offset by the impact of lost customers. Gross margin increased due to actions we have taken to drive improved profitability, higher revenue and the acquisition of NSD, partially offset by higher warehousing costs.

Truck brokerage revenue grew 30% in the quarter to $127 million despite a 6% decline in volume. Contractual freight represented 51% of total brokerage volume in the first quarter of 2021 as compared to 64% in 2020. Truck brokerage gross margin increased relative to first quarter 2020 due to revenue per load growth in both contractual and transactional freight, partially offset by the impact of higher purchased transportation costs.

Dedicated revenue increased 11% compared to the prior year to $69 million due to growth from existing and new customers, partially offset by the impact of business we exited. Dedicated gross margin increased primarily due to our profit improvement actions and growth in revenue, partially offset by higher driver costs.

Costs and expenses decreased slightly to $85 million in the first quarter of 2021 due primarily to lower professional fees, higher gains on the sale of equipment and a reduction in travel expense, partially offset by increased costs resulting from the acquisition of NSD and an increase in salaries and benefits expense related to variable compensation.

Capital expenditures for the first quarter of 2021 totaled $10 million. At March 31, 2021, we had cash and cash equivalents of $226 million.

2021 Outlook

We expect that our 2021 diluted earnings per share will range from $3.20 to $3.40. We estimate revenue will grow in the mid-teens percentage range for 2021, and that gross margin as a percentage of revenue will range from 12.5% to 13.0%. We estimate our costs and expenses will range from $365 million to $380 million for the year. We project our effective tax rate for 2021 will range from 24% to 25%.

We expect capital expenditures for fiscal year 2021 to range from $165 to $175 million and primarily consist of investments to support growth in the business, including containers, tractors and technology. For 2021 we expect to add 3,000 containers, which will result in net growth of approximately 2,750 after retirements of containers that have reached end of life. We are also planning to add approximately 700 tractors to replace older units and support growth in our drayage and dedicated fleets.

Non-GAAP Financial Measure

In this press release, we present EBITDA, a non-GAAP financial measure 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 the non-GAAP financial measure contained in this press release to 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 May 5, 2021 to discuss our first quarter 2021 results.

Hosting the conference call will be Dave Yeager, Chairman and Chief Executive Officer. Also participating on the call will be Phil Yeager, President and 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 register at:

https://www.yourconferencecenter.com/confcenter/PinCode/Pin_Code.aspx?100374&o=UWogBCHMijVtPy

Registrants will be issued a passcode and PIN to use when dialing into the live call which will provide quickest access to the conference. You may register at any time, including up to and after the call start time. On the day of the call, dial (888) 206-4064 approximately ten minutes prior to the scheduled call time; enter the participant passcode and 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 forward-looking statements are based on management's experience and perception of trends, current conditions, and anticipated future developments, as well as other factors believed to be appropriate. We believe these statements and the assumptions and estimates contained in this release are reasonable based on information that is currently available to us. Factors that could cause actual results to differ materially include general or regional economic conditions and health concerns; the effect of the COVID-19 pandemic, including on our business operations, as well as its impact on general economic and financial market conditions and on our customers, counterparties, employees and third-party service providers; our ability to sustain or the effects of plans intended to improve operational execution and performance; changes in or implementation of governmental or regulatory rules and interpretations affecting tax, wage and hour matters, health and safety, labor and employment, insurance or other undeterminable areas; intermodal costs and prices, the integration of NSD and any other acquisitions and expenses relating thereto; the future performance of Hub’s Intermodal, Truck Brokerage, Dedicated and Logistics business lines; driver shortages; the amount and timing of strategic investments or divestitures by Hub; the failure to implement and integrate critical information technology systems; cyber security incidents, retail and other customers encountering adverse economic conditions and other factors described from time to time in Hub Group's SEC reports, press releases and other communications. Hub Group assumes no liability to update any such forward-looking statements.

SOURCE: Hub Group, Inc.

See the “Non-GAAP Financial Measure” section of this release for the definition of EBITDA and a discussion of this non-GAAP financial measure.

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
				Three Months Ended March 31,
					2021					2020
							% of					% of
				Amount			Revenue		Amount			Revenue
Revenue				$	919,553		100.0%		$	838,859		100.0%
Transportation costs					810,806		88.2%			734,265		87.5%
	Gross margin				108,747		11.8%			104,594		12.5%
Costs and expenses:
	Salaries and benefits				56,951		6.2%			50,876		6.1%
	General and administrative				19,243		2.1%			26,336		3.1%
	Depreciation and amortization				8,502		0.9%			7,623		0.9%
		Total costs and expenses			84,696		9.2%			84,835		10.1%
Operating income					24,051		2.6%			19,759		2.4%
Other income (expense):
	Interest expense, net				(1,904	)	-0.2%			(2,052	)	-0.3%
	Other, net				(93	)	-0.0%			(222	)	-0.0%
		Total other expense			(1,997	)	-0.2%			(2,274	)	-0.3%
Income before provision for income taxes					22,054		2.4%			17,485		2.1%
Provision for income taxes					4,824		0.5%			4,249		0.5%
Net income				$	17,230				$	13,236
Earnings per share
	Basic			$	0.52				$	0.40
	Diluted			$	0.51				$	0.40
Basic weighted average number of shares outstanding					33,419					33,159
Diluted weighted average number of shares outstanding					33,775					33,488

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
					March 31,				December 31,
						2021				2020
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents			$	226,264			$	124,506
		Accounts receivable trade,net				507,377				518,975
		Accounts receivable other				3,364				1,265
		Prepaid taxes				985				1,336
		Prepaid expenses and other current assets				17,898				26,753
				TOTAL CURRENT ASSETS		755,888				672,835
	Restricted investments					21,735				23,353
	Property and equipment, net					641,858				671,101
	Right-of-use assets - operating leases					42,859				43,573
	Right-of-use assets - financing leases					2,973				3,557
	Other intangibles, net					150,857				163,953
	Goodwill, net					520,592				508,555
	Other assets					18,005				18,469
				TOTAL ASSETS	$	2,154,767			$	2,105,396
LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade			$	317,798			$	285,320
		Accounts payable other				17,019				12,680
		Accrued payroll				33,395				23,044
		Accrued other				111,942				102,613
		Lease liability - operating leases				10,233				10,093
		Lease liability - financing leases				1,023				1,793
		Current portion of long term debt				89,531				93,562
				TOTAL CURRENT LIABILITIES		580,941				529,105
	Long term debt					154,341				176,797
	Non-current liabilities					41,085				42,910
	Lease liability - operating leases					35,037				36,328
	Lease liability - financing leases					6				8
	Deferred taxes					166,856				162,325
	STOCKHOLDERS' EQUITY:
		Preferred stock, $.01 par value; 2,000,000 shares authorized;
			no shares issued or outstanding in 2021 and 2020			-				-
		Common stock
			Class A: $.01 par value; 97,337,700 shares authorized and
				41,224,792 shares issued in 2021 and 2020; 33,755,036 shares
				outstanding in 2021 and 33,549,708 shares outstanding in 2020		412				412
			Class B: $.01 par value; 662,300 shares authorized;
				662,296 shares issued and outstanding in 2021 and 2020		7				7
		Additional paid-in capital				182,005				186,058
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306				(15,458	)			(15,458	)
		Retained earnings				1,270,390				1,253,160
		Accumulated other comprehensive loss				(201	)			(191	)
		Treasury stock; at cost, 7,469,756 shares in 2021
			and 7,675,084 shares in 2020			(260,654	)			(266,065	)
			TOTAL STOCKHOLDERS' EQUITY			1,176,501				1,157,923
				TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,154,767			$	2,105,396

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
					Three Months Ended March 31,
						2021				2020
Cash flows from operating activities:
	Net income				$	17,230			$	13,236
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization			32,111				30,576
			Deferred taxes			4,325				696
			Compensation expense related to share-based compensation plans			5,117				4,097
			(Gain) loss on sale of assets			(1,924	)			121
			Other operating activities			-				240
	Changes in operating assets and liabilities, net of acquisitions:
			Restricted investments			1,618				4,409
			Accounts receivable, net			8,389				(9,480	)
			Prepaid taxes			350				(50	)
			Prepaid expenses and other current assets			8,825				9,054
			Other assets			(189	)			(477	)
			Accounts payable			36,820				19,657
			Accrued expenses			18,695				(28,551	)
			Non-current liabilities			(3,994	)			(2,875	)
				Net cash provided by operating activities		127,373				40,653
Cash flows from investing activities:
	Proceeds from sale of equipment					14,933				497
	Purchases of property and equipment					(9,522	)			(25,467	)
				Net cash provided by (used in) investing activities		5,411				(24,970	)
Cash flows from financing activities:
	Repayments of long term debt					(33,381	)			(24,373	)
	Stock withheld for payments of withholding taxes					(3,759	)			(3,769	)
	Finance lease payments					(772	)			(747	)
	Proceeds from issuance of debt					6,894				121,444
				Net cash (used in) provided by financing activities		(31,018	)			92,555
	Effect of exchange rate changes on cash and cash equivalents					(8	)			(87	)
Net increase in cash and cash equivalents						101,758				108,151
Cash and cash equivalents beginning of period						124,506				168,729
Cash and cash equivalents end of period					$	226,264			$	276,880

HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
	Three Months
	Ended March 31,
		2021			2020
Intermodal	$	506,004		$	478,034
Logistics		217,035			200,202
Truck brokerage		127,262			98,017
Dedicated		69,252			62,606
		-			-
Total Revenue	$	919,553		$	838,859

HUB GROUP, INC.
RECONCILIATION OF NET INCOME TO EBITDA1
(in thousands)
(unaudited)
	Three Months
	Ended March 31,
							Change				Change
		2021			2020		$				%
Net income	$	17,230		$	13,236		$	3,994			30.2%
Interest expense		1,905			2,455			(550	)		-22.4%
Depreciation and amortization		32,111			30,576			1,535			5.0%
Provision for income taxes		4,824			4,249			575			13.5%
EBITDA	$	56,070		$	50,516		$	5,554			11.0%

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.

CONTACT: CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745