Hub Group Inc. (NASDAQ:HUBG) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 05:00 pm ET

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Hub Group Inc. (NASDAQ:HUBG) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Hello, and welcome to the Hub Group's Third Quarter 2018 Earnings Conference Call. Dave Yeager, Hub's CEO; Don Maltby, Hub's President and COO; and Terri Pizzuto Hub's CFO, are joining me on the call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question.

(Forward-Looking Cautionary Statements)

As a reminder, this conference is being recorded.

It is now my pleasure to turn the call over to your host, Dave Yeager. Sir, you may begin.

Executive
David Yeager

Good afternoon, and thank you for participating in Hub Group's Third Quarter Earnings Call. Our third quarter results are the culmination of a great deal of work and effort to increase our margins while reducing expenses in our Intermodal network.

Our Intermodal volume was up 3% for the quarter, as we benefited from a very strong pricing environment and excellent operational execution. We continue to see a strong peak while experiencing capacity constraints across our network. We believe that this tight capacity environment will continue through the end of the year. The strength of the Intermodal market, coupled with the cost advantage versus trucks, will contribute toward a positive pricing environment in 2019. We are forecasting mid- to high single-digit price increases in 2019, along with continued volume growth.

And with that, I'll turn the call over to Don to talk about the performance of our other business units.

Executive
Donald Maltby

Thanks, Dave. We had a strong quarter as we continue to price our products and services to reflect the market and provide the solutions that our customers have come to expect. Our targeted approach has allowed us to grow both revenue and yield, while we also focus on process, workflow engineering, network improvements and execution. We believe we are well positioned to drive further yield improvement and growth in the fourth quarter and 2019. Our pipeline for all of our service lines is robust as we further deploy our go-to-market strategy.

Now let's talk about the businesses. Logistics revenue for the quarter declined 11%, as we continue to feel the impact of lost customers from earlier this year due to bankruptcy and insourcing. However, we were able to increase yield with our existing customers by taking contractual price increases, reducing our costs and providing our customers additional solutions to drive results. We are focused on yield and process improvements with our existing customers and future growth with new ones.

We expect growth in logistics from two accounts that were onboarded late in the third quarter as well as a strong pipeline for 2019. During the third quarter, we were successful in renewing several customer contracts that will provide incremental margin contribution in the fourth quarter and for the duration of those contracts. We continue to advance and standardize our TMS technology as our logistics offering remains quite strong.

Dedicated revenue increased 36% as we continue to onboard new