Hub Group, Inc. Q3 FY2025 earnings call

• Thanked team members for their efforts in the evolving environment. • Discussed near-term market conditions, delayed West Coast peak season, and regulatory requirements as positive catalysts. • Highlighted investments in intermodal business and Transcontinental Rail merger prospects. • Mentioned acquisitions of Marten Transport's Intermodal division and SITH LLC. • Addressed performance in each segment, cost controls, technology investments, and focus on revenue quality across ITS, Dedicated, and Logistics segments.

Revenue for the third quarter was $934 million, down 5% year-over-year but up 3% sequentially. ITS revenue was $561 million, slightly greater than prior year due to steady Intermodal volume and 2% growth in revenue per load, partially offset by lower Dedicated revenue and fuel revenue. Logistics segment revenue was $402 million, down from prior year due to lower volume, revenue per load, exiting unprofitable business, and sub-seasonal demand. Intermodal had slightly improving volumes, with Transcon down 1%, Local West down 2%, Local East down 12%, Mexico up nearly 300%, and refrigerated up 55%; revenue per load up 2% due to mix, surcharges, and balanced pricing. Dedicated was impacted by lost sites despite higher volumes and revenue per tractor per day. Logistics segment saw revenue decline 13% but operating margins improve 10 basis points; Final Mile onboardings ramping, CFS improved space utilization, brokerage faced volume and revenue per load declines but cost restructuring, and Managed Transportation performed well with new onboardings and productivity gains.

• Full year EPS guidance $1.80 to $1.90, revenue $3.6B to $3.7B, effective tax rate ~24.5%, CapEx <$50M. • Tempered fourth quarter outlook due to muted peak season, shifted Final Mile start dates, and revenue pressure offsetting cost savings. • ICS segment: Intermodal volume growth comparisons challenging, Dedicated impacted by lost sites; Logistics segment: Further progress on Final Mile onboardings, sustained profitability in Managed Transportation, brokerage volume pressure.

• Risks related to freight market activity, including muted demand, low visibility, and competitive dynamics. • Impact of regulatory changes and potential operational challenges from mergers and acquisitions.

Q: Scott Group asks about customer feedback on rail merger and share opportunities.

A: Phil Yeager responds that there is positive customer feedback, they have a great value proposition, and are well-positioned for upcoming bid season.

Q: Scott Group asks about volume trends in Q3 and Q4.

A: Phil Yeager states July was flat, August down 5%, September up 6%, October month-to-date up 3%, with potential continuation into November but expected sequential slowdown post-Thanksgiving.

Q: Bascome Majors asks about timeline for rail merger benefits.

A: Phil Yeager says bid schedule is pulled forward, with majority of business bid and effective in first half of year, likely seeing impact in second half.

Q: Jonathan Chappell asks about bid season and merger impact.

A: Kevin Beth says there's strong customer engagement, alignment with rail partners, and upside opportunity in 2026 despite typical seasonality.

Q: Brian Ossenbeck asks about Louisville Lane example.

A: Kevin Beth explains it's converting inefficient Chicago dray to Louisville, improving service and cost structure, with potential 2.5 million loads opportunity.

Q: Brady Lierz asks about investment in network and M&A.

A: Kevin Beth says they're upgrading transportation systems, have staff containers with potential utilization improvements, and are open to targeted M&A within leverage target.

Q: Daniel Moore asks about intermodal capacity and leverage.

A: Phil Yeager says intermodal has potential capacity via container utilization and reduced transit times, and they're targeted in M&A with willingness to leverage up to 2x net debt-to-EBITDA.

Q: Elliot Alper asks about Final Mile and housing impact.

A: Phillip Yeager says housing market recovery is beneficial, Final Mile onboarding ramping with customer cautious transitions but meeting expectations.

Q: Michael Triano asks about intermodal pricing in 2026.

A: Kevin Beth says bid season is competitive, customers engaged in merger process, and there's opportunity for better pricing with targeted rail partnerships.

Q: Brandon Oglenski asks about bid season and pricing.

A: Phillip Yeager says there's opportunity for better pricing, focusing on capacity tightening and service value proposition to drive growth and margin repair.