Hub Group, Inc. (NASDAQ:HUBG) Q4 2022 Earnings Call Transcript

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Operator: Thank you. Our next question comes from the line of Jon Chappell of Evercore. Your line is open. Jon?

Jon Chappell: Thank you. Good afternoon. Phil, I also was going to ask about the quarter-to-date, that you just brought it up. The 9% sequential increase was that a function of December being substantially weaker than you anticipated, maybe kind of earlier, I don’t know, slowing down ahead of the holidays, given some of those inventory situations? Or do you feel that you have a little bit of a tailwind now as it relates to the start of this year? And also just to tie this in, are you seeing significant service improvements that give you some optimistic views that type of momentum to be continued?

Phillip Yeager: Yes, Jon. I think that’s a great question. And I would agree with the comments that you made. I think December was lighter than we anticipated, but I think January and the improvement that we’ve seen sequentially has been stronger than we actually anticipated. So we feel very good about the progress that we’re seeing with wins that we’re having with customers and a return to overall demand. We’re actually seeing import volumes improved sequentially and seen ordering patterns normalize. So a lot of good signs and that momentum really carried throughout the entire month of January with each week sequentially improving and we’re seeing that really carry into February as well. I think a big piece of that is around rail service improvement as well.

We do feel as though that’s going to be sustainable. We’re out promoting that very aggressively with our customers around both the service and improvements and sustainability of that, but also the cost savings that they can have associated with that as well when you take into account fuel costs. I think the last piece that we’ve highlighted to a lot of our customers is derisking of their supply chain and their capacity as we look into the back half of the year and a normalization of ordering patterns capacity will be tighter. And so by locking in more capacity now, they’re going to be de-risking their overall supply chain, so all those factors are coming into play, but we do feel very strongly we have some good momentum starting here.

Geoff DeMartino: I’ll just add to that too, Jon. We’re confident in that rail service being sustained throughout the year. So we’ve actually been tightening our transit and looking to promote more of that conversion from over the road to our intermodal volume.

Jon Chappell: That’s great. And then Brian just to have you, on the pricing front so, it sounds like your demand outlook is a tale of two halves a little bit weaker in the first half, hopefully some recovery in the second despite January is pretty good start sequentially at least. On the pricing side, is it almost flipped off? I mean, do you have some kind of legacy pricing momentum from last year when the market was still kind of incredibly tight? And how do you kind of think about that as we go through the year on competing with truck trying to get that model conversion. But on the other hand, having your shippers lock in capacity for it does get tighter?

Phillip Yeager: Yes Seth this is Phil. I think it’s a little early for a determination on bid season, but I can give you a little bit of color. Obviously, it’s a different environment than we were in this time last year. But we do feel as though and this has been the historical norm that intermodal will outperform truck by a pretty strong margin. We are continuing to show our customers strong savings towards truck, especially when you take into account fuel and our focus is going to be on that maximization of margin per load day. We have a significant opportunity to better balance our network and take out empty repositioning costs that can create more density and fluidity with our driver base as well. So we’re really focused on – we have a sustainable service products, we have savings.

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