HUB GROUP, INC. FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Financial Performance Overview

Hub Group, a leading supply chain solutions provider in North America, has reported its financial results for the first quarter of 2025. The company operates two main business segments: Intermodal and Transportation Solutions (ITS) and Logistics.

The company’s total consolidated operating revenue decreased by 8% to $915 million in the first quarter of 2025, down from $999 million in the same period of 2024. This decline was driven by lower revenue in both the ITS and Logistics segments.

Intermodal and Transportation Solutions (ITS) Segment

The ITS segment, which offers intermodal transportation and trucking services, saw its revenue decrease by 4% to $530 million. This was primarily due to changes in product mix, pricing, and fuel costs, though intermodal volumes increased by 8%. Operating income for the ITS segment increased to $14 million, or 2.7% of revenue, up from $13 million, or 2.4% of revenue, in the prior year. The improvement was attributed to cost control efforts, lower dedicated start-up costs, and better insurance and claims expenses.

Logistics Segment

The Logistics segment, which provides non-asset-based services such as transportation management and freight brokerage, experienced a 14% decrease in revenue to $411 million. This was mainly due to lower volume and revenue per load in the brokerage business, the exiting of unprofitable consolidation and fulfillment operations, and seasonal softness in the managed transportation and final mile businesses. Logistics operating income decreased to $23 million, or 5.7% of revenue, compared to $24 million, or 5.0% of revenue, in the prior year. The decline was offset by positive contributions from the consolidation, fulfillment, managed transportation, and final mile operations.

Consolidated Operating Expenses and Profitability

Purchased transportation and warehousing costs, the company’s largest expense, decreased by 11% to $658 million, or 71.9% of revenue, down from 74.1% in the prior year. This was primarily due to lower rail and third-party warehouse costs, driven by the completion of the company’s network optimization project in 2024.

Salaries and benefits increased by $5 million, or 16.3% of revenue, up from 14.4% in the prior year. This was mainly due to higher driver compensation and warehouse labor costs, as well as the addition of employees from the EASO acquisition.

Depreciation and amortization expense decreased to $33 million, or 3.6% of revenue, down from $38 million, or 3.8% of revenue, in the prior year. This was primarily due to changes made in the third quarter of 2024 to the estimated useful lives of the company’s containers.

Insurance and claims expense decreased to $11 million, or 1.2% of revenue, down from $13 million, or 1.3% of revenue, in the prior year, due to fewer auto liability claims.

General and administrative expenses remained consistent at $27 million, or 2.9% of revenue, compared to 2.7% in the prior year.

Overall, the company’s operating income increased slightly to $37 million, or 4.1% of revenue, up from $37 million, or 3.7% of revenue, in the prior year. Net income was $27 million, or 3.0% of revenue, compared to $27 million, or 2.7% of revenue, in the prior year.

Liquidity and Capital Resources

As of March 31, 2025, the company had $113 million in cash, as well as $18 million in restricted investments and $28 million in restricted cash. Cash provided by operating activities was $70 million in the first quarter of 2025, compared to $81 million in the same period of 2024. The decrease was primarily due to changes in operating assets and liabilities.

Net cash used in investing activities was $16 million, primarily for capital expenditures on tractors, technology investments, and warehouse equipment. The company estimates that its total capital expenditures for 2025 will range from $40 million to $50 million, focused on tractor replacements and technology investments.

Net cash used in financing activities was $40 million, including $26 million in debt repayments, $14 million in treasury stock purchases, and $7 million in dividend payments and stock tendered for withholding taxes, partially offset by $14 million in debt issuances.

The company has a credit facility with $349 million in unused and available borrowings as of March 31, 2025, and it was in compliance with all financial covenants.

Strengths and Weaknesses

Strengths:

• Diversified customer base across various industries, including retail, consumer products, and durable goods
• Comprehensive transportation and logistics services, including intermodal, trucking, freight brokerage, and final mile delivery
• Ownership of transportation assets, such as tractors and trailers, which provides more control and flexibility
• Successful network optimization and cost control efforts, leading to improved profitability in the ITS segment
• Strong liquidity position with $113 million in cash and access to a credit facility

Weaknesses:

• Decline in revenue and profitability in the Logistics segment, particularly in the brokerage and consolidation/fulfillment businesses
• Increased salaries and benefits expenses, driven by higher driver compensation and warehouse labor costs
• Reliance on third-party carriers and service providers for a significant portion of the company’s transportation and logistics services

Outlook and Risks

The company’s outlook for 2025 is subject to various uncertainties and risks, including:

• Inflation and increased healthcare costs
• Potential slowdown in consumer spending due to factors such as tariffs, interest rate hikes, and economic recession
• Shift in consumer spending from goods to services
• Increase in retailer inventory levels
• Ability of customers to pay accounts receivable
• Increased transportation capacity in the market and aggressive pricing actions by competitors
• Inability to pass on cost increases to customers

Potential positive factors that could impact the company’s performance in 2025 include:

• Exiting of truckload capacity
• Declining retail inventory levels leading to restocking demand
• Return of typical shipping peak season demands
• Stronger used tractor market

Overall, Hub Group’s financial performance in the first quarter of 2025 was mixed, with the ITS segment showing improvement in profitability, while the Logistics segment experienced a decline. The company’s liquidity position remains strong, but it faces various uncertainties and risks that could impact its future performance.