North American transport and logistics company, Hub Group, has reported its latest financial results.
The company reported net income of $62 million USD for Q1 2023 (Q1 2022: $88 million USD)
“Although we are in a softer demand environment the $1.2 billion of revenue we generated in the quarter is the second highest first quarter revenue in the history of our company,” said Hub Group President and CEO, Phil Yeager.
“Our yield management, cost containment and operating efficiency initiatives resulted in operating income margin of 6.8 per cent of revenue.
“We continue to execute on our long-term strategy, investing in our core business and technology while diversifying our service offering. We remain focused on managing our costs and capital structure, while supporting our customers with great service and investing for growth to drive success in a variety of market conditions.”
First quarter 2023 results.
Consolidated revenue for the first quarter of 2023 decreased to $1.2 billion USD as compared to $1.3 billion USD in first quarter 2022. Purchased transportation and warehousing costs declined as compared to prior year due to lower volumes, reductions in third-party carrier costs per load, and decreased use of third-party carriers for drayage, partially offset by higher equipment and rail costs.
Salaries and benefits costs increased $9 million USD relative to prior year due to $28 million USD of incremental expense related to growth of our driver and warehouse employee headcount, partially offset by a $19 million USD reduction in office employee compensation due to lower headcount and lower incentive compensation expense.
General and administrative expense increased as compared to prior year due to higher rent expense and higher outside services expense primarily for IT software related to the acquisition of TAGG Logistics. Depreciation and amortisation expense increased as compared to prior year due to investments in our container and tractor fleets, as well as amortisation of intangible assets related to the acquisition of TAGG. Operating income for the quarter was $78 million USD (6.8 per cent of revenue) as compared to $115 million USD (8.9 per cent of revenue) in the prior year. EBITDA (non-GAAP) for the quarter was $124 million USD. The first quarter 2023 effective tax rate of 19.4 per cent benefitted primarily from a change in state apportionment methodology.
First quarter ITS Segment revenue was $709 million USD, as compared to $777 million USD in the prior year. Intermodal revenue per load for the quarter increased 3.0 per cent while volume decreased 12 per cent as compared to prior year.
Volume for the quarter was impacted by softer demand conditions as retailers’ inventory levels increased from the lows seen in 2021, which impacted demand for our services. Revenue for our Dedicated business line grew 5.0 per cent in the quarter. ITS operating income decreased to $49 million USD (7.0 per cent of revenue) as compared to $86 million USD (11.0 per cent of revenue) in the prior year due to lower volume, higher equipment costs and lower surcharges. These headwinds were partially offset by lower drayage costs as we increased the portion of drayage handled on our own fleet to 74 per cent in first quarter 2023 as compared to 58 per cent in the prior year, as well as an improvement in profitability at our Dedicated service line.
First quarter Logistics Segment revenue was $469 million USD, as compared to $541 million USD in the prior year. The decline in revenue was driven by lower revenue per load in our brokerage business line and lower managed transportation business line revenue, partially offset by revenue from TAGG. First quarter operating income was 6.1 per cent of revenue as compared to 5.4 per cent last year. Operating income was unchanged at $29 million, as lower revenue was offset by lower purchased transportation costs and our yield management initiatives.
Capital expenditures for the first quarter of 2023 totalled $27 million USD. As of March 31, 2023, Hub Group had cash and cash equivalents of $343 million USD.