Hub (HUBG) - 2024 Q4 - Annual Report

Financial Performance - Hub Group, Inc. generated approximately $4 billion in annual revenue, driven by new customer additions and service cross-selling [16]. - Total operating revenue decreased by 6% to$ 3.9 billion in 2024 from $4.2 billion in 2023 [124]. - Operating revenue for 2024 was$ 3,946,390, a decrease of 6.1% from $4,202,585 in 2023 [203]. - Total operating income decreased to$ 140.3 million in 2024, down from $212.2 million in 2023, representing a decline of 34% [124]. - Net income attributable to Hub Group, Inc. decreased to$ 103,993 in 2024, a decline of 37.9% compared to $167,528 in 2023 [203]. - Basic earnings per share dropped to$ 1.72 in 2024, down 35.2% from $2.65 in 2023 [203]. - Comprehensive income attributable to Hub Group, Inc. was$ 102,669 in 2024, a decrease of 38.7% from $167,613 in 2023 [206]. - The company reported a total operating expense of$ 3,806,099 in 2024, down 4.6% from $3,990,354 in 2023 [203]. Operations and Logistics - The company operates approximately 50,000 dry containers and 900 refrigerated containers as of December 31, 2024 [21]. - As of December 31, 2024, Hub Group's trucking operation consisted of approximately 2,300 tractors, 3,200 employee drivers, and 4,700 trailers [22]. - Approximately 73% of drayage services were provided by Hub Group's own fleet, with 500 independent owner-operators contracted [24][27]. - Hub Group's logistics segment operates or has access to approximately 7 million square feet of warehousing and cross-dock space across North America [25]. - The company operates 101 offices, terminals, and warehouses across the United States, Canada, and Mexico as of December 31, 2024 [102]. Acquisitions and Growth Strategy - The company acquired 100% of Forward Air Final Mile on December 20, 2023, enhancing its logistics segment with last mile delivery services [18]. - The company regularly evaluates acquisitions to enhance core business lines, with recent acquisitions including TAGG Logistics and EASO [17][19]. - The company entered into an investment agreement to acquire a controlling interest in EASO for approximately$ 55 million on October 23, 2024 [122]. - The company’s growth may be adversely affected if it cannot pursue its acquisition strategy or successfully integrate acquired businesses, impacting revenue and net income [77]. Financial Position and Cash Flow - Cash provided by operating activities totaled $194 million in 2024, down from$ 422 million in 2023, a decrease of $228 million [162]. - Total current assets decreased to$ 768,329 in 2024, down 9.5% from $849,245 in 2023 [201]. - Total liabilities decreased to$ 1,176,392 in 2024, down from $1,283,074 in 2023, reflecting a reduction of 8.3% [201]. - Total stockholders' equity increased to$ 1,691,951 in 2024, up from $1,634,645 in 2023, representing a growth of 3.5% [201]. - Net cash used in financing activities was$ 201 million in 2024, including $107 million for long-term debt repayments and$ 30 million in dividends paid [166]. Cost Structure and Expenses - Purchased transportation and warehousing costs represented 74% of consolidated revenue in 2024, 75% in 2023, and 76% in 2022, indicating a significant cost burden on the company [62]. - Salaries and benefits increased to $577 million in 2024 from$ 553 million in 2023, rising to 14.6% of revenue [132]. - General and administrative expenses increased to $114 million in 2024 from$ 106 million in 2023, rising to 2.9% of revenue [137]. - Depreciation and amortization expenses rose to $144 million in 2023 from$ 132 million in 2022, increasing to 3.4% of revenue from 2.5% [153]. Market and Economic Risks - The transportation and logistics industry is highly competitive, with potential downward pricing pressures impacting revenue and profit margins [52]. - Economic downturns and global uncertainties may decrease demand for the company's services, affecting revenue and profitability [54]. - The company is significantly affected by driver shortages, which have led to increased compensation costs that may not be fully passed on to customers [51]. - Cost increases outside of the company's control, such as fuel prices and wage rates, could materially reduce profitability if rates cannot be increased sufficiently [58]. - The company faces risks from geopolitical events and regulatory changes that could disrupt operations and increase costs [86]. Technology and Innovation - Hub Group's digital strategy includes significant investments in technology for customer management, pricing, and order-to-cash processes [15]. - Technology investments are critical for maintaining competitiveness, with ongoing enhancements in order management, transportation management, and warehouse automation [69]. - The company leverages proprietary technology and collaborative relationships with third-party service providers to enhance supply chain services [119]. Compliance and Legal Risks - Legal and regulatory risks related to independent contractor classifications could lead to significant liabilities, including unpaid wages and employee benefits [81]. - Compliance with environmental laws and regulations may result in substantial costs, and violations could lead to significant fines [87]. - The company is subject to various litigation risks that could result in significant expenses and impact financial condition [90]. Shareholder Returns - The Board declared a quarterly cash dividend of $0.125 per share on Class A and Class B Common Stock throughout 2024 [112]. - In October 2023, the Board authorized a share repurchase program of up to$ 250 million for Class A Common Stock [108]. - The company purchased 39,364 shares of Class A Common Stock for $1.7 million related to employee withholding in Q4 2024 [109].