Dive Brief:
- Transportation and logistics company Hub Group is positioning its logistics segment for growth through acquisition, President and CEO Phillip Yeager said during the company’s July 27 earnings call.
- The company’s focus on developing its logistics segment over the past several years is showing promise even in a challenging freight environment. Yeager noted that its value-added services provides differentiation and creates growth opportunities for clients.
- While he did not specify any potential deals during the call, Yeager noted the company is “maintaining a strong pipeline of acquisition opportunities that will continue to bolster our end-to-end non-asset logistics segment.”
Dive Insight:
Since late 2020, intermodal and logistics service provider Hub Group has worked to enhance its logistics capabilities through acquisition over the past few years.
In December 2020, Hub Group acquired last-mile service provider NonstopDelivery, which enabled the company to service all U.S. zip codes. Hub Group’s acquisition of 3PL reefer specialist Choptank Transport followed in October 2021, which the company projected would help it reach more than $6 billion in annual revenue by 2025.
More recently in August 2022, Hub Group acquired Tagg Logistics, a provider of warehouse and fulfillment services. At the time, Hub group said that Tagg diversified its non-asset-based logistics and brokerage business, which represented more than 40% of its total revenue.
While the integration of Tagg’s operations led to higher workforce and benefit costs, Hub Group’s recent acquisitions also translated to lower purchase, transportation and warehousing expenses, EVP, CFO and Treasurer Geoff DeMartino said during the earnings call.
The company’s capital expenditure range for this year remains unchanged at between $140 million and $150 million, DeMartino told analysts. He added EBITDA, minus capital expenditures, would generate about $300 million in 2023.
“This free cash flow profile, combined with our zero net debt balance, positions us with the financial flexibility to invest in our business through capital expenditures and acquisitions as well as returning capital to shareholders,” DeMartino said during the call.
