Phillip Yeager: As Brian said, I think culturally, it’s been a great alignment. Both of our organizations are focused on service and the great reputation that we have together, I think, is enabling a lot of that cross-selling. That’s has been great, great off right off the bat.
Operator: Our next question comes from Brian Ossenbeck of JPMorgan.
Brian Ossenbeck: Hey, good afternoon, thanks for taking the question. Maybe just coming back to intermodal specifically, can you talk about just how the progression of margins we should expect throughout the year? Because typically when you have pricing down mid-single digits, it’s going to be a lot more impactful than volume up high single digits. So does this kind of stay where it is now margin-wise for the segment, and then improve from here as you get some of the things that Brian was mentioning in terms of the chassis and the density or is there something else some I’m missing here? Because again, it usually feels like pricing down that much is going to make it hard to improve margins?
Kevin Beth: Yes, Brian, yes, you’re definitely correct. Price definitely moves the needle much quicker than volume does. We do believe that some costs are still in middle innings of the cost takeout. We will also be seen that the rail contracts are also more often changing as we move along during the quarter. So at the end of the day, we do think it should be stable, and maybe fluctuate a couple of points, one way or the other throughout the year.
Phillip Yeager: Yes, I think a lot of it depends on realization rate as well. And do we see kind of a typical seasonality there? As Kevin mentioned, there’s just upside. I think we’d see more typical seasonality would be three years in a row now without a real peak, which I think would be odd, but there’s certainly some factors that are out there that could drive some increase. West coast imports, and watching that closely and aligning with our customers around what peak might look like, but certainly that’s upside potential, but as Kevin also mentioned, we are anticipating operating margin dollar improvement quarter-to-quarter through this year.
Brian Ossenbeck: Okay. Thanks for clarifying that. So, the other question I had was just on the local East conversions, and you’re seeing what sounds like some pretty good truckload conversion. What are sort of the spreads that you’re seeing there, because what we’re tracking is still pretty competitive, which obviously you’re seeing in the market as well, but I wouldn’t have expected to hear that much success considering just how competitive that market especially is, and it is in the short haul. So what are you seeing there and how you’re getting those deals done?
Brian Alexander: Yes, we’re seeing intermodal spread to contract truckload in the high 20%, some of the spot pricing compresses that into the single digit level, but that’s still where we’re able to compete. And in those shorter length to haul, we’re still able to compete against truck within those ranges. So, I think it began a focus on our costs, and to your earlier question, too, just to add that as well, we intend to stay balanced, right? That was a big effort within our bid season is to maintain balance within our network. And as we see things grow and shift throughout the year, we’ll be disciplined in our approach to maintain those balances.
Phillip Yeager: And I’d just like to add, I think we’re providing a truck-like service, and it’s been highly consistent. And I know I’ve referenced this couple of times, that it’s about service levels I’ve seen in my tenure at Hub, and so I think that’s a huge factor in building customer confidence. So yes, we think that will progress throughout the year. And you’ll see, as we mentioned, with April being up 16%. A large portion of that will be locally flowing.
Operator: Our next question comes from Justin Long of Stephens.
Justin Long: Thanks. This is Justin Long from Stephens. Sorry if I missed it earlier, but did you give the intermodal yield number for the first quarter? And then also on ITS margins, I know you mentioned there was a claims settlement. I was curious if you could quantify the impact from that?
Kevin Beth: Yes, Justin, this is Kevin. Yes, so OI for ITS was 2.4%. And no, we’re not going to give the actual numbers on any claims settlements, but a couple of basis points between the three factors that I noted on the OI percentage and the three factors, again, where the January storm, we had start-up costs in the dedicated as we were growing in the Pacific Northwest, and we had that claim as well. So across the board that, you know, there are a couple of things, a couple of basis points back to where we were on OI adjusted for Q4.
Phillip Yeager: And, rounding out the question, and I think revenue per load was down 15% in intermodal. I think two things Kevin referenced in his prepared remarks were fuel and . The other thing I would just highlight is that mix impact from local east really outperforming those longer haul segments certainly was the revenue per load headwind in the quarter.
Justin Long: Okay. Got it. So that intermodal yield number you said was down 15%?
Phillip Yeager: Correct.
Justin Long: Okay, thanks. And I guess shifting to the Logistics segment, you talked about the growth you’re expecting this year. Could you talk about the growth you’re expecting from an organic standpoint, if you were to strip out the Final Mile acquisition, and any updated thoughts on what you view as the normalized margin for that segment pro forma for that deal?
Brian Alexander: Yes, I’ll touch on the growth, Justin, this is Brian. We’re really pleased with what we have set up within our logistics network as we build that out. I think within our brokerage, we continue to be a standout, as I’ve mentioned, with five sequential volume growth quarters in a row, and we don’t intend to break that streak by any means. But what they’re really good at doing is adding new logos, and then progressing that down a cycle of cross-selling to where we can organically offer more services to those customers. So we see that continuing. We win that volume based on leveraging our price, having a diversified service offering within our brokerage. And then being able to, as I mentioned, cross-sell those into other offerings.
I think as we do that, we do see our yields improve. And the pricing becomes less of a topic the more we cross-sell and the business becomes stickier. So we do anticipate that that continued growth. And I’ll let Kevin maybe mention — to speak to the margins.
Kevin Beth: Yes, so, on the margins here, unfortunately, right now, the brokerage margin is really dragging down the logistics segments. Now the truckload and the spot market are much lower than our overall margins. So I think we’re really probably at the trough as far as that goes. And I think the only upside as the truckload, both contract and spot market wouldn’t inflect upwards.
Phillip Yeager: And I would just round it out with I think the brokerage revenue per load is the big headwind. If you thought about the logistics business organically ex the Final Mile acquisition. If you look at the other businesses, they’re actually performing quite well. And we’ve got, as Brian mentioned, some new warehouses that we’re bringing on that we think are going to drive some nice top line organic growth. And I think our team’s did a great job, in particular, selling the LTL solutions and our cross-docking network continues to expand as well. So a lot of really good things happening there. And the brokerage I would tie more to we’re dealing with market conditions, and a lot of our growth is in LTL, which the lower revenue per load. But if you look at those more contractual services, those are growing quite nicely on the top line.
Operator: Our next question comes from Thomas Wadewitz of UBS.
Thomas Wadewitz: Yes, good afternoon. I wanted to ask a little bit about the — I think you were just talking about brokerage and obviously pressure on revenue per load. What’s the mix you have in terms of contract and spot? I don’t know if you mentioned that and I missed it. But are you heavy towards spot? Or is it 50-50? Where are you right now on contract and spot and brokerage?
Brian Alexander: Yes, Tom, this is Brian. It stayed pretty consistent. We’re right about 50-50, 48-52. And I think that helps us position where we’re able to leverage our contracted capacity, and freight with carriers to be able to then position that for improved spot pricing, that we can go to market with, and continue to win that volume. We think that will kind of continue to stay. And we saw some early signs in Q1 of January spot pricing inflection. It did fade kind of throughout the quarter. But as that picks back up, we’ll look to maintain some of that debt balance in our brokerage.
Thomas Wadewitz: Okay. Yes. Great. Thanks, Brian. And then I think, you’re getting growth coming in pretty significantly in intermodal. What do you think the dynamic the impact is of the ocean carriers? Because I think, you know, while you’re doing well, maybe some of the other domestic players aren’t doing as well. And if you look at the way the railroads are commenting, they’re seeing stronger growth in international intermodal than in domestic. Do you think that– I don’t know if it’s like know, excess boxes in international, and they’re happy to see the boxes go to Chicago versus the approach two years ago? Or what it is. But do you think that the you see competition from international, and capacity available in international, or is it more so where people want to keep the inventory and there’s inventory in the inland empire? Just trying to figure out the different pieces setting aside competition within the domestic? Thanks.
Phillip Yeager: Yes, no, I think it’s a great question. Yes, it’s certainly a competitive set right now. You typically see your point, when things are busy and cross border trade. They want to pull that capacity back. But given how slow things are right now, I think they’re very happy to see those boxes go inland and be taking on some revenue. And so I think our customers are, if it’s west coast oriented, the economics still point to utilizing transloading most of the time, although if pricing continues to drop, they might just use those boxes going inland. But the utility you get in extra freight, you can fit into a big box, obviously its a pack. But we see less transloading on the East Coast, more IPI competition there, I would tell you, but yes, it’s certainly something we’re seeing right now.
But long term and the commitment to capacity that we have, we typically find that’s used more temporarily by our customers when rates are very low. And then as things pop back, and you see the steamship lines start to want that capacity back, they’ll flip that back to us very quickly.
Thomas Wadewitz: Do you think there is some negative effect of maybe the international player behavior at the moment? What about Red Sea disruption impact? Does that help you at all in terms of pushing a little more to the West Coast or not necessarily?
Phillip Yeager: No, it certainly does. Yes. I think the potential east coast labor disruptions is going to be another driver of volume. And yes, I would I would say, though, that right now, it’s certainly a piece of competition that we’re dealing with ITI.
Operator: Our next question comes from Bruce Chan of Stifel.
Bruce Chan: Thanks, operator, and good afternoon, everybody. Just to follow up here, on the commentary on Final Mile. I’m wondering if it’s possible to parse out what the organic growth might have looked like in that business and maybe how far you’re into that cross-sell push that you talked about as an opportunity?
