Hub Group, Inc. (NASDAQ:HUBG) Q4 2022 Earnings Call Transcript

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So we would expect a little bit of a more reasonable level of evaluation. But we’re encouraged by the success we’ve had with cross selling the TAGG acquisition was a good win for us. It gave us an e commerce fulfillment capability. It also improved our nationwide footprint of warehousing space and gave us really nice balance of asset and non-asset based warehousing and we’d like to really replicate that with those types of acquisitions.

Allison Poliniak: No, that’s great. And then just on the tag logistics, what are you seeing in terms of the dispensability that model just given is exposed to e-commerce? And then in terms of organic CapEx into that business, is that part of that this year or is it sort of a wait and see?

Brian Alexander: No, it absolutely is. Allison, this is Brian. And we’re off to a great start with TAGG. The e-commerce has fit really nicely into our retail and CPG verticals and really since bringing them on in late August, we’ve already achieved $30 million in wins in cross sells that are onboard throughout 2023. We’ve got two new buildings opening in the West that have already opened this year and then adding two more in the Midwest in the second quarter. And really as we fill those buildings to digest some of that growth, but then it’s also to help us optimize deployment of our space with our 3PL partners and very similar to our drayage model, we balance and feel it’s important to run and operate our own assets, but then have that 3PL partner there as well to flex when we need to. So, off to a great start with more to come.

Geoff DeMartino: And to your point on – or to your question on CapEx, so the facilities are all leased. We do make some investments in equipment and racking that’s maybe 5%, 6% of our overall CapEx.

Brian Alexander: And I would just add, I think one of the great things about the e-commerce portion is when with our CaseStack acquisition, a lot of those customers had a e-commerce program that we couldn’t effectively serve. So we’re cross selling very well into our existing CaseStack customer base. And I think the other piece that’s been very exciting is we are building multipurpose warehousing space. So we can use it for cross stacking, for storage for e-com fulfillment for consolidation. And I think that’s going to be a very effective strategy as we look ahead. We’re going to be at probably $12 million square feet of warehousing space with a lot of room to grow this year so very excited about it.

Allison Poliniak: Great thanks for the color.

Operator: Thank you. Our next question comes from the line of Bruce Chan of Stifel. Your line is open, Bruce.

Bruce Chan: Hi, good afternoon and congrats to you Phil on the new role. I just maybe want to stick with the fulfillment business here. You mentioned some cost inflation in the release. I’m wondering if we’re starting to see that roll off at this point. And also maybe whether you’ve got any contract mechanisms there claw some of those back. And then you also talked a little bit about exited business there, so maybe just some color on that. Was that just residual attrition, I guess, post-acquisition or was that something else?

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