Hello, and welcome to the Hub Group third quarter 2022 earnings conference call. Dave Yeager, Hub's CEO, Phil Yeager, Hub's President and Chief Operating Officer, and Geoff DeMartino, Hub's CFO, are joining me on the call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. Any forward-looking statements made during the course of the call or contained in the release represent the company's best good faith judgment as to what may happen in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate, and project, and variations of these words. Please review the cautionary statements in the release. In addition, you should refer to the disclosures in the company's Form 10-K and other SEC filings regarding factors that could cause actual results to differ materially from those projected in these forward-looking statements. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Dave Yeager. You may now begin. Good afternoon, and thank you for participating in Hub Group's third- quarter earnings call. Joining me today are Phil Yeager, Hub's President and Chief Operating Officer, and Geoff DeMartino, Hub's Chief Financial Officer. We had a strong third quarter, which resulted in doubling our year-over-year operating income. The results for the third quarter reflect our strategy of diversification, which allows Hub to be more resilient during all economic environments and helps us to mitigate the cyclical nature of the transportation market. The fourth quarter is generally the peak of the holiday shipping season. However, judging by the feedback from our clients, this peak will be muted versus historic norms. Beyond 2022, we do acknowledge the potential for a continued softening economy, but we believe that we are positioned for success as we've taken several important steps to improve our resiliency in a down market. With our recent acquisitions and organic growth, our non-asset-based businesses represent a growing part of the overall results and will generate significant free cash flow while deepening our value to our customers. This diversification into non-asset-based services, along with enhancements to our intermodal agreements, allow us to be more flexible and market-based. We've also aggressively begun to insource a higher percentage of our drayage, which enhances our competitive positioning in intermodal. We expect to continue to benefit from these business model adjustments, as well as continuing our relentless focus on operating efficiencies. With that, I'll now turn the call over to Phil to review our performance. Thank you, Dave. I wanted to start by congratulating the entire Hub Group organization on their strong performance, which continues to be driven by their focus on supporting our customers and team members. I will now discuss our service line performance. ITS revenue increased 22% in the quarter, driven by a 31% increase in revenue per load in intermodal on 6% lower volume, as well as a return to strong growth in dedicated. Volume was impacted due to the averted rail strike, as well as slower turn times and increased competitiveness within shorter haul segments. Local West volume increased 1%, while Transcon declined 1%, and Local East declined 18%. We had a sequential deterioration in utilization, but an improvement in rail service while we dramatically enhanced our on-time performance to our customers. Gross margin as a percentage of sales increased 180 basis points year-over-year, driven by yield management initiatives in dedicated and intermodal, and enhanced purchase transportation costs through increasing our insourced drayage percentage, which was offset by higher rail costs. We have opportunities to improve our network and capture incremental volume growth through our enhanced service and our compelling intermodal value proposition. We believe that with our improved street economics and rail partnerships, we will be in a strong position in this dynamic environment. Logistics revenue increased 12% as we onboarded new clients, completed the TAGG acquisition, and drove organic growth with our existing customers through our focus on supply chain savings and continuous improvement. Gross margin as a percentage of sales increased 370 basis points as our continued focus on profitable growth was offset by increased purchase transportation and warehousing costs. With the addition of TAGG, we are continuing our development of the premier third-party logistics solution, which we believe will enable long-term growth and bring significant value to our customers. Brokerage revenue increased 63% year-over-year, driven by a 54% increase in volume and 6% increase in revenue per load. Our growth was due to the addition of Choptank, as well as organic growth in our LTL and dry van offerings. Our service levels continue to improve year-over-year and will help us differentiate ourselves along with our diversified capacity offerings. Gross margin as a percentage of sales declined 60 basis points year-over-year as we saw more aggressive competition for a smaller amount of spot market shipments, but we believe we will see improvement year-over-year in the fourth quarter and into next year as our mix shifts from 52% spot to a larger percentage of contractual volumes throughout bid season. We are continuing to focus on growing in this important service line and are investing in talent and technology to assist in propelling our growth. With that, I will hand it over to Geoff to discuss our financial performance. Thank you, Phil. Our business continued to perform well in today's environment, with strong growth across all lines of business, leading to a 26% increase in total revenue. Our yield management, cost recovery efforts and focus on operating efficiency led to gross margin of 16.5% of revenue and operating income margin of 8.7%. We continue to leverage our gross margin performance against our operating expenses with costs and expenses equal to 7.8% of revenue, down from 9.1% last year. Operating expense dollars increased from last year due to incremental expenses from Choptank and TAGG, higher legal and use tax expense, and costs for the consolidation of one of our office locations, offset by gains from the sale of transportation equipment. Our diluted earnings per share for the quarter was $2.61, which is more than double the prior year. We generated $157 million of EBITDA in the quarter and spent $103 million on the acquisition of TAGG Logistics and $110 million on share repurchases. We continue to have low levels of net indebtedness, which provides us with flexibility to invest in our business through capital expenditures and strategic acquisitions. As part of our commitment to returning capital to shareholders, our board recently authorized the repurchase of $200 million of our class A common stock. For 2022, we expect diluted EPS of between $10.40 and $10.60 per share. We expect to grow revenue to approximately $5.5 billion. We expect intermodal volumes will decline low single digits for 2022. We forecast gross margin as a percent of revenue of 16.5%-16.7% for the year as our rate increases surcharges and accessorial revenues offset higher costs for rail transportation, third-party drayage and driver wages. For the year, we expect costs and expenses of $420 million to $425 million. Our capital expenditure forecast is unchanged at $240 million to $250 million. Finally, our entire business is supported by our pristine balance sheet and strong free cash flow generation. In 2021, we introduced our long-term revenue and margin targets. Our recent acquisitions and our purchases of intermodal equipment are illustrative of the types of strategic investments we will make in our business, adding scale while also introducing new service offerings with strong cross-sell potential. With that, I'll turn it over to the operator to open the line to any questions. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our first question comes from the line of Todd Fowler with KeyBanc. Please proceed with your question. Great. Thanks and good evening. Maybe for my first question, just a shorter term question on the guidance for the fourth quarter, the implied guidance for the fourth quarter. It's still a pretty wide range and obviously there's a lot of kind of cross currents in the macro. I don't know, Dave, Geoff or Phil who wants to take it, but if we think about kind of the difference between the high end and the low end just to finish out the year, what are some of the variables between what gets you to the high end versus what puts you at the low end right now? Sure, Todd, this is Geoff. Our pricing is, you know, primarily set at this point. The real swing factors for us would be volume growth or volume decline, surcharges which we are expecting to decline sequentially, and then gain on sale would be the third factor. Geoff, just as far as maybe the volume trends, you know, we can see what the third quarter was, and you talked about low single digit decline for the full year, but maybe a little bit of color on 3Q and what you're seeing right now into 4Q. Sure. In the third quarter our volume was down 6%. Around 200 basis points of that we estimate had to do with activity around the threatened rail strike. Year- to- date or month to date rather, in October we are down about 8% year-over-year. It is a sequential improvement from September on a business day basis. Okay, got it. Just for my follow-up, you know, Dave, you had the comments about, you know, the improved resiliency in the model that the portfolio, you know, has changed. Is there a sensitivity that you can help us think about? I'm not looking for anything particularly granular, but, you know, at this point, is it that 40% of your business now, you know, is much more, you know, kind of asset light and viewed as a little bit less cyclical? Is that the right way to think about it? Is there a way we can kind of think about, you know, what truly has that cyclical exposure maybe that we've seen in the past, and then what you've diversified into? Any comments around other levers that you can pull. Thanks. Between 40%-45% of the revenue now is asset light. You know, we do have a lot of levers, some of which we didn't have last time. We have much more flexibility in our rail contracts. They can go up and down, and they're more attuned to market-based phenomena than they have been in the past. We've also begun to in-source a lot more of our drayage. In the third quarter in markets where we have our own capacity, we're up at over 60%. That's up about 500 basis points year-over-year. We'll continue that trend. That has a service advantage but also a pretty powerful profit advantage as well. We look to continue to do that. You know, we ran our playbook in 2019 and 2020 around cost savings opportunities. We've already begun to collect that and start to implement that in anticipation of a downturn. Then one last piece of information just to leave for you. The last time we did see a decline back in 2019, we had about a 35% reduction in EPS from peak to trough. That's one other factor to consider this time around. This is Phil. I'd just add, I think, you know, with our model now, we're gonna continue to kick off, and the diversification piece of it really comes into play. We're gonna kick off a significant amount of free cash flow. That's gonna allow us to be opportunistic in investing in the business, but also continuing to look for accretive acquisitions. That's gonna continue to be a focus of ours, and I think we have a really good playbook that we've run there and have a great reputation as an acquirer. I think if you look at our most recent acquisitions with TAGG and Choptank and NSD, all of those are much more resilient models, both from a margin profile as well as we find the stickiness of the business, in particular in warehouse and consolidation and final mile home delivery. Feel very good about the adjustments we've made to the suite of services because it's also helping to make our business stickier on the intermodal and brokerage side, which can be much more volatile historically. I think a lot of good changes that we've put into place, and we are seeing them play out, which is great. Yeah. Just to be clear, that 35% decline in 2019, but that was also before you had the changes in the rail contracts and then some of the other. Exactly. Yep. Okay, good. Yeah. All right. Without the continued diversification through the acquisition. That's correct. Yeah, understood. I just wanted to make sure we got that frame of reference correct. Thanks for the time tonight. Yep. Thank you. Yep. Thank you. Our next question comes from the line of Jon Chappell with Evercore ISI. Please proceed with your question. Thank you. Good afternoon. Geoff, you kind of referenced this as you related to the fourth quarter. You said the pricing is effectively fixed. At the time of the last call in July, you said you were through the peak, the bid season as well. As we think about, you know, weakness in other segments of transport, you know, maybe some of the demand concerns that I think Dave insinuated, is the pricing really baked now through the first half of next year? Or do you start to get some significant renewals in the early part, where we could see some step down, you know, if other factors start to weigh on intermodal pricing? Yeah, about 35%-40% of our volume will reprice in Q1. The bulk of that is probably in the March timeframe. We certainly have a tailwind carrying us through the first part of next year. You know, by the middle of the year, you know, 80% is repriced. I would also highlight a lot of our larger customers come in the third quarter timeframe, and so those are pretty well in place. I think it's a little early to tell exactly how bid season is gonna play out, but I think historically, intermodal has not moved quite as significantly or directly as truckload. Our focus is gonna be really on maximizing our margin per load day. That's how we generate the highest return within the intermodal segment. You know, that's gonna continue to be the focus for us. You know, I think an opportunity we have is to create more balance in the network. Our empty repositioning costs have increased on a year-over-year basis, and that's an opportunity we're looking at as we enter bid season, and that'll also help with volume and turn times. We're really out right now with our customers focusing on, you know, the improved service products that we have, as well as the savings that we have versus truck to offer, as folks look at converting freight from truck to intermodal. I would just add, too, you know, even in today's market, intermodal long haul, Local West and Transcon, you're looking at a 20%-30% lower rate relative to truckload still. Okay. That makes sense. Phil, something you mentioned there on the balance kind of led me to my follow-up question, which is if we look at the last couple quarters, the variance between west and east has been tremendous. East is even decelerating, I think it was down 14%, second quarter down 18%. This was even before really, you know, I think the truckload market or especially truckload contract has come down. When you think about your capital, your equipment commitments, your positioning of resources, et cetera, do you have to still, you know, have the same amount of investment in maybe that lagging region? Is that part of the entire network and part of the balance? Can you de-emphasize maybe an underperforming part of the network and really prioritize your equipment to where you're getting kind of the best turns and the best returns? Yeah. I think it's a great question. When we run our network model, once again, we're focusing on maximizing that margin per load day. I think you can see that showing up in our revenue per load, which, you know, I think tells a story of how we've been trying to maintain pricing discipline, focusing on the right lane, you know, for our network. I think when we look at volume, there's some controllable factors and some non-controllable ones. When I look at the non-controllable factors, we mentioned the 200 basis point impact from the averted rail strike. We're certainly hoping that's all resolved in these upcoming discussions. When I look at controllable ones, I think our end markets have slowed down a little bit. We are very retail and e-commerce centric. Inventories have moved up, obviously, and so we've seen a slowdown in overall demand from those customers. We're focusing on getting deeper with those clients, but also diversifying our client base and adding to that long tail. We have deliberately focused over time on growing in long-haul segments. I think you've seen that play out probably over the last couple of years, where our Transcon Local West business has really outgrown our Local East, mainly because of the stickiness that's associated with it and the gap that it has versus truck. We don't see that slip nearly as much between intermodal providers or really flip back and forth between truck and intermodal around rate and transit sensitivity. I think lastly, you know, we saw price in the East move more quickly, both in intermodal and in truck, than we were moving, or have moved. You know, I think for us, we look at it as running a network where we need to maximize that return, maximize margin per load, and we're gonna allocate our equipment and capacity to do that. I do think we have latent capacity in the network. We can improve our turn times, but part of that is creating balance and getting that velocity back as well. Mm-hmm. Sup er helpful. Thanks, Phil. Thanks, Jon. Thank you. Our next question comes from the line of Elliot Alper with Cowen. Please proceed with your question. Great. Thanks for the question. Maybe on the increased guidance, can you quantify or speak at a high level, to any of the rail disruption assumptions holding back volumes in the fourth quarter? Some new headlines have come across on a potential rail strike. I guess, is any part of the guidance range based on whether or not they're a significant impact to volumes? Yeah. We've factored in the range of potential outcomes on volume within the 1,040-1,060. We have seen an improvement on a per- day basis sequentially from September into October. It doesn't seem like there's any impact to that news as of yet. Okay. Understood. Maybe for the follow-up, you guys have had some clear success with some recent acquisitions. Can you talk about recent trends within the M&A market, maybe what's crossing your desk? Have multiples come down at all, or any color there will be helpful. Thank you. Yeah, you know, we actually have seen a slowdown in probably the last six or seven weeks on new acquisition opportunities that come across our desk. I think that either a combination of the financing markets or economic conditions are probably leading to a little bit of a slowdown. But frankly, we've had much more success on outbounds, you know, companies that we get to know and spend time with and make sure they're a good cultural fit, and really have been able to have success in doing acquisitions on kind of bilateral negotiations with sellers. So I think there is gonna be a slowdown. I think private equity probably is gonna pull back from their interest in the sector for some period of time. We don't think that's gonna impact our ability to continue to grow through acquisition. We think it is good timing for us, though. With our balance sheet, we're gonna be out in the market, very actively continuing to run the same playbook that we have, diversifying our service offerings, getting deeper with our customers, and adding really great companies that can benefit from additional investment and cross-selling opportunities. Okay, great. I appreciate it. Thank you. Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question. Hey, thanks. Afternoon, guys. Thanks, Scott. When you talk about less earnings variability, is it more about gross revenue, less gross margin variability, more OpEx variability? What's gonna ultimately be the driver of less earnings volatility? Well, I think we have, you know, we have levers that we're gonna pull. We've had those in the past, and we've executed on those in prior downturns. We have this time, I think, you know, the rail contract features around, you know, price up, price down, is a really key factor that we didn't have in the past. That's obviously the biggest cost factor in our biggest line of business. With the ability to flex up and flex down based on market conditions, we think that is gonna lead to less volatility in earnings. Yeah. I would just add, Scott, I think it's both from a gross margin perspective, but also below the line. I think you've seen in the past with us, we are very disciplined in our cost structure, and we'll continue to do that. Then with these additional levers, as well as adding more contractual and stickier services, we think on a gross margin perspective, we'll continue to maintain and hold at levels that are higher than in our history. I mean, is there any way to, like, talk about, like, what historically was like that range of intermodal gross margin through a cycle and what, maybe what you think that new range will be with these rail contracts that now go up and down? Sure. I mean, I think, you know, we're obviously in a pretty strong price environment right now. You know, you can see in our guidance on where we're gonna exit this year, where we've come down off the Q2 levels. Certainly much higher than we were, you know, back two, three, four years ago, you know, where we're kind of in the low, you know, 12%-13% gross margin. I think, you know, it's at least probably, you know, 150 or 200 basis points north of that is where we think we're gonna be longer term. You know, we're just starting our 2023 budget process right now, so I don't have a more concrete number to give you for next year. We'll obviously come back to you with that on our next call. I think that's a good frame of reference to start with. No, I mean, I guess what I was trying to ask is like, meaning historically, the margins peak and trough, there's a 400 basis point difference in gross margin. Now with the variability of rail contracts, do you think it'll be more like 200 basis points? I mean. Yeah, that's probably half of the variability as we've seen in the past. We'd be able to cut in half through that feature. Okay. Just last thing, if we do have a year of sort of down earnings next year, how do we think about what the incentive comp as a, you know, as a potential offset? Sure. That's probably the biggest single driver of the on the operating expense line. That's about a, you know, could be as much as a $40 million swing year-to-year. Our goal would be to not have that happen. I'm sure. Okay. Thank you, guys. Appreciate it. Thanks, Scott. Thank you. Our next question comes from the line of Brian Ossenbeck with JP Morgan. Please proceed with your question. Hey, good afternoon. Thanks for taking the question. Wanted to see if you could go into a little more detail on TAGG acquisition. It's only been a couple of months now, I guess, since you had that in-house. You can maybe elaborate on the strategic goals and how those are progressing, how it fits in the portfolio. What's the initial feedback, cross-selling, all those things would be helpful to kind of get a sense as to what you see here and how it's progressing so far. Sure. Yeah. There were really two main factors that led us to that acquisition, which we've been looking in this space for some time. The acquisition of TAGG really gives us an e-commerce fulfillment capability that we didn't have in the past. We've been in the consolidation and warehousing business since we made our acquisition of CaseStack back in 2018. CaseStack's got a great model serving small and mid-sized consumer goods companies, but they didn't really have an e-commerce fulfillment capability. We were, you know, not able to pursue business. We were able to only obtain part of a customer's share of wallet, and we wanted to add that capability. We've got a list of both our existing customers who we can now offer that to, but also we have our list of customers who had, you know, were looking for that type of service that we can now go back to and win new business based on that. That gives us a partial footprint that we didn't have in the past as well. The other factor was with the acquisition of CaseStack and the footprint we had, we had about five million sq ft of non-asset-based warehousing space that we spoke for. TAGG adds four million sq ft of asset-based space, so around nine million sq ft now with close to a 50/50 mix between asset and non-asset. That gives us the ability to scale up more quickly for new opportunities. It also gives us some leverage when we're negotiating rates with our non-asset-based partners, where we have, you know, a better understanding of the cost that it costs to serve in a given market. You know, I would just add, I think we're seeing that play out now. Since the acquisition, the receptivity from our customer base has been phenomenal, and we're far exceeding anything that I thought we would do from a cross-selling perspective. It's been much quicker. But with our balanced asset, non-asset model, we're actually able to not only take on that demand, but also optimize it from a margin perspective by insourcing the right customers and growing with our third-party partners in the right business. That has really been exceeding my expectations. It's a great team. They have a great reputation, and it's worked very well. I think the other piece that we're bringing to them that the TAGG team didn't have before was the expertise that we have in transportation. By tying that together for legacy TAG customers, we're seeing them want to get deeper in with TAGG, give us more business and outsource their entire supply chain to us versus just a component. I think it has really been just a phenomenal acquisition thus far and excited to see, you know, what we can continue to do. On the actual fulfillment side, is that done by third-party contractors as well? No. We've got about 18 warehouses across the country, and those are primarily company employees. We do use contractors for seasonal spikes, but primarily it's done by employees. Just a quick follow-up on drayage and the insourcing. What was that percentage when you look at sequentially versus the second quarter? You know, where do you expect to be exiting this year and sort of rough goal for next year, given some of the constraints that we see on drivers and equipment? To the extent you have or want to offer any sort of sensitivity on margin, in terms of what a percentage point increase would mean for the bottom line, also be helpful. Sure. Markets in which we had our own drivers, we were at 52% insourced in the quarter. That's up about 200 basis points sequentially. It's up about 500 basis points year over year. We recognize about $1.5 million of incremental profitability for every 100 basis points. Our long-term goal is to get to 80%. I think, you know, we're working through our budget. I think we're gonna probably be targeting around 70% for the end of next year. That will require some capital for new tractors, but the bulk of that is actually coming through productivity. Running more drivers per truck through slip-seating and running each driver is gonna run more loads per day. We've become more efficient in how we plan those drivers' days, and we're seeing the benefits of that from an efficiency perspective. Yeah, we're significantly improving our recruiting. We've been able to get more slip-seating in our fleet. We went from about a 1.05 driver-to-tractor ratio a couple of years ago. We're not where we wanna be, but we're near 1.4 now, and we still have opportunity to become more efficient. We're adding drivers at a really nice clip in some very important markets for us and insourcing that higher share. You know, we continue to see progress as we've enhanced our recruiting capabilities. I think we've got, you know, a great offering to drivers where they can be home every night, get paid at the high end of the market, and be in the newest and best equipment. The average age of our fleet is nearing 2.3 years, and it's just a great asset to be able to go to drivers and show them that value. I think we're a destination at this point for drivers, and we're seeing that show up in our turnover numbers as well. All right, great. Thanks for the detail. Thank you. Our next question comes from the line of Tom Wadewitz with UBS. Please proceed with your question. Yeah, good afternoon. Wanted to ask you a bit about how you think about the competitive dynamic in intermodal in 2023. I mean, it seems like there's a lot of interest in growing from the different players. I guess I don't know where you're at in terms of volume growth focus, but, you know, there you've got some new, you know, better flexibility on rail pricing, you know, or purchase transportation, which you pay. So you could be more aggressive if you want. I'm just wondering how you think about the competitive dynamic. You think it's gonna be stable, or do you think there's some risk that there's a, you know, kind of increase in competition in the market because people wanna grow volume? Yeah, this is Dave. I would suggest to you that at this point in time, the market is very stable, as stable as I've seen, and particularly as we're beginning to see a little bit of a softening among more competitive competition from over the road. I do think we are all focused on growth, but at this point in time, just speaking for Hub, we're also very focused on margin. We're very focused on pulling some of the levers that Phil and Geoff have been talking about that are within our control to control our costs and in fact, reduce our costs. I don't believe that it's going to be impossible to not only grow the overall volumes but also continue to maintain reasonable margins that will allow us to continue to invest in intermodal. Do you think your focus is gonna persist just in terms of, you know, more focus maybe on price and profitability and a bit less on volume? Is that you're gonna stay the course with that, or you think that may change? I think, again, we'll do both. I think that we'll be focusing on growing volume in particular lanes where we feel as though we have a competitive advantage. At the same time, we'll be focused on continuing to deliver solid financial results for our shareholders. Yeah. I think, Tom, it really goes to the strategy that we've executed on over the last several years, continuing to grow those long-haul sticky segments that really stay in intermodal as long as you're providing a really good service. Also creating more balance in the network to drive more volume and velocity. It has to be both. I think we have the opportunity to do both. Right. Okay. That makes sense. Just one more quick one. You've talked a bit about the flexibility, you know, on the rail costs. What's the timing on that, and how do we think about what drives the adjustment? Is that like a, you know, kind of a one quarter lag, or is it longer? And is it driven by the pricing you realize, or is it some type of a market metric for, I don't know, truckload contract rates or intermodal contract rates? Yeah. Tom, this is Dave. We really don't talk about our contracts, and so that's something we just can't delve into. Okay. All right. Fair, fair enough. Thanks for the time. Thanks, Tom. Thank you. Our next question comes from the line of Bascome Majors with Susquehanna. Please proceed with your question. Thanks for taking my questions. Just high level to kind of follow up on the last question. If we were to feel peak pricing pressure in intermodal sometime, call it the third quarter of next year as the cycle reverses and counts peak, you know, how long would it take? Just is it a quarter, a few months to get that reaction in the rail pricing that you're getting on the PT side? Yeah. I think it would be moving, you know, in some ways as the market shifts, but not at a linear rate. You know, we would see it over a period of a year, probably fully manifest itself, would be my you know, just kind of assertion on that. I don't wanna delve too far into the detail, but I tell you, it works itself out relatively evenly over a calendar year period. Okay. That's factoring in both our East and West contracts, which differ on mechanics. If intermodal contract pricing were to trough in sometime in the second half of next year, your rail PT would probably trough between the second half of next year and the first half of 2024. I think that's probably correct. Yeah. Yeah. You know, to your hypothetical comments earlier about, you know, there are some differences in the business, and we don't expect to call it 1/3 EPS decline in the next downturn here. I mean, that gets you to call it $7 in earnings power at that 35% that you don't expect to hit in the downturn. Can you talk any about what the free cash flow profile of the business might look like in a downturn? Just, you know, would that fall more or less? Any thoughts on the cash generation power and its resiliency in a downturn? Thank you. Absolutely. Yeah, we would expect to have really strong free cash flow. We do have the ability to, you know, to scale up or scale down our CapEx. This year at our range of $245 or $240-$250 is a pretty heavy year. We're growing the fleet, the container fleet by 13%. Over time, we'd expect more around a 10% on average. You know, again, we're going through our 2023 budgeting right now, but our, like, our assumption at this point is we'll kind of be in the, you know, mid- to high single-digit percent range for container growth, which would probably put our CapEx to the end of the $150-$175 range. We do have the ability to scale down. This year does include about $25 million on the headquarters building, which is, as you know, complete. Thank you. Thank you. Our next question comes from the line of Bruce Chan with Stifel. Please proceed with your question. Hey, everyone. Thanks for the question. Just, you know, maybe wanna start here with a big picture question. You know, you talked a lot about how half the portfolio is now, you know, non-asset, at this point or almost half the portfolio, you know, even if that's not getting reflected in the valuation. You know, when you think about M&A, and when you think about the growth profiles in each of the various businesses, where do you see the mix being in, you know, say, the next three to five years? Yeah, I think our mix will continue to shift in the direction that we've seen it over the past several years, where our non-asset segments become near to, if not the majority of our overall revenues, which we think will allow us to continue to invest in the asset side while continuing to focus on accretive acquisitions and growth in our non-asset segments. I would anticipate it's not because our asset-based businesses are shrinking, but because we are continuing to grow the non-asset side at a faster clip because of the components of organic and inorganic growth. Okay, great. That's helpful. Just a follow-up here on the brokerage side. I think you mentioned that you were still 52% spot, which seems like it might be a little bit of a challenge in this market. You know, assuming that's not just an artifact of mode mix, what does the right ratio look like for you know, in this part of the cycle, and how fast do you think you can move there? Yeah. I would highlight that, you know, when we purchased Choptank, that shifted our mix to about a 50/50 split to close to 60/40 spot to contract. We're actually seeing that come back to a more normalized level. I think this is where the benefits of Hub and Choptank coming together are really gonna show, because traditionally with the Choptank model, we would have seen you know, a more difficult time because of the focus on spot. We're bringing a lot more contractual and bid business opportunities that that team is winning and the pricing expertise to support that while their inside sales force is really helping us continue to drive momentum on transactional wins and develop a better tactical relationship with a lot of our customers. I think there's this mutual benefit here that's gonna help us have a much more balanced model over the long term, and I think you'll see us continue to toggle back and forth between, call it, a 45-55 sort of spot to contract ratio. That'll be the appropriate mix over time. Now that we're in bid season and that's starting to kick off, I think you'll see that that mix shift even more broadly. Okay, great. Appreciate the color. Thank you. As a reminder, if you have a question, please press star one one on your telephone. Once again, if you have a question, press star one one. Our next question comes from the line of Justin Long with Stephens. Please proceed with your question. Thanks. I wanted to start with a question on rail service. It sounds like utilization was under pressure in the third quarter, but I was wondering if you could put some numbers around that and then how you've seen utilization recover here recently and where you think we might normalize. Yeah. Utilization did deteriorate for us on a sequential and year-over-year basis. I think the good news is that we actually saw rail transit sequentially improve, both on a year-over-year basis as well, where we are continuing to see an elongated in transit is really on our customer dwell. We need to continue to work with our customers to draw that down. I think as inventories are high, you know, in many ways our containers are being used as a storage unit in some ways, and we're working very closely with our customers on changing that. I think as inventories are drawn down, you'll see that normalize. That's gonna help us get more velocity back in the network as well, which is, you know, part of the longer street dwell that we're seeing. I think as we balance out the network a little bit more, we'll see improvement in that as well. I would also just highlight, you know, rail service has improved both in the east and west. Not only has it gotten better on just a percentage basis, but we've seen more of a stabilization in that overall service product. That's where really what we're going to our customers and presenting is an improvement, but also a stabilization, which allows us to operate better, allows us to give better visibility to our customers, use our drivers more effectively, and really just give an overall better customer experience. Been very pleased with that. I think a good example of that is that we have reduced in a number of lanes the transit estimates by up to three days. We are definitely seeing some sequential improvement. Okay. That's helpful. Secondly, I wanted to ask about intermodal volumes. I've heard the update on October, but do you have the monthly intermodal volumes for the third quarter? Then any thoughts on intermodal volumes in 2023? Sure. In Q3, July was down 9%, which we talked about in our last call. August was up about 1.5%. September down about 10%, and obviously was impacted by the rail strike news. As we look at 2023, I think our goal is gonna be growth, you know, and maximizing that margin per load, but growth through enhanced balance, which will improve overall yields and margins. Okay. You're planning on growth even in a mild recession scenario? Correct. Got it. Thanks for the time. Thank you. Thank you. Our next question comes from the line of David Zazula with Barclays. Please proceed with your question. Hey. Real quick, you'd mentioned that you'd seen some acceleration in dedicated. Is that something you're planning to lean into, in the event that there is some softening of demand next year? Is that somewhere you think you can grow in 2023? Yeah, David, this is Phil. We've put a lot of work into improving our dedicated business, improving our contracts and customer mix. We feel as though it is an area that we can grow. We wanna grow with the right customers in the right regions where we have density. I think that's really been our focus. I think for us, we're gonna stay disciplined, but we do like these long-term contracts with set price escalators that give our drivers, you know, a good view to their wage as well. You know, it's good business for us. We plan to continue to do it and grow in that service line. But it's great to see a return to growth, but also margin improvement. Just as a cleanup, do you have the employee count, Geoff? I do. Bear with me one moment. At the end of the quarter, we were at about 2,150, and that includes drivers we've always had, and we now have warehouse employees, so that number is an office headcount number. Okay. Thanks. Appreciate the time. Yep. Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question. Hey, guys. Thanks for the follow-up. Just a couple of last quick things. You talked about a little, maybe a little less M&A activity. You just reauthorized a buyback. How are you thinking about buybacks going forward? Yeah, we're gonna be opportunistic. You know, we bought back stock in the quarter, you know, at a double-digit free cash flow yield. You know, it's a pretty attractive investment for us. If we continue to trade at these kind of ridiculously low valuation levels, we're gonna take advantage of that. You know, we don't have any set timeframe on the $200 million, but, you know, we'll make a financial decision around that investment. You know, again, where we were last quarter as well with, you know, our performance lately this year, our balance sheet is very underlevered. We're at 0.2x debt to EBITDA. You know, our priorities for capital investment are CapEx and acquisitions. In the current environment, we think we certainly have the financial flexibility to also do a return of capital to shareholders. Okay. You've had some healthy gains on sales this year. Is that tractors? Is it containers? How do we think about that in a downturn? Is that an earnings risk this cycle that maybe we haven't had in the past? Yeah. We've been obviously benefiting from pretty strong market conditions for used equipment. It's all been on tractors. We're nearing the end of that. I think, number one, just the number of pieces of equipment we have left to sell, but also the, I think the market's gonna, you know, certainly. We're not planning on this level of, you know, these types of market conditions continuing. This is something we've never had these types of gains in the past too, so it's, there's no real frame of reference for kind of what that looks like going forward other than we think it is gonna come to an end. I think for the, you know, at least for the near term, though, we are continuing to see strong gains. It's attributable to improving the age of the fleet, which helps us on our M&R expenses, but also better utilization. I pointed to the driver to tractor ratio before, and by getting that slip-seating, it allows us to take advantage of that. We'll reach a threshold where we're really optimized probably over the next six months. The amount of equipment we would sell would then come down even if the market conditions deteriorate or are staying the same. I would anticipate it's a headwind, but you know, at the same time should help us in our expenses. Okay. Last thing. The rails have new labor contracts. I'm sure they would like to pass some of those costs through to their customers. Does that impact you in your rail costs? No. We have contractual agreements, and we do not anticipate or expect anything like that. Okay. All right. Thank you, guys. Thank you. I would now like to turn the conference back to Dave Yeager for closing remarks. Great. Well, again, thank you for joining us this afternoon. As always, if there's any questions, Phil, Geoff, and I certainly would be available. Thank you for joining us, and have a good evening. This concludes today's conference call. Thank you for participating, and you may now disconnect.