Hello, welcome to the Hub Group Fourth Quarter 2022 earnings conference call. Phil Yeager, Hub's President and CEO, Brian Alexander, Hub's 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, Phil Yeager. You may now begin. Good afternoon, and thank you for participating in Hub Group's fourth quarter earnings call. With me today are Brian Alexander, Hub Group's Chief Operating Officer, and Geoff DeMartino, our Chief Financial Officer. I'm honored and privileged to be able to serve as Hub Group's third chief executive in our 52-year history. I wanted to thank our board of directors for their support, but in particular, our Executive Chairman, David Yeager, who led the company as CEO for 26 years with vision, integrity, determination, and humility. He's been a phenomenal leader, and I look forward to continuing to work with him to deliver on our long-term goals for the organization. I wanted to also thank all of our team members for their continued commitment and focus on supporting our customers in a constantly evolving environment. Our team delivered a record year in 2022. We were able to grow all of our service lines in both revenue and profitability, reaching $1 billion in revenue in both logistics and brokerage for the first time as an organization, while eclipsing $3 billion in intermodal revenue. We continued to execute on our strategy to deliver world-class service and invest in our core business and technology while diversifying our service offerings through organic and acquisition-driven growth. We delivered on that strategy while maintaining a phenomenal balance sheet, generating strong free cash flow and returning capital to shareholders. As we look ahead to 2023, the freight economy has changed from this time last year. Inventories have elevated, and we have seen capacity loosen. We anticipate another year of variations in demand with a stronger second half of 2023 based on continued consumer strength and a need for inventory restocking. While this backdrop may create short-term challenges, we believe that Hub Group is well-positioned to grow in this environment, given the many improvements we have made to our business over the past several years. In intermodal, we anticipate increased conversion to rail from over the road, resulting from an improved and more consistent rail service product that, along with our rapidly increasing insourced drayage percentage, improved rail agreements, and lower outside drayage costs, will help our customers reduce costs while driving efficiency and sustainability in their supply chain. Our dedicated pipeline is strong, and we have improved our processes and leadership team, which we believe will help us deliver another year of profitable growth driven by our high service levels and engineered solutions. We have also diversified our revenue streams to be more non-asset-based, which now represents 40% of our annual revenue. In brokerage, we are offering more diverse capacity alternatives that increase scale and have enhanced our technology to drive improved purchasing efficiency and service levels, which is enabling continued cross-selling wins with our customers. Our logistics business continues to develop into the premier end-to-end supply chain solutions provider with our investments in people and technology, as well as acquisitions like TAGG Logistics. We are helping our customers save money through our continuous improvements while providing a world-class customer experience that is able to bring the analytical, technological, and execution benefits of managed transportation to fruition for our clients. All these enhancements to our business model will allow us to continue to grow while maintaining strong profitability and returns. We will continue to invest consistently into the business through cycles in order to ensure we can support our customers in a variety of environments through both capital investments in technology and capacity, as well as acquisitions that help us deliver more value while maintaining our strong financial position and utilizing our buyback authorization to reward our shareholders. Our team is focused on delivering another excellent year in 2023. With our aligned strategy as well as focus on execution and efficiency, we feel we are in position to deliver another strong performance. With that, I will hand it over to Brian to discuss our service line performance. Thank you, Phil. Also want to thank our entire team for delivering a record year as they support our vision for growth while also providing our customers a best-in-class service experience. I will now discuss our service line performance, starting with intermodal. In the fourth quarter, ITS revenue increased 5%, driven by a 19% increase in intermodal revenue per unit, as well as continued growth in dedicated trucking. With the lack of a traditional peak season, intermodal volumes declined 12% in the fourth quarter, with a 9% decline in the Local West, 9% decline in Transcon, and decline of 17% in the Local East. Gross margin as a percent of sales decreased 266 basis points year-over-year. We are actively offsetting this decline in margin with an increase in insourced drayage, up in year-over-year fourth quarter from 47% to 65%. Improved rail agreements, lower outside drayage costs, and several other operating cost improvements. In addition, we've already started to experience improvements in efficiency with rail service, which will help drive conversion volume and improve our box turns. These improvements in intermodal efficiency have us well-positioned to grow our volume and maintain operating margin discipline. Now turning to logistics. Logistics revenue increased 9% in the quarter as we continue to deepen our value to our customers through our integrated approach to supporting their end-to-end supply chain needs. We are well-positioned for growth in our consolidation and fulfillment business, taking advantage of the capabilities that TAGG has brought us, which have already enabled several large transportation and warehousing wins. Gross margin as a percent of sales increased 217 basis points as we maintained our focus on operational discipline, yield management, and customer continuous improvements that drive organic growth. We have a great pipeline of new onboardings and have improved our logistics deal size and close ratio as we offer more integrated supply chain solutions. Our logistics offering has continued to grow the volume it contributes to our other lines of business to support multimodal capacity. With these enhancements, we are in a great position to continue our trajectory of profitable growth. I'll conclude with brokerage. We are very proud of our brokerage team as they performed well against challenging market conditions in the fourth quarter. We remain focused on service to our customers and leading with a competitive price and capacity. This generated an 8% increase in year-over-year fourth quarter volume and an increase in gross margin as a percent of sales to 61 basis points, but a revenue decline of 11% year-over-year. Our acquisition of Choptank helped drive disciplines in our purchasing as well as cross-selling growth in our LTL and dry offerings. Transactional moves represented 52% of our volumes throughout the quarter, while our contract business provided consistent volume and margin expansion as we improved purchasing. We are well-positioned to continue our growth through our integrated approach to our customers, high service levels, and expertise in our capacity types, including reefer, dry, LTL, and drop trailer. With that, I'll hand it over to Geoff to discuss our financial performance. Thank you, Brian. Our business had a very strong 2022, with revenue up 26% to over $5.3 billion and $1.3 billion in Q4. ITS grew revenue to over $3.3 billion, with brokerage and logistics each at $1 billion. Our diversification and focus on transportation cost containment, yield management, and operating efficiency led to gross margin of 16.7% of revenue for the year and 15.9% in Q4, with operating income margin of 8.9% for the full year. We continue to leverage our gross margin against operating expenses, which were equal to 7.8% of revenue for the year, down from 8.5% in 2021. Operating expense dollars in Q4 increased from last year due to incremental expenses from TAGG and less gains from the sale of equipment, offset by lower compensation expense. Our diluted EPS for the quarter was $2.42. We generated $148 million of EBITDA in the quarter and ended with $287 million of cash on hand. We are introducing guidance for 2023. Demand conditions softened in the second half of 2022 due to macroeconomic factors and rising retailer inventory levels. We expect these conditions to persist for the first half of 2023, but are anticipating a slight improvement in demand in the second half. For the year, we expect to generate diluted EPS of between $7 and $8 per share. We expect revenue will range from $5.2 billion-$5.4 billion. For intermodal, we're forecasting low single-digit volume growth for the year, with strength in the second half. We anticipate gross margin as a percent of revenue of 14.5%-15.0% for the year, driven by softer pricing and less surcharge and accessorial revenue, partially offset by lower purchase transportation costs. For the year, we expect costs and expenses of $420 million-$440 million, increasing from 2022 due to a full year of TAGG and less gain on sale. We will continue to invest in our business in 2023, with capital expenditures of $170 million-$190 million targeted for containers, tractors, warehouse investments, and technology. As we enter into a new year, we thought it would be important to recognize the changing profile of our business. Over the last five years, we have grown our top line by over 70%, both through organic growth in our asset-based intermodal business as well as through acquisitions in our non-asset businesses that have brought us new capabilities in areas such as fulfillment, consolidation, final mile, and refrigerated transportation, while also adding scale to our business. We've expanded our operating income margin from 2% to nearly 9% today, with a similar large improvement in our return on invested capital. Despite this, we traded a lower valuation than we did several years ago and continue to trade at a large valuation gap relative to our peers. While we intend to use our pristine balance sheet to invest in the business through capital expenditures and acquisitions, we also have the flexibility and authorization from our board to take advantage of this inefficiency in the equity market. With that, I'll turn the call over to the operator to open the line to any questions. 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 of KeyBanc. Your question, please, Todd. Hi, everybody. I'm assuming it's for Todd Fowler at KeyBanc. Thanks for taking the question. Maybe to start with the guidance, you know, certainly understand that this is a, you know, volatile environment, but a pretty wide range for 2023, that $7-$8, wider than what you typically guide to. I guess maybe can you talk to what would put you at the high end of the range versus the low end of the range and some of the moving pieces? Is it mostly just where the bids come in? How much is dependent on the underlying environment? Just some thoughts around, kind of the range here to start. Sure, Todd. This is Geoff DeMartino. You know, the range is wider than usual, I think just appropriate given the macroeconomic conditions. We are, you know, we are certainly anticipating conditions will tighten and the outlook to improve in the second half of the year. We saw retailers inventory levels really elevate off the bottom in the last few months of 2022, which impacted our performance. We're continuing to see that today. I think what we're hearing from our customers is, you know, they're expecting inventory levels to be worked down throughout the year. We're anticipating some increase in demand towards the end of the year, and that's what really would get us to the high end of the range. You know, you followed us for many years. We tend to be pretty conservative in our guides. The last couple of years, we've ended up beating, you know, by north of 50%. I'm not sure we're gonna do that quite that well this year, we tend to be conservative on our overall guidance initially at the start of the year. Yeah, Todd, this is Phil. I just wanted to add in, you know, we did wanna be conservative on the economic outlook. I think it's a little early to tell exactly if that snapback and demand will be large or small, and we didn't really wanna make a call on that given that it's a few quarters out. We tried to remain relatively conservative in that outlook. Okay. Got it. Yeah, that's helpful. It sounds like you've got pretty good line of sight into this, and the bias would be upwards. Maybe for my follow-up, maybe this is for Brian. You know, when I think about the 12% volume decline on the intermodal side here in the fourth quarter, that seems to be maybe a little bit worse than what we've heard from some peers and maybe some of the industry data that's out there. I don't know if you wanna comment or share any thoughts on maybe the volume decline here in the fourth quarter. Seems like Local East was down quite a bit. Maybe just how you're thinking about your kind of the environment and share right now. Thanks. Yeah, Todd, this is Phil. You know, we watch our share very closely. Our strategy has been to really focus on maximizing our margin per load day, which has guided us towards longer transit and longer haul business, which I think led to some of the volume decline, especially when you take into account the longer customer dwell. When we look at it, we actually feel like, and revenue per load is up 19%, that we actually gained share on a revenue basis, even though volumes were down. Our focus is gonna continue to be on maximizing that margin per load day, as that's what generates the highest return on capital. As we look at January, volumes were down 8% on a year-over-year basis, but actually up 9% sequentially. Also feel good about the momentum that we have to start the year. Okay. All that's helpful. Thanks a lot, Phil. Thanks for the time tonight. Thank you. Our next question comes from the line of Jon Chappell of Evercore. Your line is open, Jon. Thank you. Good afternoon. Phil, I wasn't gonna ask about the quarter to date, since you just brought it up. The 9% sequential increase, was that a function of December being substantially weaker than you anticipated, maybe, kind of earlier, I don't know, slowing down ahead of the holidays given some of those inventory situations? Do you feel that you have a little bit of a tailwind now, you know, as it relates to the start of this year? Also just to tie this in, are you seeing significant service improvements that give you some optimistic views that that type of momentum could be continued? Yeah, John, I think that's a great question, and I would agree with the comments that you made. I think December was lighter than we anticipated, but I think January and the improvement that we've seen sequentially has been stronger than we actually anticipated. We feel very good about the progress that we're seeing with wins that we're having with customers and a return to overall demand. We're actually seeing import volumes improve sequentially and seeing ordering patterns normalize. A lot of good signs, and that momentum really carried throughout the entire month of January with each week sequentially improving, and we're seeing that really carry into February as well. I think a big piece of that is around rail service improvement as well. We do feel as though that's gonna be sustainable. We're out promoting that, very aggressively with our customers around both the service and improvements and sustainability of that, but also the cost savings that they can have associated with that as well when you take into account fuel costs. I think the last piece that we've highlighted to a lot of our customers is de-risking of their supply chain and their capacity. As we look into the back half of the year and a normalization of ordering patterns, capacity will be tighter. By locking in intermodal capacity now, they're gonna be de-risking their overall supply chain. All those factors are coming into play, but we do feel very strongly we have some good momentum starting the year. I'll just add to that too, Jon. We're confident in that rail service being sustained throughout the year, so we've actually been tightening our transits and looking to promote more of that conversion from over the road to our intermodal volume. That's great. Brian, since I have you, on the pricing front, it sounds like your demand outlook is, you know, a tale of two halves, a little bit weaker in the first half, hopefully some recovery in the second, despite January's pretty good start sequentially, at least. On the pricing side, is it almost flip-flopped? I mean, do you have some kind of legacy pricing momentum from last year when the market was still kind of incredibly tight? How do you kind of think about that as we go through the year, on, you know, competing with truck, trying to get that modal conversion, but on the other hand, you know, having your shippers lock in capacity before it does get tighter? Yes. This is Phil. I think it's a little early for a determination on bid season, but I can give you a little bit of color. Obviously, it's a different environment than we were in this time last year. But we do feel as though, and this has been the historical norm, that intermodal will outperform truck by a pretty strong margin. We are continuing to show our customers strong savings towards truck, especially when you take into account fuel. Our focus is gonna be on that maximization of margin per load day. We have a significant opportunity to better balance our network and take out empty repositioning costs. That's gonna create more density and fluidity with our driver base as well. We're really focused on we have a sustainable service product, we have savings, and you're able to de-risk your supply chain, and all that is coming together, I think, very well, to see a strong bid season for us and just for in general for over-the-road conversion to intermodal. Yeah. I'll just add to that too, Jon. You know, I mentioned in some of the prepared remarks too, but we're putting in those cost disciplines and really bending that cost curve down in every possible way. I mentioned a few of them, but that insourced drayage is a big piece for us. You know, we hit 65% in Q4, which is a substantial improvement, but have our eyes set on 70% as we go into 2023, as well as our third-party drayage, taking that cost out. Then as that service improves, the fluidity of our overall network gets much better from a cost perspective as well. All right. That's super helpful. Thanks, Brian. Thanks, Phil. Thank you. Thank you. Our next question comes from the line of Jason Seidl of Cowen and Company. Your question, please, Jason. Thank you, operator. Hey, gentlemen, how are you? Two quick things. One, I was talking to another large IMC, and they mentioned that they think now and going forward, there's gonna be a lot of market share taken from the smaller and mid-sized IMCs. I mean, one, would you agree with that statement? Two, why would you think it would occur going forward now? I have a follow-up about, sort of East Coast, West Coast. Long chance of the first one, I'll get to the second one. Yeah. This is Phil. I feel very strongly, we feel strongly that asset-based players are gonna continue to take share from the non-asset-based IMC, both around an overall access to capacity, also drayage economics. Our rail partners are building their network and their service product around a asset-based carrier, with better integration on technology and overall just a better service product, we think, for asset-based players. I think that's gonna continue. I think the last couple of years have shown a lot of the weakness in the non-asset-based IMC model, particularly around driver availability and capacity availability. Yes, I would agree with that assumption. Makes a lot of sense. Thinking about sort of the shift that went on last year as the West Coast ports had a problem, saw a lot of container traffic flow to the east, there's gonna be a certain percentage of that, probably a large percentage flow back to the West. Are you guys agnostic to that, or would you rather have it on the East Coast or on the West Coast? Yeah, this is Phil. We typically see a higher margin per load day off the West Coast because it is typically a transcon move. We also see higher transload volumes off the West Coast. You know, typically for us, West Coast business is gonna be better and a higher profitability. I agree with you. I think we typically see our shippers switch their ordering patterns from coast to coast on a kind of annual basis. We believe that with some of the labor issues getting put to rest, that we'll see a strong year off the West Coast, and that will create a strong peak season, we hope. We'll see volumes continue to get back to growth on the West Coast. That's very beneficial to us. We'll have our fingers crossed too. Appreciate the time as always, guys. Thank you. Thank you. Our next question comes from the line of Brian Ossenbeck of JPMorgan. Please go ahead, Brian. Hey, good evening. Thanks for the time. Geoff, you mentioned the big disconnect with the valuation, the stock and versus peers. You're active with the buyback in the third quarter, but it didn't look like there was any activity on the fourth quarter. Maybe you can give us some thoughts on how you expect to deploy some of the extra capital going forward throughout the rest of the year with the still remainder on the recent program authorization. Sure. Our priorities for capital deployment have always been invest in the business first and foremost through CapEx. We've been growing the container fleet at 5%-10% a year. We've had a really nice benefit from our tractor cycle upgrades. We've taken the average age from four years down to about two and a half years now, and a really nice return on that investment in terms of lower M&R and better fuel economy. We'll continue to do that. We've had a great experience with acquisitions, really with TAGG, the most recent one, you know, improving our offering, expanding our offering, and allowing that, you know, with that, and we saw this with CaseStack a few years ago too. You know, those companies are really good at what they do, which is operating inside the warehouse, and then we marry that up with what we do, which is managing transportation and really put together a really nice offering for the customer and take out some costs there. Very pleased with that and the ability and the cross-sell abilities that came with several of our recent acquisitions. We're looking to do more of that. M&A has been part of our growth path. We've been averaging, you know, one deal a year. We'd like to probably accelerate that. We think we have a good pipeline out there now, and we're working on that for 2023. That's kind of why we didn't pursue a share repurchase in the fourth quarter, is we wanted to kind of run out some of the M&A opportunities in the pipeline as well as invest in CapEx. You know, given the really strong financial performance the last two years, we've got a balance sheet that is pretty much net debt zero. We'll look to deploy that capital in certainly, probably all three of those channels in 2023. Okay. I appreciate that. Just to follow up on maybe what's also embedded in the guidance. We talked a lot about how this time is a little bit different in terms of flexibility with the rail contracts. Can you talk about if how much of that is reflected in the guide, you can get the full benefit of those? It did seem like, you know, maybe these aren't really linear. It would take a little bit of time. Obviously, you have a few different partners. Just wanted to see how much of a benefit you'd expect to get in 2023, and if there could be even, you know, a bit more in 2024 if the truck market continues to be as soft as most of us expect. Sure. We have great rail partners, both of which I think you've seen. You follow them, you know what they're doing. You know, we've really seen them embrace intermodal over the last few years, you know, deciding to work with channel partners like us, investing in their fleets. I think UP invested $600 million last year in terms of, you know, new terminals and equipment. I think, you know, we've seen them embrace, you know, better economics for us as a way for us to drive growth and convert freight off the road. There is, to your point, there is more flexibility than we've had in the past. There is a little bit of a lag that's built into the way those contracts reset. That will carry through beyond 2023. I think, I'd just add there are opportunities, I think, as well for us to be more efficient in our network, creating more balance, also, as Brian mentioned, in sourcing more drayage, reducing our third-party costs. By getting back to more of a high-velocity network, we think we can reduce costs there as well. you know, I think Geoff DeMartino mentioned earlier, we are conservative in our guidance, I think, you know, your point that, perhaps we're being a little conservative is probably right, but we also don't wanna, build in a significant kind of economic, bullwhip that, maybe some others have. We're trying to just make sure we stay conservative on that economic outlook. All right. Thanks for the time. I appreciate it. Thank you. Our next question comes from the line of Bascome Majors of Susquehanna. Your line is open, Bascome. When we think about the guidance and the cadence, is there a quarter or a period in the year where a couple of negative things line up, be it the roll-off of accessorials and, you know, pricing or really anything like that, or even the rail increase, where it's just, you're just gonna feel kind of the maximum part of the pain based on things you have some visibility into? I think that would be helpful as we set expectations for how the year plays out. Thank you. Yeah, good, great question. Something we thought about when we were putting guidance together. You know, it's gonna be a little balanced. We're gonna be entering the year with a nice price tailwind coming out of a strong bid season in 2022. About 75% of our volume will reprice in the first half. We're expecting stronger pricing in the first half, stronger accessorials. The second half we'll see a pickup at volume. The accessorials probably roll off as we see more fluidity, and, you know, price won't, we're not anticipating will be quite as strong in 2023. We probably will start off the year a little bit stronger. I think there is upside, though. You know, we've had, really, you know, two really strong years of peak season surcharges that really kind of went on throughout the year, that has gone away. You know, to the extent the upper end of our case is realized, you know, that would come with a tightened, you know, a tightening in the second half of the year, which we would expect would come with more surcharges. You know, to follow up on an earlier question, you've kind of pushed us towards the higher end and talked about conservatism. You know, what scenario has to play out to get you to $7 or below? Just wanna understand, you know, how dire the dire case is in your mind. Thank you. We think with respect to intermodal, you know, if there's no, you know, if retailer inventory levels stay low or the recession is severe, impacting consumer spending and volumes don't kind of pick back up, that would certainly impact the second half. You know, we haven't talked much about it, but we do have our other lines of business that account for, you know, 40% of our revenue that tend to be less cyclical and less, you know, less price and volume driven and more kind of longer term in nature. You know, that's one of the things that's changed if you look back at our history. Those non-asset-based businesses are 40% of our revenue today. That's up from about 30% five years ago. That is, does provide more, more of a cushion. As a housekeeping item, what sort of free cash flow outlook does the midpoint of your range get to? Thank you. Yeah, it's around $250 million, so EBITDA and CapEx and a little bit of cash taxes. Thank you. Thank you. Our next question comes from the line of Scott Group of Wolfe Research. Your question please, Scott. Hey, thanks. Afternoon, guys. just following up on the last question of sounds like pricing better first half, volumes better second half. What does that mean from, like, the earnings cadence? Sometimes in the past, you've given us some sort of directional color. You know, what percent of the earnings you think first half, second half, or even quarters or, you know, however you think about it. I'd say at this point it's probably pretty balanced with those two offsetting one another, maybe a little bit stronger in the first half. We'll have more to say obviously as we get further into the year on what the rest of the year looks like. At this point, that's our best guess. Okay. You talked about the operating margins have gone from 2% to 9%. I think I want to try and understand the sustainability of these margins at this level. When we look at intermodal, I know you don't report intermodal margin, but where is that relative to the other big guys that are low double digit margins right now? you know, we don't kinda bring it down to that level, but I would suggest we're probably in the same range as them, if not higher. You know, our business tends, you know, price is a pretty strong driver for us, and we certainly saw the benefit of that in 2022. I think what Geoff was trying to stress in his prepared remarks is also that it's a far less capital intensive model as well. We have very strong margins without the capital intensity, and we're generating a lot of free cash flow that we can put back into the business. As we insource more and we've got new rail contracts, is the range of intermodal margin ultimately gonna be a lot narrower, like maybe those guys look like? Maybe a little bit more capital intensive if we're doing some more of our drayage, but a tighter band of margin. How do we think about that? I think it's certainly an improvement from where we've been historically. There is obviously some level of cyclicality in the business. When capacity is tight and demand is strong, you're gonna get results like last, you know, like 2021 and 2022. We think we've reset at a higher base than where we had been in the past. One of the really nice things about our drayage insourcing is we've been able to really increase the amount we've insourced without adding a lot of capital to date. That's through better efficiency, where we've improved our driver-to-truck ratio, and we've improved our loads per driver per day and really been able to see a nice pickup without a lot of capital. If I can just squeeze one more just to that point. Is there any way to quantify what, like, every 10 points of insourcing means for operating margin earnings, however you think about it? Yeah. 100 basis points over the cycle is about $1.5 million of pre-tax. 100 basis points movement. But your goal is to go from like 60 to 90 or something, is that right or? We're targeting 80% insourced. We're still the largest purchaser of third-party drayage. We think that's important, and it's a good lever actually to have through cycles. It allows us to flex up more quickly to service our customers in high demand environments and create a more variable cost structure as we see demand dwindle. We wanna remain in that position for that 20%, you know, we think is kind of optimal. We'll maintain a focus on that. We're running to start the year in kind of the 70% range, which is great. Obviously, it's on lower volumes, we need to continue to hire as we see volumes pick up to maintain that share. I would tell you, I think that 65-70 number for a full year is really a good target that we have set, which would be some pretty strong growth on a year-over-year basis. Okay. Thanks for all the back and forth. Appreciate it. Thank you, guys. Thanks, Scott. Thank you. Our next question comes from the line of Chris Kuhn of Benchmark. Your question, please, Chris. Yeah. Hi, good afternoon, guys. Can you just talk about maybe your plans for container adds? Some IMCs that have reported talked about holding off on container additions this year. Just wondering what you, what your thoughts are on that. Thank you. Yeah, thank you. I think it's a really good question. You know, in our preliminary CapEx planning, we have planned a, you know, call it 5%-6% sort of net increase in our fleet. We think that it is very important to maintain consistency in capital expenditures and investment into the fleet that allows us to support our customers as we see returns of demand, and maintain service levels at a better level. We wanna keep that consistency, I think we said that in our prepared remarks, you will see us net add some this year. It would be less than the 11% that we did this year, but we will have a net add to our container fleet. All right, great. Thank you. Thank you. Our next question comes from the line of Allison Poliniak of Wells Fargo. Your question, please, Allison. Hi, good evening. Just wanna turn to M&A. I know you talked about the pipeline being active, but could you maybe give us a little color on what that pipeline's looking like in terms of are multiples becoming more reasonable out there? You did talk of maybe doing more than one, just management capacity to handle sort of an increase in M&A. Just any thoughts there? Sure. Yeah, we've been pretty active the last several years, they're kind of averaging around one a year. We feel like we've got a really good playbook developed, and we've got the disciplines in place to be able to handle more than one. You know, for us, we've kind of targeted anywhere from $100 million- $300 million in deal size historically. You know, I think with the success we've had, we'd like to actually go a little bit larger if it makes sense. You know, we're a conservative company and we're cognizant of maintaining appropriate levels of leverage. We could do, you know, two smaller ones or maybe one larger one as part of our M&A strategy. I think, you know, multiples are probably gonna come in to some degree in 2023. I think, you know, the last two years saw a pretty strong bid from private equity buyers, and it seems like the financing markets have sort of dried up for those types of transactions. We would expect a little bit of a more reasonable level of valuation. But we're encouraged by the success we've had with cross-selling. The, you know, 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 a really nice balance of asset and non-asset-based warehousing. We'd like to really replicate that with, you know, with those types of acquisition. No, that's great. Just on the TAGG Logistics, what are you seeing in terms of the defensibility that model just given as it is exposed to e-commerce? You know, in terms of organic CapEx into that business, or, is that part of that this year, or is it sort of a wait and see? No, it absolutely is. Allison, this is Brian. We're off to a great start with TAGG. The e-commerce has fit really nicely into our retail and CPG verticals, really since bringing them on in late August, we've already achieved $30 million in wins and cross-sells that are on board throughout 2023. We've got two new buildings opening in the West that have already opened this year, adding two more in the Midwest in the second quarter. Really as we fill those buildings, it's to digest some of that growth, it's also to help us optimize the deployment of our space with our 3PL partners. 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. Yeah, off to a great start with more to come. To your point 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. 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. We're cross-selling very well into our existing CaseStack customer base. 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. I think that's gonna be a very effective strategy as we look ahead. You know, we're gonna be at probably 12 million sq ft of warehousing space with a lot of room to grow this year. Very excited about it. Great. Thanks for the color. Thank you. Our next question comes from the line of Bruce Chan of Stifel. Your line is open, Bruce. Hey, good afternoon. Congrats to you, Phil, on the new role. I just maybe wanna stick with the fulfillment business here. You know, 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 to claw some of those back. You know, you also talked a little bit about exited business there, so maybe just some color on that. Was that just, you know, residual attrition, I guess, post-acquisition, or was that something else? You know, this is Phil. We haven't had any large customer changes. We, we typically do have some churn within our consolidation programs as customers are acquired or they get large enough to insource their own warehousing footprint, nothing really material there. I think we've done a really nice job of setting a long-term warehousing space plan with our partners, both on the 3PL side as well as, you know, some of our real estate partners. We don't really foresee any out-of-market sort of increases in overall costs. Obviously, you know, industrial capacity remains very tight from a warehousing perspective, not at historic levels, but coming off of those. We're gonna, as we look at new space and renewals, try to take that into account. We also wanna take a long-term view and continue to grow and invest in expanding that footprint. We feel like we have a great team that works on that. Very, very pleased with the process thus far, and feel very good about our ability to keep growing there. As Brian noted, the cross-selling has been phenomenal to start, and we've exceeded our expectations already. Bruce, I'll just add to that as well. You know, with that, it's helped us retain our customers. We're adding, and Phil mentioned this, our existing contracts, new service offerings, and that's helped us with customer retention and contract renewals. It's also really in that strong pipeline. I mentioned it before, just to elaborate to it as well, is that it's helped us improve our deal size, and we've seen that deal size really increase. Our close ratios are improving. While shippers are still price, you know, very focused on price, they're less sensitive to it when we have a diverse service offerings that we can offer to them. We'll continue to see growth there. Okay, great. Just to follow up real quick, what sort of renewal rates do you typically see in that business, if you can, if you can comment on that? Yeah, you know, we're seeing mid-nineties for that renewable. You know, there's some of those that factors in some of the items that, you know, I think Phil mentions as well that, you know, there may be some acquisition components that are more uncontrollable, but we're typically in that mid-nineties. All right. Very good. Thank you. Thank you. Our next question comes from the line of Thomas Wadewitz of UBS. Your line is open, Thomas. Yeah, great. Thanks. Good afternoon. I'm not sure if I missed this, you talked a little bit about December volumes, but I didn't hear a kind of by month. Can you give us what the intermodal volumes were year-over-year by month in the quarter? Sure, yeah. October, down 9%, November down 14%, and December down 13%. Okay. All right. When I think about the, I guess the 12% down for the full quarter, you know, it's obviously it's a, it's a weak market. I'm wondering how do you think about pricing, your approach to pricing against that backdrop? Is it something where you say, okay, we can kinda, you know, stay reasonably disciplined if we're, you know, down 10%, down 12%. You know, if we end up going down 20% and someone else pushes harder on price, then we got to kind of push back more. I'm just trying to think about, you know, what happens with the intermodal competitive environment and just how we think about, you know, the pricing dynamic in the contract season for 2023. Yeah. That, that's where we utilize that margin per load day model. We really focus on how can we maximize that, based on what's going on in the broader market. I think you saw that our revenue per load was up 19% intermodal. We feel like we're staying very disciplined, and really trying to pick our spots to create better balance and velocity in the network. We're seeing, you know, a pretty disciplined start to overall bid season. Obviously more competitive than what we've seen before, but not anything different than what you'd expect in this environment. We're really focusing on, you know, winning volume in the places where it benefits our network, benefits our drivers, and ensuring that we maintain incumbency as well. We're really making sure that we lock in that incumbency in advance of RFP events, which we think will benefit us as well. I guess when you put that together and you say the guide is $7-$8, do you assume like a kind of a, you know, mid-single digit decline in intermodal pricing? Do you assume low single digit? What's the kind of ballpark, you know, without being overly precise? Yeah. I would say not as strong as 2022 and better than truckload is kind of how we modeled it. Right. Do you think? Okay. I think that market view is kind of truckload down high single digits, maybe something in mid-single digits or whatever, something better than truck. Yeah, better than truck. Yeah. Okay. All right, great. Thank you for the time. Thanks, Tom. Thank you. As a reminder to ask a question, please press star one one on your telephone. Again, that's star one one on your telephone to ask a question. Our next question comes from the line of Ravi Shanker of Morgan Stanley. Your question please, Ravi. Thank you. Good evening, everyone. Sorry to revisit the whole midyear inflection topic again. If I were to ask that question a different way, what are your customers telling you is gonna happen kind of in the back half of the year once we do have that midyear inflection? Is it a case of, you know, we get inventories back down to normal, and then we sort of bounce along the bottom here waiting for macro to improve? Or if like the macro conditions that we see right now remain reasonably the same, do they expect an actual restock, and a real upcycle in the back half of the year going into 2024? Ravi, this is Phil. I think that's the unknown with our, with our customer base is how fast do inventories bleed down, and what does that require from a ordering for peak season. I've heard a myriad of different thoughts on that. I think what we've seen historically is a bleed down probably too far in overall inventories, and that leads to more snap sort of ordering and rush ordering, which typically leads to more West Coast transloading and really supports, you know, intermodal growth. We didn't build that into our guidance, but, you know, I think that that might delay the increase in ordering, but it also might exacerbate the extreme of the capacity tightness, if that makes sense. Got it. No, that is helpful, and I agree kind of that's probably the biggest unknown out there. Maybe as a follow-up kind of, obviously you said that you expect over-the-road conversion, which is understandable as rail service improves. Again, your conversations kind of over the last few years, how has the kind of the rail service you've seen kind of has that kind of permanently shifted any customers towards truck? Also in the last couple of up cycles, when shippers are looking to restock, they look for service and speed, and so they tend to kind of bias towards truck versus rail. Are you confident that will not happen in the next up cycle, hopefully that's in the back half of this year? Sure. Maybe I'll start with truck capacity, where I think that, you know, CapEx has been limited at replacement levels, you know, really for the past couple of years. The ability to really net add to the overall truckload capacity has been limited. I think you're also starting to see with spot market rates at these levels, small and mid-sized carriers really starting to exit the market. It's our estimation that truckload capacity is going to continue to tighten, which will make intermodal a more conducive sort of path to be able to move freight. I think with improved rail service, which we're very confident that's gonna be maintained, a lot of folks are gonna be looking at transloading solutions to be able to get into the big box and really move that freight inland through the West Coast ports. That would be our view. We're out really promoting right now, as Brian mentioned, tighter transits and a mid-90s sort of on-time performance. We obviously need to prove that as volumes continue to pick up, but we feel very good about the investments we're making as well as our rail partners to sustain that service. Very helpful. Thanks, guys. Thank you. Thank you. Our next question comes from the line of Justin Long of Stephens. Your question please, Justin. Thanks. I wanted to ask about the guidance for gross margin percentage. Is there any additional color you can provide on the quarterly cadence of that metric? Just curious where you're expecting to start the year in the first quarter versus finish the year in the fourth quarter. I know you talked about intermodal price earlier, but anything you can share on the pressure you're anticipating in accessorials? Sure. Those two would kinda go hand in hand. You know, I think we, from a margin percent perspective, we'll start the year stronger, probably in a similar spot to where we finished, 2022. We would anticipate that those, that margins would decline as a percent in the second half, with softer pricing and with less accessorial revenue. Offset that, you know, with an increased volume to drive the dollars, if that makes sense. Got it. That makes sense. Are buybacks factored into the guidance for 2023? I just wanted to clarify the comment earlier around container adds that you made, Phil. It sounded like you're modeling a 5%-6% increase this year. Was that on a gross basis? I guess, on a net basis, you're assuming something less than that, but still positive? Just wanted to clarify. That's correct. Yes. It's 5% to 6% on a net basis. We've got some containers that have reached end of life that we've held off on retiring, we are gonna pursue that this year. The, your other question, the guide, does not assume any share buybacks. acquisitions. acquisitions. Okay. Helpful. Thank you. Yep. Thank you. I would now like to turn the conference back to Phil Yeager for closing remarks. Great. Well, thank you for joining us on our call this afternoon. As always, if there are any questions, please feel free to reach out to Brian, Jeff, or I. Hope you have a great evening. This concludes today's conference call. Thank you for participating. You may now disconnect.