Hello, welcome to the Hub Group First Quarter 2023 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 full 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. 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. Thank you for joining Hub Group's First Quarter Earnings Call. With me today are Brian Alexander, Hub Group's Chief Operating Officer, and Geoff DeMartino, our Chief Financial Officer. I wanted to start by thanking all of our team members across Hub Group for their tireless effort to support our customers and one another in this rapidly evolving environment. The market has shifted from this time last year. Capacity is loose, customers are more fluid, rail service is improving, inventories are elevated, import volumes are down, and the employment market has become more balanced. The improvements that we have made to our company over the past several years through our diversification, technology enhancements, yield and cost disciplines, and intermodal operating improvements are supporting our ability to successfully compete in this environment and support our customers with world-class service. In intermodal, rail service has improved as have customer turn times. Given slower import demand and elevated inventories, as well as a more aggressive pricing environment, volumes have underperformed our expectations. Our insourcing of drayage, reduction in third-party spend, improved rail partnerships, as well as our enhanced operational discipline and service levels, have enabled us to perform well in bid season. As bid awards are realized, we anticipate improved volumes, velocity, and network balance, which will help offset lower pricing and accessorial fees. We will maintain our focus on providing outstanding service and improving our cost structure to drive long-term growth. I am very pleased with the performance of our other service lines, which are generating strong results in a challenging environment. In brokerage, we are maintaining order count and taking share while enhancing margin percentage through our great sales team, improved systems, enhanced purchasing power, and successful cross-selling. We are growing our dedicated business with improved returns through organic and new customer wins. The acquisition of TAGG has been very successful, and we are expanding our warehousing footprint to support demand from our cross-selling and insourcing synergy opportunities. Lastly, we are driving organic and new customer-led growth in our managed transportation and final mile businesses due to our industry-leading service levels, scale, and continuous improvements. We have an extremely strong pipeline of new onboardings across all of our offerings, and we are bringing value by integrating these otherwise separate solutions to our customers, which provides increased savings and enhanced service. We have an extremely strong balance sheet and are generating significant free cash flow, which will allow us to stay focused on executing our strategy of providing best-in-class service, investing in our asset-based solutions, diversifying our service offerings, and enhancing our technology platform. We will execute on this strategy while maintaining a strong focus on cost controls and efficiency enhancements while returning capital to shareholders. We believe this focus will help us navigate the currently challenging environment successfully and lead to long-term growth. With that, I will hand it over to Brian to discuss our business unit performance. Thank you, Phil. I also wanted to thank our experienced team for their efforts in leading and executing through a changing freight environment and delivering continued value to our customers. I will now discuss our reportable segments, starting with our intermodal and transportation solutions. In the first quarter, ITS revenue declined 9%, driven by softer intermodal volume that declined 12%. Transcon Intermodal declined 6%. The Local West declined 12%, and the Local East declined 17%. Intermodal revenue per unit increased 3% in the quarter, and we continue to grow our dedicated trucking operation with a revenue increase of 5% in the first quarter and a strong pipeline for the rest of the year. Softer import volume and elevated customer inventories generated softer volume and lower accessorial revenue, which led to a decline in ITS operating income as a percent of revenue by 400 basis points year-over-year. We continue to offset price pressure with several cost improvements that include, but certainly are not limited to, lower outside dray cost, improved rail agreements, and an increase in insourced drayage from 58% in the first quarter last year to 74% this year. These cost improvements have more runway through the second half of 2023. In addition, rail transits continued to improve in the first quarter and are much more consistent, leading to improved service and street economics. We are pleased with the wins we have so far through bid season, and we expect them to start to materialize in the second half of the year. We will continue to invest in our intermodal business, even in a down cycle, to deliver a superior service product that helps bring cost savings and sustainability to our customers, which in turn, we believe will continue to drive long-term sustainable growth. Now turning to our Logistics segment. As we continue to deepen our value to our customers with our integrated approach to supporting an end-to-end supply chain, we were successful in expanding our logistics operating income as a percent of revenue by 70 basis points in the first quarter. Despite the challenging freight environment, our brokerage held volume close to flat and grew market share with several new customers. Our overall Logistics segment experienced a revenue decline of 13% in the first quarter. As illustrated in our yield improvements, we have been successful in executing on lowering the cost of purchased transportation and integrating our service offerings. We have successfully integrated our past two non-asset acquisitions and continue to harvest cross-selling synergies. We continue to be very pleased with our brokerage team as our Choptank integration has provided non-asset mode diversification, buying leverage, and continued cross-selling upside, which will further position us for growth. To support our growth, we onboarded two new multipurpose logistics locations in the West in the first quarter, and we expect to onboard at least two more in 2023 to take our warehouse logistics square footage to over 10 million by the end of this year. These locations are strategic to our hub network of freight as they support inbound and outbound multimodal hub volume and service our customers' supply chain needs. We have a great logistics pipeline of new onboardings with launch dates in Q2 and Q3. Our logistics deal size continues to grow, and our close ratio remains strong. With these enhancements, we are in a great position to continue our trajectory of profitable growth. With that, I'll hand it over to Geoff to discuss our financial performance. Thank you, Brian. Despite softer freight market conditions, we generated revenue of $1.2 billion for the quarter, which is the second-highest first quarter revenue in the history of our company. Our continued focus on cost containment and operating efficiency led to operating income margin of 6.8% of revenue. As detailed in our press release, we are updating our income statement presentation, as well as disclosing revenue and profitability for our ITS and Logistics segments. Purchased transportation and warehousing represents costs paid to third parties for carrier and storage capacity. These costs declined as a percentage of revenue as compared to the prior year, reflecting our focus on cost containment. Salaries and benefits reflect the costs of our office and non-office employee base. These costs rose from the prior year as we significantly expanded our company driver count and added in warehousing operations through the acquisition of TAGG Logistics. This increase was offset by lower office employee costs and lower incentive compensation expense. Our depreciation and claims costs both increased from the prior year due to investments in fixed assets and the expansion of our company drayage operation. G&A costs increased as we upgraded our drayage terminal and warehousing network and invested in IT software. Our diluted earnings per share for the quarter was $1.88. Our performance softened as the quarter progressed, particularly within Intermodal, as lower volumes, a rapid decline in accessorial revenue, and lower pricing impacted profitability. We generated $124 million of EBITDA in the quarter and ended with $343 million of cash on hand. We are updating our guidance for 2023. Demand conditions began to decline in the second half of 2022 due to macroeconomic factors and rising retailer inventory levels. We expect these conditions to persist for at least the first half of 2023, but are anticipating a slight improvement in demand later in the year. For 2023, we expect to generate diluted EPS of between $6-$7 per share. We expect revenue will range from $4.6 billion-$4.8 billion. For Intermodal, we're forecasting mid-single-digit volume declines for the year. We expect to face softer pricing, less accessorial revenue, and a lack of surcharges this year, which will be partially offset by lower purchased transportation costs and improved operating efficiency. We expect Q2 EPS will be the lowest of the year and will decline from Q1 levels at a similar sequential rate as we experienced in Q1. We have also revised our capital expenditure expectations for 2023 to $140 million-$150 million, down from our initial estimate of $170 million-$190 million as we reduced our planned container adds for the year. Based on this guidance, we would expect to generate EBITDA less capital expenditures of over $300 million in 2023. This free cash flow profile, combined with our zero net debt balance, positions us with the financial flexibility to invest in our business through capital expenditures and acquisitions, as well as returning capital to our shareholders. With that, I'll turn it over to the operator to open the line for 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 Jon Chappell of Evercore. Your question, please, Jon. Thank you. Good afternoon. Guys, can I just start with the trends from basically January through where we are today, especially on the intermodal volumes? Overall kind of the cadence through March and as you have it right now? Sure. Intermodal volume on a year-over-year basis, January down 8%, February down 10%, March down 18%, and April also down 18% to date. Okay. I think, Jon, I think we've haven't seen necessarily the typical seasonality you would see with March being a stronger month in Q1, which is a big part of the revision to the guidance, and seeing where April is coming in, with, you know, pricing resetting at a lower level as well as accessorial fees rolling off. T hat makes sense. We feel good about the logistics part of our business, performing well. It's, you know, intermodal is just coming off such a high level from last year and such a big part of the business. Yeah. Okay. That aligns with what we've been hearing otherwise. Kind of bigger picture question, Phil, and maybe for Geoff as well. Last quarter, you talked about, you know, the acquisition pipeline, hoping to do more than one per year as you've kind of done in the past. Does this environment kind of give you some pause? You know, the bank environment give you some pause, or does it create more opportunities? How do you think about kind of the timing and the size of acquisitions this year amid this much weaker backdrop versus you have this massive cash flow generation, the stock's really cheap by anyone's metrics and the buyback program you have outstanding right now? Well, I think our free cash flow profile and our current balance sheet situation really affords us the opportunity to pursue both. We do have a good pipeline of opportunities. We actually think the current state of the financing market plays well to our strength, given our ability to fund an acquisition off of our balance sheet. We don't need to rely on capital markets. Obviously, you know, we're pursuing companies that are performing well and, you know, as you would expect, that's the companies that are willing to talk right now are those that are performing. You know, we've, and we've mentioned this in the past, I think we talked about this on our last call. If we don't feel like we're in a position to execute on an acquisition, we will more aggressively pursue the return of capital. We are not at that point right now, but we do have the ability to pursue both. You know, I would just add, Jon, I think we've built through the acquisitions we've done in the past, a more resilient model and changed that free cash profile. As we've said before, we're gonna continue to focus on non-asset businesses that help us build scale or bring differentiation in our service offering, as well as new technology. We do, as Geoff mentioned, we do have a strong pipeline, and are hopeful that we'll be able to close on a transaction this year. But if not, and if things don't come along as we were hoping, we'll certainly be ready to enact the buyback. Got it. Thanks, Phil. Thanks, Geoff. Thank you. Our next question comes from the line of Elliot Alper of Cowen and Company. Please go ahead, Elliot. Great. Thank you for the question. You talked about a $7 floor on your previous guidance last quarter, kind of how it would take a material change in consumer spending and volumes to change that. I guess, is that what happened this quarter, or are you seeing other factors at play? No, it's really driven by demand. You know, we just think we're in that, in that lull period still. We know that will correct. It's certainly a question of when and not if. You know, that in, you know, along with that, I think supply conditions remain pretty loose. We expect those will tighten as well. To get to the upper end of our current guide, we would expect, you know, both those conditions would need to be satisfied. If conditions were to stay the same for the full year, that's what gets us to the lower end of our guidance. Yeah, I think when we initially issued guidance, we were coming into the year with sequential improvement from December to January. We were anticipating that trend would continue, and we would see that March would be much stronger in the quarter. I think as we went through the quarter, we saw we're repricing in a more aggressive environment. We're seeing accessorial fees roll off, and we're not getting the bid compliance that we were hoping for on the awarded business. With that trend continuing into April, we wanted to make sure we adjusted the guidance. I think as we look ahead, we do feel as though our bid compliance will improve. Our new bid awards are certainly having a higher compliance level than our older ones. As we reset all those, we'll be in a good position. I think we have performed very well in bid season. We have focused on, you know, really maximizing that margin per load day, increasing the velocity in the network. If we see a trend of inventory starting to come down, import volumes increasing, that floor in the spot market really come together, and that will lead to those bid awards materializing. That's why we do believe we're gonna see some sequential improvement from Q2 to Q3 and Q3 to Q4. Yeah. No, that's really helpful. Thank you. I guess maybe on the commentary on kind of a mid-single-digit volume decline for intermodal volumes for the year off of a down 18% in April, I guess, how should we think about that progressing through the year and kind of what gives you confidence on that kind of back half turnaround? Yeah. I think part of it is comparables from last year. I think the other piece is that compliance level that we're seeing on new awards. We're also seeing really strong performance in our other service lines, which help to feed our intermodal business. We have some nice wins that are gonna be coming on. Part of it is comps, part of it is also we have a good pipeline of onboardings. We just need to see those really materialize. Yeah, Elliot, this is Brian. I'll add to that as well. I think we're finding new ways to win with our customers. Where we certainly participate in bids and win transactionally, we're able to couple together some of our other logistics non-asset offerings that help us win that volume, become more sticky with it, and be less price sensitive. If customers are looking for transload or consolidation solutions, we're able to supply those for them, as well as giving them access to our logistics square footage throughout our network. We see that also helping the drive in the back half. Great. Appreciate it. Thank you. Thank you. Our next question comes from the line of Brian Ossenbeck of JP Morgan. Your question, please, Brian. Hey, good afternoon. Thanks for taking the question. Just wanted to talk more about competition, get you to elaborate on that a little bit. Where are you seeing the most pressure? Obviously, volumes are down quite a bit across the board, but also in the Local East. Is this more IMC competition? Is it more truck? Can you elaborate a little bit more on that and what do you expect to see throughout the rest of the year? If you can throw in the spreads, where they are right now in the different regions versus truck, that'd be helpful. Thanks. It's certainly been a more competitive bid season. I think, in shorter haul segments, we're seeing that be with both truck and intermodal, and then in longer haul segments, more with intermodal. As you know, our growth has mostly been in the transcon portion of our network, which has a little bit more resiliency in this sort of environment, but is also very dependent on import volumes, which have been slower. We are seeing wins continue to come online. We're seeing more customers respond positively to our increased service levels, the economics we can bring, and the capacity assurances, I think, as we see things tighten up over time. It's certainly been more competitive. It's not anything that's surprising to me, or any increased competition versus where you would anticipate it would be. For us, we're staying focused on that margin per load day model that helps us generate the maximum returns, creating more balance, creating more fluidity and velocity. I think from a spreads perspective, you know, on contract business, it's really anywhere from mid-teens to high teens on the longer haul business to a little bit under that, maybe just low double digits in local markets. The spread is certainly tighter than what we would anticipate. I think if you see the spot market really start to bottom and some volumes really come online, that'll get wider again. Yeah. Brian, this is Brian as well here. I'll just add to that too. In an effort to drive that competitive price out there, we've been very successful in taking costs out of our network. I mentioned our improvement in insourced dray, as well as our improved buying power and outsourced dray, as well as our rail service agreements. Also we're coming to the end of a rollout of technology in all of our terminals. We've centralized our load planning, and that's helping us become more efficient on the street. That all altogether helps us compete. Then just to follow up on the guidance, it sounds like accessorial has rolled off quicker than you expected. Is that one of the bigger needle movers, I guess, in terms of how the guidance has changed, is that now all out of the updated numbers? Anything else you're assuming in the guide in terms of either gain on sales or buybacks? Thank you. Sure. The guide does not assume a buyback. It does assume, to your point, accessorial revenue did decline pretty rapidly in the quarter. We had been modeling that for the year, it just happened faster than we thought. There's a minimal level of that going forward, Gain on sale, about $4 million in the quarter, minimal going forward as well. We didn't build in a very significant peak season or surcharge-related revenues associated with that as well. Just to clarify, Geoff, is the accessorials just came out faster than you thought and there really was no net change, or were there more of that coming out, you know, just all together on a net basis? W e got to the point we thought we'd be at by, you know, the end of the year in the first quarter. Okay. Yep. Thanks for clarifying. Yep. Thank you. Our next question comes from the line of Bascome Majors, Susquehanna. Please go ahead, Bascom. Looking past 2017, you've fortunately done a lot more raising of guidance than lowering it. I was hoping that you could walk through the lower end of the range today and walk us through some of the levers beyond that $4.6 billion in revenue. You know, how do you get conviction that the first cut is the last cut? You know, granularly, what are the assumptions that get you to $6, and how are you comfortable there? Thank you. Sure. We tend to be pretty conservative in our guidance, so it was a big deal for us to come in with a reduction. We did wanna be provide a balanced view of what we're seeing. You know, the conditions, again, softened throughout the first quarter and have not really firmed up since then. If conditions were to stay the same and, you know, volume were to be basically flat sequentially the rest of the year, that's what gets us to the lower end of our range. The higher end of the range would come with a stronger improvement in volume sequentially for the year. You know, at the midpoint, we're down mid-single digits on volume. You know, to get to the higher end of the range would be closer to flat for the full year, which obviously would imply a sequential improvement in the back half. If the conditions exist that drive that type of volume, we would expect to see surcharge revenue coming into play in late Q3 or Q4. That would also get us to the higher end of the range as well. I'll just call out Bascom as well. This is Brian. The resilience of our brokerage operations amongst the headwinds in the market. Even with those market headwinds, they've been able to hold their volume close to flat and continue to add new customer logos and gain market share. As the demand increases, that's really gonna accelerate their performance while they also are able to keep their costs contained. That team moves very fast, they move ahead of the market, and they protect the service, the market share, and their overall yields, and that helps bring a diversified offering. Thank you both for that. Just one more piece. I believe you said you thought you could do about $250 million in free cash flow at the initial guide. You've cut CapEx. You know, maybe there's some working capital release here. Any update on what free cash flow looks like, at least within a range at the new income level? Thank you. Sure. I had said it in my prepared remarks, but on an EBITDA less CapEx basis, with this guide, we'd be north of $300 million. Thank you. Thank you. Our next question comes from the line of Scott Group of Wolfe Research. Please go ahead, Scott. Hey, thanks. Afternoon, guys. I was wondering if you could help maybe give us some, a little bit more history of this ITS margin. Right? It fell from 11% to 7%, you know, where was this margin, you know, prior to the pandemic? What's been the historical peak to trough range? Any sort of color history there, I think could be helpful. Sure. In the press release, in the appendix, we did put in 2022 by quarter. 2022 full year ITS operating income margin was 10.5%. You know, we didn't go back and recast all of the history, but, you know, the company as a whole back in the, you know, 2017, 2018 timeframe was, you know, around that kind of 2.5%-4% range. And back then, intermodal was a much bigger part of the overall puzzle. That, you know, that would've certainly been a part of a big driver of that. You know, 2.5%-4% would've been in intermodal. Kind of call it, you know, the 4%-5% range. Since then, you know, we've done a lot to improve the business. We've taken a lot of costs out. We have better yield management disciplines. Certainly insourcing our drayage is a big driver of value as well as offers a service benefit as well. Taking that up from, you know, historically mid-fifties up to, you know, we're north in the mid-seventies today and looking to go higher, that's another driver as well. Along with the technology and operating efficiencies below the transportation line. Yeah. Scott, I'd just highlight, I think we're a far better recruiter of drivers now, so we feel that we can sustain the, you know, 74% that we're at and get to that 80%. We actually have a backlog of candidates that are coming on, and we've increased our driver count 33% year-over-year. You know, those are markets where we're oversubscribed. We have a few that we need to make up the gap to get to 80%. We're aggressively pursuing drivers in those markets. Those, those economics will certainly help us quite a bit, and are proving to be very helpful in this sort of environment. I would also just highlight the improved rail agreements that we have that are certainly supporting our ability to go out and win as well. Just one piece to add to that as well, is we've integrated our drivers, that we've really found a lot of optimization in how we share drivers amongst our dedicated and our intermodal drayage within that ITS. Maybe do you have-- What's in the guidance for Q2 and full- year ITS margin? You know, I just wanna, like, last quarter or last few quarters, we talked about why there would be less sort of cyclicality in the margin going forward, and 400 basis points, a big drop in one quarter. I just wanna understand, you know, is the variability of the rail contracts, is that still in play, but it just happens on a lag? I just wanna understand, you know, the cyclicality of these margins a little bit better. Sure. I think the cyclicality of the margins overall is gonna benefit from our logistics line or logistics segment, where the margin did improve year-over-year, and we expect that will continue to ramp. The reality though is ITS and in intermodal particular is, you know, is sensitive to rate, and it's the biggest single part of our business. That does drive some variability in the business. You know, we expect, you know, in a cyclical market such as is intermodal, you know, there's gonna be periods of price strength and periods of price weakness. Last year was obviously a period of price strength. This year we expect is, you know, is gonna be the one of the troughs on the price weakness side. While there will be variability within intermodal, we do have the levers around rail, flexibility with our rail contracts and the ability to insource more of the drayage. The other key factor is just the growing part of our overall business coming from from logistics. Scott, there is a lag on those rail agreements. I would also just highlight, I think we're coming off of historic highs in gains on sale, on accessorial fees, on surcharges that have normalized more quickly and drastically than I think we would have anticipated. We've set, we feel, a higher floor on earnings that we can now grow off of. I also believe that it's higher than our 2021 earnings per share, which I think is very strong. That's the second best year we've ever had in the company. I think lastly, we feel we've built a more resilient model with that insourcing drayage, with continuing to improve those rail contracts and with the diversification that we've done, which is leading to a really high free cash flow generating model in a difficult environment. Yeah, those are all good points. Do you mind just sharing though, what's in the guidance for Q2 and full- year ITS margin? It'll be a step down from where we were in Q1. You know, somewhere in the, you know, probably another 150 basis points down for the full year. All right. Thank you guys. Appreciate the time. Thank you. Thank you. Our next question comes from the line of Tom Wadewitz of UBS. Please go ahead, Tom. Yeah, good afternoon. Wanted to ask you a little bit about the competitive dynamic out there. I think, you know, there's some sense or has been a sense maybe that, you know, intermodal prices don't, won't go down quite as much as truckload contract rates. Maybe broker rates down the most and then truck asset base not as bad and intermodal not as bad. I wanted to get your thoughts and see if that's right. I guess that's excluding the impact of storage fees going away. On that, and do you think that there's some kind of, I guess, stability, or is it, you know, the pressure keeps building and, you know, might get a bit worse, you know, as you go through 2Q? Really just around a competitive dynamic. Thanks. Yeah, sure. I think that your assertion around rates by group of brokers having the lowest full truckload carriers having the next lowest intermodal outperforming is accurate. In Q1, our year-over-year revenue per load was up 3%, which I think is strong. Obviously, we're renewing those rates through this cycle at a lower rate. I agree with what you said there. Brian, you wanna take this one? I think on the brokerage side too, you know, what we saw in Q1 of last year was we were about 60% spot, 40% contracted. What we did is work really hard to get those customers moved out of spot into contracts so that we could retain them in a much more stable environment in our contract side. We've seen that help protect our volume as illustrated in our brokerage results, we think that's gonna help us as the market starts to move up as well to drive more volume in that brokerage side. Just to round it off, Tom, I don't anticipate that we're gonna see rates go much lower from what we're renewing right now. That would to me be surprising and would really be driven, I think, by a consumer driven recession. I think, you know, we're through 43% of our bids with renewals that are effective. We're repricing another 40% right now that'll be effective in Q2, and there's just not that much left after that, obviously in the third quarter and fourth quarter to reprice, even if there was additional downside. I think we have seen a few customers pull bids forward. That hasn't been a dramatic change, but that you can tell that there is a thought out there from our customers that the market might shift a little bit here in the back half, and they want to try to get the best rates during this kind of Q2 pricing season. That would be our read on go forward. Just one last piece to that as well, is we still are hearing from our customers that they have volume that's moving over the road that they want to convert to intermodal. That service stability that we've been seeing from the rails has really played out nicely in Q1. We've gained confidence in the stability of that and the consistency of it. We've trimmed our transits to those customers to better compete, not just on price, but on overall service with over the road. I have one that's a little more granular, I suppose. When you talk about the guidance of the kind of decline in 2Q EPS similar to the decline 1Q versus 4Q, are you talking about a percent change or an absolute earnings per share change? It makes a little bit of a difference the way you look at it. Percent. Percent. Right. Yep. Okay, great. Thank you for the time. Thank you. Thank you. Our next question comes from the line of Justin Long of Stephens. Your question, Justin. Thanks, and good afternoon. I guess, Phil, it was helpful to get some color on the cadence of bid season, but would love to kinda hear how contract pricing is trending so far when you look at that kind of first 80% of bids and maybe your level of visibility at this point. Sure. Certainly lower, on a year-over-year basis. You know, I think for us, there's a mixed component where we're really trying to target balance. We're focused on retention of incumbent kind of long haul and head haul business, while getting that backhaul balance. I think that, from a revenue per unit perspective might be lower than, you know, that kind of mid-single, but on a, by retaining the head haul, we're really, you know, doing far better than that. I think you can see that in the revenue per unit being up 3%, you know, on a year-over-year basis despite, you know, renewing the majority of that business or that 42% of the business during the quarter. Our view is still, you know, we're gonna do better than truck, that it will be in the, you know, kind of single digits on renewals from a decline. You know, we're really managing I think very well through bid season, winning, you know, really picking our spots and trying to get the velocity and balance back into the network. Got it. You know, if rates are down single digits, I know mix is gonna play a role as well and accessorial. Is there a way you can help us think about the trend of all-in yields going forward and what's baked into the guidance on a year-over-year basis? Sure. We are assuming, you know, it would be down, could be flat to down, low single. Okay. Last thing I wanted to ask, I wanted to try the question on segment margins maybe a bit differently. Given the resegmentation, how are you thinking about targeted operating margins in both ITS and logistics? Is there a range you can give us in terms of where you think both of those businesses kind of trend through the cycle? Sure. I mean, on the ITS side, I mean, I think last year demonstrates the power of our business in a strong pricing environment. You know, this year is probably gonna be the opposite. In Q1, we were at 7.0%. You know, if you think on a full year basis, we're down another 100 basis points. I mean, that's kind of the range of strength and softness from, you know, maybe the midpoint is a good long-term average. On the logistics side, you know, we keep doing better and better, raising yields and operating more efficiently. I'm not sure we're ready to come out with a long-term number, but, you know, where we are today, we think there's definitely upside. As that becomes a bigger part of the business, it'll mix up the overall margin. Yeah. Part of that will be driven by how much acquisition revenue we drive into the logistics segment. I think we haven't had that be as high, so you're not being as burdened with some of those costs that come through post-acquisition. You know, just to kind of tie it together, I think when we came out, you know, quite a while back with a 2025 operating margin target of 4%- 5.5%, you know, I would anticipate we'll continue to outperform that in totality and by, on the high end. And you'll see, as Geoff mentioned, in a strong environment, ITS really be the driver of that outperformance. In an environment like this, which is part of the balance of the portfolio that we have, logistics really be the driver of the outperformance. Got it. That's helpful. Thanks for the time. Thank you. Thank you. Once again, 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, Ravi. Thank you. Good evening, everyone. Just a couple of follow-ups here. I think there's been a fair bit of discussion on this call about, you know, floor EPS and kind of where that lies relative to your prior expectations. If I can just kind of follow up on that and ask you if your view of normalized mid-cycle EPS and that long-term guidance has changed at all, kind of given where the sort of almost the new floor is and how kind of bad the cycle has been relative to your expectations, kind of is that just, you know, the pendulum swings a lot more? Or do you think that you probably also have recalibrated what normalized EPS is? Well, I think Phil addressed some of that on the prior question. I think, you know, our prior long-term guide was 4.0%-5.5% on operating income margin, and we expect the normalized kind of through the cycle operating income margin will be well north of that 5.5%. I think, you know, last year is a pretty good indication of the strength. Then this year obviously is gonna be the opposite. Longer term, we're gonna be in the middle of those two guideposts. Got it. That's helpful. Maybe kind of as a follow-up to the competition question, I mean, obviously the truck market right now is very loose, but it feels like the rail intermodal market's also kind of fundamentally changing competitively with the combination of CPKC and kind of new offerings and such. Basically all the IMCs and players in the space are kind of jockeying to be positioned for that. What does that mean for kind of Hub Group as a whole? You know, where are the opportunities? Where are the risks for you guys kind of maybe looking out, again, in that same three to five year period, from these changes that have taken place, I'd say over the last 12 months? Yeah. We're really excited about the Falcon Premium service that just got launched by our western partner, Union Pacific. It's, you know, really gonna help us, I think, take advantage of the nearshoring opportunity, both in the near term as well as longer term. It's two to three days better than the next best service. We hope can be a catalyst for growth, and certainly it's gonna be a focus area. I think for us, we're also anticipating, you know, with West Coast Port labor challenges getting behind us. We'll see an import volume getting back to a more normalized level. That'll be a good driver of growth. With improved service, and sustainable service, which our rail partners and us are making the investments to really maintain that in an upcycle, we really wanna see us get back to growth in the shorter haul Local East market. We're certainly working very closely with our partner in the east to make that happen. Very good. Thank you. Thank you. Our next question comes from the line of Brandon Oglenski of Barclays. Your question, Brandon. Hey, this is David Zazula on for Brandon. If I could just ask on brokerage. I think there was a competitor that had mentioned kind of 4 Q or 1 Q as kind of the trough levels in net revenue per load. I know that's not something you disclose, but I guess are those the trends you're seeing in the market? Are you seeing something else trending in terms of, you know, what you'd realize on a unit basis? Yeah, sure. Yeah. Thanks, David. This is Brian. Yeah, I think, yeah, Q1 would probably be in that trough. We've seen April perform just about as about the same as March. You know, with that, as I mentioned before, the market share that we've gained really over the last two quarters with our combination of our acquisition of Choptank and how we face that market, we see our volumes holding quite strong, and we've expanded our gross margin as a percent of revenue. We feel very well positioned to see a good Q2 and even stronger back half of the year with our brokerage. I'll mention too that, you know, our brokerage is integrated into our full logistics offering, and so we have, as we diversify our service offerings with our customers, and we bring, more than just capacity to them on the transportation side, we're bringing them warehouse capabilities, cross dock and consolidation capabilities, as well as, transloading, that we've seen that business be stickier and less price competitive and we provide a stronger service offering. Well, only thing I'd add on that, this is Phil, is that our customer count is at record levels in brokerage. T hat's the testament to our sales team and, the cross-selling efforts that we have. We think that positions us very well as the spot market does begin to tighten up, to be there for those customers and make sure that we're absorbing maybe some of the tender rejections they're gonna see from asset-based carriers. Thanks. That's very helpful. I guess the other segment I wanted to talk about, or not segment anymore, but area I wanted to talk about, was dedicated. I guess you've been dedicated as a place that you can lean into maybe that, you know, customers are looking for more capacity this year. Y es, you're right, David. We have seen customers look for more stable and consistent capacity in taking out a lot of that volatility that they've experienced the last two years in their supply chain. Our pipeline is very strong. We have good line of sight to our onboardings in Q 2 and in Q three. We've also taken a lot of cost out of that model as well and ran it more efficiently as we've integrated it within our intermodal drayage operation. Yeah, we feel very good about our dedicated growth. Great. Just as a cleanup, Geoff, I don't know if you have handy the non-driver employees. I mean, I don't know if you're now breaking them up by segment, but if you have them by segment, I would definitely take that. Our total office headcount was just over 2,100 at the end of the quarter. Thanks. Much appreciated. Have a great one. Sure. Thank you. I would now like to turn the conference back to Phil Yeager for closing remarks. Great. Well, thank you for joining our call this evening. Hub Group is continuing to position for long-term success. I am confident in our strategy and team and believe we will successfully navigate this more challenging environment. I think that's evidenced by Hub being on track for our second-best year in our company's 50+ year history. As always, Brian, Geoff, and I are available for any questions. Thank you again, I hope you have a great evening. This concludes today's conference call. Thank Thank you for participating. You may now disconnect.