Hello, and welcome to the Hub Group third 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 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 joining Hub Group's third quarter earnings call. Joining me today are Brian Alexander, Hub Group's Chief Operating Officer, and Geoff DeMartino, our Chief Financial Officer. Over the past few years, we have transformed our earnings, returns, and free cash flow profile through a clear strategy of organic investment into our core business, while enhancing capital efficiency through technology deployment and accretive non-asset-based acquisitions. In ITS, we have created a less asset-intensive model that provides industry-leading service and value while becoming more efficient through enhancements to our drayage and dedicated operations. In logistics, we have built a service-leading end-to-end solution for our customers that provides best-in-class scale and technology. This evolution of our business has resulted in Hub Group being a more diversified and resilient company with an improved customer experience as well as significant free cash generation. Our operating model changes have proven effective as we have managed through this challenging freight cycle with a full year forecast that we expect will likely be our second-best year in our company's 52-year history. With that performance in mind, and with the benefit of extensive feedback from our board, as well as existing and potential shareholders and equity analysts, we have taken the opportunity to reassess our capital deployment strategy. I'm excited to announce the results, which are also highlighted in the investor presentation, which is available on our website. First, we are establishing a long-term leverage target of 0.75-1.25 times net debt to EBITDA. We are not in a rush to achieve this target and will do so methodically as we continue to invest in our core business, grow via acquisition, and return capital to shareholders. Second, we have received authorization from our board for a $250 million share repurchase program while retiring our current authorization, which had $83 million remaining. We believe this new and larger program demonstrates our commitment to returning capital to shareholders and the long-term value we see in Hub Group. Third, our board has authorized a two-for-one share split that will be effectuated early in 2024 through a share dividend, which we believe will enhance liquidity in our stock and support long-term investment. Last, in the first quarter of next year, we plan to begin paying a quarterly cash dividend equal to $0.50 per share annually on our new share count. The transformation of our business that I described earlier has provided us with a free cash flow and balance sheet profile that allows us to implement these four capital allocation initiatives, which will provide greater consistency regarding return of capital, while allowing ample opportunity to continue to invest in our core business and execute on our acquisition strategy. Now turning to the quarterly results and outlook. As we discussed on our last call, we felt as though the third quarter would be our most challenging, and that did come to fruition. However, we saw improvement in demand throughout the quarter and increased tightness in the West Coast, indicating a need for some inventory replenishment. However, peak season has been muted and we do not anticipate a sharp inflection in demand in the fourth quarter. Demand was soft through July and August, leading to volume declines in intermodal. Rail service has remained strong and we executed improved volumes per business day in September, while onboarding wins in shorter haul markets. We continue to focus on improving operations on the street, reducing our cost to serve, and maximizing the efficiency of our team. Although we have made significant progress, we still have opportunity to improve operational fluidity and reduce costs. We believe there is considerable intermodal conversion opportunity in the upcoming bid season, and our commercial organization is focused on returning to growth. Our rail partners have remained committed to providing a great service product, and we believe that the combination of quality service, cost benefits versus truck, and greenhouse gas emission reductions will lead to share gains from over the road and create improved balance and velocity in our network. Our logistics business performed well once again, illustrating the resiliency of our model. We executed well in brokerage, leading to share gains due to our strong service and value proposition, while driving new wins and organic expansion in our warehousing, managed transportation, and final mile services. Our pipeline for logistics and dedicated opportunities is very strong, and we remain focused on excellent execution for our customers. While we are experiencing some improvement in demand, the length of time it will be maintained remains unclear. With bid season approaching, we are focused on returning to growth in intermodal, leveraging our strong service and cost structure to drive conversion from truckload. As bid award realization rates improve, capacity attrition accelerates due to low spot rates and customer demand increases, we will be in a strong position to support those opportunities, given our excellent team, creative solutions, and available capacity. We will maintain our focus on providing world-class service and efficiently operating our business while executing on our long-term investment plan. With that, I will turn it over to Brian to review our operating results. Thank you, Phil. I would like to start by thanking our talented team for their efforts and dedication in leading and executing through a changing freight environment and positioning us for growth with our customers. I will now discuss our reportable segments, starting with our Intermodal and Transportation Solutions. As Phil mentioned, and we anticipated, our third quarter was challenging, with ITS revenue declining 30%, driven by softer intermodal volume that declined 16%. Transcon volume declined 9%, the Local West declined 18%, and the Local East declined 14%. Continued soft import volume, elevated seasonal inventories, and an oversupply of truckload capacity generated softer volume and lower accessorial revenue in the third quarter, which led to a decline in ITS operating income. Throughout the year, we have improved our cost structure and feel well-positioned going into the upcoming bid season. In retrospect, we held the line on price for too long in 2023, which has impacted our volume. We have made the appropriate structural and process changes that are focused on regaining velocity and balance in our network and feel confident in our timing and disciplined approach for the 2024 bid season. We continue to be pleased with our dedicated trucking growth and yield expansion, along with a strong pipeline of confirmed wins scheduled to onboard in the fourth quarter and early in the first quarter of 2024. As I've mentioned in our previous calls, we have been improving our intermodal cost structure throughout the year. Our new rail agreements are helping us move with the market to provide compelling volume for our customer base, and rail service improvements have helped us better manage our equipment costs. On the street, we have continued to improve our dray costs by increasing our insourced dray from 62% last year to 78% and have lowered our cost of third-party purchased dray. We continue to execute and see additional opportunities to improve our street economics through regional planning improvements and fixed cost reductions. We will continue to defend our incumbency and have incremental wins that will set us up for long-term success. In addition, the recent expansion of our cross-border rail solutions have already generated new wins that will expand in 2024. We'll continue to invest in our intermodal business for the long term and are confident that these investments, along with improved rail service, will help support further conversions from over-the-road to intermodal. While the near-term results are impacted by low volume, we are confident that our actions will position us for growth and deliver high levels of service for our customers with sustainable profitability. Now turning to our Logistics segment. As we continue our diversification strategy to deepen our value with our customers, with our integrated approach to supporting an end-to-end supply chain, we were once again successful in expanding our Logistics operating income as a percent of revenue by 40 basis points. Despite the challenging freight environment, our brokerage team continues to stand out with growing volume, and margin expanded throughout the quarter. Our third quarter brokerage volume was up 5%, led by share gain with existing customers and continued new customer onboardings. Our overall Logistics segment experienced a revenue decline of 12% in the third quarter, but has a strong pipeline of confirmed wins, with onboardings in the fourth quarter and start of 2024. In addition, we continue to harvest cross-selling synergies with our most recent non-asset Logistics acquisitions. While we continue to drive Logistics growth, we are also improving our costs as we leverage our ability to establish new multipurpose Logistics locations to support our growth and lower our costs. As mentioned in previous earnings calls, these locations are strategic to our hub network of freight, as they enable the continued growth of our LTL, final mile, and e-commerce solutions, and support inbound and outbound multimodal hub volume to service our customers' supply chain needs. We saw the benefits of these new locations in the West and Central regions, supporting the growth of our LTL solutions in the third quarter, and we expect this success to accelerate heading into 2024. We will also continue to invest in our non-asset-based Final Mile offering as we continue to onboard new customers and build more density, driving stronger service and enhanced margin performance. Our Logistics pipeline remains strong, with larger deal sizes and improved close ratios. Our non-asset-based Logistics growth strategy is playing out well, and we are in a great position to continue our trajectory of profitable organic growth and continue to integrate future acquisitions. With that, I'll hand it over to Geoff to discuss our financial performance. Thank you, Brian. Despite recessionary freight market conditions, we generated revenue of over $1 billion for the quarter and an operating income margin of 4.2%. Our diluted earnings per share for the quarter was $0.97. We generated $88 million of EBITDA and ended with over $400 million of cash on hand. During the quarter, we purchased 208,000 shares of our stock for $17 million. Our purchased transportation and warehousing costs declined slightly as a percentage of revenue as compared to the prior year, reflecting our focus on cost containment and yield management. Salaries and benefits costs rose from the prior year as we expanded our driver count by 12%, which has enabled a large increase in our insourced drayage percentage.... In addition, the inclusion of TAGG Logistics for a full quarter added $4 million of expense as compared to the prior year. This increase was offset by lower office employee costs and lower incentive compensation expense, as our office headcount declined by 12% as compared to the prior year. G&A costs decreased by over $10 million due to lower legal and use tax expenses and a lease impairment charge in the prior year. Depreciation and amortization expense increased as compared to prior year due to growth-oriented investments in equipment and technology as well as the acquisition. Gain on sale was minimal this quarter, whereas the prior year benefited from very strong used truck pricing. Logistics segment revenue of $460 million was down 12% from prior year, but increased 2% from the second quarter. Segment operating income of $29 million was 6.3% of revenue, a 40 basis point improvement from the prior year. While brokerage volume grew 5% and productivity was up by over 40%, revenue per load was down 21% as compared to the strong conditions we experienced in 2022, which impacted our profitability in the quarter. This headwind was offset by growth in profitability in our managed transportation, final mile, and consolidation businesses, as well as a full quarter of results from our fulfillment business. The benefits of our long-term acquisition strategy and cross-selling initiatives are showing in our results, with logistics segment operating income accounting for nearly 70% of total. Our logistics offering provides a more stable earnings stream and improves our positioning as a broad supply chain solutions provider. We have a strong sales pipeline and several large recent wins, which will drive profitability into 2024. ITS segment revenue of $595 million was down 30% from prior year, due primarily to lower intermodal volume and a 20% decline in revenue per load. Operating income margin declined to 2.3% as the impact of intermodal price declines and reduction in profitable accessorial charges more than offset improvements in drayage, rail, and equipment costs. While soft demand conditions and abundant capacity weigh on price, the operating team performed well in reducing controllable costs and driving efficiency, and we saw the benefits of our new flexible rail contracts. We are realizing the cost benefits of insourcing drayage with every 100 basis point increase, worth approximately $1.5 million annually over the course of a cycle. Profitability within our dedicated service lines has significantly improved in 2023, reflecting improved yields and leveraging of operating expenses. Our updated guidance for 2023 assumes market conditions decline throughout the remainder of the year, with softness following the Thanksgiving holiday per more typical seasonality in our intermodal and brokerage services, with stability in our more contractual service lines. For 2023, we expect to generate diluted EPS of between $5.30 and $5.40 per share. We expect revenue will be approximately $4.2 billion for 2023. For intermodal, we're forecasting volume will decline low double digits to mid-teens for the full year. The remainder of the year will reflect the impact of lower prices and less accessorial and surcharge revenue, which will be partially offset by lower purchased transportation costs and improved operating efficiency. We expect a tax rate of approximately 20% for the year. Our capital expenditure range is unchanged at $140 million-$150 million. Based on this guidance, we would expect to generate EBITDA less capital expenditures of over $250 million in 2023. Over the past several years, we have made important strategic changes to our business, including our focus on yield management, asset utilization, and operating expense efficiency, which has significantly improved profitability and returns. We've also completed several acquisitions to build out our logistics offering and drive more stability in our earnings. While we compete in a cyclical marketplace, these actions have driven a step change in our trough-to-trough results, with operating margin growing from 2% in 2017 - 6% today, along with an improvement in free cash flow to over $250 million, as compared to $60 million in 2017. These strategic changes have positioned Hub Group for success in both the short-term and long-term time horizons and in soft and strong demand environments. With that, I'll turn it over to the operator to open the line to questions. As a reminder, to ask a question, you will need to press star one one on your telephone. Our first question is from Scott Group of Wolfe Research. Please proceed with your question. Hey, thanks. Afternoon, guys. So I want to, I want to try and focus on this, the ITS margin, and we don't have a lot of history to know what it looked like in prior troughs, but it was 10% a year ago in Q3, now it's 2%. It, it, it doesn't feel like we're, we're seeing the benefits of different rail contracts or more flexibility like, like we've talked about, and it looks like the Q4 guide implies margins take another step down from here. So why are we not... I guess, why aren't we seeing the, the benefits of all the stuff that you've talked about in, in, in margin? And, and, and, and where do you think we go on margin from here? Yeah, sure, Scott, this is Phil. I'll start. So I think we have executed well on cost out. If you look at the quarter year-over-year, we saw cost per dray drop. ... 27% year-over-year, our, our rail contracts did actually help us offset some of the pricing pressure. I think when you're looking at the prior year numbers, those were also somewhat inflated with high accessorial revenue, as well as gains on sale, which came out. So if you, if you normalize those, I think you are seeing a, a more consistent earnings pattern. Obviously, pricing has been somewhat more aggressive than we would have anticipated. And I think Brian did a good job of calling out in, in his prepared remarks that we didn't necessarily move quickly enough on pricing in the first portion of bid season this time last year, which we wound up losing some share to over the road. We now have an opportunity to garner some of that back, and given some of the spreads that we're seeing, I think we have a significant opportunity to do so. We have a higher asset count today, and when it is not moving, you're going to see degradation in overall margins. And so our goal is to get velocity back into the network through the upcoming Bid Season. And then I think you'll really start to see the benefits of those rail contracts. And so if, as we approach Bid Season, it sounds like you want to recapture some share. Do you need to... Does price need to go lower from here in order to do that? Or do you think there's an opportunity to regain share but also improve price? I would think that's hard to get both, but curious what you guys think. Sure. Brian addressed some in his prepared remarks. I think some of the structural changes we made with our pricing group, following some of the share losses to truck initially in bid season. Since then, we've actually performed quite well, and have really seen some nice wins come online, in particular in some shorter haul markets. We feel that our current pricing methodology actually is working, and we won't have to go much lower. I think you also look at the spreads that we're seeing right now between OTR and normal contract rates. It's up in the mid-30s at this point. So we think with a combination of really strong service product, higher fuel prices, and some uncertainty around what truckload capacity in the spot market will look like, there is a significant opportunity for intermodal conversion, and we're planning to focus on that and capture that. Okay. And then just lastly, as maybe, Geoff, are we thinking about this right, that the guidance implies, you know, closer to, like, a 1.5% margin in ITS in Q4? If that's right, how should we think about those segment margins into next year? No, it wouldn't be that low. I would say it's going to be pretty consistent with where we are today from a margin%. I think we are going to see some pressure towards the end of the year on the brokerage side. I think we performed well in Q3, and we are starting to see that soften. I would say, you know, our, our, our business model, as you know, within intermodal is, you know, is very asset light from an equipment perspective. You know, we do, like most companies, have some level of fixed costs on the operations side. So if you think about incremental volume from a contribution margin perspective, you know, those numbers are in the, you know, upper, upper teens area, just on a contribution margin, and that's with flat price. Obviously, price is very, very impactful. A 1% price increase on, you know, on today's financial profile is worth, you know, nearly 100 basis points in operating profit. So, we are focused on returning fluidity into the network, and then pricing will be incremental upside from there. Okay. I'll pass it on. Thank you, guys. Thank you. Our next question is from Jon Chappell of Evercore ISI. Please proceed with your question. Thank you. Good afternoon. Phil, to your answer before on holding price too long, and Brian's commentary on that as well, you mentioned that you lost share, you think, to over the road. As we try to determine how long you'll be bouncing along the bottom with intermodal pricing, can you speak to the competitive landscape among your intermodal competitors? Is that what's driving the race to the bottom, or is it just the overcapacity in truckload, and you feel that once that stabilizes, the whole intermodal industry can get a bit of a floor? Yeah, I think it's mostly the overcapacity in the truckload market. We are seeing, you know, some really nice wins that we've brought on lately. It was just later in the overall bid season, and as you know, our bid calendar in the first quarter will reprice over 40% of our total business. And so that's where we felt as though last year we didn't have a great overall service product, and we tried to hold the line on price, and that's where a lot of that share went to over the road. So we believe that there are a lot of questions out there from our customers on how they're gonna, as demand returns and they need to replenish inventories, how they're going to move that product. We're displaying a very strong rail service product. We're showing that fuel prices are up and that the spreads between contract rates are expanding. So, we think we have a very strong value proposition to bring to our customers and having a lot of great conversations on conversion. Okay. So if we think about it, now you've transitioned a little bit to hopefully stem the share loss. I don't recall you giving the monthly breakdown of the intermodal volumes, but maybe that would help with, you know, as you went through the third quarter and, you know, we're mostly through October now, maybe where you stand there. Sure. Yeah. So July was down 13%, August was down 19%, and September was down 15%. October, thus far, is down 9%. One thing I think that is worth highlighting is when we came out of Q2, June to July, we actually saw a 3% sequential increase in demand. We then, July to August, saw an 8% decline, and then August to September, a 9% ramp. What occurred in August, which I think was very impactful in the back half of August, and really cost us, we think, 2-3 percentage points on total volume for the quarter, was Hurricane Hilary. I know, obviously, it was very impactful to the western portion of our network. And so that was something we didn't call out specifically, but I think it's important to reference as we think about the volumes for the quarter. Okay, I appreciate it. Thank you, Phil. Thank you. Our next question is from Jason Seidl with Cowen and Company. Please proceed with your question. Thank you, operator. Hey, Phil. Hey, Geoff. Hey, Brian. I wanted to talk conceptually about next year. You know, you guys announced that you have a pending dividend out here. Most companies don't put out a new dividend announcement if they think the business is going south. You know, how should we think about the potential for earnings growth with the backdrop of, you know, 40%, call it, of your business coming due in Q1, you know, improving rail costs on your side and, sort of an increase in your percentage of own internal dray? Sure. No, I think, I think it's a great question, and I think, you know, I'll start and let Geoff and Brian fill in. I think it's a little early, you know, to give anything too concrete, as we're in our budgeting process, but what I'll try to do is kind of frame it up. As we look at the market, I think we're seeing some form of peak season, which is great. We're starting to see capacity exits and a more balanced spot market. Inventories are coming more back in line. I think from intermodal, I referenced, you know, fuel prices increasing is normally a good thing for conversion. Our service levels, even with increasing sequential volumes, are holding up very well. I mentioned that OTR versus intermodal contract spread. I think when you look at Hub, we're far more efficient. You know, headcount is down 12% year-over-year. I mentioned our cost per dray. We're going to have far lower capital expenditures going into next year, and I think if you layer in some accretive M&A and the capital allocation plan, barring some sort of consumer recession, we're going to be targeting earnings and revenue growth. I think the only thing that remains unclear is, is the timing on recovery of demand, but we'll certainly obviously have more specifics for you on the fourth quarter call. I'll let Brian and Geoff fill in. Sure. Yeah, no, Jason, I, I think, you know, what we see going into next year, and we talked a little bit about it earlier this year, too, about the inventories, and a lot of that inventory has to burn off more seasonally. So while there was some bloated inventories earlier this year, it just took a full seasonal cycle to burn off. And so as we push through the holiday season and enter into the spring, we see that that's going to be reset and in a good position to be replenished. And as we do that, we'll see our intermodal volumes grow. We, we called out our brokerage, which is a standout in the marketplace. Despite all these market headwinds, they've stood out really well with that 5% growth and really continued growth going into next year as well. Our logistics services continue to see really strong demand for all of our logistics services, with our managed transportation, what we bring to the table with our consolidation and fulfillment locations that I've mentioned, that we're adding and investing, with new buildings. We're working kind of left to right, adding 2 in the West earlier this year, 2 in the Midwest, and we're going to finish out the year, working into the East and going into 2024. As well as our final mile. We continue to win service awards from our customers in our final mile offering. We're bringing on new logos and diversifying that customer base. And our non-asset-based model in final mile has proven to be really great for flexing and growing with our customers. We're going to see continued success there as we invest in that from a growth perspective. Yeah, those are the big areas that we'll continue to focus. You know, Phil mentioned a lot of the over-the-road conversions into the previous questions. There's still over $56 million over-the-road truckload volume that's out in the marketplace that is eligible for intermodal conversions, and we're highly focused on delivering that, on that growth and converting it in the right cost structure. I appreciate those comments. How should we think about your rail partners? You know, there's obviously been some talk about improved rail service. You know, I'm happy to see that, but I'm not giving them as much credit because we haven't really seen the improved rail service with improved volume. So how confident are you guys, if we do see volumes come back at some point in 2024, that your rail partners will be able to handle that increase? Yeah, this is Phil. I think you're seeing a good test right now with some sequential volume increase in pretty short order, which I think has been a good test. We're hoping that this is more prolonged and continues to move forward. I agree with you. We have to continue to show our customers that, but at the same time, I think you're seeing the commitment in hiring and resourcing to handle that demand, and so we believe, you know, we are going to be in that position. It's a massive opportunity for us and our rail partners, and I know all of our conversations are related to growth at this point in time. Okay. Well, one final one, and I'll turn it over to somebody else. You know, Phil, I think you mentioned accretive M&A. Can you maybe give us an update on the M&A market? You know, are you still seeing a lot of stuff being put up for sale? And what do the multiples look like, say, compared to a year ago? Sure. I'll start, and I'll let Geoff go in. You know, we haven't seen as many companies coming up for sale, just given some of the challenges in the broader market and obviously interest rates increasing. So, and there's been somewhat of a disconnect on overall value, but I think what we've been able to do is continue to go out and find interesting and exciting off-market opportunities. And we have a very strong pipeline right now, and you know, are certainly working towards closing something, we hope, in the near term. Yeah, I'll just add- Gentlemen- ... it's a key, it's a key part of our strategic growth plan. We highlighted that today in the context of the overall capital allocation plan. I think we have a good pipeline, and we're continuously evaluating. And again, we've had more success on those outreaches that we've generated, and we think we're a good buyer in this market. ... Thanks for the time, gentlemen. Thank you. Thank you. Thank you. Our next question is from Brian Ossenbeck of J.P. Morgan. Please proceed with your question. Hey, afternoon. Thanks for taking the question. So maybe just to come back to competition on the intermodal side. So can you talk about more what you're going after here? Is this really some of the things you think left the rail network with poor service, and this is really just over-the-road conversion? Maybe you can give some context in terms of where that spread is versus history. I mean, is service good enough to get this back, or is this really more of a play on price and getting a little bit more of that density that you might have not had as much as you wanted before? Sure. So I think, you know, you could imagine, given the market conditions, that it's obviously a competitive marketplace. But I think what we're seeing are our very savvy customers are focusing on total cost, including fuel expenses and rate. And so we're seeing some nice conversions outside of bid cycles right now back to intermodal, taking advantage of the improved service product in some of those shorter hauls. When you think about the spread that we're seeing between contract and both from intermodal and over the road right now, in longer lengths of haul, it's up near 40%. In the shorter lengths of haul, it's getting closer to the high teens and 20 percentile, but in aggregate, really in the mid-30s. That's what we're trying to go to our customers, both in advance of RFP events and during them, and highlight that differential as well as those strong service levels. We think that the opportunity for conversion is significant, both in the short and longer haul, and we're very focused on getting that back. Yeah, Brian, this is Brian. I'll just add on that, too. We'll continue to focus and target the cross-border. We've started that process already. We have some confirmed wins, and we expect those to expand going into next year. We have a superior product on the rail with our partners there on service and transit, and also diversified offerings as well there, too. So that's something that we'll continue to target as we grow into 2024. Okay. And in terms of capacity, boxes, and as rail service comes back, there's going to be more boxes effectively out there. What are you doing in terms of your storage, and how do you view CapEx and the investment? I know in the slide deck, you've got more color in terms of the longer-term viewpoint, but how does that investment translate here to the rest of this year and I guess in, into next year? Sure. Yeah, no, yeah, Brian, we've got, we have boxes stacked now. I think, you know, a lot of, a lot of the industry does right now. We've started to actually unstack a little bit as we've started to handle and manage through this muted peak. We'll evaluate as we finish out the year, how we manage that as we enter the year. But certainly as that volume returns, we'll be bringing down that, that stack. You know, we mentioned about our discipline around targeting balance in our network and then getting the most utilization out of that equipment. And as that improves, you know, we'll be able to evaluate what we need. As we go into next year, Geoff, maybe you want to talk a little about our CapEx plan on that. Sure. We'd expect, you know, for this year, our guidance is 140-$150. Our preliminary thoughts for next year would be a pretty big reduction in that. I think, on the container side, you know, we probably would be looking to add to the fleet, next year, and then we do have a smaller replacement cycle on the tractor side. So, certainly something, you know, south of $100 million next year, which would have a pretty big impact, on our free cash flow. Well, only other thing that I would highlight is that we've seen utilization improve about 10% sequentially from Q2 to Q3, so we are getting more out of the existing equipment. We still have a ways to go, but, but it is good to see progress on that, that very key metric. All right, thanks. Just one quick follow-up on balance sheet and the leverage. I know, Phil, you talked about not being in a hurry to get to that, that new mark, but maybe you can just give some thoughts in terms of how you're, how you and the board are looking at going through that process, and if there's anything we should sort of pencil in for buybacks here, in the near term. Sure. So we're going to be very thoughtful around that. As we mentioned, we have some very interesting acquisition opportunities that we're continuing to look at. I think it'll take likely two to get us to the middle of the leverage target that we laid out. But we are going to be thoughtful on the approach. I think and as we did roll out the newer purchase plan, you know, assuming that we would execute on it, I don't think there's anything to build into the model. We certainly didn't in our forecast, but at the same time, we will be opportunistic with it and utilize the very strong balance sheet that we have effectively. I don't know, Geoff, you want to add anything? Yeah, I think, you know, we'll... Again, it'll be the use of the authorization will be tempered by our outlook for both CapEx and acquisitions. Okay, makes sense. Thanks, guys. Thank you. Our next question is from Bascom Majors of Susquehanna Financial Group. Please proceed with your question. If you look at the guidance and results for 3Q and 4Q, you're at $1 or so earnings run rate. You typically do less seasonally in the first half than you do in the second half. So, you know, barring some super seasonal outcome in the first half of next year, and you've got a lot of catch up to do in the second half. Can you walk us through, you know, what has to happen to deliver the earnings growth that you hope for preliminarily next year from the starting place we are today? And just any other thoughts to help us kind of level set expectations for next year now, rather than waiting till February. Thank you. ... Sure. So I do think we are seeing some peak season. We need to perform in the upcoming bids, that is a key priority. I think, capacity continuing to exit and the spot market staying relatively balanced. I think, the consumer staying resilient, all those pieces, you know, are certainly going to support that. We need to successfully onboard a lot of the logistics wins that we have, and we need to get our intermodal fleet moving again. You know, having a significant portion stacked is not optimal for earnings growth. I think if you layer in us then executing on the capital allocation plan and acquisition strategy, that should frame up earnings growth. I do agree with you, it will likely be driven by execution in the latter portion of the year. We would hope to see some increase in demand in the spring to help drive that. We think if we do see that, we're in an excellent position to go out and execute. Yeah. I'll just add one item to that, too, is, you know, we've created a really long tail of customers that we are cross-selling into right now. And as we look at it from a revenue perspective, 80% of our revenue is using two or more services of ours. But as we look at that customer count, 80% of those customer count is only using one hub service. So that's a big part of our growth plan, is continuing to cross-sell, that's been underway and is going to accelerate as we go into next year. Thank you for that. Can you update us on where bid compliance is? I apologize if I missed that earlier. Just maybe anecdotally, how are these conversations going with your customers? It seems that the economic case for intermodal, from your earlier discussion, is very attractive, but the reality is, it's just not converting. You know, what is holding that back, and what has to happen to change that, in your view? Thank you. Sure. This is Brian. In regards to the big compliance, you know, we started the year at about 70%. We finished last year at 81. We did see that compliance improve throughout the year, finishing out Q3 at around 78% compliance. And we think a lot of that was the shippers starting to realize where their balance was at, where their demand was going to be. A lot of those conversations with them is about the seasonality of their inventory, and as that starts to rebuild, they know that that over-the-road capacity is going to be exiting and needs to come back into the rail. And they want to have that assurance that the service is going to be there, that we've talked about. And Phil, as Phil mentioned, we've seen the continued investments from our rail partners to ensure that that service is going to be there. You know, to be a little bit more tactful in that, too, you know, we've been confident in that service, so we've improved our transit times that we submit in those bids and have a lot more confidence in those competing very well against over the road. Thank you both. Yeah, and just one piece on that before we go into the next question, too. I think, you know, in regards to those customers, too, we saw capacity exit in with the departure of Yellow, and we've been really successful, one, in protecting our customers with that, but then also providing solutions for them to consolidate that LTL through our network, our logistics network, and convert that into intermodal as well. We see that piece growing for us and for our customers going into next year as well. Thank you. Our next question is from Justin Long of Stephens. Please proceed with your question. Thanks, and maybe I'll start with one for Geoff on the guidance. Last quarter, you talked about the tax rate for the fourth quarter being in the mid-teens. It looks like based on the guidance you gave today, it could be a little bit lower than that. So I was just wondering if you could provide an update there. And just given the decline in the tax rate, it also seems to imply that operating income will probably take a step down from 3 Q-4Q. I was wondering if you could comment on what's driving that. It sounds like logistics margins may be down a bit, but I wanted to make sure I wasn't missing anything else. Sure. Yeah, your math is correct. On the tax rate, we think in Q4 will be around 10%. That's driven by a change in state apportionment project we've been working on all year. So Q4 will be low as we file the 2022 final tax returns. To your point on the operational side of the earnings, you know, we're expecting, you know, seasonal strength in October is going to fall off, as it usually does, in the latter half of Q4. We are expecting some more softness on the brokerage side, and of course, brokerage is in our logistics segment. So it's really the transactional parts of our business between intermodal volume, brokerage volume, and some tailing off in profitability into Q4. The rest of our logistics segment, we think, will continue to perform based on recent wins that are being onboarded, but not enough to overcome the performance of the other two pieces we talked about. Yeah, we certainly wanted to be conservative in the approach on what we think volumes will be, just given that it does remain somewhat unclear, right? And there's certainly upside to that. If we see the demand continue right up to and through the Thanksgiving holiday, that is certainly upside. And so we'll—but felt as though with the guidance, we should be conservative. Got it. Thanks. And maybe as a follow-up for Brian, you talked about some onboardings and logistics in the fourth quarter and early next year. Is there a way to think about the collective impact that these onboardings could have to the top line? I just wanted to get a sense for how you're set up for potential growth in that segment as we move into next year. Sure. Yeah, no, Justin, yeah, I appreciate that question. And, you know, we love our logistics wins for a lot of reasons. One, it's great to continue to get out there and win, but a lot of what we see within our logistics wins is that it helps feed the other lines of business and creates that overall Hub network of freight. So as we win in the final mile, we're able to leverage our assets for the middle mile management of that. As we onboard these new buildings that I've mentioned, we're again leveraging our assets to manage the inbound and the outbound across all modes of transportation. And then it also just continues to add to that long tail of customers that we cross-sell into and provide more solutions for. As we do that, and we get deeper with our customers, they become less price sensitive, they become more sticky, and our retention continues to go up. We've seen our deal sizes continue to grow in logistics. I'll also mention on the dedicated, from a contract win perspective, our dedicated product continues to stand out again against some of the headwinds, but strong pipeline, continued demand. Our win ratios are the highest we've seen them. Our largest dedicated win of the year will onboard right before the turn of the calendar and set us up really well going into next year. Thank you. Our next question is from Bruce Chan of Stifel. Please proceed with your question. Hey, thanks, operator, and good afternoon, everyone. Just want to look at the brokerage side of things for a minute here. It seems like, you know, the market's going to be grinding lower for a bit longer, and just assuming that's the case, want to see if you have any more opportunities for cost rightsizing there, whether it's, you know, headcount related or technology related, or maybe something else? Sure. Yeah, no, Bruce, appreciate the question. And, you know, one of my favorite guiding principles that we say here at Hub is, is that we innovate with a purpose, right? And that we direct our IT investments in a meaningful way that focuses on our customers, our carriers, and our team members, that drives profitable growth. And that's exactly what we've seen in our brokerage. And, and Geoff called out some of those productivity gains that we saw. While we did see volume grow, we saw that, that grow on top of a lower cost base and drive more efficiency in our overall operation. So we do sense some more headwinds coming in the fourth quarter. We feel well positioned to handle those, but with some of the softer volume, we'll make sure that we're scaled appropriately and that, again, our investments are appropriated towards driving that profitable growth. Okay, great. I think just one- Oh, go ahead. Go ahead, Bruce. Go ahead. I was just going to add one thing around our program is that, you know, our commission model really incentivizes volume growth around, but we obviously pay off of gross profit dollars, but we also incentivize volume growth and handling additional volumes. And that has really allowed us, with the growth that we've seen, to remain very lean in our operation and not have to add additional headcount, but actually become more and more efficient. And I believe we saw about a 20% in aggregate productivity improvement year-over-year in our brokerage. And so, you know, really significant improvements there, and we still have a long way to go and need to return to growth, but that will come as the market does, but we'll keep focusing on taking share, as well. Okay, that's, that's great color. And I was just going to ask, with that 5% volume growth, was that related to some of those incentive programs, or is it fair to say that was tied more to the disruption from Yellow in the LTL market? A little bit of both. Like I said, we saw a lot of growth in our customers from that Yellow exit, and we protected our customers from that. We did pick up volume there, but we also get new logo wins. Our brokerage team's adding anywhere from 80-100 new customers a month. And so as we do that, then we cross-sell into those. And our brokerage also offers a diversified subset of modes as well. So you know, outside of just dry van, our Choptank acquisition really built out a nice temperature-controlled offering, as well as our LTL rates that we bring to the table, flatbed and other submodes that become very meaningful to our customers. So it's a good overall balance of growth. Great. And then just a final follow-up before I turn it over. You know, we had a fairly high-profile competitor exit in that space last week. Just want to get your take on that and whether, you know, you anticipate any major changes in the market as a result. Sure. I wouldn't reference any major changes. I think it's just an indication of how challenging the market can be, and having brokerage as a key capability that you can bring to customers as part of a full suite of services, I think, is very important and something that we've tried to utilize. We think our model works, and we're continuing to invest in the brokerage product, so feel good about our positioning for the long term there. That's great. Thanks for the time. Sure. Thank you. Our next question is from Thomas Wadewitz of UBS. Please proceed with your question. Yeah, good afternoon. Wanted to ask you about the ITS operating margin and just how we should think about the potential levers for improvement. I know you've talked about volume and being a bit more aggressive with some of the bids and winning volume. Is that kind of a key lever to see improvement off the level in third quarter? Or is it more appropriate to think about pricing being the lever, and you kind of wait for potential improvement in rates in the bid season next year in second half? I just wanted to get a little more perspective on what really, you know, kind of drives potential improvement in the timing as well. Sure. I think we have a good feel for the market at this point and have positioned ourselves well. We've seen some nice wins, as I mentioned, in the latter portion of bid season and even some out-of-market opportunities. So I don't think it's- ... it's taking rates lower, and we're, we're currently, you know, have that pricing fully baked. What I think we see as the opportunity is, this timeframe last year, which I referenced, you know, about 43% of our freight, is, is pricing effective in Q1. That is a significant opportunity where we lost shares over the road, and given some of the, question marks around the, the spot market, as well as, customers taking a deeper look at fuel prices and, and aggregate costs, I think presents an opportunity to leverage the strong service we've had and, and that disparity in contract rates to, to garner some of that, that volume back. So, you think that if you get the volume back in 1 Q,2 Q, that could be a meaningful margin lever, or you think it further out than that? Yeah, so, you know, at the same, we getting, getting the container fleet unstacked and driving more velocity in the network will reduce the fixed costs and, and help us really, really, with the efficiencies we've gained in, in headcount, drive a better flow-through to the bottom line. Okay. And then, I guess on the brokerage side, I mean, it's, you know, your results in brokerage look very good, you know, the 5% volume growth in a tough market. So, you know, kudos for executing well in that business. I wanted to see if you could give us a sense of the mix of spot and contract, and how you would think about the risks that, you know, eventually, you know, the cycle is going to happen and spot rates are going to go up. And, you know, that, that can be a risky time for brokers just in terms of the gross margin percent pressure and potentially the impact of profitability from that. So, you know, what's the split look like, and how much of a potential headwind is that, you know, if spot rates move up in first half next year? Sure. Yeah, no, you know, Tom, this is Brian. I'll kind of start even last year. So as we look at last year, we moved, our brokerage was about 60% spot and 40% contracted. Throughout this year, we were very focused on growing in our contracted volume, and we saw that kind of level off right around 50/50. And what's really good about the growth within our contracted volume is we really leverage that volume with our carriers in the way that we purchase that transportation to really make sure that we can contain that spot, capacity, and price. And so we feel well positioned that as that spot starts to grow, our capacity in the truckload marketplace starts to exit, and it starts to press up, that we have a really good model and a good balance with those carriers to keep that contained, but while also making sure that we're recovering it with our customers as well. So you don't think we should anticipate pressure if spot rates rise or it's manageable amount of pressure? It's manageable in our model. Right. Okay, great. Thank you. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question is from Ravi Shanker of Morgan Stanley. Please proceed with your question. Hey, thanks. This is Christyne McGarvey on for Ravi. I wanted to circle back to the capital allocation announcement, specifically calling out on the acquisition front. Doesn't feel like that's super new for you guys. So just wondering if you're trying to signal anything different going forward in terms of, you know, pace of transaction or type of transaction that you guys are looking for going forward? I think the announcement today is really just formalizing things we've been working on. So M&A has always been an element of our growth strategy, particularly in the non-asset parts of our business, expanding that logistics offering. You know, we've always had the strategy to invest in our intermodal fleet, containers and tractors. We'll continue to do that. I think you've seen us be more opportunistic on the return of capital with share repurchases, and we are today announcing, or we're signaling a more rigorous framework around that. So, really no change in the pieces. I think just more of a framework to measure a return of capital performance by. I think we all feel good about our acquisition pipeline, and we're optimistic to get an acquisition completed in the short term here. Got it. That's really helpful. And if I could, squeeze one more in, switching gears a little bit on the drayage and sourcing and some of the other kind of costs, or process initiatives. Can you just frame up for us at all, sort of the cost benefits that you guys are seeing and maybe how to think about incremental margins in that business going forward, in the next upcycle when it comes, if you think it can be, you know, structurally improved, on the back of these? Yeah. So we have a pretty strong focus on operating efficiency with, you know, within our headcount, within our kind of below the transportation part of our P&L. Within transportation, I think, you know, having those, that insourced number, you know, around 80% may drift down in a stronger market, but, you know, we feel like that's the right balance of fixed costs. You know, right now, third-party costs are pretty low. It's a very big, very different story last year in a stronger market. You know, we like to have that flex, but also the ability to insource on our own fleet. As we do more volume, we are able to leverage our fixed costs as we improve that productivity on our tractors, and on our drivers. I referenced earlier, a contribution margin just on today's cost structure. An incremental load, with no change in price, is going to deliver, you know, north of 15% incremental, flow-through operating margin. Great. Appreciate it. Thank you. Thank you. Our next question is from David Zazula of Barclays. Please proceed with your question. ... Hey, thanks for squeezing me in. Sorry to beat the dead horse on brokerage volumes, but I just want to understand a little bit. You guys said you're seeing peak, and you gained 5% in volumes this quarter, but it sounds like you're talking about potentially some pressure in the fourth quarter. So, I mean, is that a factor of customers going away from brokerage on a temporary basis? Or, you know, can you talk about what is driving the volume outlook for brokerage in the fourth quarter? Some of that's just... Yeah, this is Brian, David, and some of that's really just the decline, you know, after Thanksgiving of what we'll see just in a softer tail off of the year, from what we're expecting in overall volumes. But, you know, I think we're, you know, continuing to driving the cross-sell and where we're growing with our brokerage internally as well. So yeah, we still think that we'll continue to stand out in the marketplace in the fourth quarter, but are just anticipating some of that softness as we wrap up the year. Great. Thanks for the help. And then if I could just get one follow-up. You mentioned some dedicated wins. I know you've had some competitors that have lost existing customers. Can you talk to your dedicated retention rate and how it compares to history? Yeah, no, we've knock on wood, we've done very well with our retention. We have retained our customers. I think our model for doing so, as I mentioned before, is that we see a higher retention when we're offering multiple lines of service. So while our dedicated service and assets and management and efficiencies are all really important to our customers, we find that if we can have them cross-sold into multiple lines of service, it helps drive that overall operating efficiency, but it also helps with that retention. But we focus on being a very strong operator and making sure that we pass those efficiencies along to our customers and that we position to retain, but it's also helped us in the bid cycle. We've seen a higher rate of our wins on these because they are highly competitive, and our deal sizes are growing. I mentioned one of our largest ones will be onboarding later in this quarter and setting us up really well for next year. Those are organic as well as new logo customers that we're winning with. Thanks very much. Appreciate it. Thank you. Our next question is from Brian Ossenbeck of J.P. Morgan. Please proceed with your question. Yeah, thanks for taking the follow-up. Just a real quick one. I think you mentioned accessorials were down. Just wanted to see if that was a sequential comment or year-over-year. I think there's been some providers who have seen a little bit more come out than they initially thought. I know you guys took a pretty big hit earlier in the year. So, where do you stand on accessorials right now, and you kind of at a run rate you expect to carry into, into next year? Yeah. Sequentially, on the revenue side, it's flat. The big step down is year-over-year. We do have accessorial costs as well, which we have been reducing sequentially, but not enough to offset the revenue piece. Do those costs come out with more, with more volume, with more fluidity, I guess, better service? They would... Yeah, we would expect them to. Yeah. All right. Thanks for the follow-up. Yep. 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. Just to wrap up, you know, despite headwinds in the broader logistics market, we believe Hub Group is extremely well positioned to drive long-term growth and returns through our focus on providing best-in-class service, continuing to operate efficiently, and investing in our business through accretive acquisitions and long-term organic growth. We believe this investment approach, along with our focus on consistently returning capital to shareholders, is going to create long-term value. I want to thank you again for joining our call this evening, and as always, Brian, Geoff, and I are available for any questions. This concludes today's conference call. Thank you for participating. You may now disconnect.