Hub Group Inc., a multimodal transportation service provider, said it is exploring “strategic alternatives” for its Mode segment.
Hub Group intends to redeploy capital derived from a potential sale of its Mode segment into acquisitions of new service lines, existing businesses and technology, Hub Group CEO Dave Yeager said on the company’s earnings conference call Tuesday.
“Hub continues to look for acquisitions that would add value to our network and allow Hub to continue to diversity our product offerings,” Yeager said.
Commenting on whether Hub Group could make acquisitions prior to selling off its Mode segment, Yeager said the company could make a purchase of “a fair size,” but said “it’s not really something we can comment on because we don’t know any timing, if or when it will occur.”
Mode is one of Hub Group’s two distinct business segments and consists of the Mode Transportation LLC business only.
Mode LLC markets and operates its freight transportation services — comprised of intermodal, truck brokerage and logistics — primarily through agents who enter into contractual arrangements with Mode LLC.
Mode LLC has independent business owners who sell and operate the business throughout North America, as well as sales-only agents. It has corporate offices in Dallas and Memphis, Tenn., as well as a temperature-protected services division, Temstar, in Oak Brook, Ill.
Yeager said, “Mode has an excellent management team, with a strong solid agent base and loyal customers. While Mode has been quite successful in retaining and growing its client base and portfolio of services, there is a lack of strategic alignment with Hub’s centralized business model.”
The Hub segment has employees throughout the United States, Canada and Mexico and offers various multimodal solutions, including intermodal, truck brokerage, logistics and dedicated services.
Both segments posted year-over-year revenues growth during the second quarter of 2018. The Mode segment’s revenues reached $314.1 million, up 29 percent from last year’s second quarter, while the Hub segment’s revenues totaled $888.2 million, up 26 percent.
Hub Group’s net income for the second quarter of 2018 totaled $22.1 million, a sharp increase from $9.5 million for last year’s second quarter, while its total revenues clocked in at $1.2 billion, up from $923.6 billion a year earlier.
Capital expenditures for the quarter totaled $47.1 million, which Hub Group primarily used for tractors, trailers and technology investments, and the company expects capital expenditures for the full year will range between $200 million and $220 million.