Hello and welcome to the First Quarter 2018 Hub Group Earnings Conference Call. My name is Michelle and I will be your operator for today's conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that today's conference is being recorded. I will now turn the call over to Mr. David Yeager. Sir, you may begin.

Good afternoon and thank you for participating in Hub Group's first quarter earnings call. As we discussed in our fourth quarter earnings release, Hub Group had a very strong finish to 2017. That momentum continued into the first quarter as consolidated revenue grew 23%. Revenue for the Hub segment grew 23% and 19% for the Mode segment. For much of the quarter, both intermodal and truck capacity were tight due to strong demand throughout the country. Many markets that traditionally have surplus capacity in the first quarter had capacity deficits as demand overwhelm supply. Intermodal volume for Hub Group was up 6%, which is in line with the overall industry. Thus far, in April, demand continues to be exceedingly strong, with the truckload industry running at full capacity, backed by a strong economy. 80% of Hub's business is either bid or re-priced annually. We have completed the price changes of roughly one-third of our book of business. Price continued to strengthen throughout the quarter. Thus far, we have not found a ceiling for the increases as price inflation continues to gain momentum. To date, our price increases are in the mid-single digits. With that said, on the cost side, we're experiencing driver wage inflation, increased costs with our outsourced draymen and rail price increases, but we remain committed to increasing prices to our customers that will outpace our cost increases in order to secure a reasonable margin that will allow us to continue to invest in the intermodal product. We're also seeing higher operational costs as we continue to see substandard rail service, especially in our Eastern network. These challenges not only harm intermodal's competitive position versus truck, but also add unnecessary costs to our operation and reduce our fleet utilization. On a positive note, since mid-March, we have experienced…

Thank you, Dave. Our results clearly reflect that our strategy to become a leading multi-modal solutions provider continues to gain traction. Our unwavering commitment to service, execution, along with the standing by our commitments during capacity-constrained peak, has enabled us to provide our customers multiple options to support their network. Over the years, we have improved our cross-selling capabilities. And as Dave mentioned, with the addition of Dedicated, our sales organization has many tools available to support our customers. With that said, all of our service lines grew during the quarter. With bids being approximately one-third complete, we are seeing increase share, strong demand and improved price. The commitments we made to our customers during peak are now bearing fruit in this year's rewards. During the quarter, we further aligned our organization, making internal efficiencies to better support our customers. These changes will continue to bring value and position us to sustainable growth opportunities. We also been improving the overall performance of our network by deploying our multi-modal pricing and market strategy to our bids. Although this initiative is in the early stages, we are seeing an improvement in balance and yield with targeted customers and markets. We believe that our commitment to stay focused on further implementing our multi-modal strategy, coupled with the changing marketplace, puts us in a very favorable position. Truck brokerage grew revenue by 13% in the quarter in a tight capacity market. Our focus remains on targeting multi-modal solutions accounts. In doing so, we can offer our clients a diversified product offering from transactional and search capabilities to project management and long-term committed capacity. During the quarter, we were able to secure new accounts, provide existing customers project management support, while at the same time, growing our transactional business. We believe we will continue to…

Thanks, Don, and hello, everyone. I'd like to highlight three points. First, we are excited that operating income grew 35% compared to last year. Second, as we expected, intermodal pricing accelerated as the quarter progressed. And third, Hub Group Dedicated won over $70 million of new business. Now, let's take a more in-depth look at our performance in the first quarter. Hub Group's first quarter revenue increased 23% to $1.1 billion. Hub Group's diluted earnings per share was $0.48. This is compared to an adjusted first quarter 2017 earnings per share of $0.40 that excludes onetime costs and uses a 25% effective tax rate. That's an impressive 20% increase. Now, talk about details for the quarter, starting with the financial performance of the Hub segment. The Hub segment generated revenue of $832 million, which is a 23% increase compared to last year. This increase came from combined topline growth of 14% in intermodal, truck brokerage and logistics, and $60.4 million of revenue from Hub Group Dedicated which we purchased on July 1, 2017. Taking a closer look at our business lines, intermodal revenue was up 14%, due to a 6% increase in loads and an increase in fuel revenue and freight rates. Mix was also favorable. Transcon volume was up 13%, local west volume was up 4% and local east volume was up 4%. Truck brokerage revenue was up 13%, fuel price and mix combined were up 14%, and loads were down 1%. Logistics revenue increased 16% due to new customers onboarded last year and an increase in existing business. Hub's gross margin increased by $18.6 million or 26%, due to the addition of Hub Group Dedicated as well as growth in intermodal and truck brokerage gross margin, partially offset by a decline in logistics margin. Gross margin as a…

Great. Thank you, Terri. With that, why don't we just open up the phone to questions.

Thank you. We will now begin the question-and-answer session. We have the first in the queue, comes from Scott Group from Wolfe Research. Your line is open.

Hey, thanks. Afternoon, guys.

Hello.

So, wanted to ask, so first quarter obviously came in a lot better than you guys were expecting – or certainly a lot more than $0.04 better than you were expecting. But the guidance only goes up $0.04. So, I guess why was the first quarter so much better and why are you sort of implying that the rest of the year is worse than you originally thought?

Scott, I'll take part of that. Back when we gave our guidance in February, we didn't foresee the Toys 'R' Us liquidation or losing three other logistics customers. And, as I mentioned in my prepared remarks, logistics gross margin was down about 17% in the first quarter. We do expect our logistics margin to be down between 3% and 6% for the whole year. Meaning that on a combined basis, gross margin will be up in Q2, Q3 and Q4, and we feel confident about that. But on an overall basis, when we look at what we originally provided guidance on back in February, specifically for logistics versus where we are now with losing four customers essentially, that was an impact of about $0.10.

Yeah. Scott, this is Dave. On the positive side, I would say that, first and foremost, I think we're comfortable with the higher end of the range. There's no question there is some headwind with the logistics. But if you look at the intermodal business at this point in time, we have not, as I indicated in my formal remarks, really found a ceiling on price increases. We're a third of the way through. We've been very focused on increasing our overall pricing to our clients ahead of what we feel our cost will be. And so, I think that we'll be able to give you another update after the second quarter when we got over half of the price increases accomplished. But for right now, I mean, we're looking at mid-single-digits that are continuing to rise from our perspective right now due to demand.

Yeah, with two-thirds of updates will be done by the end of the second quarter.

Right.

We certainly have visibility. But the push has been the price, we've been doing that. And also, the demand has been strong on the intermodal piece. The headwind is simply on the logistics side for the first six months of this year.

Could you say how much revenue you're losing on the logistics side?

It's about $130 million.

That starts going forward...

Yeah. Well...

...or did that already started in the first quarter?

Yeah, yeah.

Well, it started with obviously Toys 'R' Us with that bankruptcy.

Right. And then, the rest comes later on.

Right.

Okay. And maybe talking just about rail service, is there any way to think about the operating income impact it may have had in the quarter? And what gives you the confidence in Norfolk starting to get better in the second half of the year? And then, just big picture, we've got really tight truck market, rising truck rates, rising fuel, but bad rail service. What's the customer telling you about intermodal? Do they want to be here despite the service or they want to be here but they can't be here because of the service? What's the customer saying?

I'll answer that last part. What the customer is saying right now is we work with this customer to set the proper level of expectations. In this case, if it's going to be half a day longer from Chicago to Harrisburg, we're right in front with them, we tell them we intervene when there's issues. And so, I think that our – the service versus our – our on-time performance versus the current services is actually pretty good. We're able to deal with that because we're dealing with realistic benchmarks. I think that particularly in this environment with a tight truck environment that – the customers, really, there is other places to go but it's much, much more expensive and more costly. As far as why do we think the Norfolk Southern will improve in the second half, we, obviously, we talked to their people on an ongoing basis. They're doing an awful lot to change the service. But as you know, Scott, there's not just a light switch. You can add locomotives, you'll add cruise, you add chassis, but it takes time, it's gradual. And that's why we looking towards the second half of the year but we're quite confident that it's going to improve during that period.

And how that impacted the numbers, I'll take that part of the question. Our utilization was about four-tenths of a day worse this quarter than it was in the first quarter of last year. So for every day of utilization, that's about $6 million annually. And then, the other thing that hurts us is when rail service is unpredictable or inconsistent.

Right.

And that makes it more difficult for us to set appointment for delivery, for example, with our customers and can make the load planning and improving our empty miles more difficult.

Right.

And to Terri's point in your question, Scott, how the customer is saying, that's exactly it. It's consistency that they want so they can plan. So, we work with our clients to say, if the plan is going to change, we have to tell you that upfront so you can adjust your TMS accordingly. So, consistency has to be there.

Okay. And then, just my last question, why do you think Transcon's so strong probably a little bit of a different mix than what others have said? And then, can you give – maybe give an update on April intermodal volume?

Yeah, this is Don. Transcon is strong. We were fortunate to be growing that the last six months or so with some retail accounts, strong retail accounts. And with our pricing moving up, we're still continuing to keep that Transcon business and grow it actually. We've grown every region, especially in the East also, up 4% for the quarter.

And then, as far as April, we're up about 5% in volume.

We are. And also contributing to that Transcon volume was some new business that we landed last year, and then, growth related to delivering on our commitments during peak season. And we believe part of the growth was also conversion frame.

Yes. Good point, Terri.

Okay. Thanks a lot for the time, guys.

The next question in the queue comes from Ben Hartford of Baird. Your line is open. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Thanks. Maybe, Don, how confident are you that you'll be able to recoup most, if not, all of the revenue lost here in logistics over the next year or two? Is that a reasonable expectation?

Yeah. It's realistic expectation to continue to grow that business. We expect it though really to start onboarding new accounts in the second half of the year, but it'll be a slow rise up. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Okay. To completely fill that bucket, is it two years out or is it too big of a hole to really estimate at this point?

The $130 million would be year... Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Yeah. Okay.

...one solid year from second half of this year. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: I guess then, Terri, as we think about some of the headwinds here, you talked about the gross margin relative to your initial base, but some of those fall off, startup costs fall off, Mode's yield is probably reversed if and when gross margins normalize, the loss of the business you fill that bucket. You still expand gross margins sequentially. The probability that it continues to rise in 2019, I assume, is high in terms of gross margin percentage. Is that a fair assumption as well?

Right. As the startup costs, for example, at dedicated would abate pretty much in the fourth quarter for the over $70 million in new business that we're bringing on annualized, all that will not be in this year but will certainly ramp it all up this year. And then, you're correct. If we begin to fill that, as Don said, that logistics pipeline with new business, that will help. And then, finally, Mode was just 50 basis points lower than what we originally projected and that was primarily due to intermodal with Mode. They just didn't have that as much margin growth as we did and...

We did, right.

...as the Hub segment did in intermodal. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Sure.

That's the turnaround, too, is they re-price that business.

Yeah. And as we re-price the intermodal, as I said, we're one-third of the way through on bids. Through the second and third quarter, those margins as we onboard that business will increase. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: And then, from a higher level perspective, the mix of the business has changed and is changing. Gross margins are inflecting from the trough. There's 2017 a trough and gross margin trough in overall EBIT margins. Hopefully, fingers crossed. Investors will have their opinion on when the cycle ends. But as you think about the profile of this business, with dedicated growing, with some of the acquisitions in the pipeline, with the focus on getting to reinvestable levels sustainability on the intermodal side, what are reasonable kind of peak gross margin and EBIT margin targets in the business as it's presently constructed? You don't need to give a specific number if you don't want to. But just trying to get a sense for what is a reasonable feeling on both fronts as presently constructed?

Yeah. Well, we love 4% operating margin, that's where we used to be. And for the Hub segment, it was 1.9% this quarter. Then, for the Mode segment, it was 2.4%. We think we can get back to those levels with a couple of strong pricing cycles in intermodal. And as Dave mentioned, we haven't hit the ceiling yet, so we hope to get part of the way there this year, and then, further along, in 2019. And this year, if you remember from our discussion back in February, we have a headwind that's more bonus this year, a lot more bonus than we had last year, that certainly drive operating margin down but we won't have that headwind next year.

Right.

It'll be in the numbers already. So to answer your question specifically, I mean 4% is the ideal operating margin we'd hope to get to in a couple of years, maybe by the end of next year. And then, gross margins, because dedicated is a higher gross margin business than our other business lines and truck brokerage is second biggest and we've had significant growth in our truck brokerage business over the last couple of years, we're confident we'll be able to grow that as well. And maybe gross margins get back to closer to the 13% range.

In the next bid... Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Okay.

We did this bid cycle and then next year's bid cycle...

Right. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Right.

We'll be very, very focused on being opportunistic here on increasing prices. We're very focused within the spot market with our truck brokerage, which is a real sweet spot right now. And so, again, we're not going to lose that focus. The market is, I think, the entire market is looking after what was an abysmal late 2016 and 2017. I think everybody's looking that we need to be able to earn our cost of capital. And so, that's going to be our focus. And it does, as I said, it does appear as though the industry's focus as well.

And the acquisitions that we're looking at will all improve our operating margin and our gross margins as well.

Right. Yes. Benjamin J. Hartford - Robert W. Baird & Co., Inc.: Sure. Okay, great. That's very helpful. Thank you.

The next question in the queue comes from Justin Long with Stephens. Your line is open.

Thanks. Good afternoon.

Hi, Justin.

Hey. Just wanted to clarify first on the guidance, Terri, I think you said the impact from the lost logistics customers was $0.10. So, is the right to think about it that the kind of fundamental outlook for the business actually improved by about $0.14 if you strip out those losses?

Yes. Exactly, right.

Okay. And thinking about the cadence of earnings over the remainder of the year, I think last quarter, you gave a little bit of guidance for the first quarter. Could you help us think about the ramp in 2Q in the back half or at least what's baked into the guidance?

Yeah. Well, I'll talk to operating income perhaps and how that trends. Maybe that's the easiest. So, operating income on an adjusted basis was up the same as our adjusted EPS when you normalize for taxes at – our 25% effective tax rate and add back the onetime costs. If we look at Q2, it could be up – operating income could be up a similar amount, maybe a little bit less. And then, in Q3, operating income ramps up more than Q1 and Q2, and this is all at a consolidated basis. And then, because we have such a tough comp in the fourth quarter, maybe operating income is about flat in the fourth quarter.

Okay. That's very helpful. And going back to the question on service, Terri, you mentioned you saw degradation of about four-tenths year-over-year. What was that utilization number in the first quarter and how are you expecting that utilization number to progress the rest of the year?

Yeah. It was 15.8 days compared to 15.4 days last year, Justin. And we expect utilization to be about two-tenths of the day worse than last year overall, so – for the whole year. So, we're assuming rail service is similar for the rest of the year to what it is now.

Yeah. I do think that we are seeing some improvement in the West. And Justin, we really do expect that the NS will be improving the last half of the year. So, I think that our estimates are conservative. But we definitely – again, we want to establish the proper expectations with our clients and we'll change for the better, hopefully, those expectations as the year goes on.

Okay, great. And I guess, lastly, I wanted to ask about intermodal pricing. You made a comment that you're not finding the ceiling yet. Could you talk about where you exited the quarter and maybe what you're seeing in April in terms of intermodal pricing? You talked about mid-single digit increases on average. But I'm just curious if you're more in that high-single digit increase level or maybe something better as it stands today?

It really does vary a lot by a customer as far as the amount of the increase. We are in the mid-single digit right now. We're hoping that we can continue to increase that and rise. But again, a lot of it is very account specific where some maybe in the 15% range and some maybe in a lower range. If sequentially, we have been able to consistently – January was better than December with February better than January, so again, where we may end up this quarter, I'm not quite sure. It's going to be interesting but we're pressing to find that ceiling.

Right. And what we're seeing, too, with price is also growth. So, you've got twofold, one is how we're pricing to the market and how we're pricing to our network. We talked a little bit about that on my comments, is we're really looking at how we can try to reduce our empty repositioning costs and look at our network to grow. So, we're seeing that. And as to Dave's point, as these bids come in, we're closely looking at the opportunities, closely looking at the lanes that we're bidding on, and then, trying to take that price up which has been very effective so far.

Okay, great. I'll leave it at that. Thank you so much for the time.

Thanks, Justin.

The next question in the queue comes from Tom Wadewitz from UBS.

Good afternoon. Dave, I wanted to ask you a bit about growth in intermodal and the cycle, and also, how you think about container add. Maybe first off, could you just refresh on what you're doing with your container fleet this year? Is it basically flat or you have some net adds into this year?

We do have some net adds.

We do. We're increasing our container count by about 7%. At the end of the year, we had about 34,500 containers. We expect to have around 37,000 containers by the end of 2018, which means we'll get 4,000 new containers in. And you remember that we had about 1,300 manufactured last year that we didn't bring over yet, which we are in the process of bringing over, and we'll be returning about 1,500 of these containers, for a net add of 2,500. The reason that we – if you remember from our last call, we did up that by about 500 containers to have those container – that capacity available for our customers when they need it. And so, with transits as they are and with the demand that we've had, we thought it's prudent to increase the order by 500.

Yeah. So net-net, when you consider the service, we're probably at about flat versus 2017 on the fleet.

When you consider the service.

Right, when you consider the service.

Okay. So the – right, so the turn is being down and your effective capacity is essentially flat today or at year end it would be flat?

By year, I would say more by the later third quarter, it would be flat.

Okay. So, I guess the other question is really, as shippers see such a dramatic step up in their rates, maybe they can't do as much more on intermodal as they would like to rail service constraints. Maybe you don't get a lot more containers in. They're probably drayage constraints for some people. So, do you think that looking back at prior cycles, if this sets up to be a really powerful year potentially or when you look forward a bit? And rails made some investments, you get some more containers in, that you could set up for a pretty strong conversion to your – in 2019 or maybe you see some of that come in later this year. Is that a reasonable way to think about the potential setup for the cycle? And then, I guess, I suppose fuel is hard to predict where it's going but there has been somewhat of a move up in fuel I suppose the last several months. So how much you think about that?

Well, I would say, first and foremost, I do think that there's no question that our customers are not particularly happy with the increase in costs that are occurring. But I think at the same point in time, if you look at the entire industry and what we've gone through the last 18 months that it shouldn't be unexpected. We like them need to return our cost of capital for our shareholders. So, that's first and foremost. I do think that right now, since the economy is so strong, we've burned out so much inventory, the demand is going to continue to be very, very strong. I would suggest your one observation there, Tom, with potentially the drayage capacity. I think that that could be one issue, not so much for us and some others but for the asset-based guys, but I do think it definitely the – it's a constrained market. There's not a lot of new drivers that are entering the drayage industry. And so, that potentially could be a factor that would keep it damper on how much growth overall intermodal may have, although we feel as though we like where we're positioned on that. From a fuel perspective, no question with fuel rises, intermodal becomes even more attractive than it is today. So, it does seem, as though, that's an ongoing trend right now. And you or I choosing – or picking whether it's going up or down in the next six months is...

Right.

...probably doesn't make much sense. But as it does rise, it certainly – intermodal already is extremely attractive. Increases in fuel just makes it more so.

Yeah. Right now, the divide between truck and intermodal is anywhere from 24% to 30%. So, that spread is nice and that will continue to spread higher once the fuel keeps going up.

So, I guess just to ask a little bit more on that. Is it reasonable to think there might be some pent-up demand for intermodal that rail constraints and maybe container limitation and so forth, you can't take as much volume as shippers might want to move from truck to intermodal or is that being a little bit too optimistic in the way we think about pent-up demand and volume looking forward to couple quarters?

It's interesting you ask that. In the first quarter, we actually had constrained markets in traditionally non-constrained except in this environment. So, we do look forward, and we're beginning our peak planning already, a very, very strong peak. And we obviously – we're very committed of our clients on making sure that we live up to our commitments. But I would suggest that probably you are correct that when we get later into the quarter end, the second quarter end and into the late third quarter, there will be a lot more opportunity than capacity.

Yes.

Okay. Just one more related question. Have you experienced drayage as a significant constraint or you have more outsourced drayage than some of the other big players? Has that been an issue for you or have you been able to get the drayage capacity that you need?

We have been able to get the drayage capacity we need. Our spend is about $230 million roughly...

Yes.

...without outsourced drayage. We work very, very closely with our outsourced draymen. We try not to be transactionally focused but we try to work with them the same way that we want our clients to work with us. And so that has allowed us, I think, to build some very strong relationships that we have been able to in fact get the capacity that's required.

Absolutely, yes.

Right. Okay, great. Thank you for the time.

Thanks, Tom.

The next question in the queue comes from Todd Fowler with KeyBanc. Your line is open.

Great. Good evening. Terri, in the guidance right now, as it stands, the $2.34 to the $2.44, did you share what the volume assumptions are for the Hub segment? I think previously, it was 3% to 5% and I wasn't sure if that was updated. And then, same thing for the pricing, I think previously, it have been mid-single digits and it sounds like that's what you're talking to right now. But do you give any more color on volume and pricing expectations in the guidance as it stands?

Sure. Our intermodal Hub segment volume guidance is – now we raised it to between 3% and 6%, instead of between 3% and 5%, because we're seeing the demand and confident we can execute. And then, on the pricing, we're assuming mid-single-digits, as Dave said. And we'll have more visibility to that as we complete the rest of our bids but that's what we went with in our guidance.

Okay. And then, I think that this was a covered a little bit but just on the mid-single digit pricing, I think that some of your peers that have reported have been speaking to more high-single digits in the pricing in the intermodal mark. And I think you had these comments as well, it's approximately more in the truck market which seems to be higher than the mid-single digit level. Can you maybe help clarify little bit? And again, I think you talked to this a little bit but just so we understand, the volume growth seems good in the quarter but the pricing is a little bit below what we're hearing from some of the peers. Is that more of a focus on the network and targeting the volumes or how do we think about maybe some of the industry comments versus your comments on pricing?

Todd, this is Dave. Well, we certainly are very focused on what fits our network, what's going to create better balance to reduce empty miles. But I would suggest to you, as I said in some of the remarks here, is that sequentially, we have seen increases in pricing. We're only a third of the way through. And so, I would not discount the fact that we could end up in the high-single digits. But again, we're only a third of the way through our bid process and re-pricing process. But certainly, all signals are very positive at this point that we can continue to increase that percentage.

Yeah.

Okay. I think I understand where you're coming from there. Just I wanted to ask on the dedicated business that you're winning, can you speak to where that's coming from? Is that private fleets being converted? Is that existing dedicated that you've won for somebody else? And I know that you've quantified the startup costs at least that you're expecting in the back half of the year. But we've also been seeing – with the driver market where it is right now, some additional costs in recruiting and retaining drivers. So, I was just hoping to get to the extent that you can provide some confidence that you can onboard that amount of business and have the capacity to do that at the margins you're expecting.

Yes. Todd, we're really excited about the new business. The total is about $75 million annually is dedicated, and the two most significant wins that represent about 70% of the business are private fleet conversion and then business from an existing top customer.

Okay.

They're pretty huge wins for the Hub Group Dedicated compared to the historical wins. And so, we are adding drivers and we believe we're well-positioned to be successful. And the startup costs, you're right, we're about $0.5 million in first quarter. We project that that'll be $1.5 million to $2 million for the whole year and that would include the travel, the recruiting, the sign-on bonuses, the driver training and orientation, and then, the fact that in some cases, we have to – but it's tractors and drivers as we ramp up.

Yeah. The other point to that, Todd, is we want to make sure we deliver value to our customers. We do not want to sacrifice service and safety to support them. So, we're conservative in our approach and how we went onboard dedicated. It's far exceeding our expectations and that's a good thing, but we also want to be very cognizant that as we add business we want to do it right.

Okay, good. Yeah, this is helpful, too, just I think in the context of what you've got in your expectations for your guidance on a couple of these areas. So just lastly, I think the comment was made about the acquisition market and I was curious if you could speak to maybe how close or how far away you might be from doing something, and I know that obviously the timing of that can be very lumpy. And then, just give us a reminder, I know some of the general criteria but some of the areas that you're still focused on, that could be helpful. Thanks.

Sure. We do have several that are in the pipeline that were kind of in the final stages, if you will, not actually signed but we're actually – we've gone through several stages in the cycle as far as where they may stand with the acquisition. So, we've made some progress there. We feel that we're close. We're hoping that we will have one, possibly two, more acquisitions this year.

Okay.

And so, the pipeline is very full. Geoff's doing a great job in identifying them and then making sure that we're competitive, where it's appropriate and more strategically it makes sense of us. As always, we're looking at businesses that will help us to diversify. And also, those that may be complementary within the IMC business, the drayage business can be attractive, particularly in this market of constrained drivers. We're looking at truck brokerage, in particular. We do have a desire to build scale but we also have a desire to build technology that'll make us more productive. So, I would say that those are the two primary areas that we're looking at right now. And as always, logistics opportunities, transportation management, they may take us into verticals that we are not in, would also be very attractive.

Okay. Interesting. Thanks for the time tonight.

Thanks, Todd.

Thank you, Todd.

The next question in the queue comes from Brian Ossenbeck from JPMorgan.

Hey, good evening. Thanks for taking my question. So, just a quick clarification on pricing. Are there trends you're seeing inclusive of accessorials? I know recently, we've been talking about that as the trend this year versus perhaps the prior years, we're trying to go back and get those with contract renewals, especially the equipment perhaps isn't being used efficiently as you might like. So, maybe if you can give us a little comment on that please?

Yeah, absolutely. This is Don. We certainly are going after the accessorials contracts in a way that brings back negative to positive. So, part of our agreements with our customers as we look at them is not only the price of the transaction for the move, but also the accessorial agreement that we have in place. So, we've been actively changing those agreements over the last four months, five months, and we're going to continue to do that, and it's bearing fruit.

And it's really is – it's part of the cost. And I think the beauty of it as we go – when we do approach a customer that has a negative accessorial agreement, we're given the option of a increase X plus, if you want to keep that accessorial agreement in place because the real cost or at X, which is a slower number, if they change the accessorial agreement, because that's something that is under their control. And so, that way, they can actually direct how large of an increase they take or don't take.

Okay. It's helpful. So, I guess is the way to – if I heard you correctly, the way to interpret the pricing, mid-single-digits that you're looking at now, that would be excluding accessorials. So if shippers decide to make the choice or not that would be reflective in interest rates? (51:22)

Yeah. It sounds like all of our customers have negative accessorial...

No.

...but those that do were addressing upfront right now.

It's a cost.

Right, right. Okay. The other question I have is just on – just to refresh us on the technology investments, the pieces spend and where you might start to see some of that leverage rolling out that we've worked with TMS system. And anything else you have in the works right now?

Yeah. This quarter, Brian, we spent the majority of our time working on finalizing our quote cash design which will create the foundation within our new financial system that will go live in the first half of 2019. And in addition, we continue to configure capabilities in OTM to facilitate the asset portions of our business. So, that's what really we've been working on.

Right. And we've also been working on implementation within the Unyson Logistics product. And I feel good that we're – it's making excellent progress right now and it's very focused with our outside consultants.

All right. As last quick one for me, if you could just comment on the insourcing contracts in logistics. I mean, I think it's – typically, we think of this environment is where outsourcing would be more of the trend. And a lot of factors can drive insourcing, M&A on the customer side or incumbents or anything along those lines. So in a tight market, I would expect more outsourcing within. So, maybe if you could give a context around that?

Yeah. In one of the accounts that the contract change was an acquisition, so that contract's being absorbed internally. And then, the other two, to our point, were brought in because they had a TMS and they wanted to be able to use their own tools to handle it. Was a surprise? I'd say one of them but the others I understand. So yeah, you're right. That's that balance of the customer of how much it cost to insource versus outsource it. And to this day, those some customers find that they want to insource their own but they realize quickly that they can't get the IT resources to support it.

Okay. Is that included in the $130 million or was that just the one large customer?

The $130 million includes the loss of the four contracts.

Okay. All right. Well, thanks a lot for your time.

Thank you.

The next question in the queue comes from Bascome Majors from Susquehanna Financial.

Yeah. Thanks for taking my question here. Just a follow-up on the M&A line of questioning. The one or two deals that you may get done this year, hopefully, will get done this year. Can we think about that moving the needle? I mean, are we talking pennies of EPS here on a run rate basis if these things go through? Just trying to size that up as we think about the cadence into 2019.

Yeah, we're still in – we're in the latter stages of process with these. But we're still a bit off here and we're trying to – nothing is finalized with the numbers and trying to give an accretion number at this point would be difficult. We obviously – one of our major focuses is that we have – that it's initially accretive...

Yeah.

...to earnings. So, that's would be hard to do right now because we're not at that point that where we can finalize the purchase price and the cost. We are getting closer but we don't have an eye on that yet.

Now, maybe just to directionally size things up, could you talk about – or can you give us a bracket around dealer investment value so we kind of think about the size of what may be coming on?

That's hard to do, too, because we're just not far along enough yet. On a combined basis, it would be less than we paid for dedicated.

Understood. That's helpful. And just lastly, maybe put a finer point on the first question of the call and just trying to reconcile the seasonality. It looks like kind of what you've guided to for the full year is fairly normal seasonality with where the first quarter went off. Yet, most trucking and intermodal-related businesses are guiding pretty significant or seasonal plus acceleration in the second half of the year. If I could kind of interpret at the earlier comments, it sounds like you're suggesting that logistics loss is a headwind that kept maybe a more material guide up from happening and potential tailwind would be rail pricing accelerating as you hoped but aren't willing to guide that it is. Is that a fair assessment of kind of how you see the puts and takes in the second half of the year or is there anything you would like to add to that?

Yeah. I think that that's pretty fair. But as we have said, number one, we're comfortable with the top end of the range. Secondarily, we do feel as though, unless something dramatic happens within the economy that all indications are that the pricing increases will continue to accelerate through the year. Again, we are by our nature very conservative but we're only a third of the way through the bid cycle. And so, I think that approach – we're not being cautious with trying to find what the ceiling is from a price increase, but I think as we give you guidance, we want to make sure that it's something that we can live up to.

Understood. Thanks for the time this afternoon.

The next question in the queue comes from Diane Huang from Morgan Stanley. Diane Huang - Morgan Stanley & Co. LLC: Great. Thanks for squeezing me in here. My first question is there have been some fears that the TL market will weaken from here. So from your perspective, how much of your intermodal pricing and load outlook for the second half is dependent on the TL market? Have you seen any impact from ELDs? And what are your expectations of ELD impact in the second half?

Okay. As far as our dependency on the truckload market, of course, it does get on the shorter lengths of haul more competitive when, in fact, there's an excess number of trucks. I would be shocked if that occurs in the second half of this year or even the first half of next year. I think – again, it's the demographics with the truck drivers aging, it's people that in fact are leaving the industry at this point in time. And partially, with the impact of ELDs, it's hard to really quantify how large it is because there is still some exemptions on agricultural goods, that type of thing. I do believe once those become effective, that we're going to continue to see an impact of ELDs in shrinking the overall truckload capacity. So, I think that intermodal is very, very well-positioned to continue to grow at the existing pace through this year and certainly into the next half – the first half of next year.

As we said before, we mentioned that it was a third of our bids. We're seeing incremental growth on top of what we had. So, prices coming up and growth is happening on the intermodal side. Diane Huang - Morgan Stanley & Co. LLC: Okay, got it. So, it sounds like you think the impact from ELDs will be more gradual over the next six or 12 months rather than an immediate impact following April 1.

Yes.

Absolutely. Diane Huang - Morgan Stanley & Co. LLC: Okay. And then, quick question for Terri. Last quarter, I think you guys called out about $6 million to $7 million of onetime-ish cost that would be in the first quarter. Just wondering if you can quantify if you had any of those costs in 1Q, because when I look at 1Q's costs, excluding transportation, it was much lower than the guidance of $104 million to $109 million.

Oh, yeah. The $6.1 million you're referring to was onetime cost in 2017. Is that what you're talking about, on the $6.1 million of onetime cost? And then, you're right that our guidance was higher on our costs and expenses than what they came in at for a couple different reasons. Number one, we expected our head count to be up and it's actually down 21 people, as I mentioned. Number two, Mode's agency commission were down about $1 million from what we projected because gross margin was also down from what we originally projected in the first quarter. And then, number three, our IT spend was about $1 million less than we projected in the first quarter. Diane Huang - Morgan Stanley & Co. LLC: Okay. Yeah. I was referring to, yeah, the bonuses, the restricted stock and like the IT spend, but it sounds like those changed.

Yes. Diane Huang - Morgan Stanley & Co. LLC: Okay, great. Thank you very much.

Thank you.

Thanks, Diane.

The next question in the queue comes from Matt Brooklier from Buckingham Research.

Hey, thanks. Good afternoon. So, I had another driver question. In terms of market tightness, is there a difference between the dedicated driver market and the drayage driver market or are they equally as tight right now?

They certainly are both very, very tight. We do think that – it's obviously when you take over a fleet from another carrier, it's a lot simpler because you have an automatic driver base that obviously likes the business, likes the way it's operated. But we have actually – we were kind of staying level set, if you will, with our intermodal drayage drivers. And we have changed our recruiting. We've added recruiters and we have actually, the last several weeks, are showing very, very positive signs of adding on to the intermodal driver fleet. No question that the dedicated is ongoing and we're thinking that the total for this year that we'll add to need a total of about 400 drivers for both Hub Group Dedicated as well as Hub Group Trucking, and so, when we think that those are very achievable.

Okay. And then, can you talk to driver wages, where those are trending in the quarter, where you think they're going to land for the year? A couple of your competitors have talked to driver wage increases that kind of commensurate with the pricing that they're getting right now but would be curious to hear your opinion on the topic.

Yes. We did increase our driver wages in February. We've also changed some of the structure of how we pay drivers, particularly within intermodal, to make it more attractive. But I would agree that by the end of this year, they're very likely, depending upon the geographic region, maybe additional increases that we'll be taking with increasing our driver wages. And it's really down a region by region basis that we look at it. So, there's no question, one of the key assets is certainly the driver at this point in time.

Okay. And then, just switching gears, you mentioned there's some end markets, some industries that you're not currently in. What are some of those markets that potentially you'd like to get some exposure to and I'm assuming you would potentially do that through M&A?

Yeah. Matt, I think what we're actually looking more towards adding on, if you will, with the existing business lines. When I talk about with Unyson, we're looking for a transportation management solutions company that may offer different verticals. As an example, we're not very big in the refrigerated space. We're not very big in the industrial space within logistics. Those would be adding value to us because as we look at it, we do like the businesses we're in and we want to be very deep in those businesses. With intermodal, we're the second largest player. With truck brokerage, we want more depth.

Yes.

With logistics, we want more depth. And the same with dedicated, we'll grow that organically. So, that's what I was referring to, was actually looking at different business verticals to expand into with some of our existing products.

Okay. That's helpful. What about final mile?

We've looked at it. We've talked about it. I think it's our belief that those that have large infrastructures that would be costly to rebuild are better positioned to do that than us. That could change. But we have not found an acquisition target that, in fact, we think would put us solidly enough in that space that would be defensible longer-term.

Okay. That makes sense. That's all I got. Thank you.

Thank you.

Thanks, Matt.

The next question in the queue comes from David Ross with Stifel. Your line is open. David G. Ross - Stifel, Nicolaus & Co., Inc.: Thank you. Not going to take up too much time but appreciate you squeeze me in. Truck brokerage, you mentioned, is a hard market right now. How do you guys find capacity? You're a decent size broker. You're not only competing into the other brokers for the truckers. You're competing in for other shippers or truckers. What has allowed you to find your customers' freight and keep carriers or increase the carrier base?

Well, we've always – this is Don – we've always been different in the brokerage space with regards to how we went to market. We generally have around 150 to 250 carriers that are really the go-to folks that service our business. We've got 35,000 carriers that are under contract with us. But at the end of the day, what we've been able to do is leverage that relationship with those carriers to drive performance. The other part of it where on the truck brokerage side is to leverage a greater amount of carriers on a transactional business which, as you know, is the spot side of the business, which has been growing rapidly for us. And as we try to grow more and more into that space to get more and more load boards when capacity gets tight, we got to lean on our carrier base. So, we've been loyal to our carriers since we've had brokerage and we've been able to develop those relationships. So, we look at brokerage again in three stools: one is transactional, one is contract and one is projects. And when we're selling to a customer, we're selling those three products to them. David G. Ross - Stifel, Nicolaus & Co., Inc.: And then, just real quick on dedicated. It's a fairly new business line for you all but you look like you're having success in it so far. What do you view as the target margin for that business or target operating ratio to allow for the good, safe product that you want to provide your customers?

Yeah. As Dave and Don both mentioned, we're going to carefully ramp up on this new business and make sure we do it right and carefully. So in the long run, we target operating ratios in dedicated similar to what our competitors have, which is the mid to high-single digit. David G. Ross - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

Thank you.

Thanks, David.

There are no further questions in the queue at this time. I'll turn the call back over to Mr. Yeager for final remarks.

Okay, great. Well, thank you for joining us for our first quarter earnings call today. As always, if there's any questions, further questions that you like to ask Don, Terri or I, please do not hesitate to call us. Have a good night.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your phone lines at this time. Enjoy your evening.