Hello, and welcome to the Hub Group First Quarter 2021 Earnings Conference Call. Dave Yeager, Hub's CEO and Phil Yeager, Hub's President and Chief Operating Officer and Justin Martino Hub, 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 disclosures in the company's Form 10 ks 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, Dave Yeager. You may now begin.
Good afternoon, and thank you for participating in Hub Group's Q1 earnings call. I'm joined today by Phil Yeager, Hub's President and Chief Operating Officer and Jeff DeMartino, Hub's Chief Financial Officer. On April 19, Hub Group celebrated the 50th anniversary of Parents starting the company in a one room office over a flower shop in Hinsdale, Illinois. Over the decades, thousands of people have worked to ensure that Hub grew and prospered. My thanks go to each and every one of them for their contribution to position Hub for future success.
On the conditions that will continue to benefit our customers. The macro outlook remains favorable with GDP growth of 6%, Strong retail sales and historically low inventory to sales and strength in imports. On the supply side, the outlook for truckload capacity continues to be constrained due to a shortage of drivers, issues with truck production, rising insurance expenses and driver of regulatory changes. We believe that the combination of strong demand and a tight supply of transportation capacity creates a positive pricing environment that will be partially offset by increased costs. With that, I'll turn the call over to Phil to review our business lines.
Thanks, Dave. Congratulations to the entire Hub Group team on 50 years of success through our focus on service, innovation and integrity. I Officer. I'd also like to congratulate our Chairman and CEO, Dave Yeager, on his 25th year as our CEO and his 1 hundredth earnings release. His drive, determination and steady handed leadership has enabled us to be successful for 50 years and will set us up to continue to succeed for 50 more.
For the quarter, we continue to prove the strength of our model through a dynamic market, delivering strong results with significant improvement opportunities ahead, in particular, in For the quarter, intermodal revenue was up 6% and volume was up 2% year over year. Transcon volumes increased 9%, Local West increased 11% and Local East declined 11% year over year as the impact of weather and network disruptions impacted volume. Gross margin as a percentage of sales declined 190 basis points year over year as our Intermodal segment was most impacted by the weather disruption with a 6% volume and a $3,000,000 gross margin impact in the quarter. The dislocation of the network created inefficiencies Leading to increased repositioning costs and outsourcing of drayage, which along with slower fleet turns could not be offset with our higher pricing, Surcharges and enhanced productivity of our trucking fleet. As we look ahead, we see robust demand through the end of the year along with a continually improving pricing environment.
We continue to invest in our fleet by adding an additional 500 containers On top of our previously announced 2,500 order, which along with our purchase of 3,300 containers last year Investments in our trucking fleet will allow us to meet the strong demand for our service and reduce our costs. 180 basis points year over year. We executed on gross margin improvements in our outsourced logistics segment, which along with new business onboarding, negated losses of business from last year. This improvement was offset by customer mix, weather and cost increases in CaseStack. We are addressing this through several internal improvement initiatives that we will see benefits from throughout the remainder of the year.
NSC has been an extremely successful integration. We are executing on our cost synergies and are onboarding new wins from hub customers, while continuing organic growth from existing clients by leveraging our great service. We have a very strong pipeline across logistics Brokerage performed well with 30% revenue growth on a 6% decline in volume as well as a 110 basis point decline in gross margin as a percentage of sales. We continue to support our clients in the spot market as our mix moved to 51% contractual, 49% spot during the quarter. We grew our LTL volumes and are seeing strong wins through our enhanced value proposition.
Lastly, we have made great strides in our dedicated business. We have enhanced our operational discipline and go to market strategy, which resulted in 11% revenue growth and a 90 basis point compression in gross margin as a percentage of sales. The enhancements we continue to make to our processes, Cost Structure, Systems and Management team will allow us to further improve our service products and ensure we continue to enhance our returns in this service line, which are now at much improved level. With that, I will turn it over to Jeff to discuss our financial performance.
Thank you, Phil. We are pleased with our Q1 performance despite the challenging weather impact during the quarter. Revenue grew in all of our service lines with total company revenue up 10%. Gross margin was $109,000,000 or 11.8 percent of revenue, With quarterly costs and expenses equal to 9.2% of revenue as compared to 10.1% last year. Increased primarily due to incentive compensation expense, partially offset by lower salaries and lower headcount.
Our non driver headcount is down by 9%, excluding the impact of the NSD acquisition due to our efficiency and technology initiatives. Q1 general and administrative expenses declined by over $7,000,000 as compared to the prior year due primarily to lower professional fees, lower travel expense and higher gains on sale. Hub Group's diluted earnings per share for the quarter was 0 point 5 $1 This compares to 0 point 4 $0 of diluted EPS and ended with $226,000,000 of cash on hand. We continue to have solid liquidity and low levels of net debt. We view our capital structure as an asset and our priority is to reinvest in the business through capital expenditures and strategic acquisitions.
We are raising our 2021 EPS expectation to $3.20 to $3.40 Up from 310 to 330 that we announced in February. For 2021, we expect revenue will grow in the mid teens percentage range With intermodal volumes up high single digits and revenue growth across all of our business lines. We forecast gross margin as a percent of revenue of 12.5% to 13% for the year, increasing throughout the year as we progress through the bid season and realize rate increases. Our outlook is based on the assumption that positive economic conditions will continue to benefit consumer demand and that low customer inventory levels will drive the need for restocking. For the year, we expect cost and expenses of $365,000,000 to $380,000,000 For Q2, we anticipate cost and expenses will range from $92,000,000 to $94,000,000 and will continue to increase throughout the year as we book more variable compensation expense in line with growth in overall profitability.
We expect our tax rate to be 24% to 25% for Our 2021 capital expenditure forecast is $165,000,000 to $175,000,000 We increased our container order for 2021 and we'll be adding 3,000 containers, which will result in net growth of 2,750 after retirements. We will also be adding 150 refrigerated containers. We've ordered approximately 700 tractors, the majority of which are for replacements of older units and the remainder will support growth in our drayage and dedicated fleets. Dave, back to you for closing remarks.
Thank you, Jeff. Our outlook for the remainder of 2021 remains very optimistic. Demand is strong in all of our business lines as our customers continue to need cost efficient solutions that offer high levels of service. With that, we'll open up the call to any questions.
Thank you. We will now begin the question and answer session. And our first question comes from Justin Long from Stephens.
Thanks and good afternoon. So I wanted to start with a question on weather. You mentioned The volume headwind in intermodal and Phil you pointed out the $3,000,000 of costs as well. But all in, do you have an estimate for the EPS headwind from weather in 1Q? And then Jeff, would love to get Any thoughts around Q2 and what's baked into the guide from either a margin or EPS perspective?
Sure. Yes. So Justin, yes, great question. I think I highlighted it in intermodal first because that was the most impacted business unit that we had. We had 3 days of intermodal network shutdown in our Western network and Obviously, some challenges in the eastern portion as well.
So that was really the largest impact. We did see some benefit In the truck brokerage side, where we were able to maintain some of the freight that was delayed or needed support In the spot market, so that certainly was an offsetting benefit. CaseStack had some headwinds as well, but I think really wanted highlighted in intermodal because that's where the biggest challenge was. As you look at volume, we were up 6% in intermodal in January, and that's Not adjusting for business days, down 8% in February and then up 8% in March. We've seen that trend Improve in April with sequential improvement there, which came in around a 19% volume growth.
Just wanted to make sure I highlighted that and Jeff if you want to hit on the numbers from the weather impact.
Sure. No, I think you've kind of
got it most of the pieces there, Justin. It's kind of low to mid 2 is probably net After you capture the pieces that Phil talked about.
Okay. And in terms of the Q2, Jeff, any color you could give there?
Sure. Yes, we obviously faced a pretty easy comp relative to last year, but no, we expect we'll have sequential growth over even over Q1. Phil mentioned the April automotive volume growth up 19% year over year, just sequentially April from March up 4% On a business day adjusted basis. So we expect we'll continue to grow based on the demand profile. And we're starting now With about 40% of our volume repriced, starting to get some of the benefit of those price increases and obviously more to come, but Another 25% or 27% in the second quarter will be repriced as well.
Okay, that's helpful. And second question is Kind of more bigger picture, UP just had their Investor Day. There was clearly more of an emphasis on growth. The commentary seemed to suggest that Intermodal would be leading the charge on that front. Would it be fair to say that you've seen an inflection point In that relationship as it relates to both growing together and providing better cost visibility.
And if that is the case,
Hi, Justin. This is Dave, and I'll leave the last part of it to Jeff and Phil. The relationship with the Union Pacific, I don't believe, has ever been better or stronger. We're working very collaboratively. And so it's really a very, Very strong collaborative environment whereby we are focused on growth and investing in our intermodal product, and they certainly Are encouraging us and supporting us in doing that.
So we've never been in a better position with both of our rail partners. And I think that this will really act as a major driver for us to be able to continue to grow in the future.
Yes. And this Phil, I would just add, I think we have a really constructive contractual framework at this point that helps with that relationship. That's been Those are great growth avenues for us. So we love seeing that and being able to bring new lanes to our clients. Colton, in particular, Officer.
Their distribution center, so really a great opportunity for growth there. As we look ahead in intermodal, think you have a driver shortage, you have tight truck capacity, delays in delivery of trucks. I don't think that's going anywhere anytime Officer. You also have escalating fuel prices and I think a great backdrop with larger corporations with their focus on Carbon emissions and lowering that carbon footprint and we think intermodal is a great way to do that. So all of the kind of Qualitative and quantitative factors are pointing towards kind of prolonged growth for intermodal.
And so that is a big part of why we're going to continue to And make sure we're generating a strong return as well.
Okay, great. I'll leave it at that. Thanks for the time.
Thank you.
Our following question comes from Scott Group from Wolfe Research.
Hey, thanks. Afternoon, guys. I want to start on gross margins. So Given the pricing environment just keeps getting
better. Yes, we didn't guide specifically for Q1. I think we said we'd be up from our Q4 adjusted So I think we're on track. We think we can get to the upper 12 up to even up to 13. As more of that pricing takes hold, we are seeing very strong pricing dynamics and that has to work its way into our Volume and revenue as businesses reprice.
So we expect to continue to stay on that path throughout the year.
If I look back in 2018, the last time we had that really good pricing, you started the year at an 11%, Ended the year nearly 14. If we're starting the year now at almost 12, is it realistic to end the year perhaps 14%, maybe closer to 15% on gross margin?
I'm not sure we would go quite that far.
I think With a strong pricing environment this year and if conditions kind of stay the way they are, we certainly think that would be possible into next year, but I'm not sure we're going to end Quite that high for this current year.
I think a lot of it also depends on peak. We're getting peak plants set up right Now feeling very good about the plans we're getting in place. So that certainly gives us some upside I think versus Our forecast that really comes to fruition. So I would just highlight that as a potential upside. And based on what we're hearing from clients and the We're anticipating a really strong West Coast peak season.
Okay.
And then just lastly, do you have thoughts on Reemergence of AB5 and what the potential impact could be?
Hi, Scott. This is Dave. We are watching that very closely as obviously we do use a fair amount of independent contractors. So it's something that definitely we're making a lot of different plans in case certain actions are taken, particularly out in California. We do have a large company driver fleet in California, but it doesn't support 100% of our needs.
So it's something that We're working through just in anticipation that the legislature, in fact, will continue down the path they're going.
Any way to sort of ballpark what a cost impact could be, if any?
I think that would be pretty tough to quantify. Hi. Obviously, the independent contractor model in the gray age network is very important, but we also know that our And be successful regardless of the overall regulatory environment, whether that's shifting to Done a great job of building out an infrastructure ourselves where we've taken more share of our own drayage out there and have infrastructure going forward to Support more volume. We're at that, I would say, in a very competitive driver market, that is one of the markets where we've been very successful in adding drivers. I don't see that there is a cost impact because I think our vendor base will continue to navigate through the regulatory environment very
Our next question comes from Todd Fowler from KeyBanc Capital.
Hey, great. Thanks and good evening. I apologize if I missed this, but I think that Last quarter, you talked about expectations to realize pricing in the mid to high single digit range on the intermodal book. It sounds like you're about 40% implemented. Do you have updated thoughts on pricing?
And can you speak a little bit to where contract renewals are currently?
Yes. I would highlight this is Phil. I would highlight that we after the weather disruptions, we saw a Even greater inflection point in pricing, I think with the chip shortage and continued delays in new production of of vehicles as well and the continued driver shortage that the pricing environment has continued to improve. We're renewing at double digits At this point, I anticipate that's going to continue.
Okay. That's great. Thanks, Phil. And then Just a follow-up on your comments to Justin about the environment, the constraints and kind of looking at the environment a little bit more longer term. You're taking up the container fleet additions here this year modestly, expectations were high single digit intermodal volume growth.
Is this an environment where I don't want to say you're turning down volume, but there's an opportunity to even get more volume? And so just given some of the constraints too on The ability to add capacity that there could be more of a tail where we see sustained growth on the intermodal volume side for a couple of years at
The renewals that I was just referencing, we are seeing growth as well to that. I think the conversion Intermodal is continuing. Customers want to lock in capacity. They don't want to have another piece where they're buying in the stock market. And I think that will continue through the remainder of the year and into next year.
I think that the weather, We certainly missed volume opportunities and the recovery from that took us a little longer than I would have liked. We had a 15% slower fleet turn in the quarter. A lot of that Upgrade capacity to dig out quickly. So I think all those factors in April and now in May have trended positive. Capacity even on top of the orders that we've done.
We think that there will be we haven't modeled this, but we think there is upside in our turns in the back half. And that could create incremental capacity to handle more demand than we are today. But certainly, the demand And as we can create capacity, our deliveries will be taking place really from June going forward, which will Really benefit us earlier as well. So very bullish on our ability to take more.
Yes. Okay. That sounds good. That makes on the Velocity plus the container additions helping the ability to handle more volume. Thanks a lot for the time and congratulations on the milestone this year.
Thanks, Todd.
Our next question comes from Elliot Alper from Cowen.
Great. Thanks for taking the question. I wanted to see on intermodal. You talked a lot about volume growth. I guess, how should we think about Intermodal in the Q2 and for the full year on a margin perspective and kind of what may be baked into guidance?
And then any other color the rails are telling you about congestion right now?
Sure. This is Jeff. I can speak to the margin improvement. Much like we saw kind of Q4 into Q1, we expect Continued expansion of the margin in Limon in particular. It will increase throughout the year again More and more of our business gets repriced, for us pricing is a very big lever to our gross margin percentage.
So maybe slight improvement going from Q1 to Q2, but we'll continue to ramp up throughout the course of the year. That was one of the key drivers in our The increase in our guidance for the year was we anticipate pretty strong intermodal pricing throughout the course of the year. We do have some costs that come into play as well, particularly in the short term, but I think we'll see that margin expansion throughout the rest of the year.
Yes. And I would just add around from our rail discussions, we're certain and we're seeing it in the numbers. We are seeing improvement in I think part of that is getting past some of the weather events, making sure that congestion is down and that Also from a chassis availability perspective, we're seeing improvement there and that's in part working with our clients to help in unloading times and making sure that we have The capacity available to pull the brakes. So all those factors are heading in a positive direction and we anticipate really heading into peak Officer to be in a much better position and so we are seeing the sequential improvement.
And then secondly, at the UNP Investor Day yesterday, they talked about some drayage operations, Investing and leveraging autonomy in the future. Curious if that's something you'd consider in the future? Sure.
Yes, I think we're going to continue to experiment with different technologies. So we actually just launched Electric Vehicle pilot, I was really excited to take place in it. I think that's a great step for us in the short haul configurations that we There's some wave and infrastructure cost challenges that need to be overcome, but really exciting step there. I think in A very closed or confined sort of area, the autonomous technology can be applied and that's I don't think you're going to see that in long haul trucking anytime soon, nor in short haul. I think you'll continue to have Officer.
A driver in the truck, but could have a much safer vehicle, which I think would be a big win for everyone. So, but in those confined sort of terminals, I think there is an opportunity to really Optimize Technology and that's something that we're once with UP and other partners continuing to research and look for opportunities
Our next question comes from Bascome Majors from Susquehanna.
Thanks for taking my questions here. You made a comment earlier about sequential increases in the cost and expenses Is that just leaving some cushion in the cost guidance in case revenue and potentially income guidance tends to move higher? Just trying The cadence of those accruals and how they work. Thanks.
Sure. Yes. And we talked about this a little bit on last quarter's call because in 2020, we did not meet The criteria of paid bonus. So we do we are anticipating and budgeting to pay bonus in 2021. We pay for performance And we accrued bonus as we start to recognize more and more profit throughout the year.
So we're starting off low And we anticipate continuing to build that up throughout the year as our gross margin and other operating profit contribution In supportive of the level that would allow us to pay a bonus for the year.
Thank you for that. And Back to 4Q on the exit rate. I mean, is there an opportunity for you to be above your kind of 5% long term target either seasonally in the Q4 or exiting on a run rate assuming things stay that way into early 2022?
Yes, we certainly think it's possible.
We've done a really good job, I think, in the last 24 months or so to take out operating expenses And really improve the cost structure through efficiencies and technology and we're I think you saw in the Q1 numbers, we're able to leverage those expenses and we anticipate to Continue to do that and we'll add back some headcount and incur some additional costs as we grow. But with mid teens revenue growth, We certainly don't expect to be growing our operating expenses at that rate, so we'll be leveraging those costs. And we could be exiting the year, That 5% range could take place in the next year, a little bit of a swing based on how strong pricing is at the end of the year.
I think we met I might have mentioned the renewals that are coming in. We've certainly seen an improvement in the pricing environment, but we're also coming off of a lower base where a We're also coming off of a lower base where a lot of the customers that bid at this time last year got a benefit from Really concerns around what was going to happen with the pandemic, right. So the opportunity to bring those rates up and back into line with market is a large percentage swing. Obviously, we've maintained the commitments. I think the other swing factor that we have is once again peak and the surcharges that We'll be out in the market to provide capacity.
Obviously, we have additional costs to make sure that the capacity is available, but We think that that will be higher than last year as well and give us some upside to potentially be on a run rate on that target. What I like about some of these renewals that are coming in now is that pricing will be effective through the first half of or first three quarters Next year, which will give us a benefit through really the first half of twenty twenty two.
Last one on a similar topic, the Rail inflation, can you talk a little bit about how much visibility you have into 'twenty two at this point and how you think that will compare to what you're feeling this year on the PT side. Thank you.
Yes, we have very good visibility and anticipate it will be similar to this year,
And the next question comes from Tom Wadewitz from UBS.
Yes, good afternoon. Wanted to ask you a bit about the, I guess, the fluidity and constraints that you see in the system. What are the most important pinch points and how do you think that they could potentially alleviate as you look forward, I guess maybe East West rails and how much grade is a constraint at the present time?
Sure. So this is Phil.
We have seen, obviously, during the And at the beginning of the year, transits were elongated on the rail side. The Unloading times were up, which was constraining capacity and great capacity was at a significant premium given some of the surges that were out there. We've done a nice job, I think, of making sure that we are sticking with our rail partners and understanding where they have congestion both at the terminal level as well as online and making sure that we're We have done, I think, a very good job there. And we've done a great job, in my opinion, of continuing to align with our 3rd party carriers And ensuring that we have available capacity. There are some constraints on the drayage side Night and weekend sort of work, right?
I think that's where we've seen constraints as we move to a more 20 fourseven supply chain. That has certainly been something that has been a challenge, but once again working with our drivers and our 3rd party partners And then lastly, our last year, our customers and early this year were really struggling Certainly a constraint on capacity, a constraint on chassis availability, which downstream impacts terminal fluidity and online fluidity as well. As The vaccines have been rolled out more broadly. We've seen a significant improvement in folks coming back to work. Something that is still out there and I think this is a challenge for all industries is the continued government subsidies where that might not incentivize work long term.
Good thing for the consumer, but not necessarily for our unloading time. So that is something that we're Closely monitoring with our clients every day. And we once again have seen significant improvements from where we were In the Q4 and even the Q1 of this year. So all of those, I would say, are heading in the right direction. I don't see a negative out there for us.
Just want to make sure that we down that path and I think we'll be in very good shape to have a strong peak.
Great. Thanks for the detail on that. What about I think the numbers you offered, I didn't catch them all in terms of like TransCon East and West, but I think the East number was down a lot for intermodal Volume and WES was up. Is that something you think would normalize or is that big Spread and volume performance likely to persist through the year.
That was really something to With our bid wins, we did win a lot off the West Coast and then saw significant demand even beyond that. So given the commitments that we Push more capacity to the West Coast, but we are seeing as the year progresses more of a normalization on those growth rates And should continue to see that. For us, a big focus is making sure we take out empty repositioning costs, trying to create more balance in the network. And through growth in the local East, we can have more of that. Now I don't see the demand on the West Coast really stopping anytime soon Or at least in 2021, but we have been successful through bid season in creating more loaded inbound into those markets, which will benefit us In available capacity and cost going forward.
So would you think yeast volumes are up Or that's just a function of repositioning containers out
of the East?
I would say East volumes will trend upward on a year over year basis Going forward, that would be my but maybe not as a percentage that we're continuing to grow off the West, but we did Obviously, our growth last year was mostly off the West Coast. So we'll have somewhat easier comparable in the East. So I would anticipate as you look at the kind of remainder of the year, you'll see Eastern growth from us.
Great. Thanks for all the perspective.
Our next question comes from Jon Chappell from Evercore ISI.
Thank you. Good afternoon. Phil, we're approaching about a year now anniversarying some of the customer losses that you noted in logistics brokerage and dedicated. You said in your prepared comments that logistics you are onboarding a lot of new customers that you're offsetting customer losses. But where do you sit with all three of those businesses In kind of resetting the customer base and getting it to the point where your capacity can handle efficiently.
Yes. So I would highlight a few from a productivity perspective, maybe I'll go there first. So in our brokerage, we had 8% productivity improvement year over Officer. And we've really improved productivity 30% since the implementation of our brokerage workbench. So really pleased with that.
In logistics, in the Q1, we had a 28% productivity improvement, which is great and that is largely attributable to changes we've made to our making sure we have the right customers and that we're really pushing automation in the business. So all of that has been very positive. On the dedicated side, I really pay attention to our revenue per truck per day, which was up 12% year over year in So as we look at those items, the increases we're continuing to get in dedicated and the improvement in operational processes, we're very bullish on Our ability to continue to improve margins there and bring on profitably new wins. There's a lot of demand out there for dedicated. So we're actually being very selective And what we are bidding on and where to ensure that it's going to meet our return criteria.
In brokerage, given how efficient we've become, I And the investments we're making continually into technology, into working with our carriers more proactively, I feel We're going to continue to be able to grow there, but we're also growing our inside sales force, which is going to allow us to sustain growth even as And then lastly, in logistics, our pipeline across our outsourced transportation management, Much better operating margin wins coming on in our outsourced transportation management segment. CaseStack, we're bringing on new wins, some bigger customers, but we need to focus on the small ones as well that have a little bit of a higher profitability. And then lastly, just with NSD, the cross selling to our hub clients Has been great. It's opened up doors that the NSD team could not have gotten into before. And we've improved the pricing structure by removing layers of margin That were in there before to be more competitive and so that's bringing on new wins, which is allowing us to beat the forecast on growth.
So I feel like the non intermodal segments all have great upside and we're in a very stable and strong position right now.
That's great, great input. Thanks, Phil. And I was going to ask about the cross selling in NSD, but since you addressed it, let me ask another question. It's pretty noticeable how much your cash balance continues to increase. And obviously, you guys have a track record of making some well timed acquisitions.
I'm sure the pipeline is full and I'm sure you're looking at a lot of things right now. But just curious with the tightness across the entire supply chain, I would think maybe the valuations are also getting a bit stretched. So is there any general comments maybe Dave can make about valuations as you look at Inorganic Growth. And if they're just not there right now, you're not willing to chase anything, is there any other uses of capital that you would think about in
I can answer the one part. I think Jeff would be more qualified on the overall valuations. But we And honestly, we do believe that the most efficient use of the cash is to continue to expand the business into a variety of other verticals while investing in our more asset based or asset intensity businesses of intermodal and dedicated. Jeff, did you want to?
Sure. Yes, like Dave said, we've got some pretty stringent criteria. We don't feel like we should be chasing every Last dollar when it comes to the acquisition, but we are pretty selective. It has to meet the criteria and then when we do find something we like, we You know, do spend a pretty good amount of time on diligence and making sure there's a cultural fit. You know, the acquisitions we've done, I think have been at pretty reasonable Valuations, just given the growth profile, both what that business has been doing on its own, but also probably more importantly is what we can do With that business underarm, we've had really good success with both well, actually in all three of the recent acquisitions in terms of the cross sell, Nonstop, we're very, very pleased with that business is doing very well even with its existing customer base, but also The opportunities that we're able to bring to bear with our customer base and our sales force as well.
So we can kind of make that work if the potential is there, We're not going to certainly chase and go after a highly competitive auction type situation.
Officer. Our next question comes from Brian Ossenbeck from JPMorgan.
Hey, good afternoon. Thanks for taking the question. One of the other Carbon Footprint. Maybe you can just give a little bit more color into if that's actually happening on a regular basis or still part of the conversation, How that's been working coming to the bottom line and actually making those conversions? And then separately, can you talk about the spread in between truck and rail
Our rail partners do. Last year, for example, we use of our intermodal Products saved about 1,600,000 metric tons. We're about 70% more efficient than over the road. And increasingly, we're hearing more and more customers We request that and look for that type of support as they're trying to achieve their own environmental goals with respect to their carbon footprint. On your question on the spread between rail and truckload, I have that here.
So in the West in TransCon, north of 60% on a per mile basis, intermodal contract versus truckload contract in the East, And on low double digit percentage gap.
And I would just highlight on intermodal versus Truck pricing, I think that gap will close pretty dramatically as changes are put into place in renewals. But There is a premium on capacity and service right now, and so that's certainly something we're looking at. And we have a good understanding, I think, of where And where we can price, so that will be important going forward.
Okay, got it. And just on the follow-up on the ESG, is it something that shippers are viewing as it's nice to have and get The support for it, I guess, credit in their reporting, or do you feel like it's starting to be monetized or quantified in some way that you're seeing it actually be the trigger for new business. It's probably pretty hard right now considering capacity is so tight. But I guess how is it coming up in the conversations maybe now versus the last 12 months and where you see it going?
Although I think that varies by customers. There are some customers that are taking it extremely seriously and really making a conscious decision based Obviously, cost is always going to be a factor as well, right? So I think given the capacity environment, it's tough to say Whether it is cost or if it's actually the carbon emissions decision, but it is certainly a much larger factor. And once again, that's escalated, especially with a lot of the companies that we work with who are out making commitments on carbon emissions. This is a really easy way to make a lot of headway towards those goals.
So We are out selling it very aggressively. We are establishing automated reporting for our customers so that they can factor it in Their scorecard, which has been, I think, a great win in ensuring that they understand every week, They're getting value out of that and doing their part in the transportation and logistics group to help the company achieve their goal.
Our next question comes from David Zasula from Barclays.
Hey, thanks for taking the question. Maybe for Phil or Dave, just a question on big picture Drayage strategy, just as you've seen kind of a cycle of increased intermodal demand kind of coming up and the ability of your Any thought on how you want to try to reposition your drayage systems, be it like a split from company versus outsourced or Other ways to look at drayage to better position yourself for the next cycle?
Sure. Yes, I think it's a great question. So we traditionally in the past had been about 30% owner operator, 70% company and it really shifted About 60% company, 40 percent owner operator at this point in our own Draves network. We're being much more successful in adding company drivers. I think we have a Great value proposition with new equipment, great benefits, great pay to be out in the marketplace with.
We are continuing to add independent contractors in the right markets, where we think there is a sustainable model there though. So for us, we do believe that continuing to invest in the fleet, putting capital towards that is going to be the most cost effective and highest service solution for us. But we also maintain extremely strong partnerships with outside capacity and third parties that We've been working with for many years and we'll continue to work with. I don't have a set percentage in my head. For our fleet, I think we want to get to 80% company driver over the next several years.
But as we grow, we need to be nimble Our ability to take on more third party or contract that as the market changes, which is going to allow us to maintain margins more effectively Throughout cycle. So that would be my view. We don't really have a target in mind, but do want to continue to invest
As hot as it is, you mentioned the 5one-forty 9 split. Are you looking to be a little more aggressive into the spot market or try to take the contract percentage up to try to capture the current market.
Yes. So we traditionally run Somewhere between 70% 80% contract, sometimes even north of that. So this is a little abnormal for us. Part of it is some of the changes we've seen. Some lower projects, long term project freight, as well as some lower logistics volumes, which fall into our contractual Bucket.
So long term, a lot of our customers do annual RFPs and the spot opportunities Are going to be outside of that. So long term, I don't see this as the split. I think it will move back closer to that sort of 60% to 70% contractual On a longer term nature, but that I think that this year It's been an aberration in our stock market exposure, but we're certainly going to continue to step in to support our clients.
Thanks again.
We have no further questions. I'd like to turn the call over to Mr. Dave Yeager for closing remarks.
Okay. Well, again, thank you for joining us on the earnings call today. As always, Phil, Jeff and I would be available for any questions if you have Officer. Thank you, again.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.