Hello, and welcome to Hub Group's Second Quarter 2020 Earnings Conference Call. Joining me on the call are Dave Yeager, Hub's CEO; Phil Yeager, Hub's President and Chief Operating Officer; and Geoff DeMartino, Hub's CFO. Any forward-looking statements made during this call are based on the company's best judgment about future events. These statements can be recognized by words such as believe, expect, anticipate, and project, along with variations of these terms. Please review the cautionary statements provided in our release. Additionally, refer to the disclosures in the company's Form 10-K and other SEC filings for factors that could lead to actual results differing significantly from those projected. This conference is being recorded. I will now hand it over to your host, Dave Yeager. You may begin.

Good afternoon, and thank you for participating in Hub Group's second quarter earnings call. I'm joined today by Phil Yeager, Hub's President and Chief Operating Officer; and Geoff DeMartino, Hub's Chief Financial Officer. I'd like to begin the call by recognizing Hub's employees who have performed masterfully for our clients during this pandemic. Our office staff continues to operate effectively, while our drivers continue to be on the front lines, delivering essential goods in support of our valued customers. We continue to support our drivers and staff with necessary PPE supplies as well as training to ensure that they remain safe during the pandemic. As anticipated, the second quarter proved to be very challenging as revenue decreased by 15% year-over-year. All of our business lines declined in revenue due to soft demand, coupled with pricing pressures. We did, however, see our intermodal volumes improve sequentially, with July exhibiting strong demand in certain regions as businesses replenished depleted inventories. With that, I will turn the call over to Phil, to review our business lines.

Thank you, Dave. I would like to start by echoing Dave's remarks and thank our entire Hub Group team for their unwavering commitment to our customers, communities, and each other. We've seen an improving demand environment since April, and we are maintaining focus on our key priorities of differentiated service and an improved cost structure, which will drive long-term growth. In April, we reviewed our top 100 customers, which accounted for 80% of 2019 revenue, and determined that over 20% were either closed or significantly impacted by the pandemic. Today, over 90% of our customer base is reopened, with the remainder still somewhat impacted as their facilities continue to ramp back up to full production for serving end markets that are still affected by closures. I will now discuss our business unit performance. Intermodal volume declined 8%, and gross margin as a percentage of sales compressed 220 basis points in the quarter as our improved street performance could not offset a competitive pricing environment, lower volumes, and rail cost increases. Local west volumes declined 3%, Transcon volumes were down 7%, and local east declined 11% as we participated in a competitive truckload and intermodal environment, which was amplified by the pandemic. However, volume improved throughout the quarter and was up 5% in June. We have seen an improvement in demand to start the third quarter and have performed very well in bid season. Due to our execution during bid season, we plan to grow our fleet by 3,500 containers and over 200 tractors. The continued strength in rail service and our enhanced drayage operations are positioning us well to provide superior service to our customers as demand returns. Logistics revenue declined 15%, while gross margin as a percentage of sales improved 190 basis points year-over-year. We had strong margin enhancement and also saw growth in CaseStack. But we had several customers that were significantly impacted by the pandemic, which drove our decline in revenue. We have had several new wins in onboardings during the quarter, and this was partially offset by a small number of losses with customers that were negatively impacted by the pandemic. We are focused on profitable growth and have an excellent pipeline. Our team is becoming more productive through our new structure and technology investments, which is positioning us to grow while we provide excellent service to our customers. Brokerage volume declined 12% for the quarter, while gross margin as a percentage of sales improved 100 basis points year-over-year. We have lower spot volumes in LTL and truckload. However, volumes improved sequentially throughout the quarter. This trend has extended into July, and we are having success in selling new contractual awards. We have successfully improved our productivity through our new operating structure and technology, while providing superior service levels. Dedicated revenue for the quarter declined 12%, and gross margin as a percentage of sales improved 200 basis points year-over-year. We have supported a surge of demand from several of our retail and consumer products customers and successfully onboarded several new profitable wins. These wins helped to offset our focused effort on shedding unprofitable business. We are seeing the impact of our focus on improving profitability while maintaining our great service. We still have ample opportunity for improvement, but we are pleased with our progress. I will now hand it over to Geoff to discuss our financial performance.

Thank you, Phil, and hello, everyone. Our business performed very well in the quarter despite unprecedented macroeconomic conditions. We saw revenue improve throughout the quarter, and gross margin as a percent of revenue expanded for all four service lines compared to Q1. Q2 gross margin was 13.8% of revenue, up from 12.5% in Q1. Our results demonstrated the resilience of our operating model as we generated over $70 million of net cash from operating activities and over $52 million of EBITDA during the quarter. We continue to exhibit strong cost control. Our non-driver headcount is down 14% over the last 12 months, and we are on track to achieve the benefits of our profit improvement initiatives. We are improving our trucking operations, driving higher utilization and lower costs and reducing our operating expenses. Salaries and benefits expense for the quarter was down by over $11 million as compared to the prior year, driven by lower headcount and bonus expense. During the quarter, we incurred $5.7 million of expense for donations of refrigerated trailers to COVID-19 emergency responders. We also spent $2.6 million on consultants who worked with our team to drive improvement in our trucking operations. This engagement is now complete. G&A costs were up $4.9 million year-over-year. Excluding the donation and consulting expense, these costs were down by $3.4 million as we reduced our spending in several areas, including travel and IT implementation costs. Hub Group's diluted earnings per share for the quarter was $0.39. This includes $0.21 of costs related to donation, consulting, and severance. This compares to $0.87 of diluted EPS in the second quarter of 2019. The decrease in earnings per share was driven by the soft freight market, including the impact of COVID-19 and competition within Intermodal and truckload, partially offset by the savings from our profit improvement initiatives. During the quarter, we repaid the $100 million we had borrowed on our revolving credit facility in March. And we ended the quarter with over $200 million of cash. We continue to have solid liquidity and low levels of net debt. For the remainder of the year, we expect to spend between $55 million and $75 million on capital expenditures, primarily to support growth in the business. We are purchasing 3,500 intermodal containers and over 200 tractors, to refresh and grow our fleet. Dave, back to you for closing remarks.

Thank you, Geoff. The second quarter was quite challenging as the pandemic locked down nonessential businesses and disrupted the lives of all Americans. But we are encouraged that we are beginning to see the economy come back with the demand for logistics services growing as businesses restock their inventories, and we expect the second half of the year will reflect improved volumes. With that, we'll open up the line to questions.

And our first question comes from Justin Long from Stephens. Your line is open.

Thanks. Good afternoon and congrats on the quarter.

Thank you.

So you mentioned that volumes in June on the intermodal side were up 5%. I was wondering if you could give us monthly volumes throughout 2Q, maybe what you're seeing in July. And then after you do that, would love to get your thoughts on bids that you've won or market share you've won during bid season. And how much of that is reflected in this pickup we've seen in June and July?

Sure. This is Geoff, Justin. By month, April was down 15%, May was down 13%, June was up 5%. And then to date, in July, we're up 8%, and we expect high single digits for the rest of the year in intermodal volume.

Great. And Justin, this is Phil. Just from a bid perspective. It was somewhat aggressive during the peak of the pandemic from a pricing perspective. We did perform very well, though, with some of our larger customers in their intermodal renewals. And those customers are performing extremely well through the pandemic, actually seeing surges in demand, and that's what gives us that confidence in continuing to invest in and grow the fleet. It is still somewhat competitive out there, but we are seeing signs of tightness and hope that that will continue, and that will set us up for a very strong 2021 bid season. But we are 71% completed on our bids at this point. Still have some larger ones to complete, but feeling very good with the results that we've been able to generate.

Okay. Great. And as you think about that volume forecast for the back half, are there any thoughts around intermodal gross margins and the progression sequentially that we could see in third and fourth quarter?

Sure. For the business overall, we anticipate that margins will decline sequentially, approaching the figures we saw in Q1. We expect to see the effects of our repricing become more apparent as a larger portion of that business becomes operational. Additionally, we are facing some rail cost increases in the latter half of the year. We plan to counter these through our profit improvement strategies, impacting both gross margins and overall costs and expenses. However, we do expect gross margins to be lower in the second half.

And just to add on to that, Justin, we are continuing to see improvement in our cost for load and productivity on the drayage side and feeling very good with those results as well. So we're going to continue to push that forward to help offset those costs.

Okay. Great, I'll leave it there. I appreciate the time.

Thanks.

And our next question comes from Benjamin Hartford from Baird. Your line is open.

Good evening, guys. Maybe just to kind of close the loop on some of these cost elements. Do you have any sense or direction where salary and benefits in G&A, some of the operating type expenses will trend in the back half of the year as well?

Sure. Yes. If you use the Q2 number as a starting point and back out the specific items we called out, which are the donation, the severance, and the consulting expense, kind of all of which we don't expect going forward. I think that's a pretty good number to use.

Okay. That’s helpful. Thanks. Dave, just interested in your perspective on what's going on right now on the West Coast, in particular, I've asked this a couple of different times elsewhere, but it seems unusual how tight it is, where we're starting to see some transactional surcharges put into place. A variety of reasons for that, but as you experience that today, in your mind, what is that set up for peak? And how concerned are you as it relates to service, rail service in particular as we move into the back half of the year?

Well, thus far, rail service continues to be very good. And so our rail partners have been, I think, an awful lot of the work they did with the PSR, I think, really did help quite a bit. And so the service, we're very confident in right now. There's no question we're seeing surges off the West Coast, very strong, some of the quickest acceleration I've seen. From the customers that we've spoken with, they do believe that this is going to go through peak that we're going to have these elevated levels of business going through the West Coast. A lot of the shifts, inventory replenishment. And again, I think that a lot of it's been sitting in warehouses, apparently on the West Coast is now being shipped in mass. And so we'll see this through August through. I would hope maybe through November, maybe beyond. But it seems as though the restocking is definitely going to take some time as inventory levels are quite depleted.

And Ben, I would just add to that. I think one of the things that we've been most pleased with from a rail perspective is the reaction times and how much more nimble our rail partners are than when we have seen these kinds of spikes in the past. So even though there can be challenges, the response times and the fixes that we're putting into place with our rail partners to support our customers are very fast and very fluid. And so we think that sets us up well to serve our clients during peak.

Okay. That's good. That's helpful. Thanks. And then Phil, maybe just to complete your thought on dedicated. Can you provide us an update on where that stands operationally? It looks like a little bit of momentum there that you talked about in the press release. When do you think you can get back to positive growth from a revenue standpoint given what the pipeline looks like and just a status of where that unit sits operationally?

Sure. Yes, we are making progress. We are certainly not where we want to be long-term, but you can see it in the numbers that we are making progress. We still have some work to do operationally and on the technology front, but once again, making strides. We are through the majority of the loss of unprofitable business, and that will start to show up in the second half of the third quarter and feel very good about that. The wins that we're bringing on, obviously, there will be some start-up costs. But long-term, we think will be a very strong business for us. And so my hope is, in 2021, we're getting to a positive growth trajectory in that business with strong margins and returns.

Okay. Thank you. I’ll turn it over to somebody else.

And the next question comes from Scott Group from Wolfe Research.

Hey thanks. Good afternoon, guys. I apologize if I missed it, but did you give the gross margin trends by business in the quarter?

We didn't, but I can give those to you now. So let me just pull up here. So on a year-over-year basis, intermodal was down by about 220 basis points; brokerage was up 100; logistics, up 190; and dedicated, up 200.

Okay. When you mention high single-digit volume growth in intermodal, do you believe that is due to market share gains during bid season, or is that your perspective on the market?

I would say a combination. So we certainly did have some strong showings in bid with some of our larger customers who have the ability to drive share shifts. So we think we did perform well there, and we're focused on really hitting the mark for them and meeting the commitments that we've set. I also think with some of the tightness that we're seeing in the market right now, there will be some additional share shift from truckload. And we're seeing a lot of customers come to us now focusing on peak plans and peak support. We are focusing on supporting the clients who have stuck with us, and we're going to continue to support them. And that's really a big part of why we're expanding the fleet.

Okay. And then just, Phil, I mean, it sounds like the volumes are accelerating, but the gross margins get worse because maybe the pricing is getting a little bit worse. So is this sort of a shift of sort of refocusing a little bit more on growth and less on yield? And how quickly can you turn that yield lever back on in a tightening market?

Sure. We do want to focus on growth. We are going to continue to focus on growth. We need to get back to a strong growth trajectory in intermodal. So that is a focus of ours. We do believe that if the tightness continues in the market that we're seeing right now, that sets us up extremely well for 2021 bid season and an ability to grow and get profitability back up.

Okay. And just last question real quick. The increase in CapEx, is this pull forward from what next year was going to be? Or is this sort of a new run rate to think about continuing into next year as well?

No, it's not a pull forward; it's simply a response to the growth we are observing, especially in intermodal. Regarding the containers, the tractors we are purchasing present a strong opportunity to generate significant returns by replacing some older, higher-cost models.

And I would just add that within the drayage business or the drayage side of our intermodal business, we need to make sure that we're maintaining our share of our intermodal drayage, so that our Hub Group trucking fleet is managing a significant portion of that even as we grow. So we will need to continue to invest in that to maintain that share.

Okay. Thank you, guys.

Thanks, Scott.

And the next question comes from David Ross from Stifel. Your line is open.

Yes. Just to follow-up on the drayage comment there. What percentage is company dray at this point? And what's the target?

Sure. In the second quarter, we achieved 60% on our own assets, an increase from 54% last year. Our aim is to gradually push that figure closer to 80%.

I would add that we have terminal locations that actually represent 74% of our overall business.

Okay. That’s helpful. And are there any constraints right now in the driver market to getting that? Because it seems like you've got the balance sheet and the capital. So if you wanted to just buy the trucks, it's a matter of seeding the trucks with the drivers. So how are you thinking about the timeline on getting that up?

Yes. We've invested a lot of time and effort in improving the productivity of our drivers. So that was really step one. We also have improved our retention. So at this point, we feel very good about being more aggressive in the market going after drivers. It is getting somewhat more competitive as we're seeing some of that tightness in the market. Some drivers tend to walk towards getting their own search or really moving to an independent model during that time. But we feel very good about the value proposition that we bring to drivers. They're home every night. We help them make a very strong living and support them. So I think we're going to be able to add drivers. We have to stay competitive with wages and make sure that the drivers we have are staying happy and supported as well.

Well, it sounds good. And then just last question on the consultants, you mentioned bringing them in to tell you what to do with trucking. What were the key takeaways from their time there? Or what were the points of focus?

Yes, it's healthy. It's been a great investment for us. I think we recognized a lot of opportunities for the organization, and we've executed on a lot of those. So I would highlight a few areas. First, driver productivity and retention. I mentioned those earlier, and I think we've made significant strides there, and that's what's really reducing our cost per load in the drayage network. Our maintenance program was also another huge focus area for that, and that's really a big part of the investments we're making in the tractor fleet and in our own maintenance network. And we think we have a huge runway to improve in our maintenance organization. And then the other big area was in our procurements and how we purchase everything in our assets fleet, whether it goes to fuel or our tractors or our containers, we had opportunities to drive down our purchase expenses, and we are taking really a big swing at that and continuing to make a lot of progress there. So a lot of really good stuff that they help support.

I would just add that the trucking improvements both at drayage and dedicated was a big component of the $40 million of profit improvement initiatives we've been talking about since late last year. So we are certainly executing on that part of it.

Thanks. Thank you very much.

And the next question comes from Todd Fowler from KeyBanc. Your line is open.

Great. Thanks and good evening, everyone. Phil, can you share your insights on the bid season so far? Specifically, how did contract pricing for 2020 turn out? As we look ahead to the second half of the year, are there any initial bids expected towards the end of the fourth quarter? Additionally, do you think the market is at a point where intermodal contract pricing could become positive due to the constraints you're observing in the truck market?

Sure, we are 71% complete and have awarded contracts. While there are still some significant bids pending, we feel positive about our execution thus far. If the market remains tight at its current rate, it could lead to a strong bid renewal season in 2021. Some customers might attempt to postpone their bids, but we are committed to our 12-month rates and intend to maintain that support. However, if delays occur, we will adjust our pricing to remain competitive. We need the market tightness to persist for a longer period before I can confidently say that intermodal pricing is positively shifting on a contract basis. Nonetheless, there are indications that we are moving in the right direction.

Yes. Okay. That makes sense. And then, I mean, do you care to kind of put a range around where the 70% came in at? Is it fair to say kind of low single digits? Or do you want to share a number around that?

Yes, it would be low single digits.

Great. Okay. And then just on the cost side, I guess, Geoff, I'm curious of the $40 million that you targeted for this year, how much do you see that's already in the numbers right now? So what can we expect going forward? And then I think the next big bucket that you laid out was $20 million, and I think that that was a 2022 number, is that still a number that's out there in the horizon? Is there anything that would move that forward or push it out a little bit further?

Sure. Yes, the $40 million, what we've kind of said on that is we expect to be at a run rate once we've got all the initiatives in place. We're very close, I think, to having those initiatives largely in place. So we're starting to recognize that now. For the full calendar year of 2020, we'll recognize about half of that in year, so about $20 million. And then of course, we're still recognizing the $50 million that we executed on in the latter part of last year. As for the $20 million going forward, that's really a function. A lot of that's driven by our continued implementation of our Elevate IT initiative. So the timing of that $20 million will be dependent on those IT projects coming into play, but that's something we're looking at for next year.

Okay, I understand. For my final question, I'd like to know about the 200 tractors you're purchasing this year. How will they be allocated? Are they designated for dedicated or intermodal use? Also, do you have any expectations for dedicated revenue growth in the second half of the year as you recover from lost business and based on some of the contracts you secured earlier this year? Thank you.

Sure. Yes, the tractors, the vast majority of those are going to be in drayage. There's a few dedicated as well. And then dedicated revenue growth for the back half of the year, we are still cycling some of the site exits that happened late last year, early this year. We are winning new business, and that is starting to come on, but we do expect revenue will be down before that, those new sites can really start to contribute.

Great. Okay, thanks so much for the time tonight.

Thanks.

And our next question comes from Jason Seidl from Cowen. Your line is open.

Getting back to the intermodal pricing side, if we're getting sort of this low single-digit number now, as we look out to 2021, if we can anticipate that this tightness continues in the marketplace, should we be looking at something more towards the mid-single-digit range?

I am hopeful about that, but we do need the tightness to persist and demand to remain strong. We're optimistic that the economy will start moving positively again and that the pandemic won't cause further disruptions. Given the current market dynamics, I believe we can expect a favorable pricing environment.

Okay. And follow-up, just you guys talked about some of your initiatives. I was wondering what type of technology initiatives you might have whether it'd be on the intermodal side, the drayage side, or even the dedicated side that could drive some cost savings going forward? And if you could just give us some more details on those.

Sure. So we are in the process of moving to our single platform for the organization, really retiring legacy systems. And one of the biggest benefits of what we are implementing is our driver optimization tool. And we have seen significant improvements in the test sites that we've done in both loaded miles and productivity for our drivers as well as the productivity of our associates. So they are able to preplan a day and spend their time on really more value-added things for our clients. So it will be both a productivity headcount enhancement, but also the larger bucket of dollars is going to be making our drivers more productive, having to put in less capital, getting more out of the expense that we're putting in.

And when is that going to be 100% rolled out?

That will be a 2021 rollout.

Okay. Appreciate the time, as always.

Thank you.

And our next question comes from Bascome Majors from Susquehanna. Your line is open.

Thank you for taking my questions. I wanted to follow up on the CapEx adjustment. If I remember correctly, the initial range mentioned in February before the reduction was quite similar to the amount raised today, but there was a delay in expanding your headquarters building, which I believe was around $30 million or $40 million. Could you clarify the nature of that expenditure today? Even though the dollar amount is similar, how might the usage differ? Also, do you plan to revisit that headquarters expansion in 2021 and beyond? Thank you.

Sure. This is Dave. We have put the project on hold. There were some expenses this quarter as we needed to complete the HVAC and fire protection, but it is currently idle. We are waiting to see several things. Firstly, our headquarters building is relatively densely populated, and we are unsure if the government might implement regulations that could allow fewer people in the building. That's one factor we are considering. Additionally, we are closely examining how many functions can operate from home, and whether employees might work from home four days a week or just one. We are currently assessing that. Ultimately, combining both of these factors will help us decide whether we will finish the building, rent it out, sell it, or occupy it because we do need the space overall. There are still many uncertainties, but it is currently idle, fully up to code, and could be completed within six months if we choose to proceed.

Yes, this is Geoff. I can provide you with the breakdown. You are correct. Our original guidance back in February was between $115 million and $120 million for CapEx. This amount included approximately $35 million for the building. We mentioned about $49 million for the first half, and the outlook for the second half is between $65 million and $75 million. So we are back to that $120 million range, approximately. About $20 million of that total for the year is allocated for the building, a little over $40 million for containers, around $30 million to $40 million for tractors and trailers, and the remaining funds will go towards IT.

Thank you for that. That’s all what I had. Thank you.

And our next question comes from Brian Ossenbeck from JPMorgan.

I wanted to ask about the rail service you mentioned and the recent additions announced earlier this week. Your partner at West mentioned some market share gains. How is that affecting your business? Does it influence your decision to expand the container fleet in the near term, and what are your thoughts on the overall pace of growth? Do you expect these trends to continue, or is it still too early to say?

Thank you, Brian. We are continuously exploring opportunities to encourage our rail partners to provide additional services. We're pleased with their performance during PSR, and although we lost some lanes servicing large clients, we are working on reopening those, which is positive as it helps us reclaim business that shifted to truck. We are very enthusiastic about this opportunity as bidding seasons reopen and we anticipate a tightening in truck capacity. We believe the performance of our rail partners is excellent, and we hope it continues. We will keep collaborating with them to uncover new growth opportunities.

Okay. So it sounds like the container fleet was separate from all that because some of these are still pretty new. I guess the other question is, when do you expect to get those containers? And how much of that is replacement versus incremental growth?

It will be incremental, and we'll be getting those throughout really the peak shifting season from August until early November, start of November. So we can make sure we get some turns on those for this year. And yes, I would say, we really made that decision independent of the new offerings. But if we are successful in continuing to grow in those new corridors, then we would obviously want to continue to invest in the fleet.

Okay. Just one more, if you can give us an update on CaseStack, it has I think outperformed your expectations since you bought it. Do you have anything new to share there in terms of growing the footprint? Or how that's performing? I would think it's probably doing pretty well now with the restocking to those in the volume to the type of customers that it serves. But what you're seeing from a growth perspective? And again, with, I guess, one of the bigger competitors going over to a larger logistics company, if you've seen anything change in the market from that perspective as well.

When we acquired CaseStack, we believed they were and still consider them to be the premier company in their field. They have consistently exceeded their forecasts and are successfully serving consumer packaged goods customers in essential retail. That market has been exceptionally strong. The management team has done an excellent job in driving growth and navigating the impacts of the COVID virus. We have nothing but praise for the team, and they have added significant value to Hub overall as an organization.

I would just add that we have a national presence. We feel very positive about our locations, and we will continue to expand in our existing markets as we grow our business, which has really been our strategy. Additionally, we are securing larger contracts with long-term Hub customers, contributing significantly to our growth. One of the purposes of the deal was to enhance our cross-selling capabilities. Furthermore, we are introducing new retail programs, and we are very pleased that this has come to pass. We plan to keep growing in that area. Overall, this has been another great achievement following the acquisition.

Great. Thank you for the time.

And our next question comes from Tom Wadewitz from UBS.

I apologize if I missed this, but I don't think you've commented on brokerage as you look to the second half. It seems like you had good gross margin performance in the quarter, but the market's tightened up. Do you have any thoughts on how your brokerage business is expected to perform in the third quarter? If there is pressure, how quickly can you address some of the gross margin pressure if you do have a strong peak season?

Sure. This is Phil. As you may know, our brokerage operates mainly on a contractual basis, with most of our business coming from committed carriers. These carriers are fulfilling their commitments to our clients and continuing to support us. We are optimistic about this situation. However, we are experiencing some compression with committed lines that were sourced transactionally before the market tightness. We're actively engaging with our customers to make sure they understand this compression and are also working to introduce higher-margin spot volumes into our operations. The spot market tightened from a capacity standpoint before we saw an increase in demand from a rate perspective. We are now observing a rise in spot market load board activity and opportunities, which makes us confident in our ability to maintain healthy gross margins, although we may face some pressure in the latter half of the year. Additionally, I want to note that our high-profitability project business has slowed due to the pandemic, which will also serve as a partial offset. Overall, we believe we are effectively managing our procurement strategy, supporting our carriers, and maintaining strong relationships with our customers, allowing us to focus on growth and making wise purchases in the market.

I would just add that the process changes and technology we've put in place have made our carrier reps much more efficient than they used to be, going back 1.5 years or 2 years ago. And so we're seeing that benefit on the bottom line as well.

Great. Okay. And then with respect to the new business you're bringing in, in intermodal, is it skewed to be the West, the East, transcontinental? I just wanted to see if there's some color on the type of business that it is that you've been winning.

Many of our successes have come from the Western region and Transcontinental market. While it remains highly competitive in the East for both truckload and other intermodal services, most of our wins have primarily been in the Western and Transcontinental areas.

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

And our next question comes from Benjamin Hartford from Baird. Your line is open.

Thanks for the quick follow-up. Geoff, did you mention which specific line items related to the various expenses from the donations, consulting, severance, etc.?

Sure. Yes, sure. Severances in salaries and benefits, and then the donation and consulting expense were both in G&A.

Okay. And then an update on where you guys said as it relates to evaluating acquisitions in this environment. Can you provide us an update there?

Absolutely. We are committed to pursuing mergers and acquisitions to grow and expand our service offerings. We see opportunities to cross-sell new services to our intermodal customers, building on the success we've had with previous acquisitions. Our focus is on value-added third-party logistics businesses that do not require asset ownership, allowing us to introduce new services, increase our freight management, and explore new customer sectors. We've been actively searching throughout the year, and at one point, I was optimistic about completing a deal this year. We remain hopeful, despite needing to pause from March to June, but we are now back to evaluating opportunities and aim to finalize a deal soon.

And in the meantime, your mindset as it relates to potential share repurchases, or does that sit in the hierarchy?

Sure. We've been cautious, as seen by the $100 million reduction on the revolver earlier this year. We always assess share repurchases during our quarterly board meetings, and with one coming up, I'm sure it will be a topic of discussion.

And then lastly, you provided some parameters to how to think about modeling some of the beneath the gross margin line, operating expenses, but incentive comp in the back half of the year. And as you can even think about 2021, can you talk a little bit about what may or may not have been included in 2Q and how that might feather in as we move through the year?

Sure. Yes, very little incentive comp in Q2. Obviously, I think our earnings are going to be down year-over-year, and our incentive compensation program is not designed to pay when that happens.

Okay, that’s helpful. Thank you, appreciated.

And our next question comes Bascome Majors from Susquehanna. Your line is open.

Thanks for the follow-up. I wanted to ask about the possibility of a special dividend. Is that something your team could consider if M&A doesn't progress as quickly as expected? The cash balance is increasing, and if everything goes well, you should be in a net cash position again next year.

Yes. I mean, it's not something that's off the table. But again, our priority is for excess cash to continue to be reinvested in the business, both through CapEx and through acquisitions. And I think those are 2 areas that we are either actively or looking to invest in as a priority.

Thank you.

Thanks, Bascome.

And that concludes today's question-answer session. I'll turn the call over to Dave Yeager for final remarks.

Great. Well, again, thank you for joining us this afternoon. As always, if you have any further questions. Phil, Geoff and I are available to talk at any time. So thank you again. Have a good day.

Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.