Hub Group Inc (HUBG) Q3 2021 Earnings Call Transcript

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Hub Group Inc (HUBG -0.87%)
Q3 2021 Earnings Call
Oct 28, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Hub Group Third Quarter 2021 Earnings Conference Call. Dave Yeager, Hub's CEO, Phil Yeager Hub's President and Chief Operating Officer and Geoff DeMartino, Hub's CFO are joining me on the call. [Operator Instructions] 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, if you refer to the disclosures in the Company's Form 10-K and other SEC filings regarding factors that could cause actual results to differ materially from these projected in these forward-looking statements. [Operator Instructions] And now my pleasure to turn the call over to your host, Dave Yeager. You may now begin.

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Good afternoon and thank you for participating in Hub Group's third quarter earnings call. Joining me today is Phil Yeager, Hub's President and Chief Operating Officer and Geoff DeMartino, Hub's Chief Financial Officer. We had a solid third quarter, as pricing continues to outpace rapidly accelerating costs thereby creating record quarterly revenue and gross margin, and to kick off the fourth quarter, we've just closed on Choptank a large truck brokerage operation specializing refrigerated product. This is an acquisition that Phil had worked on for several years with Choptank's owner Geoff Turner. We share a common vision and culture, and we welcome the Choptank team to the Hub family, and look forward to growing our collective business.

Strong demand continues as inventory to sales ratios are at near all time lows while intense restocking the shelves persist. On the second quarter call we related that we believe that this strong demand and tight capacity market may extend through the second quarter of 2022. Nothing has really changed since that last report, and we believe that this imbalance will continue through most of the first half of 2022, and very likely throughout most of the year. Today, there are many issues negatively impacting customer supply chains. Among the issues our labor shortages and port congestion resulting in networking balances, helps focus continues to be on supply and reliable capacity to our clients in order for them to deliver their products efficiently. And with that, I'll turn the call over to Phil to discuss the performance of our business lines.

Phillip D. Yeager -- President and Chief Operating Officer

Thank you, David. We are very pleased with these results and the efforts of our team to support our customers during this dynamic environment. We delivered strong results in intermodal with a 17% increase in revenue and 530 basis point improvement in gross margin percentage year-over-year, which was offset by an 8% decline in volume after an 11% increase in the third quarter last year. For the quarter transcon volumes declined 1% local East was down 7% and local West was down 10%. Although the intermodal network is more congested, and we are seeing slower rail transit extended customer unloading times and more limited available drayage capacity our team has done a great job offsetting those challenges with approved on-time performance to our customers, stronger pricing a better balanced network and improved cost recovery efforts.

Demand continues to be very strong in particular off the West Coast, and we anticipate receiving all of our new build containers this year, which will help us capitalize on that opportunity. We anticipate another strong bid season and improving network fluidity into 2022, given the strong demand backdrop and the need for shippers to lock in capacity. Logistics performed well with 17% revenue growth and 100 basis point improvement in gross margin percentage year-over-year. We continue to have strong revenue growth from our consolidation and final mile service line, which was offset by lower revenue, but improved yields in our outsourced transportation management offering.

We've had many strong new wins across all of our solutions including exceeding our cross-selling synergy targets in final mile. We see continued opportunities for growth ahead, as we provide our clients creative solution to reduce cost and enhance service. Brokerage posted strong results, again, with 28% revenue growth and 3% lower volumes, and a flat gross margin percentage year-over-year. We continue to see strength in the spot market and are bringing on new clients through our growing sales force while maintaining strong efficiency. We also are very excited about the addition of Choptank to our brokerage. We have shared values and believe that along with their aggressive sales culture they will bring an improved technology platform, a new specialized service offering and a large cross-selling opportunity.

This acquisition will put just over $1 billion in brokerage revenue, and we believe enables long-term sustainable. Dedicated revenue declined 7% with a 450 basis point decline in gross margin percentage year-over-year. This decline was driven by increased insurance cost M&R expense and outside capacity costs. We're are executing on customer renewal, onboarding new more profitable wins, and continuing to enhance our systems and processes to help offset these challenges. Looking ahead, we believe, we will see a strong demand environment and that Hub Group is in a great position to provide solutions to our clients and drive profitable. With that, I will hand it over to Geoff to discuss our financial performance.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Phil. Q3 featured all time record revenue and profitability levels with total revenue growth of 16%, gross margin was $158 million or 14.7% of revenue, which is an improvement of 300 basis points, as compared to last year, and 240 basis points higher than Q2. Gross margin performance and our focus on operating efficiency led to operating income of $60 million or 5.6% of revenue. Salaries and benefits increased primarily due to higher incentive compensation and commission expense as compared to last year. General and administrative expenses increased compared to last year due to legal settlements and expenses related to the acquisition of Choptank, partially offset by higher gains on the sale of transportation equipment. Our diluted earnings per share for the quarter was $1.28, which is 73% higher than the prior year.

We generated $92 million of EBITDA in the quarter, and had over $230 million of cash on hand at quarter end. In October, we invested approximately $130 million cash to purchase Choptank. We continue to have a conservative capital structure with net leverage of approximately 0.5 times EBITDA, which provides us with ample flexibility to continue to invest in the business through capital expenditures and additional strategic acquisitions. We're raising our 2021 EPS expectation to $3.90 to $4 per share from $3.50 to $3.70 that we announced in July. For 2021, we expect revenue will grow in the high-teens percentage range with intermodal volumes approximately flat.

We forecast gross margin as a percent of revenue of 13.3% to 13.7% for the year growing as a result of rate increases partially offset by higher costs for rail transportation, third-party drayage and driver wages. We continue to see strong consumer demand and low retail inventory levels, which is driving the need for our customers to restock. For the year, we expect cost and expenses of $365 million to $375 million, which reflects incremental operating cost for Choptank. We expect our tax rate to be approximately 24% for the full year. Our 2021 capital expenditure forecast is $150 million to $160 million down somewhat, as compared to our prior guidance, as 150 of the tractors that we order this year will be delivered in early 2022. We expect to receive our full order of 3,000 containers, this year.

Last quarter, we introduced our long-term revenue and margin targets. The acquisition of Choptank is a great step toward achieving these targets, and is indicative of the type of strategic investment we will make in the business. Adding scale, while also introducing a new service offering with significant cross-sell potential. Dave, back to you for closing remarks.

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Great, thank you. Yeah. Demand continues to be strong in all of our business lines, as our customers continued to be cost-efficient solutions that offer consistent levels of service. The fourth quarter is off to a solid start, and we believe that the momentum will carry through much of 2022. And with that we'll open up the call to any questions.

Questions and Answers:

Operator

Thank you. We'll will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Justin Long from Stephens. Your line is open.

Justin Long -- Stephens -- Analyst

Thanks, good afternoon, and congrats on the quarter.

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Thank you.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Justin Long -- Stephens -- Analyst

So, Jeff, I wanted to start on the cost and expenses in the third quarter. There was a pretty substantial step up on a sequential basis, it sounds like there were some moving pieces with legal costs and acquisition expenses. So anything that you would consider one-time that won't be ongoing? And then maybe could you help us think through the contribution from Choptank you're assuming in the fourth quarter from both the revenue and opex perspective, as we think about your guidance?

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Sure. Yes. In Q3, we did have some, we got a one-time cost legal settlements not really recurring, as well as obviously the acquisition expense. Those two pretty much awash with our gain on sale for the quarter. So the real big -- so those kind of two or three items net out the real driver of the increase sequentially from Q2 has a lot to do with the compensation expense and commission expense. So as we earn more throughout the year, we've been booking more of those expenses and that was kind of incumbents in our guide throughout the year.

Going forward, you can do the math on the guidance, but you can expect the Q4 number to be basically equal to the Q3 number plus the incremental for Choptank, which is about $8 million on the opex line. For revenue, it's approximately $80 million of incremental revenue for the last few months of the year.

Justin Long -- Stephens -- Analyst

Okay. That's really helpful. And maybe looking at the fourth quarter guidance, could you talk about what you're baking in for the Truck Brokerage segment from a revenue and margin perspective, sequentially, if you exclude Choptank? And then last one for me is just on thoughts around intermodal pricing in the 2022 bid season?

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Sure. So the brokerage in Q4 ex-Choptank is going to be largely consistent with the Q3 levels, and then Choptank obviously is the delta.

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, and this is, Phil. We continue to see strong demand on the brokerage side. Great cross-selling opportunities there, and we're taking full advantage of the spot market as well. So feeling very good about the results there. As we look ahead with intermodal pricing, we're feeling very good about the early stages. The bid season, as we've kind of entered that now some of that pricing was on the lower end, given how we've seen rates continue to go up throughout 2021. So those renewals will be consistent with what we've seen in the past, and those will have effective dates early next year. So early bid season indications are very strong and a continuation of the current trend, and we're anticipating a strong bid season shippers need to lock in capacity and we've really stepped up I think for a lot of our clients to -- and we'll be able to take advantage of that next year. So feeling very good about our opportunity looking ahead.

Justin Long -- Stephens -- Analyst

Okay, great. I appreciate the time.

Operator

And our next question comes from Scott Group of Wolfe Research.

Jacob Moser -- Wolfe Research -- Analyst

Good afternoon, this is Jake on for Scott. Thanks for taking my questions.

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Sure.

Jacob Moser -- Wolfe Research -- Analyst

Can you break out how much of the pricing growth was driven by higher accessorial fees compared to how much was driven by higher base rates?

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, hi, this is Phil. I appreciate the question. We've seen very strong base pricing and that's going to continue. From an accessorial scheduled change obviously our preference is to be moving more volume, get more fluidity back into the network. And so that's really our focus is working with our clients there. It is not a huge determinant of our margin enhancement. Obviously, somewhat beneficial, but not anything that would outweigh the benefits that we see from moving more volume and continuing to get more price.

Jacob Moser -- Wolfe Research -- Analyst

Got it, thanks. And then, how much visibility do you have on rail cost inflation next year? Do you expect more than this year? And if the market remains as is, do you expect gross margins will continue to increase from here as rates move higher?

Phillip D. Yeager -- President and Chief Operating Officer

Yes. Yeah. So we, I would start with. Yes, we do have very good visibility to our rail cost increases next year, and we do believe that we're going to be able to attain rate increases in excess of our cost inflation.

Jacob Moser -- Wolfe Research -- Analyst

Got it. Thanks for taking the time. I appreciate it.

Operator

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

Todd Fowler -- KeyBanc -- Analyst

Great, thanks, and good evening. On the step up in gross margins here, both in the third quarter and for the guidance. Can you talk a little bit about the driver behind that? And then can you also talk about the sustainability of gross margins at these levels, which we really haven't seen for a while, as we get into 2022?

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Sure, absolutely. This is Geoff. So the biggest driver of gross margin is going to be our rates and the surcharges we have in place. We do have incremental transportation costs that are going up sequentially, and year-over-year, rail costs and certainly drayage cost both internal and third-party, but the price is a very big driver of margin for us. And that was the -- that was the driver of the increase.

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, I would just highlight. I think in our Logistics segment, we're seeing strong performance there, nice improvements in our transportation management margins, and a nice sequential improvement CaseStack as well. Our final mile business is I think see some sequential margin improvement, and pleased with what we're doing there. I think with brokerage Choptank, as an addition, that's going to be a nice driver of incremental gross margins and we're seeing a lot of opportunity on the cross-sell, as well. But to Geoff's point intermodal is going to continue to obviously be a large driver of that. We think that the margins are going to be sustainable. And we just need to stay focused on great operational discipline, and continuing to enhance our pricing.

Todd Fowler -- KeyBanc -- Analyst

So, Phil, if I put together the comments that you made to Justin about intermodal contract renewals being positive, and think about prices being a big driver for the gross margins that would suggest that going into '22, as long as you're able to see that positive pricing that you can run somewhat these levels obviously with some seasonality, and some other kind of factors moving through the numbers?

Phillip D. Yeager -- President and Chief Operating Officer

Correct. Yeah. We would also believe that we're going to see improved volumes next year's fluidity. One, we get our containers fully on-boarded and two, we see some improved fluidity and we're starting to see some sequential improvement in fluidity in turn times. We didn't see that from Q2 to Q3, but here at Q4, we're seeing some of that sequential improvement. And if that continue, and we maintain strong pricing could really create a nice benefit for 2022.

Todd Fowler -- KeyBanc -- Analyst

Great. And then just for my follow-up on the operating expense question. Geoff, it was helpful for the fourth quarter, and we kind of get a sense for the run rate. As we move into next year, what are some of the moving pieces? I would think incentive comp would be one on a full run rate for Choptank, but what are the other things we need to think about on the expense line for 2022? Thanks.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Sure. Those are going to be the big drivers. Obviously, we've got our personnel cost is a big chunk of overall opex. We are putting together our budget for next year. We're certainly going to be growing I think from an earnings perspective, the expansion and our profitability is probably going to come more from price than from volume. And so that meeting, not a lot of incremental headcount adds kind of we'll have more to say on that when we announce our Q4 earnings though.

Todd Fowler -- KeyBanc -- Analyst

Okay, understood. Thanks for the time tonight.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Scott.

Operator

And the next question comes from Tom Wadewitz from UBS. Your line is open.

Thomas Wadewitz -- UBS -- Analyst

Yeah, thanks for the questions and for the time. And congratulations on the strong results. What -- you sound pretty optimistic on the transition to volume growth, and it's interesting, you're seeing some recent improvement. What else do you think that you can do? Any sense do you do mid-single digits growth? Can you higher than that if you look to next yea? It seems like with the container additions you'd be positioned for that? I guess what we're hearing from the railroad seems kind of cautious then I refer to Norfolk Southern's comments about, they want to hire more people, but they're just seeing higher attrition. So maybe, I guess, some more detail on your views on capacity? And how that might constrain? What you do next year on volume?

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, obviously if our rail partners aren't able to add that could be a constraint on our capacity. I know that there have been adjustments to wages made, but I also know there has been a great deal of investment in chassis, which has been one of the larger bottlenecks that we've seen this year. And that will really help from a terminal fluidity perspective, and not having trains really stack up. So, we think that, that's a new big benefit. Hopefully, the actions that are being taken will lead to additional staffing.

I think, we've done a nice job of really stemming driver losses on our end and successfully adding third-party capacity. And so that could be a big upside factor for us next year if we're able to continue that trend of driver add, that will really help us in maintaining fluidity and control the service product. Our goal is going to be to grow next year. We don't have any hard numbers yet, but they yes with fluidity and us continuing to have drivers and the investments that are being made in chassis we think we're going to be in a good position to do that. So it has been a bit of a challenging year from fluidity, but we're seeing those -- some improvements, actually in the start of Q4, which is great.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

And Tom, I would add the macro conditions continue to look very favorable both from the demand side, and we see truckload continuing to be constrained, which is a great setup for us coming in the next year, being able to deliver value and service to our customers.

Thomas Wadewitz -- UBS -- Analyst

How do you I guess is a follow-up question. How does the, I mean, you have obviously tremendous media coverage and increased -- heightened focus on the West Coast issue, and logistics issues in general. How do you think about the kind of West Coast issue and the improvement in fluidity? How is, I guess, how does that affect your your outlook? Is that I guess, is that something that you assume get better? Or you think that even if there is still challenges at the ports and West Coast warehousing that you still can see a transition nice volume growth?

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Hi, Tom. This is Dave. I would suggest to you that the West Coast port situation is not going to be resolved quickly or easily that we're going to continue to see congestion, at least through the end of the year and I would suggest to you beyond. So, there just is not enough warehouse capacity. The 24/7 is really not going to work. I mean, you still need skilled labor to be able to load and unload those vessels. So you are seeing some diversion to some of the East Coast ports, and people are trying the Port of Portland and other ports on the West, but the congestion is there for a while. And it's -- this is not -- there is no light switch to turn it off and on.

Thomas Wadewitz -- UBS -- Analyst

Is -- are you tightly coupled to that or is that something that kind of domestic inflow well even if international intermodal is not?

David P. Yeager -- Chairman of the Board and Chief Executive Officer

It actually for domestic intermodal actually close quite well because there is only a limited amount of capacity both dray, container, as well as rail ramp capacity. So actually this almost metering in of product actually is probably beneficial and allows us to supply more capacity to our clients because it's kind of stretched out.

Phillip D. Yeager -- President and Chief Operating Officer

I would just. I think that tightness from the international box capacity is going to continue to drive more transloading into domestic, and I don't see that trend really changing anytime soon. I think that's going to continue to be a driver of more growth for domestic intermodal off the West Coast, and there's going to continue to be a high-level of demand for imports there. But even as we look at other locations we see that there's a lot of growth opportunity for us if you look at the Port of Savannah, that's been a big growth opportunity for us this year, and I think that will continue as well.

Thomas Wadewitz -- UBS -- Analyst

Yes, certainly it seems like there must be a lot of pent-up demand out there. Thanks for the time.

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Thanks, Tom.

Operator

And your next question comes from Bruce Chan from Stifel. Your line is open.

J. Bruce Chan -- Stifel Nicolaus -- Analyst

Hey, thanks, and good evening, gents. You mentioned the shipper need to lock in capacity. A couple of times. And just thinking about that in the context of dedicated. Obviously, higher cost there and issues with driver availability. Is there more business to exit in subsequent quarters? And at what point do we expect net growth there, especially as you start to convert that new business pipeline?

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, I think it's a great question. Yeah, and I would going to start with, I'm very pleased that we're generating an improved return in the dedicated business, and that's been our primary focus. What I would highlight I think with dedicated is that we were not fast enough to get wage increases and with our customers to be able to go out and recruit and see truck, and that led to some of the revenue loss that we saw. We've exited the majority of the business that we think is in non-compensatory contract, and we're trying to make sure that with our clients were adjusting language where it might not fit with a standard dedicated contract with fixed and variable sort of charges.

So I think we've done a nice job with that. We're through the vast majority of those changes. We're still always going to be trying to make sure that we're working with our clients to set up a mutually beneficial agreement. But we certainly see opportunity and demand out there for us, that's about making sure we're going after the right contracts with the right customers, and the right set of charges. So feeling good about our disciplines there and ability to maintain a better returns going forward, as we bring on.

J. Bruce Chan -- Stifel Nicolaus -- Analyst

Okay. Great, that's super helpful. And then just for my follow-up, you talked about strong residual demand for e-commerce and I'm wondering how that translates for last mile, and some of these big ticket goods, as maybe some of these stimulus dollars start to wane?

Phillip D. Yeager -- President and Chief Operating Officer

So with our big and bulky to final mile home delivery. We have seen significant growth this year. I think even if there is a slowdown with some of those clients, we have been able to diversify the customer base quite a bit with our more traditional retail and e-commerce customers. So we're feeling very good about the growth opportunity ahead regardless if there is a little bit of a slowdown in demand, we actually have some a little bit of a backlog in on-boarding and going into that will move into Q1 of next year that will really be a nice ramp for us as we look ahead into 2022.

J. Bruce Chan -- Stifel Nicolaus -- Analyst

Okay, great. Thank you for the time.

Operator

And our next question comes from Charlie Yukevich from Evercore ISI. Your line is open.

Charles Yukevich -- Evercore ISI -- Analyst

Thank you for taking my question, and congrats on the quarter guys. Focusing on truck brokerage when we think about the changes in volume and revenue per load this quarter how does this breakout between contractual and spot?

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Sure. This quarter, we were down -- just under 50% or just over 50% contractual. So, it did move down from about 61% last year Q3.

Charles Yukevich -- Evercore ISI -- Analyst

Okay. I guess, I was more focused on how contractual volumes grew this quarter. If there is any sort of color that you could give on that.

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Sure. I would say continues to be, continues to be strong. We are doing our best to convert where there is opportunities to convert slot into contract that's kind of where we played historically closer to 70%. We think we'll get back there over time.

Charles Yukevich -- Evercore ISI -- Analyst

Okay. And then I guess, as my follow-up, could you tell me what the split is between contractual and spot for Choptank?

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Sure. Choptank is around, in this market is around 65% to 70% transactional. Historically, they've been closer to to.50-50.

Charles Yukevich -- Evercore ISI -- Analyst

Okay, great. Thanks a lot for the time.

Operator

[Operator Instructions] And our next question comes from David Zazula from Barclays. Your line is open.

David Zazula -- Barclays -- Analyst

Hey, thanks for taking my question. All right. I guess for Dave or Phil whoever wants to take it. I mean you talked on the last call with Choptank about the good cultural fit that it made with your existing businesses. I guess, I was curious, did you look at any kind of measurable metrics or how did you measure that beyond kind of a personality fit on how the business would fit in?

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, I would say we always really focus on culture and alignment, and you can see through the tenure of their team, the commitment that they have for that business into the communities that they're in, and how long they've been assets. They didn't just start up a few years ago. They've been at this for 20 years and growing this business methodically and have a strategy and a way that they interact with their customers, and most of their customers stick with them for the long-term rate, and that is different than a lot of beverages. There is typically a high level of customer over a high level of team member turnover. That's something that Hub Group really values is our folks and our clients. And from that sort of a long-term relationship with both stakeholders, we thought, along with all the qualitative aspects of the diligence process, but that was really indicative of a great alignment with our organization.

David Zazula -- Barclays -- Analyst

Thank you. I mean, revolving up. I mean, obviously have been integrating for a long time. I know you mentioned a cross-sell opportunity. But do you feel like you've made any progress since the announcement as far as moving the product on to existing customers? In any way after that?

Phillip D. Yeager -- President and Chief Operating Officer

Yeah, I know we're very excited. I know there still team who is very excited. Our customers have been very excited. And we've already got wins on the board actually and we're seeing a tremendous amount of opportunity to cross-sell so. So yeah, very excited about even the progress through a week, so great.

David Zazula -- Barclays -- Analyst

Great, thanks very much.

Operator

And your next question comes from Brian Ossenbeck from JP Morgan.

Kellen Curry -- J.P. Morgan -- Analyst

Hey, this is Kellen Curry on for Brian. Both Transcom and local west volume was down. So number 1, just what's been the sequential trend into the fourth quarter? And then, what's your expectations for the utilization level for the upcoming containers given that congestion is still expected to last into the new year in rail service still needs to improve?

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah that's month quarter-to-date, so it really for the month of October, and we are down around 9% year-over-year. Last year Q4 was a very strong quarter for us. We are encouraged that we've seen sequential improvement as the month has gone on, we had our highest volume week this past week all year and really going back to January. So we're encouraged by that. We do have new containers coming in. We expect we'll receive all of them by the end of the calendar year. And we are forecasting an improvement in our container turn times sequentially from Q3 into Q4.

Kellen Curry -- J.P. Morgan -- Analyst

Okay, thanks. And then just last question for the follow-up. In terms of the vaccine mandate. Based on your reading and understanding of the mandate, does it apply to you? If not, will you be impacted by the mandate in any indirect way that could impact operations in anyway? Thanks. T

David P. Yeager -- Chairman of the Board and Chief Executive Officer

This is Dave. Certainly, the government contractors. We don't believe that, that's going to have a direct impact for us right now. We are not a government contractor. If they do, if OSHO does come out with our mandate, and forces truck drivers. It will have an impact, we're still working through it, but it will have an impact on the entire economy in my view. Because there will be a certain number of truck drivers that just feels strongly from a personal perspective that they don't want to take it. I'm not an antivaxxer I'm vaccinated. I encourage people to. But if you try to mitigate that to what could be a very independent group.

I mean it's, as I hope the common sense prevails, and it's understood that realistically the truck drivers throughout this pandemic have been out there and getting product to store shelves. And I hope, that, that's taken into account and they do get an -- we get an exemption.

Kellen Curry -- J.P. Morgan -- Analyst

Got it. Thanks, guys.

Operator

And your next question comes from David Zazula from Barclays. Your line is open.

David Zazula -- Barclays -- Analyst

Okay. Sorry if I missed it if somebody asked it earlier, but did you guys put out the employee year-over-year change?

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

We didn't. But we can do that. So we ended the year or sort of at the end of the quarter at just under 2,000, we had around 30 or 40 more last year adjusted for non-stop, so we are down slightly year-over-year.

David Zazula -- Barclays -- Analyst

Awesome. Thanks very much. I appreciate it.

Operator

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

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Okay, thank you for joining us. The seasoning as always, Jeff and Phil and I are available if in fact you come up with the different questions or additional questions. So thank you again for joining us.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

David P. Yeager -- Chairman of the Board and Chief Executive Officer

Phillip D. Yeager -- President and Chief Operating Officer

Geoff DeMartino -- Executive Vice President, Chief Financial Officer and Treasurer

Justin Long -- Stephens -- Analyst

Jacob Moser -- Wolfe Research -- Analyst

Todd Fowler -- KeyBanc -- Analyst

Thomas Wadewitz -- UBS -- Analyst

J. Bruce Chan -- Stifel Nicolaus -- Analyst

Charles Yukevich -- Evercore ISI -- Analyst

David Zazula -- Barclays -- Analyst

Kellen Curry -- J.P. Morgan -- Analyst

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