Q3 2023 CH Robinson Worldwide Inc Earnings Call

Yeah.

Good afternoon, ladies and gentlemen, and welcome to the C. H Robinson third quarter of 2023 conference call.

At this time, all participants I Wanna listen only mode.

Following the company's prepared remarks, we will open the line for a live question and answer session.

To ask a question. Please press star one on your telephone keypad.

If anyone needs assistance at anytime during the conference. Please press sorry hero.

As a reminder, this conference is being recorded Wednesday November 1st 2023.

I would now like to turn the conference over to check <unk> director of Investor Relations. Please go ahead.

Thank you Donna and good afternoon, everyone on the call with me today is Dave Bozeman, Our President and Chief Executive Officer, like Zack Meister, our Chief Financial Officer in a room Raj and our Chief operating officer.

They will provide some introductory comments arena will provide an update on our initiatives to improve our customer and carrier experience and are operating leverage Michael.

Michael provide a summary of our 2023 third quarter results at our expense guidance for 2023, and then we will open the call up for questions.

Earnings presentation slides are supplemental to our earnings release and can be found on the investors section of our website at an investor Dot C. H Robinson dotcom.

Prepared comments are not intended to follow the slides if we do refer to specific information on the slides, we will let you know which side we're referencing.

Today's remarks also contain certain non-GAAP measures and reconciliations of those measures to GAAP measures are included in the presentation.

I'd also like to remind you that Ah remarks today may contain forward looking statements slide two in today's presentation Lewis factors that could cause our actual results to differ from management's expectations and with that I'll turn the call over to Dave.

Thank you Chuck.

Good afternoon, everyone and thank you for joining us today.

It has been well documented by many industry participants and observers global afraid demand continues to be weak in the third quarter.

This combined with ample carrier capacity continued to result in a loose market with low spot rates.

Low to truck ratios remain near the low levels of 2019, and Ralph guide depth and our many services business of 1.15 and Q3 indicates their primary freaked providers are accepting most of the contractual frape tinder to them <unk>.

Resulting in fewer spot market opportunities.

And the freight forwarding market Ocean vessel and airfreight capacity continues to exceed demand, resulting in suppress rates for ocean and air freight.

We are staying focused on what we can control by providing superior service to our customers and carriers executing on our plans to streamline our processes by removing waste and manual touches and delivering tools that enable our customers and carry her face and employees to allocate their time to relationship built.

Being an exception management.

Our focus on delivering quality and improvements to our customers such as enhanced visibility and increased automation has been reflected in very positive feedback from my meetings with customers and validated by net promoter scores. This year. There are the highest one record for the company, which we believe.

That's up well with customers for the eventual positive inflection and the freight market.

Our customers value the quality stability and reliability that we provide as they work to optimize their transportation needs.

This is taken on greater importance to shippers, who had exposure to transportation providers, whose business models were not financially viable.

During my many discussions with customers over the past four months, it's clear that they prefer partners, who have financial strength and can invest through cycles and the customer experience.

They also want partners, who have the expertise to provide innovative solutions enabled by technology and people that they rely on to serve as an extension of their team.

C. H Robinson is that partner with a combination of people technology and scale to deliver an unmatched customer and carrier experience.

As I mentioned earlier, we're executing on our plans to streamline our processes by removing waste and manual touches.

The result has been meaningful cost reductions and product productivity gains across our business that are ahead of our state of targets.

And our North American trance surface transportation business, our productivity improvements have translated into an 18% year to date increase in shipments per person per day.

<unk> a typical seasonal volume pullback in queue for we are on track to meet or exceed our target of 15% year over year improvement by Q4 this year.

From a cost reduction perspective, we reduce Q3 operating expenses and nasty by 22% year over year versus a volume decline of only 3.5%.

And our global forwarding business Q3 operating expenses, excluding 23.6 million of restructuring charges declined 12% year over year. Despite a slight increase in the number of shipments.

And before the full enterprise Q3 operating expenses, excluding 24.5 million a restructuring charges declined 17% year over year compared to a 3% decrease in overall volume.

As we continue to improve the customer experience and our cost to serve I'm focused on ensuring that will be ready for the eventual free market rebound.

This means growing volume without adding head count.

We believe our teams continuing efforts to streamline our processes and remove manual touches gets us there.

Even though I'm pleased with the progress that the team has made I've challenged them to increase our clock speed on decision, making an improvement efforts.

I started by asking our employees company wide to share what was impeding their speed and where they saw opportunity to create greater efficiency and their daily processes.

The incredible response rate confirmed the desire of our employees to strengthen the company and to speak up culture that exist.

The responses validated some of our focus items and also highlighted some new opportunities.

We're not driving focus on a handful of concurrent works dreams that are addressing the highest leverage areas to eliminate productivity bottlenecks.

We're bringing forward past lessons on team structure and mechanisms to drive adoption in order to deliver it and improved customer experience through process optimization.

Or 18% year to date productivity improvement is an indicator of the progress that we're already making.

I'll turn it over to a rural shortly to share more about this and how we're utilizing generative AI.

But these focus work streams aren't example of how the leadership team and I I'm, making changes and driving focus so do we position ourselves for growth and our core business.

Ultimately our focus on continuously improving the customer and carry experience and removing waste from our workflows will result in a company that is quicker more flexible and more agile and solving problems for our customers, providing better customer service and creating an operating.

[noise] leverage and profitable growth.

I'm excited about the work that we're doing to reinvigorate ramesses, winning culture and I'm confident that together, we will win for our customers carriers employees and shareholders with that I'll turn it over to a room to provide more details on our efforts to strengthen our customer and carry.

Pence and improve our efficiency and operating leverage.

Thanks, Dave and good afternoon, everyone.

They mentioned we've identified a handful of concurrent works creams that are addressing significant opportunities to eliminate productivity bottlenecks and deliver process optimization and an improved customer experience.

We're leveraging the strength and experience of are single threaded business process owners, who are leading cross functional teams across these work screams.

What dedicated product engineering data science, and AI resources assigned to each work screen.

Along with the alignment of shared goals incentives and process accountability.

A couple of examples of these works creams on the productivity roadmap are quoting an order entry.

And both of these areas, we are reducing manual touches and our response time to customers driving faster speed to market and higher customer engagement.

In addition to our past learnings, we're needing more heavily on January the AI to deliver process improvements.

And I'm quoting work screen, we've utilized Jenny I fill in the blanks witness incomplete and unstructured information and an automated and efficient process.

Because we used the time to provide a quote from approximately five minutes or less than one minute from the time. The request is received via email.

And the last week of the quarter over 10000 transactional quotes were created using a journey I agent.

And you have a significant opportunity to scale and grow in this area. As we think this capability to more customers respond to more quote request and leveraged the ability to provide transactional quoting 24 hours a day seven days a week.

With more data and history to leverage than any other P. P L.

We have opportunities to harnessed the power to this advanced technology now offers to further capitalize on our information advantage and will continue to look for and pursue those opportunities.

In addition to improve customer service and engagement.

Sure, it's an increasing digital execution of critical touch points and the lifecycle of an order from quote to cash, thereby reducing the number of manual tasks or shipment and a time for task.

This translates to productivity improvements measured in terms of shipments per person per day, which creates operating leverage.

For example, a 15% productivity target translates when the ability to grow volume by 15% without adding head count to support that volume growth.

And a volume growth is less than 15%. The 15 per cent improvement target would be achieved through a combination of volume growth and head count production.

Either of these creates operating leverage.

As they mentioned earlier, we surpassed their goal of a 15% year over year improvement and shipments per person per day like you for it this year with an 18% year to date improvement achieved to Q3.

As it relates to Bognor clock speed and deliver further process optimization and an improved customer experience, we plan to deliver to compound it benefits from additional productivity improvements beyond 2023 with technology that support our people and our processes.

With that I'll turn the call over to Mike for a review of our third quarter results.

Thanks for room and good afternoon, everyone. The.

The soft freight market outlined by day resulted in third quarter total revenues of $4.3 billion down 28% compared to Q3 last year.

Our third quarter adjusted gross profit or a G. P was also down 28% year over year or $252 million driven by a 31.4% decline in Nast and a 31.6 per cent declining global forwarding and partially offset by a 4.6 per cent increase.

And our other business units.

On a monthly basis compared to Q3 of last year are total company a G. P per business day was down 34% in July down 26% in August and down 21% in September.

The third quarter contained one less business day, then both third quarter of last year and second quarter of this year.

In our Nash truckload business R Q3 volume declined approximately 6% year over year and 4.5% on a per business day basis.

On a sequential basis, NASS truckload volume increased 2% versus Q2 and 3.5%.

Four business days.

During Q3, we had an approximate mix of 70 per cent contractual volume and 30 per cent transactional volume in our truckload business for the third quarter in a row as the spot market remains suppressed.

The sequential declines that we have seen in our truckload line-haul cost per mile. Since Q2 of last year continued into Q3 of this year.

On a year over year basis, we saw it decline of approximately 13.5% and our average truckload line-haul cost per mile paid the carriers excluding fuel surcharges.

Due to the usual time lag associated with contract pricing resetting to follow spot market costs are average truck load line-haul rate or price built our customers excluding fuel surcharges declined 16.5% on a year over year basis with this price declining coming off of a higher based.

Cost. These changes resulted in a 34% year over year decrease in our truckload AGP per mile and a 36.5 per cent decrease in R. A G. P per load within two three a truckload AGP per load was relatively flat he was the quarter.

In our L. T. L business Q3 orders were down 2% on a year over year basis, and 1% sequentially.

On a per business day basis R Q3, L. T. L orders were down a half a percent you over a year and up a half a percent sequentially.

A G P per order declined 13.5% on a year over year basis, driven primarily by soft market conditions and lower fuel prices.

On a sequential basis, the cost and price of purchase transportation and the L. T. L market increased in Q3, resulting in a 2% increase in a G P per order.

This was primarily driven by capacity that is likely temporarily exited the market.

By leveraging our broad access to capacity in all modes of L. T. L. We were able to meet our customers L. T L needs at a high service level.

In our global forwarding business market conditions continued to be soft behind weak demand and plenty of capacity.

In Q3 global forwarding generated a G P of approximately $170 million or 32% decline you over here.

Within these results are ocean forwarding a G. P declined by 35% year over year, driven by a 34.5% decline in a G P per shipment and half a percent decrease in shipments.

On a sequential basis or ocean volume grew 2.5%.

Compared to pre pandemic levels, we have grown ocean market shares through adding new customers diversifying trade lanes and verticals and leveraging investments in technology and talent.

Turning to expenses are productivity initiatives continued to enable us to deliver on and exceed our expense reduction expectations.

Q3 personnel expenses were $343.5 million, including $3 million with restructuring charges and that was down 21.5% compared to Q3 of last year.

Excluding the restructuring charges are Q3 personnel expenses were down 22.2% year over year, primarily due to our cost optimization efforts and lower variable compensation.

Are ending head count was down 14.2% year over year in Q3 to 15391.

Q3, ending headcount was also down 2.4 sequentially compared to Q too.

As a result of the progress on our cost optimization efforts. We now expect our 20 twenty-three personnel expenses to be $1.43 billion to $1.45 billion below the 1.45 to 1.55 billion dollar range that we previously provided.

As a reminder are expensive guidance excludes restructuring expenses.

Moving to SG&A Q3 expenses were $177.8 million and included $21.4 million, a restructuring charges, primarily related to asset impairments driven by our decision to divest our global forwarding operations in Argentina.

Operating in Argentina has become challenging due to a strict monetary policies and rapid currency devaluation and this divestiture will help mitigate our exposure to the deteriorating economic conditions and increasing political instability in that region.

As a part of divesting our operations in Argentina, we are pursuing a path for a local independent agent or agents to ensure continued service to our customers with shipments in that region.

Excluding those two three restructuring charges SG&A expenses of $156.4 million declined approximately 3.5% year over year, primarily due to reductions in contingent worker expenses and legal settlements.

We expect our 20 twenty-three SG&A expenses to be near the midpoint of our previous guidance of $575 million to $625 million, including depreciation and amortization expense that is expected to be toward the high end of our previous guidance of 92 $100 million.

As you recall from our queue one earnings call, we raised our cost savings commitment to $300 million of net annualized cost savings by Q4 of this year compared to the annualized run rate of Q3 of last year.

With the progress to date on our productivity initiatives. We are on track to deliver approximately $360 million in cost savings in 2023 at the mid point of our updated guidance with the majority of cost savings expected to be longer term structural changes.

Consistent with our strategy these cost savings improve our operating leverage and we'll help our operating margins as demand and a more balanced freight market returns.

Q3 interest and other expense totaled $20.7 million up $4.8 million versus Q3 of last year Q3 included $21.8 million of interest expense up $1 million versus Q3 of last year due to higher variable interest rates against a reduced debt load.

To reduce debt load drove a 1.4 million dollar decrease in Q3 interest expense on a sequential basis.

R Q3 tax rate came in at 11.7% compared to 16.9% in Q3 of 2022, the lower tax rate was primarily driven by lower pretax income and incremental tax benefits from foreign tax credits.

We now expect our 2023 full year effective tax rate to be in the range of 14% to 15% down from our previous guidance of 16% to 18%.

Adjusted or non-GAAP earnings per share, excluding 24.5 million of restructuring charges and 5.5 million of associated tax provision benefit was 84 cents down 53 per cent compared to Q3 last year.

Turning to cash flow Q.

Q3 cash flow generated from operations was $205 million, which demonstrates our ability to generate cash and make meaningful investments. Despite the continued soft freight market.

R Q3 cash flow compares to $626 million in Q3 of last year.

Unknown Executive: Good afternoon, ladies and gentlemen, and welcome to the CA Robinson 3rd quarter, 2023 conference call. At this time, all participants are on a listen only mode. Following the company's prepared remarks, we will open the line for a live question and answer session. To ask a question, please press star one on your telephone keypad. If anyone needs assistance at any time during the conference, please press star zero.

The year over year decline in cash Flo was primarily driven by changes in our net operating working capital in Q3 of last year, we had a $359 million sequential decrease in net operating working capital driven by the sharply declining cost and price of purchase transportation.

With the more moderated sequential declines in cost and price in Q3 of this year, we had a $55 million second sequential decrease in net operating working capital.

Unknown Executive: As a reminder, this conference is being recorded Wednesday, November 1, 2023.

Chuck Ives: I would now like to turn the conference over to check Ives, Director of Investor Relations. Please go ahead. Thank you, Dana, and good afternoon everyone.

In Q3 R capital expenditures were $16.7 million compared to $31.3 million in Q3 of last year, where we now expect our 2023 capital expenditures to be toward the lower end of our previous guidance of 90 $200 million.

Chuck Ives: On the call with me today is Dave Bozeman, our President and Chief Executive Officer, Mike Zechmeister, our Chief Financial Officer, and Arun Rajan, our Chief Operating Officer. Dave will provide some introductory comments. Arun will provide an update on our initiatives to improve our customer and carrier experience and our operating leverage.

We return to $76 million of cash to shareholders in Q3 through $73 million of cash dividends and $3 million a share repurchases.

Chuck Ives: Michael will provide a summary of our 2023 3rd quarter results and our expense guidance for 2023, and then we will open the call up for questions. Our earnings presentation slides are supplemental to our earnings release and can be found on the Investor section of our website at investor.ca Robinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we will let you know which slide we're referencing.

Cash return to shareholders equates to 92% of two three net income, but was down 88% versus Q3 last year, driven by the $153 million of cash used to reduce debt.

Now onto the balance sheet highlights. We ended Q3 with approximately 1 billion of liquidity comprised of $837 million a committed funding under our credit facilities and a cash balance of $175 million or that balance at the end of Q3 with 1.58 billion.

Chuck Ives: Today's remarks also contain certain non-gap measures and reconciliations of those measures to gap measures are included in the presentation. I'd also like to remind you that our remarks today may contain forward-looking statements. Slide two in today's presentation lists factors that could cause our actual results to differ from management's expectations.

Which includes debt paydown of $615 million versus Q3 last year.

Our net debt to EBITDA leverage at the end of Q3 was 2.1 times up from 1.81 times at the end of Q2.

Chuck Ives: And with that, I'll turn the call over today. Thank you, Chuck.

David Bozeman: Good afternoon, everyone, and thank you for joining us today. S has been well documented by many industry participants and observers. Global freight demand continued to be weak in the 3rd quarter. This, combined with ample carrier capacity, continued to result in a loose market with low spot rates. Low to truck ratios remain near the low levels of 2019 and route guide depth in our managed service business of 1.15 and Q3. Indicates that primary freight providers are accepting most of the contractual freight tender to them, resulting in fewer spot market opportunities.

R capital allocation strategy is grounded in maintaining investment grade credit rating, which allows us to optimize our weighted average cost of capital.

R $615 million in debt Paydown helped maintain our strong liquidity position and investment grade credit rating.

Keep in mind that the cash that we used to reduce debt generally reduces the amount of cash for share repurchases.

Over the long term, we remain committed to growing our quarterly cash dividend in alignment with our longterm EBITDA growth <unk>.

Dividends and share repurchase program are important leverage to enhance shareholder value.

David Bozeman: In the freight forwarding market, ocean vessel and air freight capacity continues to exceed demand, resulting in suppressed rates for ocean and air freight. We are staying focused on what we can control by providing superior service to our customers and carriers, executing on our plans to streamline our processes by removing waste and manual touches, and delivering tools that enable our customers and carrier-facing employees to allocate their time to relationship building and exception management.

Overall I'm encouraged by the progress that we continue to make on our productivity initiatives and look forward to our ability to build on that progress by leveraging generative AI combined with machine learning to take the capability of our people to an even higher level, we are positioned well to further reduce waste and increase operating leverage.

And value for Robinson shareholders with that I'll turn the call back over to Dave for his final comments.

Thanks, Mike.

Over my first four months here, it's become a parent the fee is Robinson has a secret sauce with people who have deep expertise in the free market, a long standing relationships with their customers and carriers.

David Bozeman: Our focus on delivering quality and improvements for our customers, such as enhanced visibility and increased automation, has been reflected in very positive feedback from my meetings with customers and validated by net promoter scores this year that are the highest one record for the company. Which we believe sets us up well with customers for the eventual positive inflection in the freight. Market. Our customers value the quality, stability, and reliability that we provide as they work to optimize their transportation needs.

Combined with Ramos and strong technology and large dataset.

People are able to provide innovative tech enable solutions powered by <unk> information advantage for the benefit of our customers and carriers.

This secret sauce is not easy to replicate with a digital only solution.

Robinson has shown the strength of his model through cycles, and our balance sheet continues to be strong.

David Bozeman: This has taken on greater importance to shivers who had exposure to transportation providers whose business models were not financially viable. During my many discussions with customers over the past four months, it's clear that they prefer partners who have financial strength and can invest through cycles in the customer experience. They also want partners who have the expertise to provide innovative solutions enabled by technology and people that they rely on to serve as an extension of their team.

The investments, we're making to improve the experience and outcomes for our customers and carriers combined with the work that we're doing to accelerate our clock speed waste reduction in productivity improvements should position as well for the eventual freight market rebound and to deliver improved operating leverage in return.

<unk> for our shareholders.

I continue to see an opportunity for the company to reach his full potential.

Create more shareholder value by a proven our value proposition, increasing our market share accelerating growth and.

David Bozeman: CH Robinson is that partner with the combination of people, technology, and scale to deliver an unmatched customer and carrier experience. As I mentioned earlier, we're executing on our plans to streamline our processes by removing waste and manual touches. The result has been meaningful cost reductions and productivity gains across our business that are ahead of our stated targets. In our North American Transurface Transportation business, our productivity improvements have translated into an 18% year-to-date increase in shipments per person per day.

Improving our efficiency, an operating margins and increasing overall profitability.

I'm incredibly excited about our future.

This concludes our prepared remarks, I'll turn it back to Domino for the Q&A portion of the call.

Thank you in order to lettuce, many callers ask questions as possible, we ask that you limit yourself to one question.

Like to register a question State Star one on your telephone keypad. If you would like to move your question from the queue it'll be start to on your telephone keypad.

Today's the first question is coming from Chris whether it be at Citigroup. Please go ahead.

David Bozeman: Assuming a typical seasonal volume pullback in Q4, we are on track to meet or exceed our target of 15% year-over-year improvement by Q4 this year. From a cost reduction perspective, we reduce Q3 operating expenses and NASD by 22% year-over-year versus a volume decline of only 3.5%. In our global forwarding business, Q3 operating expenses, excluding 23.6 million of restructuring charges, decline 12% year-over-year despite a slight increase in the number of shipments. And for the full enterprise, Q3 operating expenses, excluding 24.5 million of restructuring charges, decline 17% year-over-year compared to a 3% decrease in overall volume.

Yeah. He thinks good afternoon guys.

It just started maybe is helpful to get the monthly break out of a G. T could you give us a sense that maybe have October is trending kind of keeping in mind that there have been some changes in the dynamics within brokerage obviously headline ended up with some high profile exits from the market just kind of curious about how October is trending and if we are seeing some volume moved back to Robinson.

Dave I think you mentioned in your prepared remarks that the customers are valuing some of the stability and strength that you guys provide just want to get a sense that maybe how that is playing out in October.

Yeah, I hate Chris How're, you doing you know.

Break in it just kind of give us some details of what we're seeing you set that question of world and let's just jump at it.

Yeah. Overall, you know, we're seeing a soft freight market, we reference that I think you've been hearing that from others. It seems to be lingering you know, we're not seeing any meaningful inflections yet in volume of rates, but I would also add that you know the way. We approach. This is regardless of where we are in the cycle.

David Bozeman: As we continue to improve the customer experience and our costs to serve, I'm focused on ensuring that we'll be ready for the eventual freight market rebound. This means growing volume without adding headcount. We believe our team's continuing efforts to streamline our processes and remove manual touches gets us there. Even though I'm pleased with the progress that the team has made, I've challenged them to increase our clock speed on decision-making and improvement efforts.

Our pursuit is to outperform the market and you know.

We remain focused on providing exceptional service to our customers and streamlining our processes amplifying the expertise of our people with our tech improving our operating leverage gaining market share.

We feel like in Q3, we made progress on all those fronts.

You kind of ask about Goin' into October where we're at you know I think you know looking forward, there's gonna be some consumer spending that normally happens during the holiday season.

David Bozeman: I started by asking our employees, company-wide, to share what was impeding their speed and where they saw opportunity to create greater efficiency in their daily processes. The incredible response rate confirmed the desire of our employees to strengthen the company and the speak-up culture that exists. The responses validated some of our focused items and also highlighted some new opportunities. We're now driving focus on a handful of concurrent work streams that are addressing the highest leverage areas to eliminate productivity bottlenecks.

And you know that will impact you know the market a little bit generally speaking, we see a seasonal bump and spot rates in queue for mostly driven by the upcoming holidays and some carriers taken time off over the extended holidays, but nothing there that would suggest there's something sustaining or something different I think.

Generally speaking the trends that we're seeing I've been.

Pretty consistent.

Thanks for your time.

Thank you. The next question is coming from Jack Atkins up Stephen. Thank please go ahead.

David Bozeman: We're bringing forward past lessons on team structure and on mechanisms to drive adoption in order to deliver an improved customer experience through process optimization. Our 18% year-to-date productivity improvement is an indicator of the progress that we're already making. I'll turn it over to Arun shortly to share more about this and how we're utilizing generative AI. But these focus work streams are an example of how the leadership team and I are making changes and driving focus so that we position ourselves for growth in our core business.

Okay, great. Good afternoon, and thank you for taking my question. So I I guess I would love to get your thoughts kinda broadly as we.

Kind of begin the bid season process here over the next 30 to 45 days it kind of think about the spring bid season of up next year.

How are you guys are approaching that obviously, it's an extremely challenging market out there I think most folks are expecting.

Real capacity to come out and perhaps.

I turned on the free market at some point in 2024, how are you balancing you know the potential for you know going out and capturing market share birthday is the need to to.

To preserve the profitability the business. If we were to see you know the framework of turn next year. How how are you guys thinking about that as we head into the to the mid season process here.

David Bozeman: Ultimately, our focus on continuously improving the customer and care experience and removing waste from our workflows will result in a company that is quicker, more flexible and more agile in solving problems for our customers, providing better customer service and creating an operating leverage and profitable growth. I'm excited about the work that we're doing to reinvigorate Robinson's winning culture and I'm confident that together we will win for our customers, carriers, employees and shareholders.

Yes, Jack let me touch on some things there. So first of all just maybe I'll cover the capacity side you know the carrier capacity is contracting, but I think less so than we would have expected at this point in the process and you know when the market's been bouncing along the bottom like it has you know pricing is really awkward you know.

We're really pricing at or near the breakeven cost for the carriers. So they actually it's been a little slower.

You know that may be the result of their ability to subsidize their business because of the big profits that they made a year ago or government subsidies or maybe the lower operating costs or whatnot, but you know in in terms of.

Arun Rajan: With that, I'll turn it over to Arun to provide more details on our efforts to strengthen our customer and care experience and improve our efficiency and operating leverage. Thanks Dave and good afternoon everyone. As Dave mentioned, we've identified a handful of concurrent work streams that are addressing significant opportunities to eliminate productivity bottlenecks and deliver process optimization and an improved customer experience. We're leveraging the strength and experience of our single-threaded business process owners who are leading cross functional teams across these work streams with dedicated product, engineering, data science and AI resources assigned to each work stream along with alignment of shared goals, incentives and process accountability.

The bad season, coming up and how we're approaching it let's be clear you know our pursuit is too.

Gain in both margin and and share and so that's what we're going to ask her it's a competitive market and we're seeing that for sure and you know it was only five quarters ago that we're seeing all time record high prices and AGP per shipment and now we're on the other side of that in the cycle in the spot market.

Volume is very hard to come by and it appears that brokers generally are being more aggressive that they've been in the past and I think with this kind of environment, you know I would expect to see.

Arun Rajan: A couple of examples of work streams on the productivity roadmap are quoting an auto entry. In both of these areas, we are reducing manual touches and our response time to customers driving faster speed to market and higher customer engagement. In addition to our past learnings, we're leading more heavily on generative AI to deliver process improvements. In our quoting work stream, we've utilized Gen AI to fill in the blanks where there's incomplete and unstructured information in an automated and efficient process, which has reduced the time to provide a quote from approximately five minutes to less than one minute from the time the request has received via email.

More brokers struggling and going out of business, given given where we're at but as we approached the season you know we've got to operate within the market that we've got our job is to help performed the market and like I said, we've got to protect our margins and make sure that we've got a good balance between the two.

Okay. Thank you very much.

Thank you. The next question is coming from Jeff Coffin, a vertical research partners. Please go ahead.

Thank you very much and David appreciate your your overview on the direction of progress I'm, just kind of curious with some of the other brokers out they're starting to shut down operations.

Arun Rajan: In the last week of the quarter, over 10,000 transactional quotes were created using a Gen AI agent and we have a significant opportunity to scale and grow in this area as we bring this capability to more customers, respond to more quote requests and leverage the ability to provide transactional quoting 24 hours a day, seven days a week. With more data and history to leverage than any other 3PL, we have opportunities to harness the power that this advanced technology members to further capitalize on our information advantage and will continue to look for and pursue those opportunities.

If we saw a turn whether it's after the holiday season lunar new year really 24 with your employee count down what do you think your excess capacity is to be able to handle incremental volume without having to add bodies at this point.

Yeah. Good question. The it's something that we've we talk about Austin first of all I'll start and say I feel really strong about our our capacity and it's something that.

We we execute on each day as a matter of fact, we're building ourselves up as you know for the eventual rebound of the market and that eventually rebound we need to have the the capacity, while keeping our our head count in check.

Arun Rajan: In addition to improve customer service and engagement, these efforts are increasing our digital execution of critical touch points in the life cycle of an order. From quote to cash, thereby reducing the number of manual tasks or shipment and the time for task. This translates to productivity improvements measured in terms of shipments per person per day, which creates operating leverage. For example, a 15% productivity target translates to an ability to grow volume by 15% without adding headcount to support that volume growth.

For me, it's about our installed capacity base and we we've been talking about installed capacity, we feel like we have sufficient capacity for what would be a a normal recovery and certainly we talk about different execution style is on the types of recovery.

Arun Rajan: And if volume growth is less than 15%, the 15% improvement target would be achieved through a combination of volume growth and headcount reduction. Either pass or goal of a 15% year-over-year improvement in shipments per person per day by Q4 of this year, with an 18% year-to-date improvement achieved through Q3.

That will happen you know very aggressive for or mild recovery, but the bottom line is I feel good about our installed capacity, where we are I think we're well positioned for the eventual turnaround that puts us in pole position here. So good question glad your accident, we feel good about about where we're at.

Okay. Thank you that's my one.

Thank you. The next question is coming from Scott Group Hustle Free search. Please go ahead.

Arun Rajan: As we raise the bar in our clock speed and deliver further process optimization and an improved customer experience, we plan to deliver the compounded benefits of additional productivity improvements beyond 2023, with technology that supports our people and our processes.

Hey, Thanks afternoon. So your slide with truckload profit per shipment is basically at an at an all time low or are we confident that we're at the trough or is it just too early to tell them and then just separately I I just want to understand what's going on with personnel costs. There was a big step.

Michael Zechmeister: With that, I'll turn the call over to Mike for a review of our third quarter results. Thanks, Arun. And good afternoon, everyone.

Down from Q2 to Q3, but based on the guidance that looks like personnel. Then takes a step up from two three Q for it is that right and and just help us understand what the right run rate for personnel is heading into twenty-four. Thank you.

Michael Zechmeister: The soft freight market out buying by day resulted in third quarter total revenues of $4.3 billion down 28% compared to Q3 last year. Our third quarter adjusted gross profit, or AGP, was also down 28% year-over-year, or $252 million driven by a 31.4% decline in NAST, and a 31.6% declining global forwarding, and partially offset by a 4.6% increase in our other business units. On a monthly basis compared to Q3 of last year, our total company, AGP, per business day, was down 34% in July, down 26% in August, and down 21% in September.

Yeah, Scott, let me chime in on those so.

First of all we kind of talked about the marketplace and where we're at you're right I think it's slide eight in the deck that points to where we are in the cycle and.

This point, we've been bouncing along the bottom for quite some time and so we've what's unusual I think about this point in the site because we've had an opportunity to re price our contracts pretty much across the board. So we've kind of reset them now.

And it's a question about when the rebound comes and when it comes you know a couple of things happened has you know so.

Michael Zechmeister: The third quarter contained one less business day than both third quarter of last year and second quarter of this year. In our NAST truckload business, our Q3 volume declined approximately 6% year-over-year, and 4.5% on a per business day basis. On a sequential basis, NAST truckload volume increased 2% versus Q2 and 3.5% per business day. During Q3, we had an approximate mix of 70% contractual volume and 30% transactional volume in our truckload business for the third quarter in a row, as the spot market remains suppressed.

When the when.

When the demand comes back or the capacity exit the markets or a combination of two we would expect prices and costs to just start to move up and the impact that that has on our business is obviously different in the contract market versus spot market. So let me take contract first and the contract side you know because we're lock.

In on contracts for different terms as the prices go up will see all the normal pressure on those but the margins associated with those but the good news is on the spot market as demand comes back, we'll we'll get both better AGP per shipment and more demand <unk> at the same time, so there's there's offsetting impasse.

Michael Zechmeister: The sequential declines that we have seen in our truckload line haul cost per mile since Q2 of last year continued into Q3 of this year. On a year-over-year basis, we saw a decline of approximately 13.5% in our average truckload line haul cost per mile paid to carriers, excluding fuel surge. Charges. Due to the usual time lag associated with contract pricing, resetting to follow spot market costs, our average truck load, line haul rate, or price bills, our customers, excluding fuel surge charges, decline 16.5% on a year over your basis.

There and you know that's not unique to a Robinson, that's kind of the way it works in this market.

Your second yeah, so I'll leave that one there.

Well, maybe I shall I have one more point, which is you know just.

Talk about where we are right now given how soft the spot market has been or a mix of volume and truckload is 70 per cent contract and 30%.

Spot, that's unusually tilted towards contract for for where we are in the cycle, but you know again has those things turn you'll see US go back to closer to where we were you know in 2021, where you know three quarters of that year, we were at 55 per cent contract and 45 per.

Michael Zechmeister: With this price decline coming off of a higher base than cost, these changes resulted in a 34% year over your decrease in our truck load, and a 36.5% decrease in our agp per load. Within Q3, our truck load agp per load was relatively flat through the quarter. In our LTL business, Q3 orders were down 2% on a year over your basis, and 1% sequentially. On a per business day basis, our Q3 LTL orders were down a half a percent year over year, and up a half a percent sequentially.

Sent spot. So that's just to show that you know when that price turns and when the costs turn there's an impact on on contract.

That's a squeeze and there's an impact on spot that's beneficial and it kind of helps you dimensionalize how that how that can go.

Over the personnel costs, you know I think you're right I think what you're doing is you're looking at the guidance that we provided and just as a recap you know we were at 1.45 to 1.55 billion in personnel expense, we took that down to 1.43 to 1.45 billion, which is a reduction of $60 million.

Michael Zechmeister: Agp per order declined 13.5% on a year over your basis driven primarily by soft market conditions and lower fuel prices. On a sequential basis, the cost and price of purchase transportation in the LTL market increased in Q3, resulting in a 2% increase in agp per order. This was primarily driven by capacity that has likely temporarily exited the market. By leveraging our broad access to capacity in all modes of LTL, we were able to meet our customers LTL needs at a high service level.

At the mid point, but that does it represent off the mid point about a four and a half per cent increase in Q4 over Q3. So a couple of things. So number one we did in Q3 have some incentive costs that got reset down lower because of performance of the business and so.

Those accruals down on that was a benefit to Q3 that we're not expecting to repeat Q4 explains a little bit of that but then maybe more broadly.

Michael Zechmeister: In our global forwarding business, market conditions continued to be soft behind weak demand and plenty of capacity. In Q3, global forwarding generated agp of approximately $170 million, a 32% decline year over year. Within these results, our ocean forwarding agp declined by 35% year over year, driven by a 34.5% decline in agp per shipment and a half a percent decrease in shipments. On a sequential basis, our ocean volume grew 2.5%.

It I just want to reinforce that our productivity initiatives continue we will you know the efforts in the pipeline of work that we have is ongoing we would expect headcount to be a little lower in queue. For then it wasn't Q3, so so that should be favorable.

And then maybe just to reinforce point made earlier about Q Ford is is seasonally lighter quarter for us in terms of volume. So so that's just another point to be made inside of that but generally speaking.

I think that covers your personal.

Thank you.

Michael Zechmeister: Compared to pre-pandemic levels, we have grown ocean market shares through adding new customers, diversifying trade lanes and verticals and leveraging investments in technology and talent.

Mmm.

Thank you. The next question is coming from can extra think of America. Please go ahead.

Hey, Greg good afternoon.

Maybe just to clarify a comment earlier in the L. T. L. I think you've noted that temporary capacity exited the market are you then assuming a rebound in that in that it sounds like you said you were assuming a rebounding capacity trying to understand that that commentary on the L. T. L. And then like I guess just to follow up on that nasty gross margin right down to 12.5% I guess that's the.

Michael Zechmeister: Turning to expenses, our productivity initiatives continue to enable us to deliver on and exceed our expense reduction expectations. Q3 personnel expenses were $343.5 million including $3 million of restructuring charges and that was down 21.5% compared to Q3 of last year. Excluding the restructuring charges, our Q3 personnel expenses were down 22.2% year over year, primarily due to our cost optimization efforts and lower variable compensation. Our ending head count was down 14.2% year over year in Q3 to 15,391.

Famous as gross profit furloughed, you know with spot rates remaining here I, just won't understand you're saying that the $450 million of gross revenues I guess from convoy that freed up into the market that that's not easing the the capacity constraints on the brokerage squeeze it does that mean this week environment is it getting worse as you move to.

The.

Peak season, if you see any anything that that suggests where we're starting to ease off that or or maybe just talk about that as we go into holiday season, I guess before the bid season, the Jack was talking about.

Michael Zechmeister: Q3 ending head count was also down 2.4 sequentially compared to Q2. As a result of the progress on our cost optimization efforts, we now expect our 2023 personnel expenses to be 1.43 to 1.45 billion dollars. Below the 1.45 to 1.55 billion dollar range that we previously provided. As a reminder, our expense guidance excludes restructuring.

Yeah. So on the second part of that the I think you were talking about convoy going out of the market and how does that impact the market and I would make a couple of <unk> comments on that so you know first of all.

The the size of that business doesn't have a material impact on our results now that being said, yes, certainly that business came available as the announcements were made we've certainly participated in that and you know where there is profitable volume to be had.

Michael Zechmeister: Investuring Expenses Moving to SGNA, Q3 Expenses were $177.8 million and included 21.4 million of restructuring charges, primarily related to asset impairments driven by our decision to divest our global forwarding operations in Argentina. Operating in Argentina has become challenging due to its strict monetary policies and rapid currency devaluation, and this divestiture will help mitigate our exposure to deteriorating economic conditions and increasing political instability in that region. As a part of divesting our operations in Argentina, we are pursuing a path for a local, independent agent or agents to ensure continued service to our customers with shipments in that region.

You know kind of that fits with our model, we certainly liked the longer loads and you know we certainly been participate in winning some of that business. Now you know a lot of that business is also localized in short runs multiple runs density around.

You know certain geography as in while we compete for that that's not a sweet spot for us in terms of profitable volume, but all that obviously is getting picked up but I would say, it's not having a an overall impact on the market just given the size of that business.

Michael Zechmeister: Excluding those Q3 restructuring charges, SGNA expenses of $156.4 million declined approximately 3.5 percent year over year, primarily due to reductions in contingent worker expenses and legal settlements. We expect our 2023 SGNA expenses to be near the midpoint of our previous guidance of $575 to $625 million, including depreciation and amortization expense that has expected to be toward the high end of our previous guidance of $90 to $100 million.

And then the other <unk> remind me of the other questions.

Yeah, Yeah, Yeah, I'll just start I think you got it yep.

Yeah L T L.

Kathy capacity temporarily.

Leaving the market yeah. Thanks for picking up on that point. The idea there was while yellow went out of business in that capacity. Then came out there is a process there where the assets that are still useful will be redeployed by new ownership and through the new hubs.

And probably come back into the market at some point and so that was the intent to the word temporary you know to the extent that the assets are still viable and useful they'll find a new owner, new home and probably make their way back into the system.

Michael Zechmeister: As you recall from our Q1 earnings call, we raised our cost savings commitment to $300 million of net annualized cost savings by Q4 of this year compared to the annualized run rate of Q3 of last year. With the progress today on our productivity initiatives, we are on track to deliver approximately 360 million in cost savings in 2023 at the midpoint of our updated guidance, with the majority of cost savings expected to be longer-term structural changes.

So just to clarify then you you would expect then continued pricing pressure in that market, if you'd see capacity sticking around and.

Yeah on the Lpl's side, I think what we've seen in the near term has been positive in terms of an increase in H P per shipment uhm related to that mood because they were a bigger part of that market in terms of the capacity to serve and so I think that I don't.

Michael Zechmeister: Consistent with our strategy, these cost savings improve our operating leverage and will help our operating margins as demand and a more balanced freight market returns. Q3 interest in other expense totaled $20.7 million up $4.8 million versus Q3 of last year. Q3 included $21.8 million of interest expense up $1 million versus Q3 of last year due to higher variable interest rates against a reduced debt load. The reduced debt load drove a $1.4 million decrease in Q3 interest expense on a sequential basis.

Unlike the convoy example is a more meaningful impact and it did we did certainly see it now the question I think longer term is rooted in network temporary which is you know how long has that capacity out how long are those hubs out of service, where do they land and how or if or when does that capacity come back into the market and that.

Will provide additional capacity that I would say it will have an opposite effect to some extent.

Thanks My Cat.

Hi, Mike and I presume that was Chuck squeezing in there. Thanks I appreciate the time.

Thank you. The next question is coming from <unk> I've ever Cry or sorry. Please go ahead.

Michael Zechmeister: Our Q3 tax rate came in at 11.7 percent compared to 16.9 percent in Q3 of 2022. The lower tax rate was primarily driven by lower pre-tax income and incremental tax benefits from foreign tax credits. We now expect our 2023 full year effective tax rate to be in the range of 14 to 15 percent down from our previous guidance of 16 to 18 percent.

Thank you [noise] regarding the year of your improvement in shipments per person per day, you're up to 18% targets 15 your confidence in the 15, you already there how low tobacco or how how could I go I guess as a percentage and what does that equate to as we think about an operating margin through cycle, what's the new kind of productivity <unk>.

Patrick mean for I guess, the beginning of the cycle and then mid cycle as it as it continues to build.

Michael Zechmeister: Adjusted or non-gap earnings per share, excluding 24.5 million of restructuring charges and 5.5 million of associated tax provision benefit was 84 cents down 53 percent compared to Q3 last, last year. Turning to cash flow, Q3 cash flow generated from operations was $205 million, which demonstrates our ability to generate cash and make meaningful investments despite the continued soft freight market. Our Q3 cash flow compares to $626 million in Q3 of last year.

I I can start.

In terms of productivity improvements you know <unk>, we're at 15, 418% year to date and respect and envy you at 15%.

Said that we feel pretty confident in setting targets for subsequent years at that at a similar right. So you know we're working on our 2024 operating plans and I would expect we target.

A similar productivity improvement.

Yeah, a compound it that'd be over 30% by the end of next year in terms of productivity improvements. So I feel pretty good about that productivity is <unk> and the way I said this my in my prepared remarks that.

Michael Zechmeister: The year over year decline in cash flow was primarily driven by changes in net operating working capital. In Q3 of last year, we had a $359 million sequential decrease in net operating working capital driven by the sharply declining cost and price of purchase transportation. With the more moderated sequential declines in cost and price in Q3 of this year, we had a $55 million sequential decrease in net operating working capital. In Q3, our capital expenditures were $16.7 million compared to $31.3 million in Q3 of last year.

Productivity ultimately is a measure that consider is volume right. So.

You ask the question of Dave what if your volume goes up next year. So volume goes up 15% next year and I'll productivity improvements are 15% <unk> yep.

That you wouldn't have to add any any head count too. So if that's in per cent additional volume. However, if me grow just five per cent. Then you know we'd get the other 10% by way of head count production. So so I you know I think regardless of cycle, we would we would measure productivity and read adjusted based on on <unk>.

Michael Zechmeister: We now expect our 2023 capital expenditures to be toward the lower end of our previous guidance of $90 to $100 million. We returned $76 million of cash to shareholders in Q3 through $73 million of cash dividends and $3 million of share repurchases. The cash return to shareholders equates to 92% of Q3 net income, but was down 88% for Q3 last year driven by the $153 million of cash used to reduce debt.

<unk>.

Okay I appreciate it thank you.

But johnny isn't it.

Just just to add on that and Ah ruin hit is the key bears were were laser focused on.

On driving productivity as well as growth whichever one you know who will do it in combination.

And driving that so that's super important and it's.

And that leaves a focus extends to the rebound as well I I can't express that enough that.

Michael Zechmeister: Now onto the balance sheet highlights. We ended Q3 with approximately 1 billion of liquidity comprised of $837 million of committed funding under our credit facilities and a cash balance of $175 million. Our debt balance at the end of Q3 was $1.58 billion, which includes debt paydown of $615 million versus Q3 last year. Our net debt to EBITDA leverage at the end of Q3 was 2.1 times up from 1.81 times at the end of Q2.

As we get ready for this market rebound.

This will be the super important from a productivity perspective and.

You know separate them that head count volume girl.

Yep. Thank you did.

Brian.

Thank you. The next question is coming from <unk> Ah Stifel. Please go ahead.

Hey, good afternoon, everyone nice to see some progress here in a in a tough market wanted to zoom out a little bit you know what I think about you know.

Michael Zechmeister: Our capital allocation strategy is grounded in maintaining investment grade credit rating, which allows us to optimize our weighted average cost of capital. Our $615 million in debt paydown helped maintain our strong liquidity position and investment grade credit rating. Keep in mind that the cash that we use to reduce debt generally reduces the amount of cash for sharey purchases. Over the long term, we remain committed to growing our quarterly cash dividend in alignment with our long term EBITDA growth. Our dividends and sharey purchase program are important levers to enhance shareholder value.

Some of the cycles and make it a cycle or two ago. There was talk about structural pressure on a G. P. As a result of.

No better customer price discovery and Digitization trends, obviously, you know you've had a lot of changes in the industry. Since then how are you thinking about a good baseline a G. P for the business through the cycle based on what you're seeing now is there any reason to believe that you should be able to get back closer to the mid teens.

Is a G P gonna be lower as a result, maybe if somebody's structurally higher capacity costs, but maybe you can make up for that with lower cost to serve any any comments around you know the direction of a G. P. In the future would be great.

Michael Zechmeister: Overall, I'm encouraged by the progress that we continue to make on our productivity initiatives and look forward to our ability to build on that progress. By leveraging generative AI combined with machine learning to take the capability of our people to an even higher level, we are positioned well to further reduce waste and increase operating leverage and value for rabbits and shareholders.

Yeah. Thanks, Bruce let me take that one I think your observations are accurate generally <unk> you know.

When you talk about the industry and price transparency and you know I would even perhaps add length of load being pressures on a G. P. That are you know kind of realities in the marketplace now.

David Bozeman: With that, I'll turn the call back over to Dave, for his final comments. Thanks, Mike. Over my first four months here, it's become apparent the C.H. Robinson has a secret sauce with people who have deep expertise in the freight market and long-standing relationships with their customers and carriers. Combined with Robinson's strong technology and large data set, our people are able to provide innovative tech-enabled solutions powered by our information advantage for the benefit of our customers and carriers. This secret sauce is not easy to replicate with a digital-only solution. Robinson has shown the strength of his model through cycles, and our balance sheet continues to be strong.

You know what we're focused on our other things that help us in that regard. So in our plans you know the ability to buy better and also I talked a little bit about the competitiveness that we're seeing right now.

David Bozeman: The investments we're making to improve the experience and outcomes for our customers and carriers, combined with the work that we're doing to accelerate our clock speed, waste reduction, and productivity improvements, should position us well for the eventual freight market rebound and to deliver improved operating leverage and returns for our shareholders. I continue to see an opportunity for the company to reach its full potential and create more shareholder value by improving our value proposition, increasing our market share, accelerating growth, improving our efficiency, and operating margins, and increasing overall profitability. I'm incredibly excited about our future.

You always see competitiveness at this part of the cycle, but I think that given the strain on the balance sheets and you know income statements of a lot of the brokers and this fragmented universe universes is pretty substantial can I think there's a little bit of unusual aggressiveness at this point that sits in the market.

Place I would expect that to shake out here in.

In the near future I think we're already seeing it.

You know anecdotally and you know so I think that's the thing Similarly, you know I've.

Talked a little bit about the capacity on the capacity side I think that we will expect to see some things shake out there. We've got anecdotal evidence would suggest that there's capacity already coming out you know one of the data points, we look at as our new <unk> New carrier sign ups were about 4900 here in Q3, and that's less than half.

Of what it was in Q3 last year. So cause these rates persist lower in law for longer you know in that capacity comes out the demand comes back that's one I think you'd get back to close to the longterm averages on AGP per shipment, an AGP margin that you're referencing so it will probably come up a little shop.

Unknown Executive: This concludes our prepared remarks.

Of of where it's been on a on a 10 year average probably closer to where it's been on a five year average.

Unknown Executive: I'll turn it back to Donna now for the Q&A portion of the call. Thank you. In order to let as many callers ask questions as possible, we ask that you limit yourself to one question. If you would like to register questions today, star one on your telephone keypad. If you would like to remove your question from the queue, it'll be star two on your telephone keypad.

But that's where I would see that chicken out and then to the extent that the work that we're doing puts tailwinds into that for example, some of the automation and work we're doing on the buy side to improve our buying we can also help ourselves relative to the marketplace. There with respect to H P margin.

Chris Weatherby: Today's first question is coming from Chris Weatherby of City Group. Please go ahead. Hey, thanks. Good afternoon, guys. If you start maybe, it's helpful to get the monthly break out of a GP. Can you give us a sense of maybe how October is trending, kind of keeping in mind that there have been some changes in the dynamic within brokerage. Obviously, there's some headlines about some high-profile exits from the market. It's kind of curious about how October is trending.

That's great very helpful. Thank you.

Thank you. The next question is coming from Jordan <unk> Goldman Sachs. Please go ahead.

Yeah, Hi, Uhm, So you talked a fair bit about things on the digital processes optimizing processes et cetera, which is very helpful. I'm just curious how much of the technology and automation tools et cetera are essentially ready to roll out versus how much additional spending into our development. So.

Chris Weatherby: If we are seeing some volume move back to Robinson, David, I think you mentioned your prepared remarks that the customers are valuing some of the stability and strength that you guys provide. Just want to give a sense of maybe how that's playing out in October.

David Bozeman: Yeah, Chris, how are you doing? I'll have my break in and just give you some details of what we're seeing. You said that question of well and let's just jump in. Yeah, overall, we're seeing a soft freight market. We reference that. I think you've been hearing that from others. It seems to be lingering. We're not seeing any meaningful inflections yet in volume or rates, but I would also add that the way we approach this is regardless of where we are in the cycle.

I'll need to take place on the tax rate for or is it pretty much ready to go or is there still more to do thanks.

Yeah, you got me.

Yeah, Let me get out let me hit that a little bit and and pass it over to a rune yeah. We've got a great pipeline. We would execute are in the pipeline I think you can see it in our results you know if you go back to some of the cost savings initiatives. We've talked about you know we started at 150 million cost savings against Q3 run rate last year, we increase that the 300.

We're not talking about $360 million. So you can see the productivity initiatives that we've had in our pipeline working their way through to our results and so yes. It's there you just heard a rune talking about productivity again in the future similar levels. So you know it's it's.

David Bozeman: Our pursuit is to outperform the market. We remain focused on providing exceptional service to our customers and streamlining our processes, amplifying the expertise of our people with our tech, improving our operating leverage, gaining market share. We feel like in Q3, we made progress on all those fronts. You know, you kind of ask about going into October where we're at, you know, I think, you know, looking forward there's going to be some consumer spending that normally happens during the holiday season and, you know, that'll impact, you know, the market a little bit generally speaking.

Not just a one project kind of thing and so many project kind of thing I'll, let rune.

David Bozeman: We see a seasonal bump in spot rates in Q4 mostly driven by the upcoming holidays and some carriers taking time off over the extended holidays, but nothing there that would suggest there's something sustaining or something different, I think generally speaking, the trends that we're seeing have been been pretty consistent. Thanks for the time.

Elaborate on that a bit more yeah, but the way we look at it is you know it's just continued focus on operating leverage and we've got a whole bunch of new tools.

Toolbox that we've got Jan AI does that lean and the point is you know it would be when you've talked about this we said this is a multi year road map of opportunities forgot to 15 per cent productivity improvements this year and we haven't to Mike's point, you have a big backlog, where we believe that we can continue to unlock significant.

Unknown Executive: Thank you.

Productivity improvements in subsequent years and you know what target another 15 per cent like I said in 2024.

Jack Atkins: The next question is coming from Jack Atkins with Stephen Zink. Please go ahead. Okay. Great. Good afternoon. And thank you for taking my question. So I guess I would love to get your thought kind of broadly as we kind of begin the bidsies and process here of the next 30 to 45 days. And kind of think about the spring bidsies of next year. How are you guys approaching that? Obviously it's an extremely challenging market out there.

And so in terms of technology spend we don't expect it increase or spend your over Europe, but we will continue to stay at the current levels of technology, you spend and execute on the roadmap that so we have.

[noise], Yeah, Jordan to stave off just add onto their the.

And I feel really good around the cheese embracing.

Ah the kind of new clock speed initiatives, just really driving more definitive more more speed of decisions.

Jack Atkins: I think most folks are expecting a digital capacity to come out and perhaps a turn in the frame market at some point in 2024. How are you balancing, you know, the potential for, you know, going out and capturing market share versus the need to preserve the profitability of the business if we were to see, you know, the frame market turn next year. How are you guys thinking about that as we head into the to the bidsies and process here?

I think it really sets us up well and and driving waste out less manual touches a.

Everyone is really locked arms on that and so we feel good about that so it's a good question.

Thank you.

David Bozeman: Yeah, Jack, let me touch on some things there. So, first of all, just maybe I'll cover the capacity side. You know, the carrier capacity is contracting, but I think less so than we would have expected at this point in the process. And, you know, when the market's been bouncing along the bottom like it has, you know, the pricing is really opera. You know, we're really pricing at or near the break even cost for the carriers.

Thank you. The next question is coming from David Fern enough Bernstein. Please go ahead.

Hey, Thanks for taking the questions. So like you talked a lot about I'm trying to trying to beat the market and I just wonder if you could elaborate maybe as a team on on what does that mean are we talking about volume we're talking about value I'm. The volume is a little bit better than I think the the the shipment index in kasson pricing is a lot worse on a on a on a.

David Bozeman: So the exit's been a little slower. You know, that may be the result of their ability to subsidize their business because of the big profits that they made a year ago or government subsidies or maybe the lower operating costs or whatnot. But, you know, in, you know, in terms of the bid season coming up and how we're approaching it, you know, let's be clear, you know, our pursuit is to gain in both margin and and share.

On a per mile basis, so how.

How should when you're thinking about how you're approaching that naff market or are you just going for volume N N N and you'll figure it out at the other end when the market correct. Sore you you also focusing on kind of value sure.

Yeah. Thanks for the questions are Super important question, let me be clear that you know our pursuit is both market share gain and margin. So it's profitable market share when I talk about beating the market I'm talking about being able to maintain our margins given the market that we're operating in while I'll.

David Bozeman: And so, you know, that's what we're going after. It's a competitive market. And, you know, we're seeing that for sure. And, you know, it was only five quarters ago that we were seeing all time record high prices and age of people shipment. And now we're on the other side of that in the cycle and the spot market volume is very hard to come by. And, you know, it appears that brokers generally are being more aggressive that they've been in the past.

So gaining market share and you know the let's take market share first you know we don't.

Oh.

Coming forward with a quarter like Q3, where a truckload volume was down 6% are down 4.5% on a per day basis, because we have one less day you know.

David Bozeman: And I think with this kind of environment, you know, I would expect to see more brokers struggling and going out of business, you know, given, given where we're at. But, as we've approached the season, you know, we've got to operate within the market that we've got our job is to perform the market. And like I said, we've got to protect our margins and make sure that we've got a good balance between the two. Okay. Thank you very much.

We don't want our volume to be down obviously, but when you look at the market that we're operating in and you look at some of the metrics that are out there you'll get cash index was down.

You know 8.7 in the quarter I think the U S Bank Index just came out I was closer to almost 10, you know that that makes us feel a little better about that but we want to grow now on the other side of that you know we operate within this market in terms of pricing and we are constantly of value.

Jeff Austin: Thank you. The next question is coming from Jeff Austin of vertical research partners. Please go ahead. Thank you very much. And David appreciate your your overview on the direction of progress. I'm just kind of curious with some of the other brokers out there starting to shut down operations.

Waiting opportunities and ways to improve that margin a lot of the work that we're doing is to improve that margin that is our pursuit that is our goal going forward and you know in the short term here as we've talked about there's some interesting competitive dynamics that I think have a lot to do with the aggressiveness.

David Bozeman: If we saw a turn, whether it's after the holiday season, Lunar New Year, early 24, with your employee countdown, what do you think your excess capacity is to be able to handle incremental volume without having to add bodies. Dispoint. Yeah, good question. The it's something that we've we talk about often first of all, I'll start and say I feel really strong about our our capacity and it's something that we we execute on each day as a matter of fact.

This around the broker set given that they are really struggling.

Now the other point I would make that I think is important for Robinson is that because we do have a strong business model and we do generate cash even in the toughest of times like this quarter, we were able to invest throughout this downturn in the market and so I think where others may be worried about.

<unk> their viability and their ongoing entities ability to even compete we're continuing to make investments to make ourselves better and I think on a relative basis that helps us with our confidence about where it will be one this market returns to a more balanced marketing.

David Bozeman: We're building ourselves up as you know for the eventual rebound of the market and that eventual rebound. We need to have the the capacity while keeping our our head count in check. For me, it's about our installed capacity base and we've been talking about installed capacity. We feel like we have sufficient capacity for what would be a normal recovery. And certainly we we talk about different execution styles on the types of recoveries that will happen, you know, very aggressive for or mild recoveries.

Alright, I appreciate the time.

Thank you. The next question is coming from Tom Water-witch. So few B S. Please go ahead.

[noise] yeah, good afternoon, let's.

Let's see I wanted to ask you I guess that slide eight is you know as the intriguing wanted to look at and and try to figure out where we're going I I think when I look at prior cycles when spot rates eventually bought them and move up there. They're typically has been a period of time, where the Nast Ah you know gross margin.

David Bozeman: But the bottom line is I feel good about our installed capacity where we are. I think we're well positioned for the eventual turnaround that you know puts us in pole position here. So good question. Glad you actually then we feel good about about we're at.

Per cent would get Ah would come down and so and and I think Mike you referred to that kind of 70 per cent contract mixed being larger than normal and and that's where you would see the squeeze. So it is it wrong to to consider that there could be we don't win spot rates come come down.

Unknown Executive: Okay, thank you. That's my one. Thank you.

Scott Group: The next question is coming from Scott group of full research. Please go ahead. Hey, thanks afternoon.

Scott Group: So your slide with truckload profit per shipment is basically at an at an all time low or are we confident that we're at the trough or is it just too early to tell and then just separately. I just want to understand what's going on with personnel cost. There was a big step down from Q2 to Q3, but based on the guidance it looks like personnel then takes a step up from Q3 to Q4.

That there could be some further pressure on that and asked gross margin or am I thinking about that the cycle kind of you know so.

Maybe a different cycle and it just quickly on there net revenue in forwarding.

I don't know if you think you're it seems like maybe we're close to the bottom, but I I don't know if you have a quick thought on that as well. Thank you yeah.

Scott Group: Is that right and just help us understand what the right run rate for personnel is heading into 24. Thank you. Yes, Scott. Let me chime in on those. So, you know, first of all, we kind of talked about the marketplace and where we're at. You're right. I think it's slide eight in the deck that points to where we are in the cycle. And, you know, at this point, we've been bouncing along the bottom for quite some time.

Tom Let me take your the first part first which.

I think we've covered a variety of the elements around that but I think you characterized it fairly you know within that contract spaces prices come up you know there is some ability to get squeezed in you know whether this cycles like the past cycles, what will really matter is the paste or the magnitude of which.

Scott Group: And so we've, you know, what's unusual. I think about this point in the cycles. We've had an opportunity to reprise our contracts pretty much across the board. So we've kind of reset them now. And it's a question about when the rebound comes and when it comes. You know, a couple of things happen as you know, so when the, you know, when the demand comes back or the capacity exit the markets or a combination of two, we would expect prices and costs to just start to move up.

Those prices pricing increases come back as the market normalizes. So is it a slow gradual increase in in that case I think we will our margins will will hold up very well as they improve going forward. If it's a sharp spike up you know then that squeeze on the contract side will be gray.

Better, but again that usually comes with a heck of a lot more demand on the spot market and will be there competing and and getting our share of that which will offset the squeeze a contract. So there's a you know he could you know every cycle is a little bit different certainly generalizations, we make about them, which is where these questions are coming from but.

Scott Group: And the impact that that has on our business. That's obviously different in the contract market versus the spot market. So let me take contract first on the contract side. You know, because we're locked in on contracts for different terms, there's the prices go up. We'll feel the normal pressure on those margins associated with those. But the good news is on the spot market as demand comes back will get both better AGP procurement and more demand at the same time.

That's kind of where we're at in the in the you know the.

The other unique thing about this one that I alluded to is it just stinks.

The broker network competitiveness here is probably a little greater than it has been [noise].

Scott Group: So, you know, there's, there's offsetting impacts there. And, you know, that's not unique to Robinson. That's, you know, kind of the way it works in this market. You're second, so I'll leave that one there. Well, maybe I still have one more point, which is, you know, just to talk about where we are right now, given how soft the spot market has been, our mix of volume and truck load is 70% contract and 30% spot.

And if anything I'll, let you know.

<unk> a G. F. You know I think generally I'll go ahead and hit bottom and G. As in <unk>, what I would say to that is you know we haven't seen any meaningful changes from Q3 on the G upside we feel great about our business there and share that we've been growing and I worked at the team's been doing and <unk>.

Reparations for when that demand comes back, but you know.

No green shoots to speak up there yet.

Scott Group: And that's, you know, unusually tilted towards contract for where we are in the cycle. But, you know, again, as those things turn, you'll see us go back to closer to where we were, you know, in 2021, where, you know, three quarters of that year, we were at 55% contract and 45% spot. So that's just to show that, you know, when that price turns and when the costs turn, you know, there's an impact on contract that that's a squeeze and there's an impact on spot that's beneficial and it can help you dimensionize how that how that can go.

Okay, great. Thank you.

Thank you for showing time for one final question. Today's last question is coming from Stephanie more of Jeffries. Please go ahead.

Hi, good evening. Thank you.

I think you know it might be helpful. You know just you know for us on the outside kind of looking in here, maybe can you give us. Some examples of the tech changes are digital changes that you've implemented you're the date.

And then you know do you view that these are the changes in your technology that will help kind of keep your head count and check you know when did that the labor market does that rebound here.

Scott Group: Over to personnel costs, you know, I think you're right. I think what you're doing is you're looking at the guidance that we provided and just as a recap, you know, we were at 1.45 to 1.55 billion in personnel expense, we took that down to 1.43 to 1.45 billion, which is a reduction of 60 million dollars at the midpoint. But that does represent off the midpoint about a 4.5% increase in Q4 over Q3.

Yeah, let let me give you a couple of examples you know what one example might be appointment automation it'll be work with a lot of customers a lot of customers have different systems into which we have to go to make appointments for our carriers to go.

Load and unload right and so we actually go through and say you know where do we have the biggest leverage in terms of customers on a certain scheduling system and we automate our ability to set appointments into that scheduling system and it'll be essentially reduce our dependence on people to schedule a visit.

Scott Group: So a couple things. So number one, we did in Q3 have some incentive costs that got reset down lower because of performance of the business. And so with those accruals down, that was a benefit to Q3 that we're not expecting to repeat Q4 explains a little bit of that. But then maybe more broadly, I just want to reinforce that our productivity initiatives continue. We will, you know, the efforts in the pipeline and work that we have is ongoing.

Ointments, that's one example.

Another one is tracking trace we've talked about that earlier in the year you know <unk>.

<unk>, they're getting all carriers to work with us and give us automated updates such that we don't have to depend on <unk>.

Scott Group: We would expect had count to be a little lower in Q4 than it was in Q3. So that should be favorable. And then maybe just a reinforced point made earlier about Q4 is a seasonally lighter quarter for us in terms of volume. So that's just another point to be made inside of that. But generally speaking, I think that covers your personnel. Thank you.

Humans to call and ask what is my truck that is another significant unlocked not only does it would use somebody does it give us productivity improvements.

Delivers a better customer experience, which is which is great.

And you know well recently been looking at.

Jan AI and.

Imagine you know our heritage and our company the way it's going up is that you know we've done a business with customers in various different ways, including customers, sending us quote request or order information over email, it's usually unstructured, we're using Jenny I too parts of those emails and you know automatic.

Ken Hexter: The next question is coming from Ken Hexter, a Bank of America. Please go ahead. Hey, great. Good afternoon. Dave or Mike, maybe just to clarify a comment earlier in the LTL, I think you noted that temporary capacity exited the market. Are you then assuming a rebound in that? And that it's not like you said, you were assuming a rebounding capacity. I just want to understand that that commentary on the LTL. And then Mike, I guess just to follow up on that.

<unk> responds with quotes and similarly set on the blanks and you know you enter the order into our systems without without a human touch. So those are all all examples of things at each one of them contributes to our overall productivity improvements.

Ken Hexter: Yes. NAST gross margin right down to 12 and a half percent. I guess that's the same as gross profit per load. You know, with spot rates remaining here, I just want to understand you're saying that the 450 million of gross revenues. I guess from convoy that freed up into the market. That's not easing the capacity constraints on the brokerage squeeze. Does that mean this week environment? Is it getting worse as you move through the into peak season?

And there are many more like that has been completed work on it.

Thanks for the question Stuffy.

[noise]. Thank you at this time I'd like to turn the floor back over to Mr. Extra closing comments.

Ken Hexter: Are you seeing anything that suggests we're starting to ease off that? Or maybe just talk about that as we go into holiday season, I guess before the bid season, the chat was talking. Yeah, so on the second part of that, I think you were talking about convoy going out of the market and how does that impact the market. I would make a couple of comments on that. So, first of all, the size of that business doesn't have a material impact on our results.

Yeah that concludes today's earnings call. Thank you for joining us today, and we look forward to talking to you again have a great evening.

Ladies and gentlemen, thank you for your participation. This concludes today's conference you may disconnect your lines to lock up to webcast at this time and you enjoy the rest of your day.

[music].

Ken Hexter: Now that being said, certainly that business came available as the announcements were made. We've certainly participated in that and where there is profitable volume to be had, that fits with our model. We certainly like the longer loads. We've certainly been participating in some of that business. Now, a lot of that business is also localized in short runs, multiple runs, density around certain geographies. And while we compete for that, that's not a sweet spot for us in terms of profitable volume.

Ken Hexter: But all that obviously is getting picked up, but I would say it's not having an overall impact on the market, just given the size of that business. And then the other, remind me the other question. Yeah, LTL capacity temporarily leaving the market. Yeah, thanks for picking up on that point. The idea there was while yellow went out of business and that capacity then came out, there is a process there where the assets that are still useful will be redeployed by new ownership.

Ken Hexter: And through the new hubs and probably come back into the market at some point. And so that was the intent of the word temporary, you know, to the extent that the assets are still viable and useful, they'll find a new owner new home and probably make their way back into the system. So just to clarify, then you would expect then continue pricing pressure in that market if you'd see capacity sticking around in it.

Ken Hexter: Yeah, on the LTL side, I think what we've seen in the near term has been positive in terms of an increase in HP procurement related to that move because they were a bigger part of that market in terms of the capacity to serve. And so I think that unlike the convoy example is a more meaningful impact and we did certainly see it now. The question I think longer term is rooted in that word temporary, which is, you know, how long is that capacity out?

Ken Hexter: How long are those hubs out of service, where do they land and how or if or when does that capacity come back into market and that will provide additional capacity that I would say will have an opposite effect. Thanks, Mike. I'm sorry, Mike, and I presume that was Chuck squeezing in there. Thanks. Appreciate that. Thank you.

John Pell: The next question is coming from John Pell of Evercore, I apologize. Please go ahead. Thank you. Regarding the year we're improving in shimmings for person per day, you're up to 18% target 15, you're confident in the 15, you're already there. How low could that go or how how could it go, I guess, percentage and what does that equate to as we think about an operating margin through cycle? What's the new kind of, you know, productivity metric mean for, you know, I guess the beginning of the cycle and then I mean, cycle as it continues to build.

John Pell: I can start, in terms of productivity improvements, we're at 18% year-to-date and we expect to end the year at 15%. Having said that, we feel pretty confident in setting targets for subsequent years at a similar rate. So we're working on our 2024 operating plans and I would expect we target a similar productivity improvement compounded that'll be over 30% by the end of next year in terms of productivity improvements. So I feel pretty good about that productivity is in the way I said this in my prepared remarks.

John Pell: Productivity ultimately is a measure that considers volume, right? So you ask the question of Dave, what if your volume goes up next year? So our volume goes up 15% next year and our productivity improvements are 15% that we wouldn't have to add any headcount to sort of that 15% additional volume. However, if we grow just 5%, then we'd get the other 10% by way of headcount reduction. So I think regardless of cycle, we would measure productivity and be adjusted based on volume. Okay, I appreciate it. Thank you.

John Pell: And John, just to add on that and Roonhead is the key there is we're, you know, we're lazy to focus on on driving productivity as well as growth, whichever one, you know, we'll do it in combination in driving that. So that's super important. And it's, and that lazy to focus extends to the rebound as well. I can't express that enough that, you know, as we get ready for this market rebound, this will be, this is super important from a productivity perspective and, you know, separating that headcount volume grow. Yeah. Thank you, Dave. Thank you.

Bruce Chan: The next question is coming from Bruce Chan. Steve, please go ahead. Hey, good afternoon, everyone. Nice to see some of the progress here in a tough market. I wanted to zoom out a little bit. You know, when I think about, you know, some of the cycles, maybe a cycle or two ago, there was talk about structural pressure on AGP as a result of, I don't know, better customer price discovery and digitization trends.

Bruce Chan: Obviously, you know, you've had a lot of changes in the industry since then. How are you thinking about a good baseline AGP for the business, you know, through the cycle based on what you're seeing now? Is there, you know, any reason to, to, you know, believe that, you know, you shouldn't be able to get back closer to the mid teens is AGP going to be lower as a result, maybe if some of these structurally higher capacity costs, but, you know, maybe you can make up for that with lower cost of service.

Bruce Chan: Any comments around, you know, the direction of AGP in the future would be great. Yeah, thanks Bruce. Let me take that one. I think your observations are accurate. Generally, you know, when you talk about the industry and price transparency and, you know, I would even perhaps add length of load being pressures on AGP that are, you know, kind of realities in the marketplace. Now, you know, what we're focused on are other things that help us in that regard.

Bruce Chan: So, in our plans, you know, the ability to buy better. And also, I talked a little bit about the competitiveness that we're seeing right now. You know, you always see competitiveness at this part of the cycle, but I think that given the strain on the balance sheets and, you know, income statements of a lot of the brokers in this fragmented universe, universes is pretty substantial. And I think there's a little bit of unusual aggressiveness at this point that sits in the marketplace.

Bruce Chan: I would expect that to shake out here in, you know, the near future. I think we're already seeing it. You know, anecdotally. And You know, so I think that's a thing. Similarly, you know, I've talked a little bit about the capacity on the capacity side. I think that we will expect to see some things shake out there. We've got anecdotal evidence that would suggest that there's capacity already coming out, you know, one of the data points we look at is our new carrier signups.

Bruce Chan: We're about 4,900 here in Q3 and that's less than half of what it was in Q3 last year. So, as these rates persist lower and long, you know, for longer you know, that capacity comes out, that the man comes back. That's when I think you get back to close to the long-term averages on AGP Pershipment and AGP Margin that you're referencing. So it would probably come up a little short of where it's been on a 10 year average, probably closer to where it's been on a 5 year average.

Bruce Chan: But that's where I would see that shaken out. And then to the extent that the work that we're doing puts tailwinds into that. For example, some of the automation and work we're doing on the buy side to improve our buying. You know, we can also help ourselves relative to the marketplace there with respect to AGP Margin. That's great.

Bruce Chan: Very helpful. Thank you.

Jordan Alliger: The next question is coming from Jordan Alliger of Goldman Sachs. Please go ahead. Yeah, hi. So you talked a fair bit about things on the digital processes, optimizing processes, et cetera, which is very helpful. We're just curious how much of the technology and automation tools, et cetera, are essentially ready to roll out versus how much additional spending and or development still need to take place on the text front? Or is it pretty much ready to go or is there still more to do? Thanks.

David Bozeman: Yeah, let me let me hit that a little bit and then pass it over to a room. You know, we've got a great pipeline. We've executed on the pipeline. I think you can see it in our results. You know, if you go back to some of the cost savings initiatives, we talked about, you know, we started at 150 million cost savings against Q3 run rate last year. We increased that to 300.

David Bozeman: We're now talking about 360 million. So you can see the productivity initiatives that we've had in our pipeline, working their way through to our results. And so yes, it's there. You just heard Arun talking about productivity again in the future, similar levels. So, you know, it's not just a one project kind of thing. It's a many project kind of thing.

Arun Rajan: I'll let Arun elaborate on that a bit more. Yeah, the way we look at it is, you know, it's just continued focus on operating leverage. And we've got a whole bunch of new tools, you know, in our toolbox, we've got GNII, we've got lean. And the point is, you know, what we've, when we've talked about this, we said this is a multi year roadmap of opportunities. We got 15% productivity improvements this year.

Arun Rajan: And we have, to my point, we have a big backlog where we believe that we can continue to unlock significant productivity improvements in subsequent years. And, you know, we would target another 15% like I said in 2024. And so in terms of technology spend, we don't expect to increase or spend your year, but we will continue to stay at the current level of the technology spend. And execute on the roadmap that we have.

David Bozeman: Yeah, Jordan, this is Dave, I'll just add on to there the, and I feel really good around the teams embracing the kind of new clock speed initiatives, just really driving more definitive, more speed of decisions. And it really sets us up well in driving, waste out, less manual touches. Just everyone's really locked arms on that, and so we feel a bit about that, it's a good question.

Unknown Executive: Thank you.

David Vernon: Thank you, the next question is coming from David Vernon, a burn team, please go ahead. Hey guys, thanks for taking the question. So Mike, he talks a lot about trying to beat the market. And I just wonder if you could elaborate maybe as a team on what does that mean? Are we talking about volume? We're talking about value. I think the volume is a little bit better than I think the shipment index from Cass and pricing is a lot worse on a per mile basis.

David Vernon: So how should we think about how you're approaching that NAS market? Are you just going for volume and you'll figure it out at the other end when the market corrects? Or are you also focusing on kind of value share?

David Bozeman: Yeah, Dave, thanks for the question. It's a super important question. Let me be clear that our pursuit is both market share gain and margin. So it's profitable, market share. When I talk about beating the market, I'm talking about being able to maintain our margins, given the market that we're operating in while also gaining market share. Let's take market share first. We don't come forward with a quarter like Q3 where our truckload volume was down 6% or down 4.5% on a per day basis because we have one last day.

David Bozeman: We don't want our volume to be down, obviously. But when you look at the market that we're operating in and you look at some of the metrics that are out there, you look at Cass index was down 8.7 in the quarter. I think the US bank index just came out that was close to almost 10. That makes us feel a little better about that, but we want to grow. Now, on the other side of that, we operate within this market in terms of pricing and we are constantly evaluating opportunities and ways to improve that margin.

David Bozeman: A lot of the work that we're doing is to improve that margin. That is our pursuit, that is our goal going forward. And in the short term here is we've talked about there's some interesting competitive dynamics, but I think have a lot to do with aggressiveness around the broker set given that they're really struggling. Now, the other point I would make that I think is important for Robinson is that because we do have a strong business model and we do generate cash even in the toughest of times like this quarter.

David Bozeman: We're able to invest throughout this downturn in the market. And so I think where others may be worried about their viability and their ongoing entities ability to even compete, we're continuing to make investments to make ourselves better. And I think on a relative basis that helps us with our confidence about where we'll be when this market returns to a more balanced.

Unknown Executive: All right, I appreciate this time.

Tom Wadewitz: Thank you. The next question is coming from Tom Watterwitz. If you'd be asked, please go ahead. Yeah, good afternoon. Let's see, I wanted to ask you, I guess at the slide eight is the intriguing one to look at and try to figure out where we're going. I think when I look at prior cycles, when spot rates eventually bottom and move up there, there typically has been a period of time where the nasty, you know, gross margin per cent would get would come down.

Tom Wadewitz: And so and and I think Mike, you referred to that kind of 70% contract mix being larger than normal. And that's where you would see the squeeze. So is it wrong to consider that there could be, you know, when spot rates come come down that there could be some further pressure on that nasty gross margin? Or am I thinking about that the cycle kind of the, you know, is maybe a different cycle.

Tom Wadewitz: And then just quickly on that net revenue and forwarding, I don't know if you think you're it seems like maybe we're close to the bottom, but I don't know if you have a quick thought on that as well. Thank you.

Michael Zechmeister: Yeah, Tom, let me take your the first part first, which I think we've covered a variety of the elements around that. But I think you've characterized it fairly, you know, within that contract spaces, prices come up, you know, there is some ability to get squeezed. And whether this cycle is like the past cycles, what will really matter is the pace or the magnitude at which those prices pricing increases come back as the market normalizes.

Michael Zechmeister: So is it a slow gradual increase? And in that case, I think we will our margins will hold up very well as they improve going forward. If it's a sharp spike up, you know, then you know, that squeeze on the contract side will be greater. But again, that usually comes with a heck of a lot more demand on the spot market and we'll be there competing and getting our share of that, which will offset the squeeze on contract.

Michael Zechmeister: So there's a, you know, every cycle is a little bit different. Certainly, generalizations we make about them, which is where these questions are coming from. But, you know, that's kind of where we're at. And you know, the other unique thing about this one that I alluded to is adjusting the broker network competitiveness here is probably a little greater than it's been in the past. And anything else around GF, you know, I think generally you don't have to get item on GF.

Michael Zechmeister: And what I would say to that is we haven't seen any meaningful changes from Q3 on the GF side. We feel great about our business there and the share that we've been growing and the work that the team's been doing and the preparations for when that demand comes back. But, you know, no green shoots to speak of there yet. Okay. Great. Thank you.

Unknown Executive: We're showing time for one final question.

Stephanie Moore: Today's last question is coming from Stephanie Moore of Jeffries. Please go ahead. Hi, good evening. Thank you.

Arun Rajan: I think, you know, it might be helpful, you know, just, you know, for us on the outside kind of looking in here, maybe could you give us some examples of the tech changes or digital changes that you've implemented year to date. And then, you know, do you view that these are the changes in your technology that will help kind of keep your head count and check, you know, when and ever leaves the market does rebound here.

Arun Rajan: Yeah, let me give you a couple of examples, you know, what one example might be appointment automation, you know, we work with a lot of customers, a lot of customers have different systems into which we have to go to make appointments for our carriers to go load and unload. Right. And so we essentially go through and say, you know, where do we have the biggest leverage in terms of customers on a certain level. Scheduling system and we automate our ability to set appointments into that scheduling system and you know, we essentially reduce our dependence on people to schedule appointments.

Arun Rajan: That's one example. Another one is tracking trace, we talked about that earlier in the year, you know, carriers, then they're getting our carriers to work with us to give us automated updates such that we don't have to depend on humans to call and ask where's my truck. That is another significant unlock. Not only does it reduce, not only does it give us productivity improvements, it delivers a better customer experience, which is, which is great.

Arun Rajan: And, you know, we recently we've been looking at Gen AI and imagine, you know, our heritage and our company, the way it's grown up is that, you know, we've done business with customers in various different ways, including customer sending us quote requests or, you know, order information over email, it's usually unstructured. We're using Gen AI to parse those emails and, you know, automatically respond with quotes and similarly fill in the blanks and, you know, enter the order into our systems without without a human touch.

Arun Rajan: So those are all all examples of things that each one of them contributes to our overall productivity improvements and there are many more like that as we continue to work on it. Thanks for the question, Stephanie. Thank you.

Chuck Ives: At this time, I'd like to turn the floor back over to Mr. Ives for closing comments.

Chuck Ives: Yeah, that concludes today's earnings call.

Unknown Executive: Thank you for joining us today and we look forward to talking to you again. Have a great evening. Ladies and gentlemen, thank you for your participation.

Unknown Executive: This concludes today's conference. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day. Thank you.