Q4 2023 CH Robinson Worldwide Inc Earnings Call

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

At this time all participants are in 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.

As a reminder, this conference is being recorded Wednesday January 31st 2024.

I would now like to turn the conference over to Chuck Ives Director of Investor Relations.

Chuck Ives: Thank you Donald and good afternoon, everyone on the call with me today is Dave Bozeman, Our President and Chief Executive Officer, Roger <unk>, Our Chief operating Officer, and Mike exact Meister, our Chief Financial Officer.

Chuck Ives: David Mike will provide a summary of our fourth quarter results and our expense guidance for 2024.

Chuck Ives: So we will provide an update on our initiatives to improve the customer and carrier experience improve operating leverage and increased focus on revenue management and Dave will share. The findings from his initial diagnosis of the company from there we will open the call up for questions.

Speaker Change: Our earnings presentation slides are supplemental to our earnings release and can be found in the investors section of our website at Investor does C. H Robinson Dot com.

Speaker Change: 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 <unk>.

Speaker Change: 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 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 and with that I'll turn the call over to Dave.

Dave Bozeman: Thank you Chuck.

Dave Bozeman: Good afternoon, everyone.

Dave Bozeman: And thank you for joining us today.

Dave Bozeman: Our fourth quarter results did not meet our expectations as we continue to battle through a poor demand and pricing environment.

Dave Bozeman: But we made progress on a number of important initiatives, including charting our path forward.

Speaker Change: Well, let me address our results first.

Speaker Change: On our third quarter earnings call, we indicated Q4 truck volumes and Nash could follow the normal seasonal pattern and in fact that is what occurred specifically.

Speaker Change: Specifically the average sequential Q4 decline in the cash freight shipment index over the past 10 years is two 4%.

Speaker Change: Excluding the pandemic impacted years of 2020 and 2021.

Speaker Change: The average sequential Q4 decline was three 7%.

Speaker Change: In Q4 of 2023, the shipment index declined four 3% sequentially and our combined truckload and LCL shipments declined less than the index at three 5%.

Speaker Change: In global forwarding, we increased our ocean shipments on a year over year basis.

Speaker Change: They were down sequentially as well as they typically are in our fourth quarter.

Speaker Change: For the enterprise in total the sequential declines in volume drove a 3% sequential decline in our Q4 versus Q3.

Speaker Change: And this equated to a 11.

Speaker Change: Of our sequential EPS decline.

Speaker Change: Below gross profit personnel and SG&A expenses were within the guidance ranges that we provided on our Q3 earnings call.

Speaker Change: Although personnel expenses were towards the high end of our guidance range sequentially Q4 personnel expenses increased due to the reduction of our incentive compensation accruals in Q3.

Speaker Change: That we Didnt expect to repeat in Q4 as was explained on our Q3 earnings call.

Speaker Change: SG&A expenses were down sequentially, but slightly above the midpoint of our guidance.

Speaker Change: In total the three 7% sequential increase in our operating expenses equated to 13.

Speaker Change: Of sequential EPS decline.

The combination of all of these changes and ACP and operating expenses some of which were expected drove the sequential decrease in operating income.

Speaker Change: Below operating income there were a couple of significant items that negatively impacted our financial results and ultimately drove the remaining 10 sets.

Speaker Change: A sequential decline in our adjusted EPS, namely noncash losses on foreign currency revaluation, and a higher income tax rate.

Later in the call Mike will share more details on these as well as provide guidance on our 2020 for operating expenses.

Mike Zechmeister: So that addresses why our Q4 results declined sequentially versus Q3.

Mike Zechmeister: Now I'll provide some additional details on our Q4 results in our North American surface transportation and global forwarding businesses.

Mike Zechmeister: And our Nast truckload business, our Q4 volume declined approximately one 5% year over year and three 5% on a sequential basis.

Mike Zechmeister: The weak demand environment, and an elongated market trough combined with excess carrier capacity continued to result in a very competitive market.

With the exception of the holiday weeks in Q4, the dry van load to truck ratio was around two to one and in the second half of the quarter was the lowest the industry has seen in the past six years.

Mike Zechmeister: With this environment in play in Q4, we targeted more truckload volume in the spot market, where we could capture more profit due to a seasonal market attention.

This led to a sequential improvement in our overall truckload AGP per load in October and November and for the quarter as a whole.

Mike Zechmeister: Profit per load in December declined as expected as the cost of purchased transportation move seasonally higher for.

Mike Zechmeister: For the quarter, we had an approximate mix of 65% contractual volume and 35% transactional volume in our truckload business compared to a 70 30 mix over the past three quarters.

Mike Zechmeister: The sequential declines that we've seen in our truckload line haul cost per mile. Since Q2 of 2022 continued through November.

Mike Zechmeister: 2023.

Mike Zechmeister: Before moving seasonally higher in December.

On a year over year basis, we saw a decline of approximately 10, 5% and our average Q4 truckload line haul cost per mile paid to carriers, excluding fuel surcharges.

Mike Zechmeister: Due to the usual time lag associated with the resetting of contract pricing to follow spot market cost our average truckload of line haul rate or price billed to our customers. Excluding fuel surcharges declined 13, 5% on a year over year basis.

Mike Zechmeister: With this price decline coming off a higher base than the costs. These changes resulted in a 29, 5% year over year decrease in AGP per loan.

Mike Zechmeister: Moving into 2024, we will substantially increase our focus on revenue management objectives to better align revenue and cost in our contractual portfolio.

Our room will share more on this in a little bit, but we intend to use our advanced pricing and contract management tools and a more surgical and disciplined approach as we navigate changing market conditions in the future with a focus on profitable growth.

Mike Zechmeister: And our LTM business Q4 shipments were down 0.5% on a year over year basis, and three 5% sequentially.

Mike Zechmeister: ADP per order declined eight 5% on a year over year basis, driven primarily by the soft market conditions and lower fuel prices.

Mike Zechmeister: On a sequential basis, the cost and price of purchased transportation and the <unk> market increased in Q4, primarily driven by the assets and capacity did us temporarily exited the LTE market.

Mike Zechmeister: This resulted in a 3% sequential increase and AGP per order.

Mike Zechmeister: In our global forwarding business results continued to be impacted by the imbalance of soft demand and ample capacity.

Mike Zechmeister: In Q4, our Ocean 40, AGP declined by 17, 2% year over year.

Mike Zechmeister: Driven by a 25% decrease in ADP per shipment that was partially offset by a 4% increase in shipments.

Mike Zechmeister: Compared to pre pandemic levels, we have grown ocean market share by providing differentiated solutions and customer service and by leveraging investments in technology and talent, leading to the addition of new customers and diversification of the verticals and trade lanes that we serve.

In the wake up the ongoing conflict in the Red Sea and low water levels and a Panama Canal global supply chains are facing transit interruptions and vessel rerouting, which is causing an extended transit times and putting a strain on global ocean capacity.

Mike Zechmeister: While the Asia to Europe trade Lane has been most affected the impact is extending to other lanes as carriers adjust routes based on shipping demand.

Mike Zechmeister: As a result ocean rates have increased sharply in Q1, while several trade lanes, including Asia to Europe, and Asia to North America.

Mike Zechmeister: While the Red Sea disruption continues without any clear timeline of when it will be resolved.

Mike Zechmeister: The strain on capacity any elevated spot rates are expected to continue through at least the Chinese new year.

Mike Zechmeister: As a global logistics provider with the scale and expertise to strategize and implement contingency plans were highly engaged with our customers to help them navigate the evolving situation and assure flexibility and resilience in their supply chain.

Mike Zechmeister: At some point, we expect that ocean pricing will loosen.

As new vessel capacity continues to enter the market in 2024.

Looking ahead, we do not see any indications of a global freight volume upturn in the immediate future.

Mike Zechmeister: And that's similar to the fourth quarter to first quarter is typically characterized by a sequential decrease in ground transportation volumes. In fact, the average sequential Q1 decline and the Cass freight shipment index over the past 10 years was two 6%.

Mike Zechmeister: As the global freight market fluctuates due to seasonal cyclical and geopolitical factors. We remain focused on what we can control by providing superior service to our customers and carriers streamlining our processes by removing waste and manual touches and delivering.

Tools that enable our customer and carrier facing employees to allocate their time to relationship building.

Mike Zechmeister: Value added solutions and exception management.

Mike Zechmeister: Our 17% improvement in Nash shipments per person per day in Q4 exceeded our stated 15% target and is an indicator of the progress that we've made are removing waste and manual touches.

Mike Zechmeister: These efforts are also bearing fruit and other key areas of our business as global forwarding achieved a 20% year over year improvement in their Q4 shipments per person per month.

Mike Zechmeister: Our continued focus on productivity improvements is one part of our plan to address and optimize our enterprise wide structural cost.

Mike Zechmeister: And we expect to carry our productivity momentum into 2024.

Mike Zechmeister: Our commitment to deliver quality and continuous improvement to our customers continues to be validated by net promoter scores in 2023 that were the highest on record for the company, which we believe puts us in good position with customers ahead of the eventual rebound in the freight market.

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

Operator: Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2023 Conference. At this time, all participants are in a listen-only mode.

Mike Zechmeister: They want a partner, who has financial strength and the ability to invest through cycles and the customer experience.

Operator: 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 1 on your telephone keypad. If anyone needs assistance at any time during the conference, please call 1-800-637-8170; please press star zero. As a reminder, this conference is being recorded. Wednesday, January 31st, 2024.

Mike Zechmeister: They also want a partner who can meet their increasingly complex logistics needs by providing expertise and a breadth of innovative solutions enabled by technology and people that they can rely on to serve as an extension of their team.

C H Robinson is that partner.

Mike Zechmeister: With a combination of people technology and scale to deliver an unmatched customer experience and with our breadth of capabilities to meet all of their logistics needs, including value added solutions for cross border freight drop trailer capacity and retail consolidation.

Chuck Ives: I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Thank you, Donna, and good afternoon, everyone. On the call with me today is Dave Bozeman, our President and Chief Executive Officer, Arun Rajan, our Chief Operating Officer, and Mike Zechmeister, our Chief Financial Officer. Dave and Mike will provide a summary of our fourth quarter results and our expense guidance for 2024. Arun will provide an update on our initiatives to improve the customer and carrier experience, improve operating leverage, and increase focus on revenue management. And Dave will share the findings from his initial diagnosis of the company. From there, we will open the call up for questions. Our earnings presentation slides are supplemental to our earnings release and can be found in the investor section of our website at investor.chrobinson.com. Our prepared comments are not intended to follow the slides.

Mike Zechmeister: As we continue to improve the customer experience and our cost to serve.

Mike Zechmeister: I'm focused on ensuring that we'll be ready for the eventual freight market rebound.

Mike Zechmeister: With a durable cost structure that decoupled volume growth from head count growth and drive operating leverage.

Mike Zechmeister: In order to further eliminate productivity bottlenecks and the highest leverage areas. We're focused on a handful of concurrent work streams that will deliver an improved customer experience through process optimization.

These focused work streams are an example of how the leadership team and I have made changes to drive focus so that we position ourselves for growth in our core business.

Chuck Ives: If we do refer to specific information on the slides, we will let you know which slide 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 our remarks today may contain forward-looking statements. Slide 2 of today's presentation lists 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.

Mike Zechmeister: Our commitment to continuously improving the experience of our customers and carriers and eliminating inefficiencies from our processes will make us a company that is faster more flexible and more agile and solving problems for our customers delivering better customer service and creating operating leverage.

Mike Zechmeister: And profitable growth.

Mike Zechmeister: I'll turn it over to a route now to provide more details on our efforts to strengthen our customer and carrier experience.

Dave Bozeman: Our fourth-quarter results did not meet our expectations as we continue to battle through a poor demand and pricing environment. But we made progress on a number of important initiatives, including charting our path forward. But let me address our results first.

Route: And our revenue management practices and improve our efficiency and operating leverage.

Route: Thanks, Dave and good afternoon, everyone.

Route: As Dave said, we continue to execute on a handful of concurrent work streams.

Route: Addressing significant opportunities to eliminate productivity bottlenecks and to deliver process optimization and an improved customer experience.

Dave Bozeman: On our third quarter earnings call, we indicated the Q4 truck volumes in NAS could follow the normal seasonal pattern, and in fact, that is what occurred. Specifically, the average sequential Q4 decline in the CAS Freight Shipment Index over the past 10 years is 2.4%. Excluding the pandemic-impacted years of 2020 and 2021, the average sequential Q4 decline was 3.7%.

Route: Two of the work streams in the productivity roadmap are aimed at quoting and order entry.

Route: In both areas, we are reducing manual touches and a response time to customers driving faster speed to market and higher customer engagement.

Route: In addition to our past learnings, we're leaning more heavily on generative AI to deliver process improvements.

Route: And our order entry bloodstream, we're utilizing Jenny I translate structured and unstructured emails pdfs and excel files that we received from customers and their vendors into orders on our system.

Dave Bozeman: In Q4 of 2023, the shipment index declined 4.3% sequentially, and our combined truckload and LTL shipments declined less than the index at 3.5%. In Global 40, we increased our ocean shipments on a year-over-year basis, but they were down sequentially as well, as they typically are in a fourth quarter.

Route: This solution sales and customer specific requirements based on their past history and customer specific prompts and scenarios and collect my frontline teams, who know the customer's business.

Route: Yes.

Route: Jenny I puts the power of large language models into the hands of our frontline teams rather than relying solely on data scientists to train models for unique customer requirements.

Dave Bozeman: For the enterprise in total, the sequential declines in volume drove a 3% sequential decline in our Q4 AGP versus Q3, and this equated to 11 cents of our sequential EPS decline. Below gross profit, personnel and SG&A expenses were within the guidance ranges that we provided on our Q3 earnings call, although personnel expenses were toward the high end of our guidance range. Consequently, sequentially, Q4 personnel expenses increased due to the reduction of our incentive compensation accruals in Q3 that we didn't expect to repeat in Q4, as explained on our Q3 earnings call. SG&A expenses were down sequentially, but slightly above the midpoint of our guidance. In total, the 3.7% sequential increase in our operating expenses equated to 13 cents of sequential EPS decline.

While our preference is still to receive an order via API or other structured electronic means there's large variability and how customer orders are transmitted.

And this new method allows customers to have an interaction as though we received their order yet structured electronic means even when they choose to email in order to us.

Route: With more data and history to leveraged in any other three PL, we have opportunities to harnessed. The power generated AI now offers further capitalize on our information advantage and we'll continue to look for and pursue those opportunities.

Route: Another area, where we've advanced our capabilities as an touchless appointments will be introduced technology to automate the entire process.

Route: This technology also uses AI to determine the optimal appointment based on transit time data from our millions of shipments across 300000 shipping lanes facility data such as dwell time and the most convenient timeline goes for carriers.

Dave Bozeman: The combination of all these changes in AGP and operating expenses, some of which were expected, drove the sequential decrease in operating income. Below operating income, there were a couple of significant items that negatively impacted our financial results and ultimately drove the remaining 10 cents of sequential decline in our adjusted EPS. Namely, non-cash losses on foreign currency, revaluation, and a higher income tax rate.

Route: Disadvantage Lynne Saint shippers, a considerable amount of time enables them to achieve higher service levels and save some money by avoiding charge backs or fines they might face in freight arriving too early or too late.

Route: In addition to an improved customer experience our efforts on increasing the digital execution of critical touch points in the lifecycle of an order from quote to cash.

Dave Bozeman: Later in the call, Mike will share more details on the..., as well as provide guidance on our 2024 operating expenses. That addresses why our Q4 results declined sequentially versus Q3. Now I'll provide some additional details on our Q4 results in our North American Surface Transportation and Global Forwarding business. In our NAS truckload business, our Q4 volume declined approximately 1.5% year-over-year and 3.5% on a sequential basis. The weak demand environment in an elongated market trough combined with excess carry capacity continues to result in a very competitive market. With the exception of the holiday weeks in Q4, the drive-in load-to-truck ratio was around 2 to 1, and in the second half of the quarter, it was the lowest the industry has seen in the past six years.

Route: By reducing the number of manual tasks per shipment and the time for task.

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

Route: As Dave mentioned earlier, we surpassed our 2020 goal of a 15% year over year improvement in NAFTA shipments per person per day with 17% improvement achieved in Q4.

Route: As we deliver further process optimization and an improved customer experience, we plan to deliver the compounded cost structure benefits of additional 2020 for productivity improvements of 15% Nast and 10% in global forwarding with technology that supports our people and processes.

Route: As Dave also mentioned revenue management is a key focus for us as we navigate this difficult freight market.

Route: With continued investment in our pricing science and contract management technology over the course of 2023, we're now in a better position to respond to dynamic market conditions with the tools and capabilities <unk> developed.

Dave Bozeman: With this environment in play in Q4, we targeted more truckload volume in the spot market where we could capture more profit due to seasonal market tension. This led to a sequential improvement in our overall truckload AGP per load in October and November and for the quarter as a whole. However, profit per load in December declined as expected as the cost of purchase transportation moved seasonally higher.

In 2024, we will increase our rigor and discipline and the application of these tools and capabilities.

Route: As tools together with our scale data and customer and carrier relationships underpinning our revenue management function.

Route: Which we can be more surgical in how we approach customer discussions and how we implement a disciplined pricing and profitable grid strategy based on individual customer value propositions.

Dave Bozeman: For the quarter, we had an approximate mix of 65% contractual volume and 35% transactional volume in our Chuck Lowe business, compared to a 70-30 mix over the past three quarters. The sequential declines that we have seen in our truckload line haul cost per mile since Q2 of 2022 will continue through November of 2023, before moving seasonally higher in December. On a year-over-year basis, we saw a decline of approximately 10.5% in our average Q4 truckload line haul cost per mile paid to carriers, excluding fuel surcharges. Due to the usual time lag associated with the resetting of contract pricing to follow spot market costs, our average truckload line haul rate, or price bill to our customers, declined 13.5% on a year-over-year basis. With this price decline coming off a higher base than the cost, these changes resulted in a 29.5% year-over-year decrease in AGP per load.

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

Mike: Thanks, Arun and good afternoon, everyone.

Mike: The soft freight market outlined by Dave resulted in fourth quarter total revenues of $4 2 billion.

And adjusted gross profit or AGP of $618 6 million, which was down 20% year over year, driven by a 24% decline in Nash and a 14% decline in global forwarding.

Mike: On a monthly basis compared to Q4 of 2022, our total company AGP per business day was down 24% in October down 20% in November and down 13% in December.

Mike: Turning to expenses Q4 personnel expenses were 361 8 million.

Mike: Including a $1 $3 million favorable restructuring charge adjustment.

Primarily driven by the significant devaluation of the Argentine peso prior to completing the divestiture of our global forwarding operations in Argentina.

Dave Bozeman: Moving into 2024, we will substantially increase our focus on revenue management objectives to better align revenue and cost in our contractual portfolio. Arun will share more on this in a little bit, but we intend to use our advanced pricing and contract management tools and a more surgical and disciplined approach as we navigate changing market conditions in the future with a focus on profitable growth. In our LTL business, Q4 shipments were down 0.5% on a year-over-year basis and 3.5% sequentially. AGP per order declined 8.5% on a year-over-year basis, driven primarily by soft market conditions and lower fuel prices.

Mike: Excluding these reversals are Q4 personnel expenses of $363 2 million.

Mike: We're down 10, 5% year over year, primarily due to our cost optimization efforts and lower variable compensation.

Mike: Our average Q4 head count was down 13, 3% year over year, including double digit decreases in Nast global forwarding and our all other and corporate segments.

Mike: Ending head count was down 12, 4% year over year to 15246.

Mike: As Steve mentioned, the sequential increase in our Q4 personnel expenses was included in our guidance. Although Q4 personnel expenses were within our guidance range. They came in at the higher end due to the achievement of certain objective bonus targets for example, delivering results on cost reduction initiatives.

Dave Bozeman: On a sequential basis, the cost and price of purchased transportation in the LTL market increased in Q4, primarily driven by assets and capacity that have temporarily exited the LTL market. This resulted in a 3% sequential increase in AGP per order. In our global forwarding business, results continue to be impacted by the imbalance of soft demand and ample capacity. In Q4, our ocean forwarding AGP declined by 17.2% year over year, driven by a 20.5% decrease in AGP per shipment that was partially offset by a 4% increase in shipments.

Mike: Moving to SG&A.

Mike: Q4 expenses were $149 4 million <unk>.

Mike: Including a $2 9 million reversal of restructuring charges also driven by the peso deflation prior to completing the divestiture of our global forwarding operations in Argentina.

Mike: Excluding the reversal SG&A expenses were $152 3 million and declined five 8% year over year, primarily due to reductions in contingent worker expenses.

Mike: And were down two 6% sequentially.

Mike: As you recall from our Q1 earnings call in April we raised our cost savings commitment to $300 million from $150 million, which was defined as the net annualized cost savings by Q4 of 2023 compared to the annualized run rate of Q3 of 2022.

Dave Bozeman: Compared to pre-pandemic levels, we have grown Ocean Market Share by providing differentiated solutions and customer service and by leveraging investments in technology and talent, leading to the addition of new customers and diversification of the verticals and trade lanes that we serve. In the wake of the ongoing conflict in the Red Sea and low water levels in the Panama Canal, global supply chains are facing transit interruptions and vessel rerouting, which is causing extended transit times and putting a strain on global ocean capacity, while the Asia to Europe trade lane has been most effective. The impact is extending to other lanes as carriers adjust routes based on shipping demand. As a result, ocean rates have increased sharply in Q1 on several trade lines, including Asia to Europe and Asia to North America.

Which is when was the commitment was originally made.

Mike: With the progress on our 2023 productivity initiatives, we delivered $346 million in cost savings for the full year, excluding restructuring charges with the majority of these savings expected to be long term structural changes.

Mike: Consistent with our strategy. We believe these cost savings will improve our operating leverage and help our margins as demand and a more balanced freight market return.

Mike: Turning to our 2024 annual operating expense guidance, we expect our personnel expenses to be $1 4 billion to $1 5 billion.

Dave Bozeman: While the Red Sea disruption continues without any clear timeline of when it will be resolved, the strain on capacity and the elevated spot rates are expected to continue through at least the Chinese New Year. As a global logistics provider with the scale and expertise to strategize and implement contingency plans, we're highly engaged with our customers to help them navigate the evolving situation and ensure flexibility and resilience in their supply chain. At some point, we expect that ocean pricing will loosen as new vessel capacity continues to enter the market in 2024. However, looking ahead, we do not see any indications of a global freight volume upturn in the immediate future. In NASS, similar to the fourth quarter, the first quarter is typically characterized by a sequential decrease in ground transportation volume. In fact, the average sequential Q1 decline in the cash freight shipment index over the past 10 years was 2.6%.

Mike: At the midpoint. This is up 2% compared to our 2023 total of 144 7 billion excluding restructuring charges.

Mike: The personnel expense drivers in 2024 includes two items that are expected to offset each other and restoration of target incentive compensation related to the expected improvement in financial performance will be offset by continued productivity improvements across the business and lower head count as the team continues.

Mike: To decouple volume growth and head count growth.

Mike: 2020 for SG&A expenses are expected to be in the range of $575 million to $625 million.

Mike: Down <unk>, 8% at the midpoint, excluding the restructuring charges in 2023.

Mike: This includes 2020 for depreciation and amortization expense is expected to be $90 million to $100 million.

Mike: Although most of our SG&A expenses are subject to inflation, we expect continued cost reduction efforts to offset the inflationary impact.

Dave Bozeman: As the global freight market fluctuates due to seasonal, cyclical, and geopolitical factors, we remain focused on what we can control by providing superior service to our customers and carriers, streamlining our processes by removing waste and manual touches, and delivering tools that enable our customer and carrier-facing employees to allocate their time to relationship building, Value Added Solutions, and Exception Management. Our 17% improvement in mass shipments per person per day in Q4 exceeded our stated 15% target and is an indicator of the progress that we've made on removing waste and manual touches. These efforts are also bearing fruit in other key areas of our business, as Global Forwarding achieved a 20% year-over-year improvement in its Q4 shipments per person per month.

Mike: Shifting to expenses below operating income our Q4 interest and other expense totaled $38 1 million, which was down $4 3 million or 10, 1% year over year.

Mike: Q4 included $21 6 million of interest expense, which was down $3 1 million or 12, 6% versus Q4 of 2022, driven by $394 million of debt reduction compared to Q4 of 'twenty to 'twenty two.

Mike: Another factor that drove Q4 other expense was $18 5 million loss on foreign currency revaluation and realized foreign currency gains and losses, which as compared to $16 9 million loss in Q4 of 2020 to the.

Mike: The Q4 loss was driven primarily by weakness in the Argentine peso and euro relative to the U S dollar.

Dave Bozeman: Our continued focus on productivity improvements is one part of our plan to address and optimize our enterprise-wide structural costs, and we expect to carry our productivity momentum into 2024. Our commitment to deliver quality and continuous improvements to our customers continues to be validated by Net Promoter Scores in 2023 that were the highest on record for the company, which we believe puts us in a good position with customers ahead of the eventual rebound in the freight market. Our customers continue to value the quality, stability, and reliability that we provide as they work to optimize their transportation needs. They want a partner who has financial strength and the ability to invest in customer experience through cycles. They also want a partner who can meet their increasingly complex logistics needs by providing expertise and a breadth of innovative solutions, enabled by technology and people that they can rely on to serve as an extension of their team. C.H.

Mike: As a reminder, our FX impacts are predominantly noncash gains and losses related to intercompany assets and liabilities.

Mike: On a sequential basis FX had an unfavorable impact of $18 4 million and.

And included an $8 9 million loss related to the significant devaluation of the Argentine peso prior to exiting the business in late December.

Mike: As you recall from our third quarter earnings call operating in Argentina had become challenging due to a district monetary policies and currency devaluation, the divestiture mitigates our exposure to the deteriorating economic conditions and the increasing political instability in that region.

Mike: As a part of the divesting of our operations in Argentina, we converted the business to a local independent agents to ensure continued service to our customers with shipments in that region.

Mike: There were also a couple of large one time tax related items that impacted our results in Q4, our Q4 tax provision of $38 3 million included a tax settlement of $19 2 million and $4 $7 million of tax expense related to.

Dave Bozeman: Robinson is that partner, with a combination of people, technology, and scale to deliver an unmatched customer experience and with a breadth of capabilities to meet all their logistics needs, including value-added solutions for cross-border freight, drop trailer capacity, and retail consolidation, as we continue to improve the customer experience and our cost to serve. I'm focused on ensuring that we'll be ready for the eventual freight market rebound with a durable cost structure that decouples volume growth from headcount growth and drives operating leverage. In order to further eliminate productivity bottlenecks in the highest leveraged areas, we're focused on a handful of concurrent work streams that will deliver an improved customer experience through process optimization. These focused work streams are an example of how the leadership team and I have made changes to drive focus so that we position ourselves for growth in our core business.

Mike: The Argentina divestiture.

Mike: In regard to the tax settlement the company came to an agreement with the IRS Appeals division on a tax position related to tax incentives for domestic investments in the years 2014 through 2017.

Mike: Although we maintain that our software investments were supportable deductions, we were only offered a partial settlement factoring in cost of litigation expert advice and at other companies who have challenged similar positions have experienced unfavorable results. We decided it was in our best interest to settle the issue.

Mike: The company has no ongoing financial exposure relating to the specific deduction as it was eliminated from the tax code beginning in 2018.

Mike: Excluding these onetime tax expenses, our effective tax rate came in at 19, 5% for the quarter and 15.0% for the year compared to 19, 3% in 2022.

Arun Rajan: Our commitment to continuously improving the experience of our customers and carriers and eliminating inefficiencies from our processes will make us a company that is faster, more flexible, and more agile in solving problems for our customers, delivering better customer service, and creating operating leverage and profitable growth. I'll turn it over to Arun now to provide more details on our efforts to strengthen our customer and carrier experience and our revenue management practices and improve our efficiency and operating leverage. Thanks, Dave, and good afternoon, everyone.

Our lower tax rate in 2023 was primarily driven by our by lower pre tax income and incremental benefits from foreign tax credits.

Mike: We expect our 2020 for full year effective tax rate to be in the range of 17% to 19%.

Mike: Q4, adjusted or non-GAAP earnings per share of <unk> 50 <unk>.

Mike: Excludes $23 $9 million of one time tax expenses $8 9 million of foreign currency losses on divested Argentina operations.

Arun Rajan: As Dave said, we continue to execute on a handful of concurrent work streams that are addressing significant opportunities to eliminate productivity bottlenecks and to deliver process optimization and an improved customer experience. Two of the workstreams on the Productivity Roadmap are aimed at quoting and order entry. In both 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 leaning more heavily on generative AI to deliver process improvement. In our order entry work stream, we're utilizing GenAI to translate structured and unstructured emails, PDFs, and Excel files that we receive from customers and their vendors into orders on our system.

Mike: And the $4 $3 million reversal of restructuring charges.

Turning to cash flow.

Mike: Q4 cash flow generated by operations was $47 million compared to $773 million in Q4 of 2022.

Mike: The year over year decline in cash flow was primarily driven by changes in net operating working capital.

Mike: In Q4 of 2022, we had a $650 million sequential decrease in net operating working capital driven by the sharply declining costs and price of purchase transportation in Q4 of 2023, we had a $7 million sequential increase.

Mike: Net operating working capital.

Mike: In Q4, our capital expenditures were $16 1 million compared to $27 8 million in Q4 of 2022, we expect 2020 for capital expenditures to be $85 million to $95 million.

Arun Rajan: This solution fills in customer-specific requirements based on their past history and customer-specific prompts and scenarios entered by frontline teams who know the customer's business. Gen AI puts the power of large language models into the hands of our frontline team, rather than relying solely on data scientists to train models for unique customer requirements. While our preference is still to receive an order via API or other structured electronic means, there is a large variability in how customer orders are transmitted, and this new method allows customers to have an interaction as though we received their order via structured electronic means, even when they choose to email an order to us. With more data and history to leverage than any other 3PL, we have opportunities to harness the power that generative AI now offers to further capitalize on our information advantage, and we'll continue to look for and pursue those opportunities. Another area where we've advanced our capabilities is in touchless appointments, where we've introduced technology to automate the entire process. This technology also uses AI to determine the optimal appointment based on transit Time Data from our millions of shipments across 300,000 shipping lanes, facility data such as peak dwell time, and the most convenient time windows for carriers.

Mike: We returned $74 million of cash to shareholders in Q4, which was down 85% year over year, primarily due to the decline in cash from operations.

Mike: Now onto the balance sheet.

Mike: We ended Q4 with approximately 1.0 or $1 billion of liquidity comprised of $840 million of committed funding under our credit facilities and a cash balance of $146 million.

Mike: Our debt balance at the end of Q4 was $1 6 billion.

Mike: Which was down $394 million since the end of 2022.

Mike: Our net debt to EBITDA leverage at the end of Q4 was 234 times up from $2. One zero times at the end of Q3, driven by the lower EBITDA.

Mike: Our capital allocation strategy is grounded in maintaining an investment grade credit rating, which allows us to optimize our weighted average cost of capital or $619 million in debt Paydown. Since Q3 of 2022 has helped to maintain our strong liquidity position and investment grade credit rating.

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

Arun Rajan: This advancement saves shippers a considerable amount of time, enabling them to achieve higher service levels, and saves them money by avoiding chargebacks or fines they might face due to freight arriving too early or too late. In addition to an improved customer experience, our efforts are increasing the digital execution of critical touch points in the life cycle of an order from quote to cash, thereby reducing the number of manual tasks per shipment and the time per task. This translates into productivity improvements measured in terms of shipments per person per day, which creates operating leverage. As Dave mentioned earlier, we surpassed our 2023 goal of a 15% year-over-year improvement in mass shipments per person per day, with a 17% improvement achieved in Q4.

Mike: Overall I am encouraged by the much needed progress that was made on our 2023 productivity initiatives and the plans in place to build on that progress in 2024, with the 17% productivity improvement delivered in Nash and the 20% productivity improvement and global for 2023.

Mike: Combined with an expectation of an additional 15% Nash and 10% in global forwarding in 2020 for each business is expected to deliver compounded productivity improvements of 32% or better over the two year period.

Mike: Our robust pipeline of process technology and waste elimination initiatives continues to be acted upon.

Mike: By leveraging generative AI combined with machine learning to take the capability of our people to an EBIT higher level Robinson is positioned well to further reduce waste and drive structural cost changes that improve our operating leverage and helped deliver on the long term operating income margin expectations.

Arun Rajan: As we deliver further process optimization and an improved customer experience, we plan to deliver the compounded cost structure benefits of additional 2024 productivity improvements of 15 percent in NAS and 10 percent in global forwarding with technology that supports our people and processes. As Dave also mentioned, revenue management is a key focus for us as we navigate this difficult freight market. With continued investment in our pricing science and contract management technology over the course of 2023, we're now in a better position to respond to dynamic market conditions with the tools and capabilities we've developed. In 2024, we will increase the rigor and discipline of the application of these tools and capabilities.

Mike: With that I'll turn the call back over to Dave for his final comments.

Dave Bozeman: Thanks, Mike.

Dave Bozeman: We share the sentiment of some of our peers and that we're happy to say goodbye to 2023.

Dave Bozeman: And although 2024 still presents some of the same challenges and headwinds I am excited about the work that we're doing to reinvigorate Robinson is winning culture.

Dave Bozeman: Over my first six months here I completed my initial diagnosis and we're taking actions to chart our path forward.

Arun Rajan: These tools, together with our scale, data, and customer and carrier relationships, underpin our revenue management function, through which we can be more surgical in how we approach customer discussions and how we implement a disciplined pricing and profitable growth strategy based on individual customer value propositions. With that, I'll turn the call over to Mike for a review of our fourth-quarter results. Thanks, Arun. And good afternoon, everyone.

Dave Bozeman: At a high level, we need to focus on both our customer value proposition and revenue generation.

Dave Bozeman: And our structural cost.

Dave Bozeman: And we need to aggressively seek the optimal balance.

Speaker Change: Let's review my findings.

Speaker Change: First our structural cost base grew too much during the pandemic and we made significant progress on reducing that cost structure in 2023, but it needs to continue to improve.

Mike Zechmeister: The soft freight market outlined by Dave resulted in fourth quarter total revenues of $4.2 billion and adjusted gross profit, or AGP, of $618.6 million, which was down 20% year over year, driven by a 24% decline in NAST and a 14% decline in global forwarding. On a monthly basis compared to Q4 of 2022, our total company AGP per business day was down 24% in October, down 20% in November, and down 13% in December. Turning to expenses, Q4 personnel expenses were $361.8 million, including a $1.3 million favorable restructuring charge adjustment, primarily driven by the significant devaluation of the Argentine peso prior to completing the divestiture of our global forwarding operations in Argentina. Excluding these reversals, our Q4 personnel expenses of $363.2 million were down 10.5% year-over-year, primarily due to our cost optimization efforts and lower variable compensation. Our average Q4 headcount was down 13.3% year-over-year, including double-digit decreases in NAST, global forwarding, and all other and corporate segments. Ending headcount was down 12.4% year-over-year to 15,246.

Speaker Change: We will do that by embedding lean practices, removing waste and expanding our digital capabilities.

Speaker Change: This will enable us to strengthen our productivity and optimize our organization structure in order to be the most efficient operator in addition to the highest value provider.

Speaker Change: Second as I listened to our customers, it's clear that their logistics needs are becoming increasingly complex and robust capabilities are required to power vertical centric and value added solutions.

Speaker Change: I found the CH Robinson has people with deep expertise in the freight market and long standing trusted relationships with our customers and carriers.

This is a competitive advantage.

Speaker Change: But we can do a better job of leveraging our unique expertise and information advantage and advance our cutting edge technology to deliver more robust capabilities and market leading outcomes.

Speaker Change: Third we need to focus on profitable growth in our four core modes, North American truckload and <unk>.

Speaker Change: And global Ocean and air.

Speaker Change: The engines to ignite growth by reclaiming share in a road segments and expanding our addressable market through value added services and solutions that drive new volume to the core holes.

Speaker Change: And fourth.

Speaker Change: We need to drive better synergies across our portfolio of services to accelerate profitable growth.

Speaker Change: One way that we're going to do this is by improving how we go to market as one company with unified account management versus showing up as distinct business units.

Mike Zechmeister: As Dave mentioned, the sequential increase in our Q4 personnel expenses was included in our guidance. However, although Q4 personnel expenses were within our guidance range, they came in at the higher end due to the achievement of certain objective bonus targets, for example, delivering results on cost reduction initiatives. Moving to SG&A, Q4 expenses were $149.4 million, including a $2.9 million reversal of restructuring charges, also driven by peso deflation prior to completing the divestiture of our global forwarding operations in Argentina. Excluding the reversal, SG&A expenses were $152.3 million, a decline of 5.8% year-over-year, primarily due to reductions in contingent worker expenses, and were down 2.6% sequentially.

Speaker Change: Our journey to unlock the power of our portfolio is underway as we take action on all of these fronts.

Speaker Change: One example of this is the recent launching of our Enterprise strategy program Management Office and the addition of Jim Rutledge <unk> to the senior leadership team to lead our strategic approach to our critical planning activities.

Speaker Change: Jim is an expert in continuous improvement and lean methodology and he brings learnings from his leadership experience at Danaher, a company with a well established reputation for continuous improvement.

Speaker Change: Jim will help us drive lean principles and continuous improvement deeper into the organization and create growth and success in our strategic priorities.

Mike Zechmeister: As you recall from our Q1 earnings call in April, we raised our cost savings commitment to $300 million from $150 million, which was defined as the net annualized cost savings by Q4 of 2023 compared to the annualized run rate of Q3 of 2022, which is when the commitment was originally made. Progress on our 2023 productivity initiatives, we delivered $346 million in cost savings for the full year, excluding restructuring charges, with the majority of these savings expected to be long-term structural changes. Consistent with our strategy, we believe these cost savings will improve our operating leverage and help our margins as demand and a more balanced freight market return. Turning to our 2024 annual operating expense guidance, we expect our personnel expenses to be between $1.4 billion and $1.5 billion.

Speaker Change: 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.

Speaker Change: Further, reducing our structural costs and improving our efficiency operating margins and profitability.

Speaker Change: I'm confident that together, we will win for our customers carriers employees and shareholders and I am incredibly excited about our future.

Speaker Change: This concludes our prepared remarks, I'll turn it back to Don and now for the Q&A portion of the call.

Don: Thank you in order to let as many callers.

Don: Ask questions as possible, we ask that you limit yourself to one question. If you do have a question. Please press star one on your telephone keypad.

Don: Our first question today is coming from Brian <unk> of Jpmorgan. Please go ahead.

Brian: Hey, good afternoon, thanks for taking the question.

Mike Zechmeister: At the midpoint, this is up 0.2% compared to our 2023 total of $1.447 billion excluding restructuring charges. The personnel expense drivers in 2024 include two items that are expected to offset each other. The restoration of Targeted Incentive Compensation related to the expected improvement in financial performance will be offset by continued productivity improvements across the business and lower headcount as the team continues to decouple volume growth and headcount growth. 2024 SG&A expenses are expected to be in the range of $575 to $625 million, down 0.8% at the midpoint, excluding the restructuring charges in 2023. This includes 2024 depreciation and amortization expense that is expected to be 90 to 100 million dollars.

Brian: Steve maybe I can just ask you to Cuba more context around.

Brian: The rationale of pivoting more to the spot market, you've been running a little bit harder and contract for longer. So just wanted to see what the.

Brian: What changed in terms of why you went that route and then maybe tying on to that the revenue management focus needs to be really important, especially given we all know what happens when the market recovers.

Brian: James can squeeze lifecycle Robinson.

Brian: That's a pretty big headwind from negative files. So one of the year. If this new focus was potentially going to limit that.

Brian: As you can see the market share.

Brian: Thanks.

Speaker Change: Hey, Brian I'm going to have.

Speaker Change: Rune jump in and address your question. Thanks for the question.

Rune: Yes, Brian I think the way we look at it is its at its opportunistic right I mean, where.

Rune: When we can get profitable demand will go and yes, there was opportunity in the spot market. So.

Speaker Change: And we went there.

Mike Zechmeister: Although most of our SG&A expenses are subject to inflation, we expect continued cost reduction efforts to offset the inflationary impact. Shifting to expenses below operating income, our Q4 interest and other expense totaled $38.1 million, which was down $4.3 million, or 10.1% year-over-year. Q4 included $21.6 million of interest expense, which was down $3.1 million, or 12.6%, versus Q4 of 2022, driven by $394 million of debt reduction compared to Q4 of 2022. Another factor that drove Q4 other expense was an $18.5 million loss on foreign currency revaluation and realized foreign currency gains and losses, which is compared to a $16.9 million loss in Q4 of 2022. The Q4 loss was driven primarily by weakness in the Argentine peso and euro relative to the U.S. dollar.

Speaker Change: As it relates to our revenue management.

Speaker Change: Ultimately I think as you know the market.

Speaker Change: And so it's a very competitive environment.

Speaker Change: And then the reality is I think everybody is in the situation where prices are prices are low cost also level.

Speaker Change: And I think what we have what we have to think about it think about from a revenue management perspective, and it's sort of a short term and the long term in this two different perspective, right and so seasonally we expect around the holidays cost to go up and then settle back down.

Speaker Change: What's different this year.

Speaker Change: Yeah.

Speaker Change: The winter storms and such have kept cost of an elevated but regardless of the short term we have contracts, we have commitments and based on our revenue management objectives, our value proposition to the customer and certain customer activity.

Speaker Change: Make a determination on <unk>, when we reprice certain targeted lanes.

Speaker Change: In the short term, we don't see an inflection in the market. So we're not really triggering any major repricing.

Speaker Change: Thank you sure.

Mike Zechmeister: As a reminder, our FX impacts are predominantly non-cash gains and losses related to intercompany assets and liabilities. On a sequential basis, FX had an unfavorable impact of $18.4 million and included an $8.9 million loss related to the significant devaluation of the Argentine peso prior to exiting the business in late December. As you recall from our third quarter earnings call, operating in Argentina had become challenging due to its strict monetary policies and currency devaluation. The divestiture mitigates our exposure to the deteriorating economic conditions and the increasing political instability in that region. As a part of the divesting of our operations in Argentina, we converted the business to a local independent agent to ensure continued service to our customers with shipments in that region. There were also a couple of large, one-time, tax-related items that impacted our results in Q4. Our Q4 tax provision of $38.3 million included a tax settlement of $19.2 million and $4.7 million of tax expense related to the Argentina divestiture.

Speaker Change: We're trying to grab as much volume as we can in the spot market with revenue management.

Speaker Change: Sort of.

Speaker Change: Yeah.

Speaker Change: Yes supply mode really kick in.

Speaker Change: Sustained inflection in the market and we don't quite see that yes.

Speaker Change: Thank you. The next question is coming from Jack Atkins of Stephens, Inc. Please go ahead.

Jack Atkins: Okay, great. Thanks for taking my question first Mike I, just wanted to say.

Jack Atkins: Really enjoyed working with you and congratulations as you move onto the next phase of your career.

Jack Atkins: I guess.

Jack Atkins: A lot of different ways, we could go with this I guess.

Jack Atkins: Would love to get your thoughts on just broadly the first quarter.

Yes.

Jack Atkins: We've had.

Jack Atkins: And to your point things have tightened up here in January with the winter storms, we've seen some volatility in the global forwarding markets as well.

Jack Atkins: How does that impact how has that impacted your business through January are you seeing are you seeing.

Speaker Change: It gets squeezed a bit could you maybe walk us through what youre seeing in the business. So far this year.

Speaker Change: Yes, Jack Thanks for the question sort of building on <unk> response to Brian.

Mike Zechmeister: In regard to the tax settlement, the company came to an agreement with the IRS Appeals Division on a tax position related to tax incentives for domestic investments for the years 2014 through 2017. However, although we maintain that our software investments were supportable deductions, we were only offered a partial settlement. Factoring in the costs of litigation, expert advice, and that other companies who have challenged similar positions have experienced unfavorable results, we decided it was in our best interest to settle the issue. Additionally, the company has no ongoing financial exposure relating to this specific deduction as it was eliminated from the tax code beginning in 2018.

Speaker Change: January we have this.

Speaker Change: I think we all know this is a seasonal cost increase yes.

Speaker Change: Capacity comes out of the market for the holidays.

Speaker Change: We expect that that generally settle down by the second week of January or latest by mid January.

Speaker Change: And we haven't seen that we've seen that in markets that are not affected by.

Speaker Change: By adverse weather.

Speaker Change: There has been weather.

Speaker Change: Storms that were unexpectedly.

Speaker Change: Just unexpected or worse than what were what was expected.

Speaker Change: We are seeing is a lot of cost pressure.

Speaker Change: And.

Speaker Change: Okay.

Speaker Change: The capacity pressure increased load to truck ratios increased cost per mile in those markets.

Speaker Change: Now, we're starting to see that ease up and dissipate.

Mike Zechmeister: Excluding these one-time tax expenses, our effective tax rate came in at 19.5% for the quarter and 15.0% for the year compared to 19.3% in 2022. Our lower tax rate in 2023 was primarily driven by lower pre-tax income and incremental benefits from foreign tax credits. We expect our 2024 full-year effective tax rate to be in the range of 17 to 19%. Q4 adjusted or non-GAAP earnings per share of $0.50 excludes $23.9 million of one-time tax expenses, $8.9 million of foreign currency losses on divested Argentina operations, and the $4.3 million reversal of restructuring charges.

Speaker Change: At the weather sort of dissipates.

Speaker Change: And so from our perspective everything that we see in the data suggest that.

Speaker Change: Any cost increases that we saw in January are purely a function of.

Speaker Change: Whether.

Speaker Change: Because like I said, we see that.

Speaker Change: Weather impacted areas happen.

Speaker Change: Capacity strain.

Versus non weather impacted regions.

Speaker Change: So, but how do you still anticipate and cost per mile comes back down.

Speaker Change: I think we're back to England.

Speaker Change: We expected this year to be.

Speaker Change: In terms of in terms of cost and so so in terms of.

Speaker Change: In terms of revenue management, and how we think about that in the short term.

Speaker Change: We could make a decision to go reprice customers, but the idea is to honor our commitments so long as changes in the cost.

Speaker Change: So short term however, if we see that this sustains.

Mike Zechmeister: Turning to cash flow, Q4 cash flow generated by operations was $47 million compared to $773 million in Q4 of 2022. The year-over-year decline in cash flow was primarily driven by changes in net operating working capital.

Speaker Change: Our revenue management will kick in and based on sort of a revenue management objectives.

The value, we provide customers and customer <unk>.

Speaker Change: We will have to do targeted repricing.

Speaker Change: Okay got it and then a room could you maybe touch on the global forwarding side of it as well just because there has been volatility there too.

Mike Zechmeister: In Q4 of 2022, we had a $650 million sequential decrease in net operating working capital driven by the sharply declining costs and price of purchase transportation. In Q4 of 2023, we had a $7 million sequential increase in net operating working capital. In Q4, our capital expenditures were $16.1 million compared to $27.8 million in Q4 of 2022. We expect our 2024 capital expenditures to be $85 to $95 million. We returned $74 million of cash to shareholders in Q4, which was down 85% year-over-year, primarily due to the decline in cash from operations. Now onto the balance sheet. We ended Q4 with approximately $1.0 billion of liquidity, comprised of $840 million of committed funding under our credit facilities and a cash balance of $146 million.

Room: Hey, Jack I'll chime in on that and first of all thanks for your comments I appreciate it feeling's mutual.

Jack Atkins: Yeah, just before I go into Ocean, just maybe add a comment on the truck side I think one point to be made.

Speaker Change: About where we're at in the AGP Thats coming in for US. Both in Q4 and then into January is the is the emphasis on the point about this elongated trough and its impact on our contract business in particular, and if you look at cycles from the past that arent as prolonged as you are coming due.

Speaker Change: And then coming back up the older contracts that you have in your portfolio is still have higher pricing one of the differences here is this elongated trough.

Speaker Change: As.

Speaker Change: <unk> is caused time to pass such that we've repriced pretty much our entire portfolio. So what's different is we have more contracts now at.

Speaker Change: Current market price and we would normally have at this point in the cycle and Thats suppressing the margin even with normal activity underneath and it's really just.

Speaker Change: Mechanical a reflection of an elongated trough. So I just wanted to throw that in there also and then over on the Ocean side, yes.

Mike Zechmeister: Our debt balance at the end of Q4 was $1.6 billion, which was down $394 million since the end of 2022. Our net debt to EBITDA leverage at the end of Q4 was 2.34 times, up from 2.10 times at the end of Q3, driven by lower EBITDA. Our capital allocation strategy is grounded in maintaining an investment grade credit rating, which allows us to optimize our weighted average cost of capital. Our $619 million in debt paydowns since Q3 of 2022 have helped maintain our strong liquidity position and investment grade credit rating. Keep in mind that the cash that we used to reduce debt generally reduced the amount of cash for share repurchases.

Yeah, a lot going on there obviously you read about what's going on in the Red Sea.

Speaker Change: Got it.

Speaker Change: Water depth issues in Panama Canal and that has caused a lot of the capacity to be rerouted, which I think we would consider to be a temporary capacity disruption on the ocean side, which has really led to some increased pricing.

Speaker Change: Both at the end of Q4, and then into January in the marketplace.

Speaker Change: I think that we see that as being a demand driven at this point.

Speaker Change: And it's really probably a temporary capacity disruption.

Speaker Change: No.

Speaker Change: I think after we get past Chinese new year and with the.

Mike Zechmeister: Overall, I'm encouraged by the much needed progress that was made on our 2023 productivity initiatives and the plans in place to build on that progress in 2024. With the 17% productivity improvement delivered in NEST and the 20% productivity improvement in Global 40. Combined with an expectation of an additional 15% in NAS and 10% in global forwarding in 2024, each business is expected to deliver compounded productivity improvements of 32% or better over the two-year period. Additionally, a robust pipeline of process technology and waste elimination initiatives continues to be implemented.

Speaker Change: Yeah.

Speaker Change: These additional capacity Thats also coming in in 2024, I think youll see some kind of normalization there.

Speaker Change: Other point I'd make on Ocean is that the composition of that business from contract to spot is very different than what we have in truckload in fact in the ocean side, we're only about 20% contract.

Speaker Change: No.

Speaker Change: As opposed to what we are quoting on the truckload side, it's 65%. So that's just another difference.

Speaker Change: Keep in mind and that means we're able to benefit from the increased spot market in ocean and more immediately than we are on the truckload side.

Mike Zechmeister: By leveraging generative AI combined with machine learning to take the capability of our people to an even higher level, Robinson is positioned well to further reduce waste and drive structural cost changes that improve our operating leverage and help deliver on the long-term operating income margin expectations. With that, I'll turn the call back over to Dave for his final comments. Thanks, Mike.

Speaker Change: Okay. Thank you very much really appreciate it guys.

Speaker Change: Thank you. The next question is coming from Jon Chapell with Evercore ISI. Please go ahead.

Speaker Change: Okay.

Jonathan B. Chappell: Thank you good afternoon.

Jonathan B. Chappell: Clearly this tough markets had an impact on others as well those are not as well as financially secure is CH Robinson as we've seen some bigger names.

Jonathan B. Chappell: A lot of business I'm, just wondering now has elongated market reaches almost a third year are you seeing any desperation in some of the newer or maybe even established competitors out there that's creating an even more.

Dave Bozeman: We share the sentiment of some of our peers and are happy to say goodbye to 2023. And although 2024 still presents some of the same challenges and headwinds, I'm excited about the work that we're doing to reinvigorate Robinson's winning culture. Over my first six months here, I completed my initial diagnosis, and we're taking actions to chart our path forward. At a high level, we need to focus on both our customer value proposition and revenue generation and our structural costs, and we need to aggressively seek the optimal balance. Let's review my findings.

Either volatile or kind of punitive pricing environment, and if so whats the opportunities and risks to you in that type of backdrop.

Speaker Change: Thanks for the question John Let me take a cut at that so youre right. It is a very stressed market and one of the things that we believe may be an advantage to us in this stressed market is that we're still investing we're still putting our money down on the pipeline of projects that we intended to do in fact.

Speaker Change: As we try to increase clock speed, we're doing some of those projects concurrently and so while others may be looking to cut.

Dave Bozeman: First, our structural cost base grew too much during the pandemic, and we made significant progress on reducing that cost structure in 2023, but it needs to continue to improve. We will do that by embedding lean practices, removing waste, and expanding our digital capabilities. This will enable us to strengthen our productivity and optimize our organization structure in order to be the most efficient operator in addition to the highest value provider. Second, as I listen to our customers, it's clear that their logistics needs are becoming increasingly complex, and robust capabilities are required to power vertical-centric and value-added solutions. I have found that C.H.

Speaker Change: Kind of hang in there whether the storm, we're continuing to make ourselves better with the idea that when we emerge the inevitable turn here will be stronger as we come out.

Speaker Change: I wouldn't comment on any specifically in there and the pinched front, but boy, we certainly hear about it we see it.

Speaker Change: The implications out there are clear.

Speaker Change: Given where we've been and how long we've been there.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. The next question is coming from Chris Wetherbee of Citi. Please go ahead.

Chris Wetherbee: Hey, Thanks, good afternoon guys.

Dave Bozeman: Robinson has people with deep expertise in the freight market and long-standing, trusted relationships with our customers and carriers. This is a competitive advantage. But we can do a better job of leveraging our unique expertise and information advantage and advancing our cutting-edge technology to deliver more robust capabilities and market-leading outcomes. Jim

Chris Wetherbee: Yeah.

Looks like from a cost perspective, when you think about 2024 that youre guiding.

Chris Wetherbee: Opex to be roughly flattish year over year. I think you guys have also said that you're not necessarily expecting a freight rebound coming in 2024 at least as far as you can see in the relative near term. So I guess I was just trying to square that up obviously you guys have added a lot of costs or Covid, Dave as you noted so as you think about sort of the opportunity here is flat enough.

Dave Bozeman: We need to focus on profitable growth in our four core modes: North American Truckloads and LTL, and Global Ocean and Air, as the engines to ignite growth by reclaiming share in eroded segments and expanding our addressable market through value-added services and solutions that drive new volume to the core modes. We need to drive better synergies across our portfolio of services to accelerate profitable growth. One way that we're going to do this is by improving how we go to market as one company with unified account management versus showing up as distinct business units. Our journey to unlock the power of our portfolio is underway as we take action on all of these fronts. One example of this is the recent launch of our Enterprise Strategy Program Management Office and the addition of Jim Rutlinger to the Senior Leadership Team to lead our strategic approach to our critical planning activities. Jim is an expert in continuous improvement and lean methodology, and he brings learnings from his leadership experience at Danaher, a company with a well-established reputation for continuous improvement.

For 2024, and then maybe you can help us give some perspective of what the longer term might look like on a cost basis.

Speaker Change: Yes, Chris let me take a cut at that.

Speaker Change: I appreciate the question there are some offsetting things going on here. One is that we've got we've got restoration of our incentives in 2024, and we've got normal inflation, that's hitting and so we're offsetting that and to break it down and just be a little more specific about your question on the personnel side the midpoint of our guidance.

Speaker Change: This is up 2% versus where we landed in 2023 ex restructuring and on the SG&A side were down 8% at the midpoint versus where we landed ex restructuring in 2023, but we absolutely have to improve our cost structure, we continue on that path.

Speaker Change: <unk>.

Speaker Change: The productivity numbers that we generated a 17% nast and 20% Jeff.

Speaker Change: As you heard to continue into 2024, 15% of Nast and another 10% on GFS. So we're talking about over 30% on a compound basis in both businesses here over the over the two year period. So.

Speaker Change: The efforts continue we do expect some rebound in the market. So that will have some volume pick up there as well but.

Speaker Change: We've got to continue to head down the path that we've been on.

Dave Bozeman: Jim will help us drive lean principles and continuous improvement deeper into the organization and create growth and success in our strategic priorities. 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, further reducing our structural costs, and improving our efficiency. Operating Margins and Profitability.

Speaker Change: Yes, Chris just to add on to what Mike said.

Speaker Change: We're also looking at this too as we as we said before is really position ourselves to.

Speaker Change: To be in a strong position for the market rebounds, and we feel good about where we're headed there.

Speaker Change: The best data, we have is back half of this year.

Speaker Change: If we start seeing that inflection.

Speaker Change: We're driving our cost structure to have really that operating leverage.

Is it a great position as well as continue to go after structural cost.

Dave Bozeman: I'm confident that together we will win for our customers, carriers, employees, and shareholders, and I'm incredibly excited about our future. This concludes our prepared remarks. 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.

Speaker Change: While creating that balance so I feel really good about that and.

Speaker Change: And the things that we're putting in place to drive that so thanks for the question.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you. The next question is coming from Stephanie <unk> of Jefferies. Please go ahead.

Stephanie: Hi, good afternoon. Thank you.

Operator: If you do have a question, please press star one on your telephone keypad. Our first question today is from Brian Ossenbeck of J.P. Morgan. Please go ahead. Hey, good afternoon.

Stephanie: In that you could maybe talk a little bit on what youre seeing.

Stephanie: But in that environment, where it stands today and how it's been trending in those conversations have been going up.

Stephanie: On the other side would love to get your thoughts on what Youre seeing in terms of our capacity access I think we all are pretty aware of what's going on there.

Operator: Thanks for taking the question.,,,,,, Dave, maybe I can just ask you to give a little more context around, https://www.thevenusproject.com. Thank you.

Stephanie: Demand side, but the exits have been much slower last year. So the love two love to hear your thoughts on kind of where that stands today. Thanks.

Speaker Change: Yeah. Thanks for the question Stephanie in terms of in terms of bids there is a variety.

Arun Rajan: Hey, Brian, I'm going to have Arun jump in and address your question. Thanks for the question. Yeah, Brian, I think, you know, the way we look at it is it's opportunistic, right? I mean, where we can get profitable demand, it will go, and there was an opportunity in the spot market, so we went there. As it relates to revenue management, you know, ultimately, as you know, the market... soft. And so it's a very, very competitive environment.

Customers come in their own forums, and there are different customers with different approaches.

Speaker Change: A lot of customers.

Speaker Change: <unk> resilient pricing of their contracts a meeting like this.

Speaker Change: They know the market is going to turn at some point and they wanted to price some of that prediction and such.

Speaker Change: Such that the.

Speaker Change: The contract doesn't have to be repriced.

Speaker Change: Whereas others want to be more aggressive and want us to quote.

Speaker Change: Just on <unk>.

Speaker Change: I don't know what the market looks like today understanding that none of us have a crystal ball.

So theres a variety of contracts.

Speaker Change: A variety of.

Speaker Change: Customers in terms of the bid environment, having said that the way we approach pricing any of these contracts is obviously a combination of our property management objectives.

Arun Rajan: And the reality is, you know, I think everybody's in this situation where prices are low, and costs are also low. And I think what we have to think about from a revenue management perspective is sort of the short-term and the long-term. I mean, there are two different perspectives, right? And so seasonally, we expect costs to go up and then settle back down, different this year, as you know the winter storms and such have kept costs elevated, but regardless of the short term, we have contracts, we have commitments, and based on our revenue management objectives, our value proposition to the customer, and certain customer attributes, we make a determination on when we reprice certain targeted lanes. In the short term, we don't see an inflection in the market, so we're not really triggering any major repricing, other than making sure we're trying to grab as much volume as we can in the spot market. But revenue management sort of...

Speaker Change: The attributes of the customer.

Speaker Change: Things like the customer lifetime value and so on.

Speaker Change: And finally, the value proposition that we deliver so on balance we have to consider all of those things in terms of how we respond.

Speaker Change: Based on what the customers asking for.

Speaker Change: Such that we can.

Speaker Change: We can sustain through the contract in a way that that that meets our with our objectives.

Speaker Change: And in terms of capacity coming on the market like you want to take that yeah sure Stephanie I'll I'll cover that so.

Stephanie: One of the interesting differences in this cycle has been the delay in the capacity on the truckload coming out but the good news is we are starting to see.

Stephanie: That kind of normal behavior of the capacity coming out there, there's a little bit of momentum in that space it hasn't significantly impacted pricing, yet, but we'd expect that to come.

Stephanie: By way of example, one of the things that we track is new carrier sign ups.

Stephanie: Last year were about 9100 in Q4 and worry about half of that little less than half of that here. In this past Q4. So would expect that to continue when you think about on the ocean side I think it's a little bit different story, where there will probably be a net capacity increase of 24 on the ocean side.

Arun Rajan: Discipline will really kick in if there's a true sustained inflection in the market, and we don't quite see that. Thank you. The next question is coming from Jack Atkins of Steven Zink. Please go ahead.

Operator: Okay, great. Thanks for taking my question. And you know, first, Mike, I just want to say I really enjoyed working with you and congratulations as you move on to the next phase of your career. I guess, there are a lot of different ways we could go with this. We'd love to get your thoughts on just broadly the first quarter.

Speaker Change: Helpful. Thanks, so much.

Speaker Change: Thank you. The next question is coming from Jeff Kauffman of vertical Research partners. Please go ahead.

Thank you very much and thank you for laying everything out so clearly today.

Jeff Kauffman: I wanted to revisit David's assessment in particular, the focus on the core four.

Operator: You know, we've had, you know, Arun, to your point, things have tightened up here in January with the winter storms. We've seen some volatility in the global forwarding markets as well. You know, how does that impact or how has that impacted your business, you know, through January? Are you seeing AGP get squeezed a bit?

Jeff Kauffman: Is there an implication here that we're applying the 80 20 rule and those are the four.

Core businesses that we really want to drive or is the implication here.

Jeff Kauffman: We're going to simplify the structure at Robinson, and if youre not part of the core four then.

Arun Rajan: Could you maybe walk us through what you're seeing, you know, in the business so far this year? Yeah, Jack, so thanks for the question, which is sort of building on my response to Brian. January, we have this, I think we all know this, there's a seasonal cost increase as capacity comes out of the market for the holidays. We expect that to generally settle down by the second week of January or latest by mid-January. And we haven't seen that, well, we've seen that in markets that are not affected by adverse weather but where there have been weather storms that were just unexpected or worse than what was expected.

Jeff Kauffman: Chile that might not be a business we're in in the long run.

Speaker Change: Hey, Jeff Thanks for the thanks for the question, Yes, let me.

Speaker Change: Double click on that a little bit.

Speaker Change: More here.

The application is where we look at Florida is about what you said the first time, it's about focus for where we want to go or.

Jeff Kauffman: Our focus for this company.

Jeff Kauffman: If truckload.

Jeff Kauffman: LTM Ocean and air and.

Jeff Kauffman: That doesn't mean I mean, we have a lot of other theater.

Jeff Kauffman: Type of businesses that will help to drive the growth.

Jeff Kauffman: Of those of those key.

Jeff Kauffman: Businesses that that I spoke up and that's really what our focus is going to be about.

Arun Rajan: What we're seeing is a lot of cost pressure and, you know, essentially capacity pressure, increased load to truck ratios, and increased cost per mile in those markets. Now we're starting to see that ease up and dissipate as the weather sort of dissipates. And so, from our perspective, everything that we see in the data suggests that, you know, any cost increases that we saw in January are purely a function of weather because, like I said, we see that weather-impacted areas have, and I'm David Zemmel. Thank you for watching. I'm Jonathan Chappell.

Jeff Kauffman: Now you're going to always look at things and evaluate them and say, what's the what's the best for the company from an operational perspective, and a long term.

Jeff Kauffman: Focus is about really truckload and it's about LCL Ocean air.

Jeff Kauffman: And maximizing the feet of those particular businesses. So that's really where we're I'm doing it.

Mike Zechmeister: I'm Michael Zechmeister. I'm Robert Houghton. I'm Ken Hoexter.

Currently evaluating the entire company on that.

Mike Zechmeister: I'm Robert Biesterfeld. I'm Michael Zechmeister. Thank you for watching. I'm Robert Hoexter. And I'm Ken Hoexter.

Speaker Change: Okay. That's my one thank you for the clarification.

Speaker Change: You got it thank you.

Mike Zechmeister: I'm Robert Biesterfeld. I'm Robert Hoexter. I'm Jonathan Chappell.

Speaker Change: Thank you. The last question today is coming from Bruce Chan of Stifel. Please go ahead.

Mike Zechmeister: Thank you for watching. I'm Capacity Strain versus a non-weather impacted region. So, but as these storms dissipate and cost per mile comes back down, I think we're back to where we expected this year to be in terms of costs. And so, in terms of revenue management and how we think about that in the short term, we could make a decision to go re-price customers, but the idea is to honor commitments so long as changes in costs are short-term. However, if we see that this sustains, our revenue management will kick in, and based on some sort of our revenue management objectives, the value we provide customers, and customer attributes, we will have to do targeted repricing. Okay, got it. In a conference room, could you maybe touch on the global forwarding side of it as well, just because there's been volatility there? Hey, Jack, I'll chime in on that.

Thank you operator, and good afternoon, everyone.

Bruce Chan: Dave you talked about one of your big findings I think it was number four as being the opportunity to drive some better synergies across the portfolio. Maybe if you could just talk about how many of your customers today are using multiple service lines and where that number could go or if youre thinking about that in a different way.

Bruce Chan: The revenue synergy opportunity could be I'd love to get some color on that too.

Dave Bozeman: Yes, Bruce Thanks for thanks for the question.

Today, if you look at let's just focus on our two largest businesses, which really kind of drive overall for Robinson in Nast and global forwarding.

Speaker Change: We track today, our customers half of our customers use.

Mike Zechmeister: And first of all, thanks for your comments. I appreciate it. Feelings are mutual.

Speaker Change: Essentially.

Speaker Change: Both Nast and global forwarding services are driven by.

Mike Zechmeister: Yeah, just before I go into OCEAN, just maybe add a comment on the truck side. And I think one point to be made about where we're at and the AGP that's coming in for us, both in Q4 and then into January, is the emphasis on the point about this elongated trough and its impact on our contract business, in particular. And if you look at cycles from the past that aren't as prolonged, as you're coming down and then coming back up, the older contracts that you have in your portfolio still have higher prices.

Speaker Change: <unk> has so.

Speaker Change: We'll look at that is that the opportunity there while that's good.

Speaker Change: We think that there is opportunity for <unk>.

Speaker Change: More wallet share that we have there by.

Speaker Change: <unk> unlocking the potential of those services in.

Speaker Change: As I as I look at this.

Speaker Change: Showing up in a more synergistic fashion, which is something that I noticed going forward, our customers really want that they want.

Mike Zechmeister: One of the differences here is that this elongated trough has caused time to pass such that we've repriced pretty much our entire portfolio. So what's different is we have more contracts now in Q4. Robert Houghton, Michael Zechmeister, Robert Houghton, Michael Zechmeister, water depth issues in the Panama Canal, and that has caused a lot of the capacity to be rerouted, which I think we would consider to be a temporary capacity disruption on the ocean side, which has really led to some increased pricing, both at the end of Q4 and then into January in the marketplace.

Speaker Change: Solutions to complicated problems that they have in their <unk>.

Speaker Change: King.

Speaker Change: We can offer that I think that separates us out.

Speaker Change: Showing up as kind of Ala carte or individual solutions.

Speaker Change: I think while we're generating some value there.

Speaker Change: There is more value, we get by really showing up at a as a suite of services.

Speaker Change: Solve more complicated deeper.

Speaker Change: As for the customer and that's why that's why we're focusing on that we have good momentum and energy around that and we have some structure things that we're doing already within the company to drive.

Speaker Change: <unk> some of that value.

Speaker Change: Okay.

Speaker Change: Alright, I appreciate the color. Thank you.

Speaker Change: Thank you we actually do have time for an additional question. The next question is coming from David Vernon of Bernstein. Please go ahead.

David Vernon: Hey, good afternoon. Thanks for fit me in here just a real quick question.

Mike Zechmeister: I don't think that we see that as being demand driven at this point, and it's really probably a temporary capacity disruption. So I think after we get past Chinese New Year and with the additional capacity that's also coming in in 2024, I think you'll see some kind of normalization there.

David Vernon: It doesn't sound like we're given any sort of explicit guidance for the year, which I totally understand and respect given the uncertainty that's out there, but I'd love your thoughts on whether sort of the exit rate of fourth quarter. Here is kind of is it as bad as it gets or do we expect it to get a little Rockier and then any thoughts on how we can translate the productivity numbers you guys are giving us in terms of 32% compound.

David Vernon: Into profitability. Thank you.

Mike Zechmeister: You know, the other point I'd make on Ocean is that the composition of that business from contract to spot is very different than what we have in truckload. In fact, on Oceanside, we're only about 20% contract, you know, as opposed to what we were quoting on the truckload set at 65%. So that's just another difference to keep in mind.

Speaker Change: Yes, Thanks, David.

Speaker Change: So I'd say a couple of things.

Speaker Change: On that we have a history of giving your expense guidance across the business. So we gave you a personnel SG&A capex depreciation and amortization tax rate, but we don't give.

Speaker Change: AGP and Thats really because of the volatility that we all experienced in this business and the difficulty in predicting the macro demand and capacity elements that drive the pricing. There. So we've tried to stay away from that.

Mike Zechmeister: And that means we're able to benefit from the increased spot market in Ocean more immediately than we are on the truckload. Okay, thank you very much. I really appreciate it. Thank you. The next question is coming from John Chappell of Evercore ISI. Please go ahead. Thank you. Good afternoon. So, clearly, this tough market's had an impact on others as well, but those are not as financially secure as C.E. Travenson is.

Speaker Change: Part and parcel to that.

Speaker Change: To your question about.

We're here in the trough how long does the trough last when do we come out of it we we provide some guidance on our website about where we think.

Speaker Change: Pricing is going but again we are.

Speaker Change: Doing our best to forecast, where we're at but those things are very difficult to know with certainty and so kind of the <unk>.

Arun Rajan: We've seen some bigger names go out of business. I'm just wondering now, as this elongated market reaches almost the third year, are you seeing any desperation among some of the newer or maybe even established competitors out there that's creating an even more volatile or kind of punitive pricing environment? And if so, what are the opportunities and risks to you in that type of backdrop?

Speaker Change: Same element there.

Speaker Change: The comments that we've made I think are.

Speaker Change: Back half of the year is when things start to really turnaround on truck.

Speaker Change: Thank you at this time I'd like to turn the floor back over to Mr. <unk> for closing comments.

Arun Rajan: Thanks for the question, John; let me take a crack at that. So you're right; it is a very stressed market. And, you know, one of the things that we believe may be an advantage to us in this stressed market is that we're still investing; we're still putting our money down on the pipeline of projects that we intended to do. In fact, as we try to increase clock speed, we're doing some of those projects concurrently. And so while others may be looking to cut back, you know, kind of hang in there, weather the storm, we're continuing to make ourselves better with the idea that when we emerge, you know, the inevitable turn here, we'll be stronger as we come out. Wouldn't comment on anybody specifically in the pinched front, but boy, we certainly hear about it, we see it, you know, the implications out there are clear, given where we've Okay, thank you.

Speaker Change: Thank you everyone for joining us today that concludes today's earnings call. We look forward to talking to you again have a great evening.

Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines of walk off the webcast at this time and enjoy the rest of your day.

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: No.

Operator: Thank you. The next question is coming from Chris Wetherbee of Citi. Please go ahead.

Operator: Hey, thanks. Good afternoon, guys. You know, from a cost perspective, if you think about 2024, that you're guiding OPEX to be roughly flat-ish year-over-year. I think you guys have also said that you're not necessarily expecting a freight rebound coming in 2024, as far as near term. So I guess I was just trying to square that up.

Speaker Change: Okay.

Speaker Change: Yes.

Mike Zechmeister: Obviously, you guys have added a lot of costs for COVID. Dave, as you noted, think about opportunity here. It's flat enough for 2024, and maybe you can help us give some perspective of what the longer term might look like. Yeah, Chris, let me take a cut at that.

Mike Zechmeister: So, I appreciate the question. You know, there's some offsetting things going on here. You know, one is that we've got a restoration of our incentive in 2024, and we've got normal inflation that's hitting. And so we're offsetting that, you know, and to break it down and just be a little more specific about your question. On the personnel side, the midpoint of our guidance is up 0.2% versus where we landed in 2023 x restructuring. And on the SG&A side, we're down 0.8% at the midpoint. Versus where we landed on x restructuring in 2023.

Mike Zechmeister: But, you know, we absolutely have to improve our cost structure. We continue on that path. The productivity numbers that we generated, the 17% in NAST and 20% in GF, as you heard, continue into 2024, 15% on NAST and another 10% on GF. So we're talking about over 30% on a compound basis in both businesses here over the next two years.

Mike Zechmeister: So, you know, the efforts continue. We do expect some rebound in the market so that we'll have some volume pickup there as well. But, you know, we got to continue to head down the path that we've been on. Yeah, Chris, just to add on to what Mike said, we're also looking at this to, as we said before, really position ourselves to be in a strong pole position for the market rebound, and we feel good about where we're headed there. The best data we have is from the back half of this year.

Dave Bozeman: If we start seeing that inflection, we're driving our cost structure to have that operating leverage. It puts us in a great position, as well as continue to go after structural costs while creating that balance. So I feel really good about that and the things that we're putting in place to drive that. So thanks for the question. Thank you. The next question is coming from Stephanie Moore of Jeffries. Please go ahead. Hi, good afternoon.

Operator: Thank you. I was hoping that you could maybe touch a little bit on what you're seeing in the kind of bid environment, where it stands today, and how it's been trending and those conversations have been going. And on the other hand, I would love to get your thoughts on what you're seeing in terms of capacity exits. I think we all are pretty aware of what's going on on the demand side, but capacity exits have been much slower for the last year. So I'd love to hear your thoughts on kind of where that stands today. Thanks.

Arun Rajan: Thanks for the question, Stephanie. In terms of bids, there's variety. Customers come in their own forms, and there are different customers with different approaches. A lot of customers want resilient pricing in their contracts, meaning they know the market is going to turn at some point, and they want to price some of that prediction in such that the contract doesn't have to be repriced.

Arun Rajan: Whereas others want to be more aggressive and want us to quote based on what the market looks like today, understanding that none of us have a crystal ball. So there's a variety of contracts and variety of customers in terms of the bid environment. Having said that, the way we approach pricing for any of these contracts is obviously a combination of our revenue management objectives, the attributes of the customer, things like their customer lifetime value, and so on.

Arun Rajan: And finally, the value proposition that we deliver. So in balance, we have to consider all those things in terms of how we respond based on what the customer is asking for, such that we, you know, we. We can sustain through the contract in a way that meets our objective. In terms of capacity coming out of the market, Mike, do you want to take that? Yeah, sure, Stephanie.

Mike Zechmeister: I'll cover that. So, you know, one of the interesting differences in this cycle has been the delay in the capacity of the truckloads coming out. But the good news is we are starting to see that kind of normal behavior, the capacity coming out. There's a little bit of momentum in that space.

Mike Zechmeister: You know, it hasn't significantly impacted pricing yet, but we expect that to come. For example, one of the things that we track is new carrier signups. Last year, we were about 9,100 in Q4, and we're about half that, a little less than half that here in this past Q4.

Mike Zechmeister: So I would expect that to continue. You know, when you think about on the ocean side, I think it's a little bit different story, where there'll probably be a net capacity increase of 24 on the ocean side. Helpful, thanks so much.

Operator: Thank you. The next question is coming from Jeff Kaufman of Vertical Research Partners. Please go ahead.

Operator: Thank you very much and thank you for laying everything out so clearly today. I want to revisit David's assessment and, in particular, the focus on the Core 4. Is there an implication here that we're applying the 80-20 rule, and those are the four businesses that we really want to drive? Or is the implication here that we're going to simplify the structure at Robinson, and if you're not part of the Core 4, then...

Dave Bozeman: Eventually, that might not be a business we're in. Hey, Jeff, thanks for the thanks for the question. Yeah, let me double-click on that a little bit more here.

Dave Bozeman: The implications as we're looking for this, it's about what you said the first time. It's about focus for where we want to go. Our focus for this company is Truckload LTL Ocean and Air. And that doesn't mean, I mean, we have a lot of other feeder type businesses that will help to drive the growth of those key businesses that I spoke of.

Dave Bozeman: And that's really what our focus is gonna be about. Now, you're going to always look at things and evaluate them and say, what's best for the company from an operational perspective and in the long run? But the focus is really truckload, and it's about LTL, ocean air, and maximizing the revenue of those particular businesses. So that's really where I'm doing it, and I'm constantly evaluating the entire company. And that's my one. Thank you for the clarification. You got it.

Dave Bozeman: Thank you. Thank you. The last question today is coming from Bruce Chan of CFOL. Please go ahead.

Operator: Thank you, Operator. And good afternoon, everyone. Dave, you know, you talked about one of your big findings, I think it was number four, being the opportunity to drive some better synergies across the portfolio. Maybe, you know, if you could just talk about how many of your customers today are using multiple service lines and where that number could go, or, you know, if you're thinking about that in a different way, like what the revenue synergy opportunity could be, I'd love to get some color on that, too.

Dave Bozeman: Yeah, Bruce, thanks for the question. Today, if you look at it, let's just focus on our two largest businesses, which really kind of drive overall revenue for Robinson and NASDAQ global forwarding. We track today our customers; half of our customers use. Essentially, both NAST and Global Forwarding Services are driven by, you know, HAF.

Dave Bozeman: What we're looking at is that the opportunity there, while that's good, we think that there is an opportunity for more wallet share that we have there by unlocking the potential of those services. And as I look at this, showing up in a more synergistic fashion, which is something that I noticed going forward, our customers really want that. They want solutions to complicated problems that they have in their supply chain.

Dave Bozeman: We can offer that, and I think that separates us out. But showing up as kind of a la carte or individual solutions, I think while we're generating some value there, there's more value we get by really showing up as a suite of services to solve more complicated, deeper issues for the customer. And that's why we're focusing on that. We have good momentum and energy around that, and we have some structured things that we're doing already within the company to drive and unlock some of that value. All right, I appreciate the color, thank you.

Operator: Thank you. We actually do have time for an additional question. The next question is coming from David Vernon of Bernstein. Please go ahead.

Operator: Hey, good afternoon. Thanks for fitting me in here. Just a real quick question.

Mike Zechmeister: You know, it doesn't sound like we're given any sort of explicit guidance for the year, which I totally understand and respect, given the uncertainty that's out there. But I'd love your thoughts on whether the exit rate for the fourth quarter here is kind of as bad as it gets, or do we expect it to get a little rockier? And then any thoughts on how we can translate the productivity numbers you guys are giving us in terms of 32% compound annual growth into profitability?

Mike Zechmeister: Yeah, thanks, David. So I would say a couple of things on that. We have a history of giving you expense guidance across the business. So we give you personnel SG&A, CapEx, depreciation, amortization, tax rate. But we don't give AGP, and that's really because of the volatility that we all experience in this business and the difficulty in predicting the macro demand and capacity elements that drive the pricing there.

Mike Zechmeister: So we've tried to stay away from that. And part and parcel to that, to your question about us being here in the trough. How long does the trough last?

Mike Zechmeister: When do we come out of it? We provide some guidance on our website about where we think pricing is going. But again, we're doing our best to forecast where we are. But those things are very difficult to know with certainty.

Mike Zechmeister: And so kind of the same element there, you know. The comments that we've made, I think, are... back half of the year, start to really turn around the truck. Thank you. At this time, I'd like to turn the floor back over to Mr. Ives for closing comments. Thank you, everyone, for joining us today. That concludes today's earnings call. We look forward to talking to you again. Have a great evening. Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.