Q2 2024 CH Robinson Worldwide Inc Earnings Call

Speaker Change: [music].

Operator: Good afternoon, ladies and gentlemen, and welcome to the CH Robinson second quarter 2024 conference call. At this time, all participants are in a listen-only mode.

Good afternoon, ladies and gentlemen, and welcome to the C. H Robinson second quarter 2024 conference call.

Speaker Change: At this time all participants are in a listen only mode.

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 press star zero.

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

Speaker Change: Ask a question. Please press star one on your telephone keypad.

Speaker Change: If anyone needs assistance at any time during the conference. Please press Star zero.

Charles S. Ives: As a reminder, this conference is being recorded Wednesday, July 31st, 2024. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Thank you, Donna. And good afternoon, everyone.

Speaker Change: As a reminder, this conference is being recorded Wednesday July 31st 2024.

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

Charles S. Ives: On the call with me today is Dave Bozeman, our President and Chief Executive Officer; Arun Rajan, our Chief Strategy and Innovation Officer; and Michael Castagnetto, our President of North American Surface Transportation.

Charles S. Ives: Thank you Donna and good afternoon, everyone on the call with me today is Dave Boldman, our President and Chief Executive Officer, Arun, Roger <unk>, Our Chief strategy, and Innovation Officer, Michael Catholic Neto, our president of North American surface transportation.

Charles S. Ives: Mike Zechmeister, our Chief Financial Officer, and Damon Lee, our incoming Chief Financial Officer. I'd like to remind you that our remarks today may contain forward-looking statements. Slide 2 in today's presentation lists factors that could cause our actual results to differ from management's expectations. Our earnings presentation slides are supplemental to our earnings release and can be found in the investor section of our website at investor.chrovinson.com. Our prepared comments are not intended to follow the slides.

Speaker Change: My exact meister, our chief financial Officer, and Damon Lee, our incoming Chief Financial Officer.

Speaker Change: I'd 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 are.

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 Dot 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 well, let you know which slide we're referencing.

Charles S. Ives: If we do refer to specific information on the slides, we'll 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. And with that, I'll turn the call over to Dave. Thank you, Chuck.

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

Speaker Change: I will turn the call over to Dave.

David P. Bozeman: Good afternoon, everyone, and thank you for joining us today. Having been in this seat for a little over a year now, I'm pleased with the progress we've made on evolving our strategy, approving our execution, and evaluating and enhancing the company's 4Ps. People, Products, Processes, and Portfolio. We've brought in some new leaders, and we're arming our people with better tools to execute on our profitable growth strategy. We're delivering innovative products to provide greater value to our customers and carriers. We're streamlining our processes, applying lean principles, and leveraging generative AI to drive out waste and optimize our costs. And we're making changes to drive focus on the four core modes in our portfolio.

Dave: Thank you Chuck good afternoon, everyone and thank you for joining us today.

Dave: Having been in this seat for a little over a year now I am pleased with the progress we've made on evolving our strategy, improving our execution and evaluating and enhancing the company's four PS people products processes and portfolio.

Dave: We brought in some new leaders and we're arming our people with better tools to execute on our profitable growth strategies.

Dave: We're delivering innovative products to provide greater value to our customers and carriers.

Dave: We're streamlining our processes applying lean principles and leveraging generative AI to drive out waste and optimize our cost.

Dave: And we're making changes to drive focus on the four core moats in our portfolio.

David P. Bozeman: All of these changes are aimed at our North Star of generating incremental operating income and delivering higher highs and higher lows over the course of the freight market cycle. Our second quarter results reflect a higher quality of execution and performance as we continue to implement the new Robinson operating model. And although we continue to fight through an elongated freight recession, we are winning and executing better at this point in the cycle. Our people are delivering exceptional service, an enhanced digital experience, and differentiated value for our customers and carriers, and I thank the team for their efforts.

Dave: All of these changes are aimed at our north star of generating incremental operating income and delivering higher highs and higher lows over the course of freight market cycles.

Dave: Our second quarter results reflect a higher quality of execution and performance as we continue to implement the new Robinson operating model and although we continue to fight through an elongated freight recession, we are winning and executing better at this point in the cycle.

Dave: Our people are delivering exceptional service and enhanced digital experience and differentiated value for our customers and carriers and I. Thank the team for their efforts.

David P. Bozeman: Our truckload business grew market share for the fourth consecutive quarter, and we took share the right way, with margin improvement in mind, and our adjusted income from operations increased 32% year over year for the full enterprise.

Dave: Our truckload business grew market share for the fourth consecutive quarter, and we took share the right way with margin improvement in mind.

Dave: And our adjusted income from operations increased 32% year over year for the full enterprise.

David P. Bozeman: On our first quarter earnings call, I discussed that we had begun deploying a new operating model that is rooted in lean methodology to improve the level and consistency of our operational execution. Today, I would like to share more about how the Robinson operating model is coming to life, which would hopefully help investors understand how things are evolving. The Robinson operating model starts with an enterprise strategy map that lays out the key strategies that we need.

Dave: On our first quarter earnings call I discussed that we have begun deploying a new operating model that is rooted in lean methodology to improve the level and consistency of our operational execution.

Dave: Today, I would like to share more about how the Robinson operating model, it's coming to life, which would hopefully help investors understand how things are evolving.

Dave: Robinson operating model starts with an enterprise strategy map that lays out the key strategies that we need to execute on to drive profitable growth and improve the operating income of the business.

David P. Bozeman: Execute on to drive profitable growth and improve the operating income of the business. Growth in operating income will come from margin expansion, by improving our cost structure and operating level, and for market share gains by igniting profitable growth in targeted market segments and industry verticals. Our enterprise strategy map converts to a balanced scorecard for the enterprise and cascades down to strategy maps and scorecards for each division and for the functional support area. These scorecards include the key metrics that each area of the business needs to deliver on and be accountable for.

Dave: Growth in operating income will come from margin expansion by improving our cost structure and operating leverage and for market share gains by igniting profitable growth in targeted market segments and industry verticals.

Dave: Our enterprise strategy map converts to a balanced scorecard for the enterprise and Cascades down to strategy maps and scorecards for each division and for the functional support areas.

Dave: These scorecards include the key metrics that each area of the business needs to deliver on and be accountable to as.

David P. Bozeman: As examples, these metrics may be related to driving growth, meeting customer expectations, optimizing AGP, optimizing costs, managing our talent, or improving our cash conversion cycle. Through a regular cadence of operating reviews on at least a monthly basis, but in some cases, weekly or even daily, scorecard metrics are reviewed, and there is a binary view of whether they are on track. The metrics are green if they're on track, and red if they're not on track. There is no yellow.

Dave: As examples these metrics may be related to driving growth meeting customer expectations, optimizing AGP optimizing cost managing our talent or improving our cash conversion cycle.

Dave: Through a regular cadence of operating reviews on at least a monthly basis, but in some cases weekly or even daily scorecard metrics are reviewed and theres a binary view of whether they are on track.

Dave: Metrics are green, if they're on track and read if theyre not on track there is no yellow.

David P. Bozeman: We're coaching our people to embrace and attack the red with countermeasures or action plans to solve problems faster, which is driving improvements in execution. This may show up in improvements such as more disciplined pricing, better decisions on the volume that we're seeking, or how we're servicing our customers and carriers. These operating reviews prosecute the problem and not the person, as we want our people to embrace the red as an opportunity for improvement.

Dave: We're coaching our people to embrace and attack the red would countermeasures or action plans to solve problems faster, which is driving improvements in execution.

Dave: This may show up in improvements such as more disciplined pricing.

Dave: Better decisions on the volume that we're seeking or how we're servicing our customers and carriers. These.

Dave: These operating reviews prosecute the problem and not the person as we want our people to embrace the red as an opportunity for improvement.

David P. Bozeman: Since we began implementing the new operating model in Q1, we're getting better at being vocally self-critical and driving transparency and accountability. And we've been able to shine a light on some error states that negatively contributed to our results. We're also getting better at making decisions faster and taking quick action on countermeasures to correct those error states and improve our performance. We are still early in our journey, but the operating model is helping us execute a solid strategy even better, and we expect further improvement as we continue to cascade the new operating model deeper into the organization and as our team continues to embrace it and build operational muscle. I know from my past experiences of implementing lean operating models that improvement isn't always linear, and we still have a lot of grass to cut.

Dave: Since we began implementing the new operating model in Q1, we're getting better at being vocally self critical in driving transparency and accountability and we've been able to shine a light on some aerospace did negatively contributed to our results.

Dave: We're also getting better at making decisions faster and taking quick action on countermeasures to correct, those aerospace and improve our performance.

Dave: We are still early in our journey, but the operating model is helping us execute a solid strategy, even better and we expect further improvement as we continue to Cascade, the new operating model deeper into the organization and as our team continues to embrace it and build the operational muscle.

Dave: I know from my past experiences of implementing lean operating models that improvement isn't always linear.

Dave: And we still have a lot of grass to cut.

David P. Bozeman: I'm confident in the team's willingness and ability to drive a higher level of discipline in our operational execution. As the global and North American freight markets fluctuate due to seasonal, cyclical, and geopolitical factors, we remain focused on what we can control, including deploying our new operating model, providing best-in-class service to our customers and carriers, gaining profitable share in targeted market segments, and delivering tools that enable our customer and carrier-facing employees to allocate their time to relationship building and value-added solutions.

Dave: I am confident in the team's willingness and ability to drive a higher level of discipline and our operational execution.

Dave: As the global and North American freight markets fluctuate due to seasonal cyclical and geopolitical factors, we remain focused on what we can control.

Dave: Including deploying our new operating model, providing best in class service to our customers and carriers gaining profitable share in targeted market segments, and delivering tools that enable our customer and carrier facing employees to allocate their time to relationship building and value added solutions.

David P. Bozeman: Our continued focus on productivity improvements is one part of our plan to address and optimize our enterprise-wide structural costs. We continue to eliminate or automate certain tasks to enable our teams to handle more volume. In 2024, we expect these initiatives will help drive a 15% increase in shipments per person per day in NAS and a 10% increase in Global 40, both of which would result in compounded productivity improvements of 32% or better over 23 and 24 combined.

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

Dave: We continue to eliminate or automate certain tasks to enable our teams to handle more volume.

Dave: In 'twenty 'twenty four we expect these initiatives will help drive a 15% increase in shipments per person per day in Nast and a 10% increase in global forwarding.

Dave: Both of which would result in compounded productivity improvements of 32% or better over 'twenty, three and 'twenty four combined.

David P. Bozeman: We also took an important step yesterday on our journey to get fit, fast, and focused when we announced that we've reached an agreement to sell our European Surface Transportation business. This move is consistent with our strategy to focus on profitable growth in our four core modes of North American truckload and LTL and global ocean and air. Growth needs to be highly scalable within our model to create the most value for our stakeholders. As such, our global forwarding and managed services businesses in Europe will continue to execute on the breadth of global services that we provide to customers and that feed our core mode.

Dave: We also took an important step yesterday on our journey to get fit fast and focus when we announced that we've reached an agreement to sell our European surface transportation business.

Dave: This move is consistent with our strategy to drive focus on profitable growth in our four core modes of North American truckload and L T L and global Ocean and air.

Speaker Change: <unk> needs to be highly scalable within our model to.

Dave: To create the most value for our stakeholders.

Dave: As such our global forwarding and managed services businesses in Europe will continue to execute on our breadth of global services.

Dave: That we provide to customers and that feed our core moats.

David P. Bozeman: With ongoing efforts to improve the customer experience and our cost to serve, we continue to focus on ensuring that we'll be ready for the eventual freight market rebound with a disciplined operating model that decouples headcount growth from volume growth and drives operating levels. I'm also excited about the changes that we've made to my senior leadership. Being able to attract Damon Lee as our new CFO is a big win for Robinson, with his proven track record of financial discipline while delivering results as an operational leader and a strategist with a lean and continuous improvement mindset.

Dave: With the ongoing efforts to improve the customer experience and our cost to serve we continue to focus on ensuring that we will be ready for the eventual freight market rebound with a disciplined operating model the decoupling head count growth from volume growth and drive operating leverage I'm.

Dave: I'm also excited about the changes that we've made well my senior leadership team.

Speaker Change: Being able to attract Daymond Lee as our new CFO is a big win for Robinson with his proven track record of financial discipline, while delivering results as an operational leader and a strategist with a lean and continuous improvement mindset.

David P. Bozeman: I look forward to Damon's contributions to our strategy and execution. I'm also greatly appreciative that Mike Zechmeister graciously agreed to extend his time with us to facilitate a seamless transition for CH Robinson and for Damon. I thank Mike for his five years of service and dedication to Robinson and wish him the best in his upcoming retirement.

Speaker Change: I look forward to <unk> contributions to our strategy and execution.

Speaker Change: I'm also greatly appreciate it.

Speaker Change: Yeah, Mike Siegmeister graciously agreed to extend his time with us to facilitate a seamless transition for C H Robinson and for Damon.

Speaker Change: I think Mike for his five years of service and dedication to Robinson and wish him the best in his upcoming retirement.

David P. Bozeman: We also recently announced that Arun Rajan transitioned from the role of COO to the new role of Chief Strategy and Innovation Officer. This change enables Arun and his team to focus their continued efforts on building our digital and operational capabilities and uphold tight alignment between our business teams and our digital investors. We're at a pivotal point as a company, and with a single-threaded leader at the helm of strategy and innovation, we can accelerate efforts already underway to bring industry-leading products, technology, solutions, and ways of working to our company and the global logistics marketplace. Working closely with the senior leadership team, Arun will oversee our enterprise strategy and innovation process from creation to implementation and measure our performance against our strategic goals.

Speaker Change: We also recently announced that a room Roger transition from the role of C. O O to a new role of Chief strategy and innovation officer.

Speaker Change: This change enables a room and his team to focus their continued efforts on building, our digital and operational capabilities and uphold tight alignment between our business teams and our digital investments.

Speaker Change: We're at a pivotal point as a company.

Roger: What the single threaded leader at the helm of strategy and innovation, we can accelerate efforts already underway to bring industry, leading products technology solutions and ways of working to our company and the global logistics marketplace.

a room: Working closely with the senior leadership team a room will oversee our enterprise strategy and innovation process from creation to implementation and measure our performance against our strategic goals.

Michael Paul Zechmeister: I have high expectations for how this new role will benefit Robinson and all our stakeholders as we continue our transformation. And finally, it's been great to have Michael Castagnetto leading and driving further improvement in our NAS business. He has a proven record of building strong relationships with our people and our customers, driving operational excellence, and delivering exceptional results. Michael has joined us on today's call, and I'll turn it over to him now to provide more details on our NAS results. Thanks, Dave, and good afternoon, everyone.

Speaker Change: I have high expectations for how this new role will benefit Robinson and all our stakeholders as we continue our transformation.

Speaker Change: And finally, it's been great to have Michael Catholic Neto, leading and driving further improvement in our Nast business. He has a proven record of building strong relationships with our people and our customers driving operational excellence and delivering exceptional results.

Speaker Change: Michael has joined US on today's call and I'll turn it over to him now to provide more details on our Nast results.

Michael: Thanks, Dave and good afternoon, everyone.

Michael Paul Zechmeister: It has been extremely energizing to be leading the NAST organization and working with our talented and dedicated team, who are committed to delivering the best solutions and service to our customers and carriers every day. While we're still in the early stages of implementing and adopting the new Robinson operating model, I'm convinced that this approach is just what we need. Our discipline, execution, and accountability have improved more than at any other time in my previous 26 years at Robinson and two years in NAC. If it feels different, that's because it is, and it's showing up in our response.

Speaker Change: It has been extremely energized to be leading the Nast organization and working with our talented and dedicated team members, who are committed to delivering the best solutions and service to our customers and carriers every day.

Speaker Change: Well, we're still in the early stages of implementing and adopting the new Robinson operating model I am convinced that this approach is just what we need.

Speaker Change: Our disciplined execution and accountability has improved more than any other time in my previous 26 years at Robinson and two years in Nast.

Speaker Change: If it feels different that's because it is and it's showing up in our results.

Michael Paul Zechmeister: Supported by our new operating model, with our product and tech teams delivering new innovative tools, like our recently announced digital matching product, our resilient team of freight experts is responding to the challenging freight environment, and we are reacting quicker and more effectively to provide solutions to our customers and carriers. As a result, our Q2 NAS truckload volume increased approximately 1.5% sequentially and year over year, which outpaced the market indices for the fourth consecutive quarter.

Speaker Change: Supported by our new operating model with our product and tech teams delivering new innovative tools like our recently announced digital matching product are resilient team afraid experts is responding to the challenging freight environment and we are reacting quicker and more effectively to provide solutions to our customers and carriers.

Speaker Change: As a result, our Q2 Nast truckload volume increased approximately one 5% sequentially and year over year, which outpaced the market indices for the fourth quarter in a row.

Michael Paul Zechmeister: Within Q2, we saw some seasonal volume strength in June, primarily related to produce. But overall, seasonality was muted in key areas, as shown in the Cass Freight Shipment Index increasing only 0.2% sequentially versus the 10-year average of a 6.1% sequential increase, excluding the pandemic year of 2020.

Speaker Change: Within Q2, we saw some seasonal volume strength in June primarily related to produce season.

Speaker Change: But overall seasonality was muted in Q2 as shown in the Cass freight shipment index, increasing only <unk>, 2% sequentially versus the 10 year average of a six 1% sequential increase excluding the pandemic year of 2020.

Michael Paul Zechmeister: Looking ahead to Q3, the 10-year average of the Cast Freight Shipment Index, excluding the pandemic-impacted year of 2020, is a 0.4% sequential decline from Q2 to Q3. At this point, it's hard to say whether the muted seasonality that we saw in Q2 will continue into Q3. From a market balance perspective, we continue to be in a drawn-out stage of capacity oversupply. Although carrier attrition is occurring, it remains at a slower pace and not enough to materially impact the overall market.

Speaker Change: Looking ahead to Q3, the 10 year average of the cast for each shipment index. Excluding the pandemic impacted year of 2020 is a 4% sequential decline from Q2 to Q3.

Speaker Change: At this point, it's hard to say, whether the muted seasonality that we saw in Q2 will continue into Q3.

Speaker Change: From a market balanced perspective, we continue to be in a drawn out stage of capacity oversupply.

Speaker Change: Although carrier attrition is occurring it remains at a slower pace and not enough to materially impact the overall market.

Michael Paul Zechmeister: Load-to-truck ratios did increase in June and put upward pressure on spot rates, but this was largely regional and related to produce volumes in the southern half of the U.S. In July, however, drive-in load-to-truck ratios have retreated to the level seen in April.

Speaker Change: Load to truck ratios did increase in June and put upward pressure on spot rates, but it was largely regional unrelated to produce volumes in the southern half of the U S.

Speaker Change: In July however, dry van load to truck ratios have retreated to the level seen in April and May.

Michael Paul Zechmeister: In Q2, we delivered further optimization of volume and adjusted gross profit per truckload, which increased 6.5% sequentially and year-over-year. The improvement compared to Q2 of last year was driven by improved pricing discipline and revenue management. This led to better AGP yield within our transactional truckload business, as our procurement teams, combined with the intentional usage of digital brokerage capabilities, delivered a cost-of-hire advantage versus the market average. These practices are part of our operating structures that are integrated into our operating model and ladder up to the NAS divisional scorecard and ultimately into the enterprise scorecard.

Speaker Change: In Q2, we delivered further optimization of volume and adjusted gross profit per truckload, which increased six 5% sequentially and year over year.

Speaker Change: The improvement compared to Q2 of last year was driven by improved pricing discipline and revenue management.

Speaker Change: That led to better AGP yield within our transactional truckload business as our procurement teams combined with the intentional usage of digital brokerage capabilities delivered a cost of hire advantage versus the market average.

Speaker Change: These practices are part of our operating structures that are integrated into our operating model and ladder up to the Nash divisional scorecard and ultimately into the enterprise scorecard.

Michael Paul Zechmeister: In our LTL business, Q1 shipments were also up 1.5% on a year-over-year basis and 3.5% sequentially, driven primarily by strength in our Retail Consolidation Service Office. By leveraging our vast access to capacity, broad range of services, and our high level of service, our LTL team continues to onboard a solid pipeline of new business and build on our existing $3 billion LTL business. The strength and unmatched expertise of our people enables us to deliver exceptional service and greater value to our customers.

Speaker Change: And our <unk> business Q1 shipments were also up one 5% on a year over year basis, and three 5% sequentially driven primarily by strength in our retail consolidation service offering.

Speaker Change: By leveraging our vast access to capacity broad range of services and our high level of service our L. T. L team continues to onboard a solid pipeline of new business and build on our existing $3 billion <unk> business.

Speaker Change: The strength and unmatched expertise of our people enables us to deliver exceptional service and greater value to our customers. We are investing in our sales organization to maximize our growth opportunities.

Michael Paul Zechmeister: We are investing in our sales organization to maximize our growth opportunities. As an example of the operating model at work, we took actions recently to streamline our sales process and reorganize our sales team, and the result has been a more effective and quicker engagement with our customers, and a greater opportunity for our more experienced salespeople to engage with the right people. We've made net additions to and are actively growing our sales team in line with a disciplined and focused approach to capture growth opportunities in targeted customer sectors. Our people are the single greatest differentiator for us versus the competition, and we are going to continue to invest in that.

Speaker Change: As an example of the operating model at work, we took actions recently to streamline our sales process and reorganized our sales teams.

Speaker Change: And the result has been a more effective and quicker engagement with our customers and a greater opportunity for our more experienced salespeople to engage with the right customers. We've made net additions two and are actively growing our sales team in line with a disciplined and focused approach to capture growth opportunities in targeted customer segments.

Speaker Change: Our people are the single greatest differentiator for us versus the competition and we are going to continue to lean into this we may have gotten the balance of people versus tech wrong at certain points in our past, but we've learned and we are getting it right now.

Michael Paul Zechmeister: We may have gotten the balance of people versus tech wrong at certain points in our past, but we've learned, and we are getting it right now. We will keep evaluating our results and adjust accordingly going forward. From upskilling our people to providing upward mobility and new opportunities, we will continue to lead with our people first.

Speaker Change: We will keep evaluating our results and adjust accordingly going forward.

Speaker Change: Remote scaling our people to providing upward mobility and new opportunities, we will continue to lead with our people first.

Arun D. Rajan: We will support our people with industry-leading technology and solutions to enhance their capabilities as we continue to focus on people, process, and technology. I'll turn it over to Arun now to write an update on the innovation we're delivering to strengthen our customer and carrier experience, increase AGP yield, and improve operating leverage. Thanks, Michael, and good afternoon, everyone.

Speaker Change: We will support our people with industry, leading <unk> solutions to enhance their capabilities as we continue to focus on people process and technology.

Speaker Change: I'll turn it over to a room now to provide an update on the innovation, we're delivering to strengthen our customer and carrier experience increase AGP yield and improve operating leverage.

Aaron: Thanks, Michael and good afternoon, everyone.

Arun D. Rajan: I'm excited about my recent transition into the role of Chief Strategy and Innovation Officer. I'm proud of the team's accomplishments over the past couple of years to build a solid foundation for our digital and operational strategies. Since I joined the organization in the fall of 2021, we have taken a surgical, data-driven approach to technology investments to accelerate our digital transformation and deliver financial outcomes. These efforts have now matured into digitally oriented operating structures that power core parts of our business, such as Digital Brokerage, Revenue Management, and Operational Excellence Teams.

Aaron: I'm excited about my recent transition into the role of Chief strategy and innovation Officer.

Speaker Change: I'm proud of the team's accomplishments over the past couple of years to build a solid foundation for our digital and operational strategy.

Speaker Change: Since I joined the organization in the fall of 2021, we have taken a surgical data driven approach to technology investments to accelerate our digital transformation and deliver financial outcomes.

Speaker Change: These efforts have now matured and digitally oriented operating structures that power core parts of our business such as digital brokerage revenue management and operational excellence teams.

Arun D. Rajan: The success of these collective efforts has enabled us to transition some of these digitally oriented operating structures into our core operations, thereby enabling me to shift my focus to accelerating actions in support of our broader enterprise strategy and innovation to drive profitable growth. The strategy process is not static.

Speaker Change: The success of these collective efforts has enabled us to transition some of these digitally oriented operating structures into our core operations, thereby enabling media shift my focus to accelerating actions in support of our broader enterprise strategy and innovation to drive profitable growth.

Speaker Change: Strategy process is not static.

Arun D. Rajan: Leveraging our operating model, we will diligently monitor execution towards strategic outcomes and the constantly evolving external landscape to take advantage of opportunities to accelerate our strategy as we expand our leadership position in the logistics industry. Innovation is at the heart of Robinson's competitive differentiation. We are leading and innovating at scale on our processes and our products for the benefit of both sides of our two-sided marketplace, in alignment with our strategy to drive profitable market share.

Speaker Change: Our operating model, we will diligently monitor execution towards strategic outcomes and are constantly evolving external landscape.

Aaron: To take advantage of opportunities to accelerate our strategy as we expand our leadership position in the logistics industry.

Aaron: Innovation is at the heart of Robinson as competitive differentiation, we are leading and innovating at scale and our processes and our products for the benefit of both sides of our two sided marketplace.

Aaron: Alignment with our strategy to drive profitable market share growth.

Arun D. Rajan: As an example, on the carrier side, we've launched an enhanced load matching platform for carriers called Digital Dispatch. This innovative tool utilizes advanced algorithms to match carriers with loads that best fit their needs and provides real-time, customized load recommendations right to their phones via text or email.

Aaron: As an example on the carrier side with Washington enhanced load matching platform for carriers called digital dispatch.

Aaron: This innovative tool utilizes advanced algorithms to match carriers with loads that best fit their needs and provides real time customized load recommendations like the carrier's phones via text or email.

Arun D. Rajan: In addition to enabling carriers to run fewer empty miles, digital dispatch books loads four times faster than traditional methods on average, transforming hours spent searching into valuable hauling time. Digital Dispatch first became available in February to carriers that own 1-10 trucks, and we have plans to expand it to larger carriers in the future. For Robinson, we expect this innovative tool to help with the acquisition, retention, and growth of our carrier base and, therefore, provide greater access and capacity for our customers, especially when the market turns.

Aaron: In addition to enabling carriers to run fewer empty miles digital dispatch books loads four times faster than traditional methods on average transforming our spent searching into valuable hauling time.

Aaron: Digital dispatch first became available in February the carriers that own one to 10 trucks and we have plans to expand into larger carriers in the future.

Robinson: So Robinson, we expect this innovative tool to help with the acquisition retention and growth of our carrier base, and therefore provide greater access and capacity for our customers, especially when the market turns.

Arun D. Rajan: On the customer side of the marketplace, we continue to innovate and leverage GenAI to respond faster than ever to dynamic market conditions with the tools and capabilities we've developed. Last quarter, we shared the example of using GenAI to automatically respond to transactional truckload quote emails, which drives faster speed to market, increases our addressable demand, and reduces manual touch. Another touchpoint where we're leading is using GenAI to translate order emails and generate on-system orders. With GenAI, we've been able to reduce the time to generate an order by more than 80%, thereby enabling us to provide faster service to customers.

Robinson: On the customer side of the marketplace, we continue to innovate and leverage that AI to respond faster than ever to dynamic market conditions with the tools and capabilities we've developed.

Robinson: Last quarter, we shared the example of using Gen AI to automatically respond to transactional truckload quote emails, which drives faster speed to market increases our addressable demand and reduces manual touches.

Speaker Change: Another touch point, where were leading is using jennie I could translate order emails and generate on system orders.

Speaker Change: Whats your NII, we've been able to reduce the time to generate an order by more than 80%, thereby enabling us to provide fastener servicing customers and to effectively scale their operations when the market returns to growth.

Arun D. Rajan: Effectively scale our operations when the market returns to growth. In addition to improving the customer and carrier experience, innovations such as digital dispatch and products that leverage the power of Gen-AI are designed to improve the employee experience and improve productivity. These productivity improvements serve as a critical input into creating operating leverage.

Speaker Change: In addition to improving the customer and carrier experience innovations such as digital dispatch and products that leverage the power of Gen. AI are designed to improve the employee experience and improve productivity.

Speaker Change: These productivity improvements serve as a critical impact and to creating operating leverage.

Arun D. Rajan: We also continue to increase the rigor and discipline in our pricing and procurement efforts in Q2, resulting in improved AGP yield across the NAST and global forwarding portfolio. With continued innovation in dynamic pricing and costing, investment in contract management systems, and increasing revenue management rigor, we are responding surgically and faster than ever to dynamic market conditions. Finally, as Michael mentioned, we believe we are getting the balance of people versus tech right.

Speaker Change: We also continued to increase and rigor and discipline in our pricing and procurement efforts in Q2, resulting in improved agent P yield across the Nast and global forwarding portfolios.

Speaker Change: With continued innovation and dynamic pricing and costing investment in contract management systems, and increasing revenue management rigor.

Speaker Change: Responding surgically and faster than ever it's a dynamic market conditions.

Speaker Change: Finally, as Michael mentioned, we believe we are getting the balance of people versus tech right.

Arun D. Rajan: Getting this balance right includes the active role that our people play from a human-in-the-loop perspective to drive continuous feedback and improvements to our algorithms and Gen-AI implementation. With that, I'll turn the call over to Mike for a review of our second quarter. Thanks, Arun, and good afternoon, everyone.

Michael: Getting this bounce right includes the active role at our people play from a human in the loop perspective to drive continuous feedback and improvements of our algorithms and Shanghai implementations.

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

Mike: Thanks, Ryan and good afternoon, everyone.

Michael Paul Zechmeister: Disciplined revenue management in the face of continued soft freight market conditions resulted in second quarter total revenues of 4.5 billion dollars and adjusted gross profit, or AGP, of 687 million dollars, which was up 3% year-over-year. Driven by a 5% increase in NAST and a 3% increase in global forwarding, On a monthly basis compared to Q2 of last year, our total company AGP per business day was down Overall, Q2 AGP results reflect progress on the revenue management initiatives that were referenced earlier.

Mike: Disciplined revenue management in the face of continued soft freight market conditions resulted in second quarter total revenues of $4 5 billion and adjusted gross profit or AGP of $687 million, which was up 3% year over year, driven by a 5% increase in Nast and a three.

Mike: 3% increase in global forwarding.

Mike: On a monthly basis compared to Q2 of last year. Our total company AGP per business day was down 5% in April up 1% in May and up 15% in June overall Q2, <unk> results reflect progress on the revenue management initiatives that were referenced earlier.

Mike: <unk> the AGP per business day improvement through the quarter also reflects both seasonal increases in freight demand and easier year over year comparisons as the quarter progressed.

Michael Paul Zechmeister: The AGP per business day improvement through the quarter also reflects both seasonal increases in freight demand and easier year-over-year comparisons as the quarter progresses. Michael covered the details of our Q2 NAS performance; I'll cover the performance of our global forwarding business, where the team has had success growing the business profitably and been highly engaged with our customers to help them navigate the ongoing conflicts in the Red Sea. The transit interruptions in the Red Sea have resulted in vessel reroutings that have extended transit time. In Q2, this put a strain on global ocean capacity and created varying levels of port congestion and container shortages.

Mike: Mike will cover the details of our Q2 NAV performance I'll cover the performance of our global forwarding business, where the team has had success growing the business profitably and been highly engaged with our customers to help them navigate the ongoing conflicts in the Red Sea.

Mike: The transit interruptions in the Red Sea have resulted in vessel rerouting that have extended transit times in Q2. This put a strain on global ocean capacity and created varying levels of port congestion and container shortages.

Michael Paul Zechmeister: While the Asia to Europe trade lane has been most affected, the impact has also extended to other trade lanes as carriers adjust the geographic placement of vessel capacity based on shipping. As we mentioned on our first quarter earnings call, ocean rates had come down from the February peak as capacity was repositioned and new vessel capacity entered the market. In May and June, however, ocean rates rose again as capacity tightened.

Mike: While the Asia to Europe trade Lane has been most affected the impact is also extended to other trade lanes as carriers adjust the geographic placement of vessel capacity based on shipping demand.

Speaker Change: As we mentioned on our first quarter earnings call Ocean rates had come down from the February peak as capacity was repositioned and new vessel capacity entered the market in May and June However, ocean rates rose again as capacity tightened given our mix of contractual and transactional business the impact.

Michael Paul Zechmeister: Given our mix of contractual and transactional business, the impact of changing market rates generally takes one to two months to flow through to our profit per shipment. So, even though rates came down from the February peak, our profit per shipment held up through March and into April as we started realizing the declines in May and the first half of June. When the ocean market rose in May and June, our same one to two month lag meant we started realizing the positive impact on our profit per shipment in the second half of June and now into July.

Speaker Change: Fact of changing market rates generally takes one to two months to flow through to our profit per shipment.

Speaker Change: So even though rates came down from the February peak hour profit per shipment held up through March and into April as we started realizing the declines in may and the first half of June.

Speaker Change: When the Ocean markets Rose in May and June our same one to two months lag meant we started realizing the positive impact to our profit per shipment in the second half of June and now into July.

Michael Paul Zechmeister: While the Red Sea disruption continues without any clear timeline of when it will be resolved, ocean rates have declined slightly in July, but remained elevated compared to 2023. Our team performed well in Q2, with our ocean forwarding AGP increasing 8.6% year-over-year, driven by a 4% increase in shipments and a 4.5% increase in AGP. However, sequentially, shipments increased 6% while AGP per shipment declined 2.5%.

Speaker Change: While the Red Sea disruption continues without any clear timeline of when it will be resolved ocean rates have declined slightly in July but remained elevated compared to 2023.

Mike: Our team performed well in Q2 with our Ocean forwarding AGP, increasing eight 6% year over year, driven by a 4% increase in shipments and a four 5% increase in AGP per shipment.

Mike: Sequentially shipments increased 6%, while AGP per shipment declined two 5%.

Michael Paul Zechmeister: There are some indications that customers may be pulling forward some of their peak season ocean freight due to ongoing concerns about geopolitical issues and capacity disruptions, as well as the potential for labor issues on the East Coast ports of the United States. One measure of this is that our ocean volume per business day grew 8% sequentially in June versus May compared to a 2% sequential decline over the same period last year.

Mike: There are some indications that customers may be pulling forward some of their peak season Ocean freight due to ongoing concerns about geopolitical issues and capacity disruptions as well as the potential for labor issues on the east coast ports of the United States.

Mike: One measure of this is that our ocean volume per business day grew 8% sequentially in June versus may compared to a 2% sequential decline over the same period last year.

Michael Paul Zechmeister: Time will tell as to whether this pulls from the normal July to September peak season in Oceania. Turning now to enterprise expense, Q2 personnel expense was $361.2 million, including $9.4 million of restructuring charges related to workforce reduction.

Mike: Time will tell as to whether this pulls from the normal July to September peak season and Ocean.

Speaker Change: Turning now to enterprise expenses Q2 personnel expense was $361 2 million <unk>.

Mike: Including $9 4 million of restructuring charges related to workforce reductions excluding restructuring charges. This year and last year. Our Q2 personnel expenses were $351 8 million down $12 4 million or three 4% year over year, driven by our continued productivity.

Michael Paul Zechmeister: Excluding restructuring charges this year and last year, our Q2 personnel expenses were $351.8 million, down $12.4 million, or 3.4% year-over-year, driven by our continued productivity efforts and partially offset by higher incentive compensation. Our average Q2 headcount was down 10% compared to Q2 last year. We continue to expect our 2024 personnel expenses to be in the range of $1.4 to $1.5 billion excluding restructuring, but likely below the midpoint of that range. With that, we expect a slower pace of net headcount reductions in the second half of 2024 compared to the first half.

Mike: <unk> efforts and partially offset by higher incentive compensation.

Mike: Our average Q2 head count was down 10% compared to Q2 last year.

Mike: We continue to expect our 2020 for personnel expenses to be in the range of one four to $1 $5 billion, excluding restructuring, but likely below the midpoint of that range.

Mike: With that we expect a slower pace of net head count reductions in the second half of 2024 compared to the first half.

Michael Paul Zechmeister: Moving to SG&A, Q2 expenses were $148.1 million, including $5.7 million of restructuring charges, which were driven by reducing our office foot print. Excluding restructuring charges this year and last year, SG&A expenses were $142.4 million, down $12.2 million, or 7.9% year-over-year. The expense reduction was across several expense categories as we continue to eliminate non-value-added spending.

Mike: Moving to SG&A Q2 expenses were $148 1 million, including $5 $7 million of restructuring charges, which were driven by reducing our office footprint.

Mike: Excluding restructuring charges this year than last year, SG&A expenses were $142 $4 million down $12 2 million or seven 9% year over year. The expense reduction was across several expense categories. As we continue to eliminate non value added spending.

Michael Paul Zechmeister: We continue to expect SG&A expenses for the full year to be in the range of $575 to $625 million, excluding restructuring charges, but likely below the midpoint of that range too. SG&A also includes depreciation and amortization expense, which we still expect to be $90 to $100 million in 2024. Our effective tax rate in Q2 was 19.4% compared to 14.9% in Q2 last year and was in line with our expectations. We continue to expect our 2024 full-year effective tax rate to be in the range of 17 to 19%. In Q2, our capital expenditures were $19.3 million, down 20.6% year-over-year on more focused technology spending.

Mike: We continue to expect SG&A expenses for the full year to be in the range of $575 million to $625 million, excluding restructuring charges, but likely below the midpoint of that range too.

Mike: SG&A includes depreciation and amortization expense, which we still expect to be $90 million to $100 million in 2024.

Mike: Our effective tax rate in Q2 was 19, 4% compared to 14, 9% in Q2 last year and was in line with our expectations.

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

Mike: In Q2, our capital expenditures were $19 $3 million down 26% year over year on more focused technology spending.

Michael Paul Zechmeister: We now expect 2024 capital expenditures to be toward the lower end of the previously provided range of $85 to $95 million. Now on to the balance. We ended Q2 with approximately $925 million of liquidity, comprised of $812 million of committed funding under our credit facilities and a cash balance of $113 million.

Mike: We now expect 2020 for capital expenditures to be toward the lower end of the previous previously provided range of $85 million to $95 million.

Mike: Now onto the balance sheet we.

Mike: We ended Q2 with approximately $925 million of liquidity comprised of $812 million of committed funding under our credit facilities and a cash balance of $113 million.

Michael Paul Zechmeister: One key differentiator for Robinson is our financial strength. This allows us to continue investing and improving our capabilities, even through this prolonged freight recession. As a result, we expect to emerge stronger when the market tightens. Our debt balance at the end of Q2 was $1.6 billion, which was down $127 million from Q2 of last year.

Speaker Change: One key differentiator for Robinson is our financial strength. This allows us to continue investing in improving our capabilities even through this prolonged freight recession.

Speaker Change: As a result, we expect to emerge stronger when the market tightens.

Speaker Change: Our debt balance at the end of Q2 was $1 $6 billion, which was down $127 million from Q2 of last year.

Michael Paul Zechmeister: Our net debt to EBITDA leverage at the end of Q2 was 2.4 times, down from 2.73 times at the end of Q1, primarily driven by the performance of the business and the resulting decrease in our net debt balance and increase in our trailing 12-month As I depart Robinson for retirement, I'd just like to add that I couldn't be more proud of the accomplishments of the team, and I couldn't be more excited about the direction of the It feels terrific to be leaving the company in such great hands with a sound strategy and solid momentum in the business.

Speaker Change: Our net debt to EBITDA leverage at the end of Q2 was two four times down from 2.73 times at the end of Q1, primarily driven by the performance of the business and the resulting decrease in our net debt balance an increase in our trailing 12 months EBITDA.

Speaker Change: As I depart Robinson for retirement, I'd, just like to add that it couldnt be more proud of the accomplishments of the team and I couldnt be more excited about the direction of the company. It feels terrific to be leaving the company in such great hands with a sound strategy solid <unk> and solid momentum on the business.

Michael Paul Zechmeister: From the deployment of the new operating model to the growth potential from the market segment and vertical focus to the incredible upside of generative AI to enhance the capabilities of our industry-leading people, the future looks incredibly bright. I will miss working with the best logistics experts in the business but will be cheering for Robinson as a shareholder. Best wishes to the entire Robinson team. And with that, I'll turn it over to Damon.

Speaker Change: From the deployment of the new operating model to the growth potential from the market segment and vertical focus to the incredible upside of generative AI to enhance the capabilities of our industry, leading people the future looks incredibly bright.

Damon Lee: I will miss working with the best logistics experts in the business, but we'll be cheering for Robinson as a shareholder best wishes to the entire Robinson team and with that I'll turn it over to Damon for a few comments.

Damon Lee: Thanks, Mike, and good afternoon, everyone. I'm excited about joining CH Robinson and partnering with the rest of the senior leadership as we execute on a strong strategic plan. I'm eager to leverage my past experiences and a focus on operational excellence to drive improved results and deliver more value for Robinson shareholders. I'd also like to reiterate Dave's comments and thank Mike Zechmeister for his collaboration and partnership to ensure a seamless transition. The first three weeks of my tenure have been great, and I look forward to talking with all of you as we continue on this exciting journey. I'll turn the call back to Dave now for his final comments. Thanks, Damon.

Damon Lee: Thanks, Mike and good afternoon, everyone I'm excited about joining CH Robinson and partnering with the rest of the senior leadership team as we execute on a strong strategic plan.

Damon Lee: I'm eager to leverage my past experiences and our focus on operational excellence to drive improved results and deliver more value for Robinson shareholders.

Damon Lee: I'd also like to reiterate Dave's comments and thank my exact meister, our first collaboration and partnership to ensure a seamless transition.

Damon Lee: First three weeks of my tenure I have been great and I look forward to talking with all of you as we continue on this exciting journey.

Damon Lee: I'll turn the call back to Dave now for his final comments Dave.

David P. Bozeman: I want to commend our people for continuing to embrace the changes that we're making to deliver a higher and more consistent level of performance and for the high-quality Q2 results that they delivered in what continues to be a challenging market. As I mentioned earlier, all the changes that we're making are aimed at our North Star of generating incremental operating income and delivering higher highs and higher lows over the course of freight market cycles. We will do this by focusing on two main areas.

Dave: Thanks, Damon I want to commend our people for continuing to embrace the changes that we're making to deliver a higher and more consistent level of performance and for the high quality Q2 results that they delivered in what continues to be a challenging market.

Dave: As I mentioned earlier all the changes that we're making are aimed at our north star of generating incremental operating income and delivering higher highs and higher lows over the course of freight market cycles.

Damon Lee: We will do this by focusing on two main fronts growing market share and expanding our operating income margins.

David P. Bozeman: Growing Market Share and Expanding Our Operating Income Margin. We'll continue to grow market share by leveraging our robust capabilities to power vertical-centric solutions, by reclaiming share in targeted segments, and by expanding our addressable market through value-added services and solutions for our customers and carriers that drive new volume to our four core modes. We'll also be more intentional with our go-to-market strategy to drive additional synergies and cross-selling across our portfolio. We'll expand our operating income margins by embedding lean practices.

Damon Lee: We will continue to grow market share by leveraging our robust capabilities to power vertical centric solutions by reclaiming share in targeted segments and by expanding our addressable market through value added services and solutions for our customers and carriers to drive new volume to our four core modes.

Damon Lee: We will also be more intentional with our go to market strategy to drive additional synergies and cross selling across our portfolio.

Damon Lee: We will expand our operating income margins by embedding lean practices, removing waste and expanding our digital capabilities.

David P. Bozeman: Removing waste and expanding our digital capability. 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, and will optimize our gross profit by monitoring key input metrics and responding faster to error states and changing market conditions with countermeasures and innovative technology that improves our execution. We take action on all of these fronts.

Damon Lee: 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 well.

Damon Lee: We will optimize our gross profit by monitoring key input metrics and responding faster to aerospace and changing market conditions with countermeasures and innovative technology that improves our execution.

Damon Lee: As we take action on all of these fronts I'm excited about the work that we're doing to reinvigorate Robinson is winning culture.

David P. Bozeman: I'm excited about the work that we're doing to reinvigorate Robinson's winning culture and to instill discipline with our new operating model. We're moving with greater speed and urgency to seize opportunities and solve problems in order to win now and to be ready for the eventual freight market rebound. And we now have a plan to share more about our strategy, how we'll execute that strategy, and the resulting financial targets at a 2024 Investor Day that is scheduled for December 12th in New York City.

Damon Lee: So it's still discipline with our new operating model removing.

Damon Lee: We're moving with greater clock speed and urgency to seize opportunities and solve problems in order to win now and to be ready for the eventual freight market rebound.

Damon Lee: And we now have I plan to share more about our strategy, how we will execute that strategy and the resulting financial targets at a 2024 Investor day that is scheduled for December 12 in New York City.

David P. Bozeman: While there is a lot more work to do, 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. Together, we will win for our customers, carriers, employees, and shareholders. 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.

Damon Lee: Well, there's a lot more work to do I continue to see an opportunity for the company to reach its full potential.

Damon Lee: And create more shareholder value by improving our value proposition, increasing our market share accelerating growth.

Damon Lee: Further, reducing our structural costs and improving our efficiency operating margins and profitability.

Damon Lee: Together, we will win for our customers carriers employees and shareholders.

Speaker Change: This concludes our prepared remarks.

Damon Lee: 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 ask questions as possible. We ask that you limit yourself to one question.

Don: A reminder to ask a question. Please press star one on your telephone keypad.

Operator: As a reminder, to ask a question, please press star 1 on your telephone keypad. Your first question is from Jonathan Chappell with Evercore ISI. Please proceed. Thank you. Good afternoon.

Speaker Change: Your first question is from Jonathan Chappell with Evercore ISI. Please proceed.

David P. Bozeman: If I look at page 17 in the presentation, the first page in the appendix, where you have this elongated history of the transportation AGP margin, it's obviously taken two pretty big step-ups sequentially in the last two quarters. But when you think about the path forward on the market, it sounds like it's still pretty volatile with July weaker than June. Is this something that's kind of market independent right now, where you can see the AGP continue to move higher based on the initiatives that you put in place in the digital processes? Or, at this point, do you really need a kind of a market tailwind to help you kind of drive it higher above 16 and beyond? Hey Jonathan, it's Dave.

Jonathan B. Chappell: Thank you good afternoon.

Jonathan B. Chappell: If I look at page 17 in the presentation on the first page in the appendix. When you have this long dated history of the transportation H P margin. It's obviously taken two pretty big step up sequentially in the last two quarters. When you think about the path forward on you know the market sounds like it's still pretty volatile with July weekend. In June is this something thats kind of market.

Speaker Change: Right now where you can see the AGP continue to move higher based on the initiatives that you've put in place in the digital processes, where at this point do you really need a kind of a market tailwind to help you kind of drive it higher above 16 and beyond.

David P. Bozeman: Hey, good to hear from you. Hey, listen, I'm going to, this is Michael's first call. He's going to jump in and add some more color to this, but I really wanted to start and say, number one, happy to see Michael and the team drive the effects of the operating model, which is some of the things that you're seeing with the discipline within the business, and we expect to continue to drive that discipline.

Jonathan B. Chappell: Hey, Jonathan it's Dave good to good to hear from you.

Jonathan B. Chappell: Hey, listen I'm going to it's Michael first call. He is going to jump in and add some more color to this but I really wanted to start and say our number one.

Michael Paul Zechmeister: Happy to see Mike Wood team drive the effects of the operating model, which is some of the things that youre seeing with the discipline within the business.

Michael Paul Zechmeister: And we expect to continue to drive that that discipline.

David P. Bozeman: And then, as we said in our comments, there's more grass to cut on this, but we're off to a pretty good start on that, but we'll give you some more color around history-wise and where we're going. Yeah, thanks, Dave.

Mike: As we said on our comments there is theres more grass to cuddle on this but.

Michael: But we're off to a pretty good start on that but we will give you some more color around history wise and where we're going Michael yeah. Thanks, Dave and again, thanks for the question.

Michael Paul Zechmeister: And again, thanks for the question. You know, as we mentioned in some of our earlier comments, we're really starting to see the leverage of the tools related to our dynamic pricing and costing come to life over the last couple quarters. Certainly, the team has battled through what has been, as we mentioned, a continued, elongated freight recession. And despite that, we're starting to see the efforts come to life.

Michael: As a as we mentioned in some of our earlier comments, we're really starting to see the leverage of the tools related to our dynamic pricing and costing come to life over the last couple of quarters certainly the team has battled through what has been as we mentioned continued elongated freight recession and despite that.

Michael: We're starting to see the efforts come to come to life really when you take the ability to combine those technologically and product advancements with our operating model disciplines that we've been able to enact we're really starting to be able to respond quicker and more surgically to our customers and really meet the dynamic market conditions.

Michael Paul Zechmeister: Really, when you take the ability to combine those technological and product advancements with our operating model disciplines that we've been able to enact, we're really starting to be able to respond quicker and more surgically to our customers and really meet the dynamic market conditions more effectively. You know, as we think about how we'll continue to do that going forward, we still have opportunities to continue to improve as we implement our disciplined pricing strategy throughout the business.

Jonathan B. Chappell: Effectively.

Jonathan B. Chappell: As we think about how we'll continue to do that forward, we still have opportunities to continue to improve as we implement our disciplined pricing strategy throughout the business, but I think I'd put it more simply than that I think we're making more deliberate and more informed decisions on the freight that we pursue.

Michael Paul Zechmeister: But I think I'd put it most simply in that I think we're making more deliberate and more informed decisions about the freight that we pursue, the manner in which we pursue it, and then also, just as importantly, how we match the right carriers to that freight to create the best transaction for both parties and, obviously, an improved result for CH Robinson.

Jonathan B. Chappell: The manner in which we pursue it and then also just as importantly, how we match the right carriers to that freight to create the best transaction for both parties and obviously an improved result for C. H Robinson.

Michael Paul Zechmeister: Thank you, Mike. Thanks, Dave. Thank you. Our next question is coming from Jeff Kauffman with Vertical Research Partners. Please proceed with your question. Thank you. And thank you for taking my question. And congratulations.

Jonathan B. Chappell: Okay. Thank you Mike Thanks, Dave.

Jonathan B. Chappell: Yeah.

Speaker Change: Thank you. Our next question is coming from Jeff Kauffman with vertical Research partners. Please proceed with your question.

Michael Paul Zechmeister: Just a terrific quarter in a difficult environment. It's great to see some of these changes kicking in. Question for Michael, it's your first conference call. You know, there were comments on how capacity hasn't really come out in the brokerage space the way it normally would, with a little lenience. I'm just kind of curious, when you're out there talking to your customers, are the customer questions changing, given some of the financial strain that some of these smaller competitors of yours have been facing? And do you see any changes in the competitive dynamic of the marketplace? Hey, thanks, Jeff. A really good question.

Jeffrey Asher Kauffman: Thank you and thank you for taking my question and congratulations just terrific quarter in a difficult environment, it's great to see some of these changes kicking in.

Speaker Change: Question for Michael It's your first conference call.

Michael: You know there were comments on how capacity hasn't really come out in the brokerage space the way it normally would little leniency.

Speaker Change: I'm just kind of curious when you're out there talking to your customers is are the customer questions changing given some of the financial strain that some of these smaller competitors of yours have been facing and do you see any changes in the competitive dynamic in the marketplace.

Michael Paul Zechmeister: And I think you asked really two things, right? So what's the, what are we seeing in terms of carrier exits related to the marketplace? And then how are customers reacting to that? You know, we have seen some acceleration of carrier exits throughout Q2, but, as we said, not enough to materially impact the market. And really, we're not seeing a change, even throughout the quarter, that would start impacting us.

Speaker Change: Hey, Thanks, Jeff a really good question and I think you asked really to two things right. So what's the what.

Speaker Change: What are we seen from in terms of a carrier exits related to the marketplace and then how are customers reacting to that.

Speaker Change: We have seen some acceleration of carrier exits throughout Q2, but as we said not enough to materially impact the market and and really where we're not seeing a change even throughout the quarter that we would see that to start impacting us.

Michael Paul Zechmeister: In the near future, as we talk to customers, it's really twofold, and it's around what their view is of the health of their long-term supply chain and how they want to set that up, and whether they're really looking at more of a short term or a long term perspective. I think customers looking for a more long-term solution and a long-term supply chain solution are certainly asking, you know, what are we predicting in terms of when the market will change and when will that inflection come?

Speaker Change: In the near future as we talk to customers, it's really two fold in it and it's around what is their look at the health of their long term supply chain and how do they want to set that up and whether they are really looking at more of a short term or a long term perspective.

Speaker Change: Zinc customers looking for a more long term.

Speaker Change: Solution in long term supply chain solution are certainly asking you know what what are we predicting in terms of when the market would change and when does that inflection come and then how do we set up a supply chain solution that allows them to have a healthy.

Michael Paul Zechmeister: And then how do we set up a supply chain solution that allows them to have a healthy route guide when the market does come back? When you think about it more transactionally or in the shorter term, customers are being very aggressive, and they're continuing to challenge us to meet them, whether it's in short-term RFPs or in the transactional space, with aggressive prices. Okay, thank you very much. That's my one.

Speaker Change: Route guide when the market does come back when you think about it more transactional or in a more shorter term customers are being very aggressive and they are continuing to challenge us to meet them, whether it's in short term rfps or in the transactional space with aggressive pricing.

Jonathan B. Chappell: Yeah.

Speaker Change: Okay. Thank you very much that's my one.

Michael Paul Zechmeister: Thank you. Our next question is coming from Chris Wetherbee with Wells Fargo. Please proceed with your question. Yeah, hey, thanks. Good afternoon, guys.

Speaker Change: Thank you. Our next question is coming from Chris Wetherbee with Wells Fargo. Please proceed with your question.

David P. Bozeman: Maybe I wanted to come at the NAST business a little bit differently and think about kind of profitability through the cycle. So Dave, you talked about higher highs and higher lows. So as we've been in better freight environments, NAST has been able to generate sort of 40% plus type of operating margins. I'm just kind of curious. We obviously saw a nice step forward in the second quarter, but we're still in, I guess, an uneven freight environment. So are those the right type of measures to think about in terms of the potential of this business? Or is there any other way you can frame that?

Christian F. Wetherbee: Yeah, Hey, Thanks, Good afternoon, guys maybe.

Christian F. Wetherbee: Maybe wanted to come at the the Nast business, a little bit differently and think about kind of profitability through the cycles. So Dave you talked about higher highs and higher lows. So as we've been in better freight environment NASA has been able to generate sort of 40% plus type of operating margin. So I'm just kind of curious we obviously saw a nice step forward in the second quarter, but we're in still a I guess an uneven.

Speaker Change: Freight environment. So are those the right type of measures to think about in terms of the potential of this business or is it any other way you can frame that.

David P. Bozeman: Yeah, Chris, good to hear from you. I say this, yeah, the short answer is absolutely. And just to put some color on it, it is higher highs, higher lows.

Jonathan B. Chappell: Yes, Chris good to hear from you.

Dave: I'd say this yes. The short answer is absolutely and just to put the color on it it is higher highs higher lows and I definitely would agree with you that it's still a tough freight market out there as we stated in our comments.

David P. Bozeman: And I definitely would agree with you that it's still a tough freight market out there, as we stated in our comments. But long term, that's still the right way to look at the business. We feel really good about it, especially with the things that we're doing and enacting. In the long term, 40% for NAST, 30% for GF.

Dave: But long term that's still the right way to look at the business, we feel really good about it, especially with the things that we're doing in enacting a long term, 40% four for NASS.

Jonathan B. Chappell: 30% for for GFS, and that's that's what we still hold on to and it's just the right way to look at it.

David P. Bozeman: And that's what we still hold on to. And it's the right way to look at it. And again, we feel we've got confidence in that in what we're doing. But the market is the market right now. And we're going to continue to do the things that we're doing in the tough market right now and be prepared for this change in the market when it comes. Okay, that's helpful. Thanks very much.

Jonathan B. Chappell: Again, we feel we've got confidence about that and what we're doing what the market is the market right now.

Jonathan B. Chappell: We're going to continue to do the things that we're doing in a tough market right now and be prepared for this change in the market when it comes.

David P. Bozeman: I appreciate it. You're welcome. Thank you. Our next question is from the line of Tom Wadewitz with UBS. Please proceed with your question. Yeah, good afternoon.

Speaker Change: Okay. That's helpful. Thanks, very much appreciate it.

Speaker Change: Youre welcome.

Speaker Change: Thank you. Our next question is from the line of Tom <unk> with UBS. Please proceed with your question.

Thomas Richard Wadewitz: And yeah, I would also certainly say, you know, congratulations on the good results. How do you think about the progression? I think, Mike, you mentioned that by month and the net revenue growth was a lot stronger in June. Should we think of that as a better representation of the growth as we look at July and as we look forward? Or is there something we should be mindful of that would have made June a lot stronger?

Thomas Richard Wadewitz: Yeah, Good afternoon, and yeah, we'd also certainly say congratulations on the good results.

Tom: How do you think about the progression I think Mike you mentioned that by month and the net revenue growth was a lot stronger in June.

Speaker Change: Should we think of that as a better representation of the the growth as you look at July and as you look forward.

Speaker Change: Or is there something we should be mindful of that would've made June a lot stronger I think you mentioned little easier comp, but just some more thoughts on kind of you know that that greater strength in June and whether that gives US you know what.

Thomas Richard Wadewitz: I think you mentioned a little easier comp, but just some more thoughts on kind of that greater strength in June and whether that gives us a look forward or if we should be more cautious. Thank you. Yeah, thanks, Tom. You know, I did make a comment on AGP per day for the enterprise.

Speaker Change: Look forward are or if we should be more cautious. Thank you.

Michael Paul Zechmeister: And you're right, we were down 5% in April, up 1% in May, and then up 15% in June. Probably, I would point to three things that were helping us in that regard. Number one, obviously, our operating model is still coming into its own. And you know, I would expect that as time passes, we get better, and the performance should reflect that. We also had some seasonal elements we talked about in the last quarter.

Speaker Change: Yeah. Thanks, Tom you know I did make a comment on <unk>.

Speaker Change: Dave for the enterprise and you're right we were down 5% in April up one in May and then up 15% in June probably I would point to three things that were helping us in that regard no number one obviously our operating model is still.

Speaker Change: Coming into its own and I would expect that as time passes we get better and the performance should reflect that we also had some seasonal elements, we talked about on last quarter.

Michael Paul Zechmeister: You know, it wasn't a huge seasonal quarter, but we did see some strength on the backside of the quarter in June, particularly when you think about produce in the southern part of the United States. You know, so there's a seasonal element there too. But, of course, the comparison was year over year.

Speaker Change: It wasn't a huge seasonal quarter, but we did see some.

Speaker Change: Strength in the back side of the quarter in June, particularly when you think about produce in the southern part of the United States. So so there's a seasonal element there too but of course, the comparison was year over year and then.

Speaker Change: There were a little bit easier comps coming into.

Speaker Change: June and the end of the quarter as well so as you go forward from there the business continues I think.

Michael Paul Zechmeister: And then, you know, there were a little bit easier comps coming into June, the end of the quarter as well. So as you go forward from there, you know, the business continues, I think, you know, you see a little bit of difference going on in NAST versus GF, you know, on the ocean side of the world, you've got, It looks like there might be some pull forward of key seas in there, and we saw some additional demand, but pricing has come down a little bit too, and I think a lot of the pricing that we've seen in ocean is attributable to the issues in the Red Sea.

Speaker Change: Do you see a little bit of difference going on in Nast versus <unk>.

Speaker Change: On the ocean side of the.

Speaker Change: The world you've got.

Speaker Change:

Speaker Change: It looks like there might be some pull forward of tea season, there and we saw some additional demand, but pricing has come down a little bit too.

Speaker Change: And I think a lot of the pricing that we've seen in ocean is attributable to the to the issues in the Red Sea in.

Michael Paul Zechmeister: Presumably, over some period of time, those will right themselves, and the capacity that exists in the market will kind of stabilize, and it'll be back to a normal supply-demand dynamic. But, you know, as we've gone into the quarter, nothing significantly different, and we certainly haven't seen enough to call any definitive inflection in the market. Does the read on July look kind of similar to June?

Speaker Change: Presumably over some period of time, those will right themselves and the capacity that exists in the market will will kind of stabilize and it will be back to a normal supply demand dynamic.

Speaker Change: But as we as we've gone into the into the quarter nothing significantly different and we certainly havent seen enough to to call any definitive inflection in the marketplace.

Speaker Change: Does the read on July look kind of similar to June.

Michael Paul Zechmeister: Any thoughts on July? Yeah, you know, we've tried to get away from commenting on the first month of the quarter or specific months because, as you know, we've got to play the full quarter out, we've got to see how the quarter comes in, and we'll certainly give you all the color on the next call. Okay, thank you. Thank you. The next question is from Scott Group with Wolf Research. Please proceed with your question. Hey, thanks. Good afternoon.

Speaker Change: Any thoughts on July.

Speaker Change: Yeah, you know we've tried to get away from commenting on the first month of the quarter specific months because as you know we've got to play the full quarter out we've got to see how the quarter comes in and and we'll certainly give you all the color on the <unk>.

Speaker Change: Carl.

Carl: Okay. Thank you.

Scott H. Group: So I'm just following up there. I know there's obviously some noise in the forwarding results right now. Just directionally, did NASA see a similar trend? This is a great example of a trend in that monthly net revenue in terms of a big acceleration throughout the quarter. Separately, just the headcount overall was down 10% year over year, down another three and a half percent sequentially. How much more is there to go on headcount here? Can we get, I know you've been talking about it, but is there a lot more in terms of volume growth and headcount down 10%? Can that persist for a while? Thanks, Scott. This is Michael.

Speaker Change: Thank you. The next question is from Scott Group with Wolfe Research. Please proceed with your question.

Scott H. Group: Hey, Thanks. Good afternoon. So just following up there I know, there's obviously some noise in the forwarding results right now just Directionally did nast see a similar.

Speaker Change: Sure and in that monthly.

Speaker Change: Net revenue in terms of the big acceleration throughout the quarter and then.

Speaker Change: Separately, just the head count overall down 10% year over year down another three 5% sequentially. How much more is there to go on head count here can we can we get I know you've been talking about it but is there a lot more in terms of volume growth and head count down 10% cannot.

Speaker Change: Persist for a while.

Michael Paul Zechmeister: I'll start. You asked a direct question about NAST and our quarterly results, and we really saw a much more evened-out quarter than maybe the folks in global forwarding. Certainly, as the quarter went on, we saw, as we mentioned in our comments, muted seasonality in the business. And so while there were some events related to road checks or the holidays, and we saw some short-term upticks in spot market pricing, the team did a really nice job of managing through that and, as we mentioned, implementing our revenue management rigor and operating model.

Speaker Change: Hey, Thanks, Scott. This is Michael I'll start you asked a direct question about Nast and in our quarterly results and and we really saw a much more evened out quarter than maybe the folks in global forwarding.

Speaker Change: Certainly as the quarter went on we saw as we mentioned in our comments muted seasonality to the business and so while there were some events related to road check or the holidays and we saw some short term upticks in spot market pricing. The team did a really nice job of managing through that and as we mentioned implementing our revenue management rigor.

Speaker Change: And operating model and so I think the team did a really nice job of.

Michael Paul Zechmeister: And so I think the team did a really nice job of managing that, driving real positive results in all three months of the quarter. In terms of headcount, you know, I'll probably pass it over to Mike and maybe Arun. You know, from a NAS perspective, we continue to see the benefits of the investments we've made both in AI and our overall technology, and certainly, you know, we're confident in our efficiency metrics that we've committed to for 2024. And we believe there is still, I like the saying Dave had, there's still some more grass to cut when it comes to our ability to drive out additional operational effectiveness and efficiency.

Speaker Change: Having real positive results in all three months of the quarter in.

Speaker Change: In terms of head count.

Mike: I'll, probably pass it over to Mike and May be a room from a nast perspective, we continue to see the benefits of the investments we've made both in in AI and our overall technology and and certainly we were confident in our.

Mike: Efficiency metrics that we've committed to for 2024 and where we believe there is still I liked the same Dave had there's still some more grass to cut when it comes to our ability to drive out additional operational effectiveness and efficiency.

Michael Paul Zechmeister: Yeah, maybe an additional comment on the headcount part of your question. So we're going to continue our productivity initiatives, continue to be committed to getting work out, and therefore not needing people to do that work and really helping our people focus on the value-added things that they do. So far year-to-date, as you saw, we're down 10% headcount year-over-year, and so we've done quite a bit there. And what we've talked about and what our plan is for the back half is really a slower pace of net headcount reduction than you saw in the first half. And our guidance, you can read through our headcount into our expense guidance, and you can see that stabilization in the back half, particularly in person. Thank you, guys. I appreciate it.

Speaker Change: Yes, just maybe an additional comment on the head count.

Speaker Change: Part of your question.

Speaker Change: So we're going to continue our productivity initiatives continue to be committed to getting work out and therefore, not needing folks to do that work and really helping our folks focus on the value added things that they do.

Speaker Change: So far year to date as you saw we're down 10% head count year over year, and so we've done quite a bit there and what we've talked about and what our plan is for the back half is really a slower pace of net head count reduction that you saw in the first half and our guidance you can read through our head count into our expense guidance.

Speaker Change: And you can see that stabilization in the back half, particularly personnel.

Speaker Change: Okay. Thank you guys appreciate it.

Michael Paul Zechmeister: Thank you. Our next question is coming from Ken Hoexter with Bank of America. Please proceed with your question. Hey, great.

Kenneth Scott Hoexter: Thank you. Our next question is coming from Ken <unk> with Bank of America. Please proceed with your question.

Kenneth Scott Hoexter: Good afternoon, Dave and team. Congratulations on the new plan and the margin gains, and Mike Z, good luck as you move on. Mike, I guess just following up on that headcount commentary there, you know, we've heard a lot in the press about significant sales layoffs. Is that really changing how you're selling or how you're organizing the business? And is this, I guess now, is there a difference in terms of how much is now automated from start to finish? I don't know if you can give numbers on that.

Ken: Hey, great good afternoon, David and team congrats on the new plan and in the margin gains and Mike. Good luck as you move on Mike I guess, just following up on that that head count commentary there.

Speaker Change #107: We've heard a lot in the press about a significant sales lay offs is there.

Speaker Change: Is that kind of really changing how you are selling or how you're organizing the business and is this.

Speaker Change: I guess now is there a difference in terms of how much is now automated start to finish I don't know if you can give numbers on that and then Mike can you also talk about the market.

Michael Paul Zechmeister: And then, Mike, can you also talk about the market? The truckload you mentioned was up one and a half percent on tonnage, but prices were down only two percent. Are we starting to see that pricing leveling off? Is that kind of flattening out in terms of the market, the state of the market? Yeah, thank you again for those questions.

Mike: Truckload, you mentioned was up one 5% on tonnage pricing down only 2% or are we starting to see that pricing leveling off is that is that kind of flattening out a flattening out in terms of the market the state of the market.

Speaker Change: Yes. Thank you again for those questions.

Speaker Change: First from a sales perspective, I think it's really important and we said it earlier, we are actively growing our sales team. What we did during the quarter was really changed the methodology and the process through our operating model to make sure that we're putting the right sales process in place and doing it with the right folks with the right.

Speaker Change: Customers and so while we had some changes in how we manage that group our overall sales team throughout the quarter and for year to date and throughout the rest of the year. Our anticipation is that we're going to continue to add to that group and pursue growth opportunities, where we have those opportunities.

Michael Paul Zechmeister: You know, first from a sales perspective, I think it's really important, and we said it earlier, we are actively growing our sales team. What we did during the quarter was really change the methodology and the process through our operating model to make sure that we're putting the right sales process in place and doing it with the right folks and the right customers. And so while we had some changes in how we managed that group, our overall sales team throughout the quarter and for year to date and throughout the rest of the year, our anticipation is that we're going to continue to add to that group and pursue growth opportunities where we have those opportunities. You know, from a pricing perspective, we've said we're in an elongated freight recession. Pricing has certainly been pretty low, and it has been relatively relatively inactive for the quarter.

Speaker Change:

Speaker Change: From a pricing perspective.

Speaker Change: We've said we're in an elongated freight recession pricing has certainly been pretty low and it has been pretty relatively inactive for the quarter and and and while we think we saw some spot market.

Michael Paul Zechmeister: And while we think, you know, we saw some spot market movement during events or specific weeks during the quarter, nothing that would stick, and really nothing that would say there's a market inflection going on and that we think there's an immediate and consistent change to the market. Thanks, Mike. Thanks. Thank you. Our next question is coming from the line of Daniel Imbrough with Stevens. Please proceed with your question. Yeah, hey, good evening, guys.

Speaker Change: Movement during events or specific weeks during the quarter nothing that would stick and really nothing that would say, there's a market inflection going on and that we think there's.

Speaker Change: An immediate and consistent change to the marketplace.

Mike: Thanks, Mike.

Daniel <unk>: Thank you. Our next question is coming from the line of Daniel <unk> with Stephens. Please proceed with your question.

Daniel Imbrough: Thanks for taking our question. David, if I can follow up on that last question just about the overall state of the market. You know, we've heard anecdotes of shippers preferring maybe locking in asset-based capacity at this point in the cycle. I'm curious how you've seen that progressing into the back half.

Daniel: Yeah, Hey, good evening guys. Thanks for taking our questions.

Daniel: If I can follow up on that last question just about the overall state of the market you know we've heard anecdotes of shippers, preferring maybe locking it asset base capacity at this point in the cycle I'm curious, how you're seeing that progressing into the back half volume was up nicely in <unk>, but I think you mentioned routing depth fell in July. So curious if that's any softening in the trends.

Michael Paul Zechmeister: Volume was up nicely in 2Q, but I think you mentioned routing depth fell in July. So curious if that's any softening in the trends, and then just how you're thinking about overall spot activity and underlying demand as we head into the back half from what you're seeing. Thanks.

Speaker Change #105: And then just how you're thinking about overall spot activity in underlying demand as we head into the back half from what you're saying.

Michael Paul Zechmeister: Thanks again. A good question. You know, as Dave mentioned, the route guide, they're holding, right? We're not seeing a lot of freight fall out of those route guides and into the transactional space. And you saw that even in our own ratio as we moved from a 65-35 contractual transactional mix to a 70-30. You know, really? I think what we're seeing is customers are being aggressive in how they're planning their route guides. So far, the market, you know, has continued to be oversupplied, so we're seeing those route guides hold.

Speaker Change: Hey, Daniel this is Michael Thanks again good question.

Speaker Change: As Dave mentioned route Route guide.

Michael: They're holding right, we're not seeing a lot of freight fallout of those route guides and into the transactional space and you saw that even in our own a ratio as we move from a 65 35.

Speaker Change: Contractual transactional mix to a 70 30.

Speaker Change: Really.

Speaker Change #111: I think what we're seeing is customers are being aggressive in how they're planning their route guides so far the market.

Michael Paul Zechmeister: But really, I think it's, and we've mentioned this, it's about the long-term health of those route guides, and that's where we're going to have to lean into our operating model and revenue management rigor once the market does inflect. But as we mentioned, at least for the foreseeable future, we're not seeing any chutes that would say that we're in the middle of that right now.

Speaker Change #111: It's continued to be oversupplied. So we're seeing those route guides hold.

Speaker Change: But really I think it's and we've mentioned this it's about long term health of those route guides and that's where we're gonna have to lean into our our operating model and revenue management rigor once the market does inflect, but as we mentioned the at least for the foreseeable.

Speaker Change: Future, we were not seeing any shoots that would say that.

Speaker Change: That we're in the middle of that right now.

Brian Patrick Ossenbeck: Thanks for the call. Thank you. The next question is from Brian Ossenbeck with J.P. Morgan. Please proceed with your question. Hey, thanks.

Speaker Change: Thanks for the color.

Speaker Change #108: Thank you. The next question is from Brian Awesome back with J P. Morgan. Please proceed with your question.

Speaker Change: Okay.

Brian Patrick Ossenbeck: Appreciate you taking the question. I wanted to ask the headcount question maybe a little bit differently, maybe to Arun or Dave, but do you think you're at the point where you've decoupled headcount from volume growth? Obviously, headcount's been coming down, and volume's up. But looking beyond where you are right now, have you reached that point? Do you have line of sight to it?

Brian Patrick Ossenbeck: Hey, Thanks afternoon appreciate taking the question.

Brian Patrick Ossenbeck: Wanted to ask the question.

Speaker Change: A question, maybe a little bit differently.

Speaker Change: Maybe to ruin or Dave, but do you think you're at the point, where you've decoupled head count.

Speaker Change #103: Volume growth, obviously headcount has been coming down volumes up.

Speaker Change: Looking beyond where you are right now.

Speaker Change: Have you reached that point do you have line of sight to it because typically the model gets a bit margin squeezed on an upturn so that might help.

Brian Patrick Ossenbeck: Because typically, the model gets a bit of a margin on an upturn. So that might help. And then, David, you can give us some quick thoughts just on the portfolio, obviously, the sale of the service transportation in Europe. But what do you think – what are you and the board discussing from here on out as regards the portfolio? Thanks.

Speaker Change: And then Dave you can give us some quick thoughts just on portfolio, obviously, the self service.

Dave: Surface transportation in Europe, but what do you think.

Speaker Change #123: Where do you and the board discussing from here on out as regards to the portfolio. Thanks.

Speaker Change: Yeah.

David P. Bozeman: Thanks a lot for the question. I'll go ahead and start and answer your tech question and productivity. So as it relates to productivity, you know, our tech investments are very well lined up. We've delivered 17 percent productivity improvements in 23, another 15 percent targeted for this year.

Dave: Thanks, a lot for the question I'll go and start and answer your question in productivity.

Dave: So as it relates to productivity.

Speaker Change #115: Our tech investments are very well lined up we've delivered 17% productivity improvements in 'twenty, three and another 15% targeted for this year.

Arun D. Rajan: Combined, those investments give us very high confidence that we've decoupled headcount and volume growth. You know, in terms of our continued investments, we think there's still opportunity, and we will continue to go after that opportunity in 24 and 25. But we feel very confident with our investments and the takeout as it relates to touches, which is the most important measure in that context.

Speaker Change: Bind those investments give us very high confidence that we have decoupled head count and volume growth.

Speaker Change: In terms of our continued investments we think there's still opportunity and we will continue to do.

Speaker Change: And go after that opportunity in 'twenty, four and 'twenty five.

Speaker Change: But we feel very confident with our investments and and that and.

Speaker Change: And the takeout as it relates to touches which is the most important measure in that context.

David P. Bozeman: Yeah, Brian, I think on the other part of your question. First of all, thanks for the question. On the portfolio, if you recall, one of the things in my diagnosis is to really look at the company under the auspices of the four Ps: People, Product, Process, and Portfolio.

Speaker Change: Yes, Brian I think on the other part of your question.

Speaker Change #121: First of all thanks for the question.

Speaker Change: On the portfolio. If you recall one of the things that my diagnosis is to really look at the company under.

Brian: You asked with the four p's people product process and portfolio.

David P. Bozeman: And in doing that diagnosis, that's actually how we executed on it, to really look and drive for focus. We told you guys that we were going to be fit, fast, and focused. And this is really just driving focus within the portfolio, and that focus is on our four core modes. And we're getting to what we do well, and that is truckload, LTL, ocean, and air. This allows us to really drive that focus for the company going forward. And that's what you're seeing in that. So I think that was the essence of it.

Speaker Change: And in doing that that diagnosis.

Speaker Change: FX Lee how we executed on it is to really look and drive for focus we told you guys to where it would be fit fast focus.

Speaker Change: This is really just driving focus within the portfolio.

Speaker Change: That focuses on our four core modes.

Speaker Change: We're getting to what we do well and that is truckload L T O Ocean and air.

Speaker Change: This allows us to really drive that that focus for the company going forward and that's what you're seeing in that so I think that was the essence of the question yes.

David P. Bozeman: Yeah, maybe I'll just add a couple more points on that, the sale of EST, since you asked about it. But, you know, over time, we hadn't proven that we could scale or be consistently profitable when you consider covering the portion of allocated corporate overhead that goes to the business on EST, which is one of the reasons for the sale. And, you know, secondly, I would just make a couple of comments about the size of the business.

Speaker Change #113: Yeah, maybe I'll just add a couple more points.

Speaker Change #116: Points on that the sale of ESG since you asked about it but.

Speaker Change #119: Over time, we haven't proven that we could scale or be consistently profitable when you consider covering portion of allocated corporate overhead that goes to the business.

Speaker Change: On ESG, which is one of the reasons for the sale and.

Speaker Change: Secondly, I would just make a couple of comments about the size of the business.

Speaker Change #101: No that <unk> had a minor impact on our enterprise results and just to put some numbers to that.

David P. Bozeman: And you know, that EST had a minor impact on our enterprise results. And just to put some numbers to that, it, you know, in Q2, it was about 2% of our enterprise AGP. And, you know, it's in the other all other segment; it's the smallest business unit within that other all other segment.

Speaker Change: In Q2, it was about 2% of our enterprise AGP.

Speaker Change: And.

Speaker Change: It's in the other all other segment, it's our smallest business unit within that all other segment.

Michael Paul Zechmeister: Great. That's all very helpful. Thanks, guys. Thank you. Our next question is from Christopher Kuhn with Benchmark Company. Please proceed with your question.

Speaker Change #102: Great. That's all very helpful. Thanks, guys.

Speaker Change #117: Thank you. Our next question is from Christopher Combe with Benchmark Company. Please proceed with your question.

Christopher Glen Kuhn: Thanks for taking my question. Dave, can you maybe just again talk about the incentive compensation structure? Has that changed under the new model? And what should we think about going forward when the freight market starts to improve? Yeah, hey, Christopher. Good question.

Christopher Combe: Yeah, Hi, good afternoon. Thanks for taking my question, Dave can you maybe just again talk about the incentive compensation structure has that change under the new model and how should we think about going forward when sort of the freight market starts to improve.

David P. Bozeman: Yeah, the short answer is, yeah, it has changed, but I would call it modified as part of the way that we're operating, and I will tell you that we will continue to tweak our operations to make sure that we're driving and doing the things that we're getting from an efficiency perspective. Right now, I would say we feel really good about how we've got that lined up on our overall incentives. And really, if you think about it, I don't look at it as if, hey, when the market changes, then your incentive has to change.

Dave: Yeah, Hey, Christopher Good question Yeah.

Dave: The short answer is yes, it has changed but I would call it modified as part of our the way that we're operating in.

Christopher Combe: And I would tell you that we will continue to tweak.

Christopher Combe: Our operations.

Christopher Combe: To make sure that we're driving and doing the things that we're getting from an efficiency perspective.

Christopher Combe: Right now I would say, we feel really good about how we've got that lined up on on our overall incentives.

Christopher Combe: And really if you think about it we don't you know I don't look at it as if hey, when the market changes and then your incentive has to change you really should be fixing those things now which is what we're doing as part of the operating model. So we feel pretty good about the elements.

David P. Bozeman: You really should be fixing those things now, which is what we're doing as part of the operating model. So we feel pretty good about the elements of the business that we're doing now, so when the market inflects, we're already set and ready to go. And so when it comes to the alignment of the organization, we feel pretty good. That doesn't say that we won't continue to tweak some things if we see it, but that's discovery, and that's part of the discipline of the operating model.

Christopher Combe: The business that we're doing now that when the market and flex that were already set and ready to go and so when it comes to the alignment of the organization, we feel pretty good that that doesn't say that we won't continue to tweak some things if we see it but thats discovery and that's part of the.

Christopher Combe: Splitting out the operating model, Michael anything you would add to that.

David P. Bozeman: Michael, anything you would add to that? No, and I think, through the work that Arun mentioned, our ability to disconnect volume growth from headcount growth really gives us that flexibility that, from a leader's perspective, I'm hoping that our incentive compensation does increase with the return of the market, and we get an opportunity to reward our team, who, obviously, we think are the best people in the industry, but we've done it in a way that allows us to continue to grow operating performance. We've seen leverage throughout each part of the cycle.

Michael: No I think through.

Michael: Through the work that our Roone mentioned, you know our ability to two.

Michael: Disconnect volume growth from head count growth really gives us that flexibility that from from our leaders perspective, I'm, hoping that our incentive compensation does increase with the return to the market and we get an opportunity to reward our team of who you know obviously, we think are the best people in the industry, but we've done it in a way that allows us.

Christopher Combe: To continue to grow operating leverage throughout the throughout each part of the cycle yes.

Michael Paul Zechmeister: Yeah, and just to put a period on that, I mean, at the end of the day, all of that is going to support our two key themes. And that is, you know, growing market share and expanding margins. That's, ultimately, what all of this is setting up to do. And I think what you're seeing is some of that operational discipline.

Christopher Combe: And just to put a period on that I mean at the end of the day all of that is going to support.

David P. Bozeman: And we've got a lot more to go and do, so that's what we're going to go out and do. That's helpful.

Christopher Combe: Our two key themes and that is growing market share and expanding margins.

Christopher Combe: Ultimately what all of this is setting up to do and I think what Youre seeing is some of that operational discipline and we've got a lot more to go and do and that's what we're going to go out and do.

Speaker Change: That's helpful. Thank you very much.

Christopher Glen Kuhn: Thank you very much. Thank you. Our next question is from Stephanie Moore with Jeffreys. Please proceed with your question. Hi, good afternoon. Thank you. First question is more of a follow-up to just the kind of questions that kind of the last couple on AGP. If you could just talk a little bit, it would be helpful to know just how NAST AGP typically looks 2Q to 3Q in this environment. I know that's very challenging given the environment we're in, but any kind of typical color would be helpful just to kind of round out the really strong performance in 2Q and then, you know, kind of our thoughts going into 3Q.

Stephanie Lynn Benjamin Moore: Thank you. Our next question is from Stephanie more with Jefferies. Please proceed with your question.

Stephanie Lynn Benjamin Moore: And then secondly, more strategic question, with the sales, the EFT business, we'd love to get your thoughts on an appetite to explore maybe other strategic sales of other businesses within the enterprise. Thanks. Sure, Stephanie, and thanks again for the questions. I'll start and then hand it over to Dave. From a NAS perspective, I think I'd point you back to the comments we made about the CAS shipment index. And, you know, normally we do see a slight decline from Q2 to Q3 from a seasonality perspective.

Stephanie Lynn Benjamin Moore: Hi, good afternoon. Thank you.

Speaker Change:

Stephanie Lynn Benjamin Moore: The first.

Stephanie Lynn Benjamin Moore: The question is more of a follow up I'm just kind of the question is that you tend to the last couple on an H M P.

Speaker Change #106: If you could just talk a little bit if there would be helpful. On just how vast AGP type of thing lots Kincaid. Thank you in this environment I know that.

Speaker Change #112: Very challenging given the environment, we're in but any kind of typical call. It would be helpful. Just to kind of round out.

Christopher Combe: That really strong performance and to kill and then you know kind of our.

Speaker Change: Thoughts.

Speaker Change #122: Thank you and then secondly, and more strategic question.

Speaker Change: With the sale, yes, he business wed love to get your thoughts on appetite to explore maybe other strategic sales of.

Speaker Change: Other businesses within the enterprise.

Dave: Sure Stephanie and thanks again for the questions I'll start and then hand it over to Dave.

Dave: From a nast perspective, I think I'd point, you back to the comments, we made about the Cas shipment index and normally we do see a slight decline from Q2 to Q3 from a seasonality perspective, but overall I'd say.

Stephanie Lynn Benjamin Moore: But overall, I'd say, you know, we've seen muted seasonality throughout Q2. We're continuing to see that, or it's, you know, really hard to say whether how far that will head into Q3. And then, you know, as Mike mentioned, it's pretty rare that the first month of the quarter gives a great predictor.

Dave: We've seen muted seasonality throughout Q2.

Dave: We're continuing to see that or.

Dave: Or it's really hard to say, whether how far that will head into Q3, and then as Mike mentioned, it's pretty rare that the first month of the quarter gives a great predictor and so we really want to comment on it much further, but I'll I'll hand, it over to Dave to talk about the Europe question.

Michael Paul Zechmeister: And so we really won't comment on it much further. But I'll hand it over to Dave to talk about the Europe question. Yeah.

David P. Bozeman: Hey, Stephanie, good to hear from you. Just to, again, look at our portfolio. We're going to always look at our portfolio, I mean, like any company would do, but again, we feel really good about where we are. We like our four core modes, truckload, LTL, ocean, and air. We feel good about those businesses, feel good about what they're doing, and, more importantly, where they're going to go and continue

Dave: Hey, Stephanie good to hear from you just to again look at portfolio.

Dave: We're going to always look at our portfolio I mean like any company would do but again, we feel really good about where we are we like our four core modes truckload L T O Ocean and air.

Dave: Good about those businesses feel good about what theyre doing and more.

Dave: More importantly, where theyre going to go and continue to go so right now I would say what you saw was.

David P. Bozeman: So, right now, I would say what you saw was something that we were doing to drive focus, and Mike gave some color on a little bit of the technicalities of the EST business, but that's just, that's the step we took for that, and I think that moves us closer to those four core modes, and right now, that's what we feel pretty good about. Thank you, guys. Thank you. That does conclude our question and answer session.

Dave: It's something that we were doing to drive focus and Mike gave color on a little bit of the technicalities of the ESP business, but.

Dave: But that's just that's the step we took for that and I think that moves us closer to those four core modes and right now that's what we feel pretty good about.

Speaker Change #110: Thank you guys appreciate it.

David P. Bozeman: I'll now pass the floor back over to Mr. Ives for closing remarks. That concludes today's earnings call. Thank you for joining us today and we look forward to talking to you again. Have a great evening. Thank you, ladies and gentlemen. This does conclude today's event. We thank you for your participation. You may disconnect your lines at this time. BF-WATCH TV 2021

Mr. <unk>: Thank you that does conclude our question and answer session I'll now pass the floor back over to Mr. <unk> for closing remarks.

Mr. <unk>: That concludes today's earnings call. Thank you for joining us today, and we look forward to talking to you again have a great evening.

Mr. <unk>: Okay.

Speaker Change #118: Thank you ladies and gentlemen, this does conclude todays defense. We thank you for your participation you may disconnect your lines at this time.

Mr. <unk>:

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Mr. <unk>: Okay.

Mr. <unk>: No.

Mr. <unk>: [music].