Q4 2024 CH Robinson Worldwide Inc Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2024 conference call. At this time, all participants are in a listen-only mode.
Speaker Change: 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 0. As a reminder, this conference is being recorded Wednesday, January 29, 2025.
Speaker Change: I would now like to turn the conference over to Chuck Ives, Senior Director of Investment Relations.
Chuck Ives: Thank you, Shamali, and good afternoon, everyone. On the call with me today is Dave Bozeman, our President and Chief Executive Officer, Michael Castagnetto, our President of North American Surface Transportation, Arun Rajan, our Chief Strategy and Innovation Officer, and Damon Lee, our Chief Financial Officer.
Speaker Change: I'd like to remind you that our remarks today may contain forward-looking statements.
Speaker Change: Slide 2 in today's presentation lists factors that could cause our actual results to differ from management's expectations.
Speaker Change: Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we'll let you know which slide we're referencing.
Speaker Change: Today's remarks also contain certain non-GAP measures, and reconciliations of those measures to GAP measures are included in the presentation.
And with that, I'll turn the call over to Dave.
Dave Bozeman: Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today.
Speaker Change: I'd first like to acknowledge the challenges that many people are facing due to the severe weather and natural disasters in certain regions of the country.
Speaker Change: including the recent wildfires that damaged and destroyed many homes and businesses in the Los Angeles area.
Our thoughts are with everyone who has been impacted.
Speaker Change: and we extend our gratitude to the first responders who worked tirelessly to keep people safe.
Speaker Change: I'm proud of the support that our company and our employees provided to help those in need as well as our customers.
Copyright OSHO is a registered Trademark of OSHO International Foundation
Turn it to our fourth quarter.
Speaker Change: We've talked extensively over the past year about our new Robinson Operating Model and the discipline execution that the model is enabling, as well as how we're leveraging our industry-leading talent and technology to raise the bar in logistics.
The benefits of these efforts were never more evident.
Speaker Change: and what continues to be a historically prolonged freight recession with market growth in 2024 that did not materialize as had been projected.
The difference in our execution versus last year is stark.
Speaker Change: Our people are embracing the discipline needed to generate higher highs and higher lows across market cycles.
Speaker Change: resulting in a higher quality of volume, greater productivity, and expansion of our gross profit and operating profit margins.
Speaker Change: In a trucking environment, where the cost of purchase transportation increased in Q4 due to a decline in industry capacity,
Speaker Change: Our dynamic costing and pricing tools, our revenue management practices, and our cost-of-hire advantage
Speaker Change: enabled us to provide greater value to our customers and at the same time improve our NAS gross margin both year-over-year and sequentially.
Speaker Change: In our global forwarding business, the team has debunked the thesis that Robinson couldn't continue to improve productivity when volumes are growing.
Speaker Change: Throughout 2024, I've been impressed with and highly appreciative of the team as they continue to be nimble and highly engaged with our customers to help them navigate various market disruptions and to provide differentiated service and solutions.
Speaker Change: As a result, our ocean and air shipments grew each quarter on a year-over-year basis, and each grew more than 5% for the full year.
Speaker Change: Through improvements in process standardization and automation and embracing the rigor of our operating model, the forwarding team decoupled headcount growth from volume growth.
Speaker Change: reduce their average headcount for the year more than 10% and achieve productivity improvement of greater than 15% for the full year.
Arun Panwar: Thank you for watching. Please subscribe to my channel. I'm your host, Arun Panwar I'll see you in the next video.
Speaker Change: Over the two-year period of 23 and 24, we delivered compounded productivity growth of 30% or more in both global forwarding and NAST.
Speaker Change: And as we said at our Investor Day in December, we view our productivity as evergreen improvements that we do not expect to get back.
Speaker Change: Enabled by the operating model disciplines and tools that are being applied across our company, we expect to further advance our productivity as we grow our businesses, including both NAS and global forwarding.
Speaker Change: The productivity improvements have lowered our cost to serve and increased our operating leverage.
Speaker Change: combined with our expanded gross margins this resulted in a 79% year-over-year increase in our enterprises Q4 adjusted income from operations
Thank you. Thank you.
Speaker Change: I want to thank our people, one of our greatest competitive advantages.
Speaker Change: for their relentless efforts to embrace our new operating model and execute in a fit, fast, and focused way as we keep pushing the bar higher on exceptional service to our customers and carriers and on financial performance across market cycles.
Speaker Change: Our new operating model has changed how we discover and inspect root cause issues and quickly implement countermeasures to improve the level of our operational execution.
Speaker Change: The reliability of our operating reviews continues to increase as we leverage our data-rich environment to inform our decision-making and enhance our competitive differentiation.
Speaker Change: This is showing up in improvements such as more disciplined pricing and better decisions on the volume that we're seeking.
Speaker Change: 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 the accountability that the operating model demands is embraced deeper in the organization.
Speaker Change: I'm confident in the team's ability to drive a higher and more consistent level of discipline in our operational execution.
Speaker Change: As freight markets continue to fluctuate due to seasonal, cyclical, and geopolitical factors,
We continue to remain focused on what we can control.
Speaker Change: including deploying our operating model and lean principles across the company.
providing best-in-class service to our customers and carriers [inaudible]
gaining profitable share in targeted market segments.
Speaker Change: We also continue to focus on ensuring that we'll be ready for the eventual freight market rebound.
with a disciplined operating model that responsibly grows market share.
Further decouples head count growth from volume growth.
drives additional operating leverage and generates incremental operating income.
Speaker Change: I'll turn it over to Michael now to provide more details on our NAS results.
For more information, visit www.fema.gov
Thanks, Dave, and good afternoon, everyone.
Speaker Change: In Q4, we delivered further optimization of our NAS volume, our gross profit margin, and our adjusted gross profit per shipment, resulting in a 40% year-over-year increase in our adjusted operating income.
Thank you. Thank you.
Speaker Change: From a volume standpoint, the market continues to be in a prolonged freight recession, as Dave mentioned.
Speaker Change: The Cast Freight Shipment Index in Q4 was down 3.2% year-over-year and down 4.8% sequentially.
Speaker Change: and it was the lowest Q4 reading the industry has seen in the last 15 years.
Speaker Change: At the same time, the truckload line haul cost per mile, excluding fuel surcharges, increased due to a decline in industry capacity.
Speaker Change: Our resilient team of freight experts responded to the challenging freight environment by improving the quality of our volume.
Speaker Change: with pricing discipline and a cost of hire advantage delivered by our procurement teams and the growing usage of our digital brokerage capabilities.
Speaker Change: All of this led to an improvement in the AGP yield within both our transactional and our contractual truckload business and a hundred and seventy basis point year-over-year improvement in our NAST gross margin.
The End
Speaker Change: Supported by our operating model and armed with innovative tools, our team also delivered a sequential improvement in NAS gross margin and truckload AGP dollars per shipment.
despite the rising cost of purchase transportation.
Thank you.
Speaker Change: From a volume perspective, our total NAS volume declined approximately 1% year-over-year, outpacing the index for the 7th consecutive quarter.
Speaker Change: This included a 2.5% increase in LTL volume and a 6.5% decrease in truckload volume.
Speaker Change: Our team is continuously testing the best combination of volume and margin to improve our earnings.
Speaker Change: We know we have the optionality to increase our volume when the conditions are right, and we are ready to pivot when it makes sense to do so. But we're going to maintain our discipline.
Speaker Change: From a market balance perspective we continue to be in a drawn-out stage of capacity over supply Although carrier attrition is occurring and moving toward better balance each quarter
Thank you.
Speaker Change: Due to a seasonal declining capacity, the dry van load to truck ratio and spot rates experienced some upward pressure during the holiday season and the subsequent winter storms similar to last year.
Speaker Change: But the load-to-truck ratio and spot rates are expected to return to pre-holiday levels once the storms abate.
Speaker Change: What stands out is that our execution is markedly different than last December and January.
Speaker Change: as we're making better decisions on the optimal freight for us and making better use of our proprietary digital capabilities.
Speaker Change: In our LTL business, the 2.5% year-over-year increase in our Q4 shipments was driven by strength across several of our LTL services.
Speaker Change: By leveraging our vast access to capacity, our broad range of LTL services and solutions, and our high level of customer service, our LTL team continues to onboard a solid pipeline of new business and build on our existing LTL business that exceeds three billion dollars in annual revenue.
Thank you for tuning in. We'll see you next time.
Speaker Change: Looking ahead to Q1, it is typically a seasonally weaker quarter compared to Q4.
Speaker Change: with the 10-year average of the C.A.S.S. Freight Shipment Index reflecting a 2.5 percent sequential volume decline from Q4 to Q1.
Thank you.
Speaker Change: As Dave said, regardless of market conditions, we remain focused on what we can control.
Speaker Change: Our people and their unmatched expertise enable us to deliver exceptional service and greater value to our customers and carriers.
Speaker Change: In line with a disciplined and focused approach to capture growth opportunities in targeted customer segments, such as small and medium businesses, we have invested in our sales organization and we will continue to deliver industry leading solutions to customers and carriers.
Thank you very much.
Speaker Change: As recently announced, one of those solutions is the introduction of C.H. Robinson Financial.
Speaker Change: An innovative digital payment solution for carriers that is aimed at setting a new standard of speed and efficiency unmatched by any other freight provider. It marks a significant leap forward in fostering financial stability and streamlining operations for carriers.
Thank you. Thank you.
Speaker Change: As Dave called out earlier, I also want to take a moment to thank the NAS team for their incredible work in 2024.
Speaker Change: Our performance and improvements throughout the year reflect their commitment to our customers, carriers, and each other.
Speaker Change: Through their continued engagement with the C.H. Robinson Operating Model, our people are delivering improved results in a very difficult marketplace, and I am proud to lead this team.
Thank you very much. Thank you.
Arun Panwar: I'll turn it over to Arun now to provide an update on the innovation we're delivering to strengthen our customer and carrier experience and improve our AGP yield and operating leverage.
Speaker Change: Thanks Michael and good afternoon everyone. As I mentioned at our Investor Day in December, CH Robinson is in prime position to disrupt from within to lead the industry forward in a way that others cannot match.
Speaker Change: The innovations that we bring to the industry and our customer supply chains, such as automation powered by Gen-AI, have a market-wide impact due to our size and scale.
Speaker Change: and we are not just talking about doing this. We are already doing it for thousands of global customers.
Speaker Change: As an example, with our proprietary technology that reads, classifies, and responds to incoming emails, we've been able to automate more than 10,000 transactions per day.
Speaker Change: This automation across the quote-to-cash life cycle of an order, whether it be quoting, order entry, load tenders, appointment scheduling, or other manual tasks, enables us to reduce our response times and provide a better and more uniform experience for our customers and carriers.
Speaker Change: It also creates business model scalability, thereby enabling us to decouple headcount growth from volume growth and to create greater operating leverage.
Thank you.
Speaker Change: In the fourth quarter, as throughout 2024, we continue to scale our process innovations at our use of Gen-AI.
Speaker Change: After utilizing GenAI to automate orders that are tendered via email, the automation of our order tenders increased 1150 basis points compared to Q4 of last year and 440 basis points sequentially.
and Michael Zechmeister.
Speaker Change: And while the automation of this process has now reached nearly 90%, the other points in the order life cycle have more runway for improvement.
Thank you. Thank you.
Thank you very much.
Speaker Change: Increased automation in our order entry process and other points in the order lifecycle enabled us to increase our NAS and global forwarding shipments per person per day by more than 30% over the two-year period of 2023 and 2024.
Speaker Change: and although our productivity improvements won't continue to compound at these levels, we expect to continue increasing our productivity in 2025 and beyond to create further operating leverage.
Speaker Change: We also continue to increase the rigor and discipline in our pricing and procurement efforts, resulting in improved AGP yield across our portfolio.
Speaker Change: With continued innovation in our digital brokerage and dynamic pricing and costing, we're responding surgically and faster than ever to dynamic market conditions by performing more frequent price discovery and enhancing the quality of the pricing that we deliver.
Thank you.
Speaker Change: Along with our operating model, this was a major contributor to the year-over-year improvement that we achieved during the seasonal market tightness and throughout 2024.
Thank you. Thank you.
Speaker Change: But, as I also said at our Investor Day, a digital-only approach has proven to be ineffective in the logistics industry.
Speaker Change: due to the level of complexity and variation in freight characteristics that necessitate human expertise.
Speaker Change: The active role that our people play from a human-in-the-loop perspective leverages their deep domain expertise and drives feedback to our algorithms on a regular basis in the form of expert market adjustments.
Speaker Change: and through our revenue management discipline, our teams are armed with intelligence on targeted countermeasures that they can take to implement a disciplined pricing strategy based on individual customer value propositions.
Speaker Change: Ultimately, we are innovating and disrupting from within to deliver on three items that are key to our strategy.
Speaker Change: transforming the customer and carrier experience to drive growth, delivering business model scalability, and driving gross margin and operating margin expansion.
Speaker Change: With that, I'll turn the call over to Damon for review of our fourth quarter results.
Thanks, Arun, and good afternoon, everyone.
Damon Lee: As covered by Dave and the team, we delivered significant year-over-year improvement in operating income in Q4.
Damon Lee: driven by an increase in AGP while reducing cost through our operational discipline and productivity initiatives and thereby driving higher operating leverage.
Thank you very much.
Damon Lee: In the face of continued soft market volume and rising spot cost due to declining capacity,
Damon Lee: Disciplined procurement of capacity and revenue management improved the quality of our volume and our AGP which was up 66 million or 10.7 percent year-over-year.
Damon Lee: driven by a 25.6% increase in global forwarding and a 6.2% increase in NASD.
Damon Lee: On a monthly basis, compared to Q4 of last year, our total company AGP per business day was up 9% in October, up 6% in November, and up 12% in December.
Thank you. Thank you.
Damon Lee: From an expense standpoint, our total operating expenses, excluding restructuring charges, declined $15.3 million year-over-year.
Damon Lee: Q4 personnel expenses were $354.4 million, including $3.7 million of restructuring charges related to workforce reductions.
Damon Lee: Excluding restructuring charges in the current and prior year, our Q4 personnel expenses were $350.6 million, down $12.5 million due to our continued productivity and cost optimization efforts.
Damon Lee: and, despite an increase, an incentive compensation related to our improved financial results.
Damon Lee: Our average Q4 headcount was down 9.5% compared to Q4 of last year.
Thank you.
Damon Lee: Moving to SG&A, Q4 expenses were $146.4 million, including a $12.6 million decrease in the loss related to the planned divestiture of our European Surface Transportation business.
Damon Lee: and $9.5 billion of other restructuring charges primarily related to reducing our facility's footprint.
Damon Lee: Excluding these, SG&A expenses were $149.6 million, down $2.7 million year-over-year, with the expense reduction across several expense categories.
Thank you. Thank you.
Damon Lee: Turning to our 2025 Annual Operating Expense Guidance, we expect our personnel expenses to be $1.375 to $1.475 billion.
Damon Lee: This includes some headcount decline, including those related to the planned divestiture of our Europe surface transportation business.
Damon Lee: and driven by continued productivity improvements partially offset by investments in our team as we reward the talented people that fuel our progress.
Thank you.
Thank you very much.
Speaker Change: We expect 2025 SG&A expenses to be $575-$625 million, including depreciation and amortization of $95-$105 million.
although most of our SG&A expenses are subject to inflation.
Speaker Change: We expect continued cost improvements to partially offset the inflationary impact.
Thank you.
Speaker Change: Shifting back to Q4, our effective tax rate for the quarter, excluding the tax impact of restructuring charges, was 12.4 percent, resulting in a full year tax rate of 18.7 percent.
Speaker Change: We expect our 2025 full-year effective tax rate to be in the range of 18 to 20 percent.
Thank you.
Speaker Change: Our capital expenditures in Q4 were $15.2 million, bringing our 2024 total to $74.3 million.
Thank you. Thank you.
Speaker Change: From a balance sheet perspective, we ended Q4 with approximately $1.2 billion of liquidity, comprised of $1.04 billion of committed funding under our credit facilities and a cash balance of $146 million.
Speaker Change: Our financial strength continues to be a key differentiator in our industry as it enables us to continue investing and improving our capabilities.
Thank you.
Speaker Change: Our debt balance at the end of Q4 was 1.38 billion and our net debt to EBITDA leverage at the end of Q4 was 1.61 times down from 2.08 times at the end of Q3.
Speaker Change: This was primarily driven by the improved performance of the business and the resulting increase in our trailing 12-month EBITDA, as well as a decrease in our net debt balance.
Thank you. Thank you.
Speaker Change: Overall, our Q4 financial results are a testament to our disciplined execution and our focus on profitable growth.
and I am optimistic about our runway for further improvement.
Dave Bozeman: With that, I'll turn the call back to Dave for his final comments.
Thank you. Thank you.
Thanks, Damon.
Speaker Change: As I reflect on the noteworthy progress that we made in 2024, I'd like to thank the Robinson team.
Dave Bozeman: for all the work they've put in to get to this point.
I don't take their efforts and dedication for granted.
Dave Bozeman: and I commend them for helping us get more fit, fast, and focused, and for embracing the discipline that the new operating model demands.
Dave Bozeman: Our Improved Execution at the Bottom of the Freight Cycle is Delivering Improved Financial Performance.
Dave Bozeman: We're making better and faster decisions on capturing the right freight at the right price to deliver a higher quality of volume.
Dave Bozeman: I believe the disciplines and practices that we have implemented at Robinson can endure through a prolonged freight recession.
Dave Bozeman: through a market inflection and through any part of the freight cycle.
Dave Bozeman: As I've mentioned during the past year and at our Investor Day in December,
Dave Bozeman: All the changes we're making are aimed at our North Star of generating incremental operating income by focusing on growing market share and expanding our gross and operating margins.
Dave Bozeman: with countermeasures and innovative technology that improves our execution, such as our dynamic costing and pricing tools and our digital brokerage capabilities.
Dave Bozeman: And we're improving our operating leverage and operating income margins by embedding lean practices.
removing waste, and expanding our digital capabilities.
Dave Bozeman: such as leading the logistics industry on implementation of the game-changing capabilities of Gen-AI.
Dave Bozeman: We are arming our people with better tools and moving with greater clock speed and urgency.
Dave Bozeman: to seize opportunities and solve problems in order to win now and to be ready for the eventual freight market rebound.
Dave Bozeman: On my first earnings call in August of 2023, I said that I looked forward to leading this great company to new heights and sharing our progress with all of you along our journey.
Dave Bozeman: While there's still more grass to cut, I believe we're on the right path.
Dave Bozeman: I'm pleased with the progress we've made on evolving our strategy and improving our execution by instilling discipline with our new operating model.
This concludes our prepared remarks.
Dave Bozeman: I'll turn it back to the operator now for the Q&A portion of the call.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.
Dave Bozeman: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the start keys.
One moment please while we poll for questions.
Speaker Change: Our first question comes from the line of Chris Weatherby with Wells Fargo. Please proceed with your question.
Thank you very much. Thank you.
Speaker Change: Good afternoon guys. I guess I wanted to kind of just make sure that I understood sort of the approach that you're taking to the market as it stands today. So at the Investor Day, you outlined gross margin opportunities, also some productivity opportunities on operating margin expansion.
Speaker Change: And I think while you outperform sort of the market from a volume standpoint in NAS, I guess TL was down sort of in that six and a half percent range. So I guess I just want to make sure I, you know, kind of get some clarity on how do you think about those separate opportunities of the gross profit margins and then ultimately the operating margins.
Speaker Change: as we're in this type of market, so I guess how should we expect you to try to balance those priorities, particularly as we turn over into 1Q and 2Q, where maybe we're seeing some recovery, maybe we're not, it's still a little bit unclear.
Speaker Change: Yeah, hey Chris, this is Dave. Good to hear from you and good to see you at Investor Day. A number of things in what you said there, it certainly still is a very tough market out there for us, which is why I'm...
Speaker Change: I'm really proud of the team and how they're really navigating the waters here within NAST.
Speaker Change: I'm going to have Michael go a little bit deeper into the team and where you're getting at and then we can also circle back to it as well when he's done it, we don't double click enough on it. But Michael, let's go a little bit further on that one. Yeah, thanks, Chris. I think you called out...
Speaker Change: Really what we're trying to make sure we accomplish, which is the quality of volume that we
Manage and Execute for our customers and carriers.
Speaker Change: And Q4 continued to be a very competitive marketplace where demand is just not where the market needs it to be. And with that in mind, we're prioritizing making sure that we haul the right freight, that we deliver a very high level of service.
and through the tools that we've implemented.
Speaker Change: You know, we were able to expand our gross margins in a rising cost market, which was a challenge we really set out for ourselves during.
Speaker Change: some of the work you saw us talk about at Investor Day.
Speaker Change: And so really, to Dave's point, proud of the work the team did. Certainly, as we head into Q1 and Q2, we would want to share the same sentiment that you have that hopefully those shoots of volume start to come forward. But even then, we're going to still maintain that discipline that we.
Speaker Change: We price things correctly, we haul the right freight, we meet our customer service expectations, and we deliver strong bottom line numbers as a result.
Speaker Change: Yeah, Chris, and then, again, just kind of put a period on that. It's really about that flexibility with our model and where we're going. If we start seeing this thing inflect
Speaker Change: Michael and team and the rest of the team across Robinson.
Speaker Change: As we said in investor day, we are prepared with the flexibility for when this market starts to come back.
Speaker Change: And again, driving at higher lows, if it's steadier throughout the year, we're prepared to continue to deliver what you're seeing here. So thanks for the question.
Appreciate it. Thank you.
Speaker Change: Thank you. Our next question comes from the line of VASCOM majors with Susquehanna International Group. Please proceed with your question.
Speaker Change: Thanks for taking my questions. We're a couple months removed from when you put the plan together to share with us in December. Just curious if you could walk through some of the cyclical puts and takes on the path to 26 as you feel today and you know if you know there's any other leanings in either direction on any of your businesses compared to what we heard in early December. Thank you.
and many more. Thank you. Thank you.
Hi Bascom, this is Damon.
Speaker Change: You know, look, certainly Investor Day was a good event for us. I think our message came across loud and clear. We feel good about the targets we laid out.
Speaker Change: and Investor Day, and the mix of those targets between businesses and initiatives. So, I would say there's not been any pivot or change from our position on how we laid out Investor Day in December and what we see.
Speaker Change: What we see today. So again, we feel good about the the targets we laid out. We feel good about the path
Speaker Change: in which we will deliver those targets. And you're touching on an exact reason on why we gave a range for the market, right? No one knows what the market's going to be between now and 2026.
Speaker Change: But we're going to control what we can control and keep the discipline and, as Michael mentioned, the focus on the quality of volume. And I think all of that will certainly line up to delivering those 2026 goals the way we laid them out in December.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Ariel Rosa with Citigroup. Please proceed with your question.
and many more. Thank you. Thank you.
Ariel Rosa: What would you say you're in in terms of inning for both of those? Is it more like
Ariel Rosa: seventh inning for Enterprise, but a whole lot more like third inning for S&D. And then on your cross-selling opportunity as your secondary, you've noted 20% of global forwarding AGP growth comes from relationships that began at NEST.
Ariel Rosa: and there could be more runway. How much opportunity is left from this cross-selling across your segments? Would you say you're in the third inning there? We'd love to hear your thoughts on both these areas of growth.
and many more. Thank you. Thank you.
Ariel Rosa: Yeah Ben, this is Michael. Thanks for the question. I think the broad answer to everyone...
on the CH call.
Ariel Rosa: Are you on the CH call? Have you switched? Are we still on CP? Okay, okay. I asked my question and then, I think, and then he started answering, and then... Ladies and gentlemen, it seems like we may have some technical difficulties. Please stand by.
technical difficulties. They're coming back.
[music]
Speaker Change: and Arun Jain. A film by Arun Jain. A film by Arun Jain.
[music]
Speaker Change: All right, ladies and gentlemen, we do have the speakers back in. We will now proceed with the Q&A session.
Thank you. Thank you.
Speaker Change: Ben, I think we'll re-answer it. I think we cut off after your question. Great, thanks. The question was really what inning are we in in our...
Speaker Change: You know, we gave some examples of verticals, you asked about SMB, and then you also asked about the cross-selling opportunity, and overall I'd say we're
We're in early innings in all aspects of that business.
capabilities and services to our customers.
Speaker Change: You know as you think about then that next stage of cross-selling whether it's NAST to GF, GF back to NAST or the example we gave with our RMS announcement right before Investor Day of bringing those two teams together We have a tremendous opportunity in front of us to maximize the value of One Robinson
Speaker Change: and and certainly while we've seen the benefits of that there's no way we could say that we've maximized that opportunity.
Speaker Change: And so we feel really good about what we presented back in December and feel really aligned to those.
Speaker Change: opportunities and more importantly we're going to hold ourselves accountable to maximize the impact of the different aspects of our divisions and make sure we bring the full scale and capabilities of Robinson to all of our customers.
Speaker Change: Yeah, Ben, and sorry for that interruption there. The only period I put on that, on what Michael said,
Speaker Change: You know, I just came off the road. I'm talking to the teams and you know, they are they are really fired up
on this
This certainly is early innings of this game.
Speaker Change: but from an SMB perspective, these guys are going out and getting it. We feel really good to Damon's question and answer too.
Speaker Change: Bascom earlier, you know we feel really good about what we've laid out on this growth trajectory and the team is really aligned and Michael and team are doing a nice job on
Speaker Change: on driving that accountability. So thanks for the question and again apologize to everyone for the disruption.
All right, thanks so much for the color.
Speaker Change: Thank you. Our next question comes from the line of Brian Osenbeck with J.P. Morgan. Please proceed with your question.
Good afternoon. Thank you for taking the question.
So I guess maybe for...
Speaker Change: Michael, can you just give us some color if you can about maybe demand or indications of demand across any particular verticals and customers that you're speaking with and then also along those lines you know where do you think we're sort of starting off the year within
Speaker Change: Within the bid season as things start to start to get ramped up here. Thank you
Speaker Change: Yeah thanks, thanks Brian. You know I think what we saw in Q4 was a continuation of a marketplace that had very high adherence to route guides.
a very, very competitive transactional space.
and the team did a really nice job of...
Speaker Change: you know, really weaving through that for the best results we could deliver. You know, an example of that is, you know, we feel really good about the health of our contractual business, our wins as we're going into those RFPs, you know, saw we beat the cash shipment index in our contractual space in Q4, so really,
Speaker Change: and then we're being really smart about the transactional business where we're winning on a day-to-day basis where incumbency has less value, right, and we aren't going to see the long-term benefits of getting super aggressive in that space based on the current market.
Speaker Change: You asked about moving into Q1. Q1 is a traditionally heavy RFP space.
Speaker Change: and I'll just keep saying what I said about Q4 is we feel good about the strategy we have from a
Speaker Change: How we're engaging customers, our pricing strategy for that space, but we're not
Speaker Change: a marketplace that we're seeing impact of carrier exits, but we're not seeing impact of demand increases at this point.
Okay. Appreciate that, Mike. Thanks.
Thank you.
Speaker Change: Our next question comes from the line of Tom Wadewitz with UBS.
Please proceed with your question.
Tom Wadewitz: Yeah, great. Good afternoon. Wanted to see if you could offer some thoughts about, and apologize if I missed this earlier, but
Tom Wadewitz: How do you think about truckload volume growth in 2025? Do you think that's something that you transition to in second half? You know I guess you have to have under maybe share your underlying view on how the market progresses but
Speaker Change: do you think we should be optimistic that you get into that? And then I guess another component of that would be, you know, did have some weakness in truckload volume in 4Q focused on, you know, kind of the right loads and everything. When the market starts to tighten, do you think you get a bigger swing?
Speaker Change: You know, a significant swing in the truckload volumes. Do you think that that's going to tend to be gradual? Thank you.
Speaker Change: Yeah, Tom, thanks for the question. I think we want to make sure we continue to reiterate the optionality that we feel we have in truckload volume right now. We're taking a very disciplined approach for what volume is the right volume for us in the current marketplace.
Speaker Change: I don't think anyone on this call would give you a crystal ball of what we think is going to happen in 2025 from a volume perspective. I think everybody in our industry has been trying to predict that for the last 36 months and it keeps extending.
But I feel really good that when the market inflects
Speaker Change: We will have the tools and the talent to maximize the impact of that inflection. We saw it seasonally in Q4, and then with the storms that happened again this January, and we said it in our prepared comments that our performance was markedly different.
Speaker Change: and that I just couldn't be more proud of the team and how they managed a situation where you know seasonal cost increases, storm related events and we're handling that in a much more disciplined and effective manner.
Speaker Change: What about when you see this swing, do you think that the way you're set up you might have kind of a big step up at volume where you think it ends up being just more gradual?
Thank you. Thank you.
Tom Wadewitz: I think, Tom, it would depend on the type of swing.
Tom Wadewitz: We, listen, we do mock-ups, we do testing of what we think will happen and we're prepared for it, but I think we all have to make sure we do the right thing depending on how that inflection happens. And whether it's a gradual inflection or a very quick turnaround, where I am confident is regardless of what it is, I think we have the tools and talent to execute against it.
Okay, great. Makes sense. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Ken Hexter with Bank of America. Please proceed with your question.
Speaker Change: Hey, great. Good afternoon. Maybe just a little bit on the forwarding side. Can you talk about, given how far, I guess, maybe the squeeze we've already seen on rates, and then what I guess could happen as maybe shipping starts to return to some normal shipping patterns?
Speaker Change: how that impacts the forwarding side, and then any side thoughts on headcount as well. Thanks.
So, hi Ken, thanks for the question.
Ken Hexter: So, as we laid out an Investor Day, you know, as part of our 2026 O.I. Walker or bridge,
You know, we did have a
Ken Hexter: An item in there related to rate normalization, right, and that was both rate normalization for truckload and rate normalization for global forwarding.
Ken Hexter: So, as the forwarding market returns to, call it more normalized levels of rates.
Ken Hexter: We have taken that into consideration as we've built our path forward for 2026.
Ken Hexter: So I'd reference you, you know, as far as the net impact of that for the enterprise.
Ken Hexter: I would reference you back to the net $10 million headwind that we showed by 2026 for rate normalization for the enterprise.
You've got tailwind coming from truckload in that.
Ken Hexter: and that $10 million, and then you've got headwind coming from ocean rate normalization from our forwarding business.
Ken Hexter: specifically to your question around headcount as Dave mentioned in his opening comments.
Ken Hexter: You know, the Global Forwarding team did a fantastic job in 2024, you know, debunking the thesis that we can't separate headcount from volume growth. In fact, it's no longer a theory.
Ken Hexter: in our global forwarding business. It's actually a fact. And in 2024, that business demonstrated
you know decoupling headcount from growth.
Ken Hexter: throughout the year and certainly those lessons we've learned those tools and skills that we've we've honed to execute that in 2024 what we'll carry forward into 2025 to whatever market we we see from a from a forwarding perspective
Speaker Change: So just to clarify your comment on the rates going back to normalization on Investor Day, I totally remember the slides, but do you think that's kind of where we're settling out as things get back to normal historical or do you think given the amount of capacity added on we start seeing maybe additional pressure on those?
on the shipping rates.
Thank you very much.
Speaker Change: Yeah, so our view hasn't changed and consistent with what we laid out in Investor Day. You know, we see the ocean rates normalizing back to the levels we saw in the second half of 2023.
Speaker Change: So, that's the math that supported our ROI bridge and market normalization assumptions in Investor Day, and we stick to that viewpoint as of today.
Sounds good. Appreciate the time.
Thanks, Ken.
Thank you.
Speaker Change: Our next question comes from the line of John Chappell with Evercore ISI. Please proceed with your question.
John Chappell: Thank you. Good afternoon. I know we've touched on a lot here, but just kind of a bigger picture question thinking about the path forward. You're obviously very focused on profitability thresholds that you want to hit. You've done a great job on the cost side. At a certain point, the market will come back and you're going to want to get your share or better of volume. So how do you think about balancing
John Chappell: this desire to win back the Robinson share, or again, better, while still keeping some of these profitability thresholds that you set for yourself over the last year.
Yeah, John, good to get to hear from you.
John Chappell: We have put together our operating model discipline that sets us up for the basis of that question.
John Chappell: and that's with, you know, our people being at the forefront of that strategy and technology, giving them the tools to drive that technology.
John Chappell: That's going to allow us to really drive growth that we've talked about in the in the verticals It's going to allow us to to drive and take share in in a small medium business segment
And on top of that, when the market inflects...
John Chappell: We have a history that will drive the transactional space as well. So, we have optionality built into our model and we feel really good about that.
John Chappell: The key point is, be it a slow burn or be it an aggressive turn, we've set ourselves up to really be ready for either one. And our team is really attacking what we can control.
John Chappell: and the cars that are dealt with us, but we are prepared for either scenario. We can double-click a little bit more with that one.
Speaker Change: Yeah, I think the question you're asking is a good one. But where we feel comfortable is, is that, you know, each marketplace creates different scenarios in the current marketplace.
implement with our team, and really...
Speaker Change: As we've said, increase the quality of our volume and making sure that we're getting that right combination of volume and margin.
Speaker Change: In a different marketplace where costing is moving and pricing is moving, we think we still have the best tools in the industry to then provide us the opportunity to pick up freight and win share. We need to be able to do both, and our expectation of ourselves is we will do both.
Speaker Change: And we've consistently been able to do that throughout 2024. And I have confidence in the team that will do that when the market inflects and continuing into 2025.
John Chappell: Yeah, John and hopefully at Investor's Day, we laid out those physicals to show you why we feel confident about that, but thank you.
Absolutely, Dave. Thanks. Bye.
Operator, next question, please.
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Apologies everyone, we seem to have lost our operator.
John Chappell: So given that we can't get the operator back on the line, I think we're going to have to end the call Apologies Please feel free to reach out to me afterwards with follow-up questions, and and we'll answer those questions for you. Thank you
For more information, visit www.fema.gov
Oh, we might have our operator back.
We'll hang on a second.
The End
The End
I'm sorry, we had some technical difficulties.
Speaker Change: If we're ready to proceed, our next question would be from David Hicks with Raymond James. Please proceed.
David Hicks: Hi guys, thanks for taking the question. I also just wanted to kind of hit back on the global forwarding segment, kind of just given the development in the Middle East.
Speaker Change: Now, what are you hearing from the ocean liners on the return to the Red Sea and Suez route? And how does that kind of change the pace or timing of ATV per shipment and forwarding coming back to those second half 23 bubbles that you mentioned?
Speaker Change: Hey David, this is Dave Bozeman. Hey listen, thanks for the question. You know, when it comes to the ship lines, certainly the situation in the Red Sea is a situation that's still ongoing. I mean, it takes time.
for the ship lines to really adjust.
Speaker Change: back into to normal operations. I think what we see from them is they are evaluating the situation. We don't see a full out
Speaker Change: you know, sellings through the Suez Shack. They're still on their normal sellings around the horn.
Thank you. Thank you.
Speaker Change: You know, so we're monitoring that closely and but at this point
Speaker Change: It's still a situation of monitor. We don't know exactly the timing of when that will shift.
Speaker Change: When it does, we'll certainly be front and center there. Damon, anything on... Yeah, David, I would just add that, look, our viewpoint is that carriers won't immediately return to the Red Sea. I mean, we're seeing some activity there, but we believe...
Speaker Change: For it to return to levels of normalcy that it'll take time for that to to happen
So nothing happens quickly or overnight.
in the shipping world and so
Speaker Change: As Dave mentioned, we're monitoring it, we're controlling what we control, and we'll certainly service our customers based on what the market yields.
Great, appreciate it. Thanks guys.
Thank you. Thank you.
Thank you for joining us.
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Speaker Change: and John O'Neill. We thank you for your patience. We will now take a short break. We will be back with more information. Thank you. We will be back with more information. Thank you. We will be back with more information.
Speaker Change: Operator, are you still connected? Let the next question through, please.
Speaker Change: Apologies everyone, we seem to have lost our operator again, so this is the conclusion of our call. Have a great evening and we look forward to talking to you again. Thank you.
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