Q1 2025 CH Robinson Worldwide Inc Earnings Call
Okay.
Good afternoon, ladies and gentlemen, and welcome to the C. H Robinson first quarter 2025 conference call. At this time, all participants are in a listen only mode.
Following the company's prepared remarks, we will open the line for a live question and answer session.
To ask a question. Please press star one on your telephone keypad.
If anyone needs assistance at any time during the conference. Please press Star zero.
Speaker Change: As a reminder, this conference is being recorded Wednesday April 30th 2025, I would now like to turn the conference over to Chuck Ives Senior director of Investor Relations. Please go ahead.
Chuck Ives: Thank you Donna and good afternoon, everyone on the call with me today is Dave Bozeman, Our President and Chief Executive Officer, Michael Caustic Neto, our president of North American surface Transportation, Haroun Raj <unk>, our chief strategy, and innovation Officer, and Damon Lee, our Chief Financial Officer.
Chuck Ives: 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.
Chuck Ives: Our earnings presentation slides are supplemental to our earnings release and can be found in the investors section of our website at Investor <unk> CH Robinson dotcom.
Chuck Ives: 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 referring to.
Chuck Ives: Today's remarks also contain certain non-GAAP measures and reconciliations of those measures to GAAP measures are included in the presentation.
Dave: And with that I will turn the call over to Dave.
Dave: Thank you Chuck.
Dave: Good afternoon, everyone and thank you for joining us today.
Dave: Our Q1 results reflect progress and the disciplined execution of the strategies that we shared at our Investor day in December.
Dave: To take market share and expand our margins we are not waiting for a market recovery to improve our financial results and the strategies that the Robinson team is executing our relevant in any market environment.
Dave: In Nast, we outgrew the market in Q1 in both truckload and L. T L, while expanding gross margins and improving productivity.
Dave: With year over year and sequentially.
Dave: In global forwarding, we continue to win new business and optimize our expenses through further increases in productivity.
Dave: Overall, we delivered a 39% year over year increase in our enterprises Q1 income from operations.
Dave: And regardless of the market environment, we will continue to lean into the self help initiatives that enabled our Q1 market share growth and margin expansion.
Dave: This includes continuing to arm, our industry, leading talent with innovative tools that help us materially elevate the customer and carrier experience.
Dave: We are innovating to harness the power of artificial intelligence and driving automation across the full lifecycle of a loan which gives our customers better service, while also helping us improve our performance by automating tasks. They are free up our talented people to work on more strategic and higher value.
Dave: [noise] work.
Dave: Our people have further embraced our new operating model and the discipline needed to generate higher highs and higher lows across market cycles.
Dave: Despite a challenging freight market they liked the transformation happening at Robinson and the momentum that we have.
Dave: The vast experience of our resilient employees and the value they bring to our customers and carriers are reflected in our Q1 results.
Dave: More recently, the new tariffs and fluid trade policies.
Dave: Creating market uncertainty and a lack of clarity, making planning activities more difficult and causing many customers to adopt a wait and see approach until they understand the impact on consumer spending and global demand.
Dave: Some customers have paused or reduced their purchases from suppliers in China in order to reduce the tariff exposure.
Dave: Causing ocean bookings out of China to decline in Q2.
Dave: For years, we have been helping our customers diversify their supply chains to be able to source products from multiple countries.
Dave: For C. H Robinson, while we're proud of our strength in the Transpacific trade Lane.
Dave: We have also diversified the global lanes that we serve to make our business more resilient and less dependent on certain trade lanes for example.
Dave: I had to the pandemic approximately 35% of our Ocean and air volume in global forwarding was generated from the China to U S trade Lane.
Dave: In 2024 that percentage decline to less than 25% due to higher growth in trade lanes serve in Europe Southeast Asia Oceana in India.
Dave: While we are certainly not immune to global market dynamics, we remain confident in our strategy and our people.
Dave: Nothing about the current environment changes that the.
Dave: The continued disciplined execution of our strategy supported by the Robinson operating model will make us stronger and we will stay focused on providing differentiated service to our customers and carriers.
Dave: Periods of volatility reinforce our value proposition custom.
Dave: Customers need a partner, who understands not only how to navigate increasing complexity, but also how to partner with them to solve their unique supply chain challenges, even amid uncertainty and change.
Dave: We have the scale breadth and differentiated experience to navigate through uncertainty as well as the financial stability and operational agility to adapt to changing market dynamics and to help our customers do the same.
Dave: So we will continue to help our customers strategize on how to make their supply chain is most efficient and cost effective.
We're a top freight forwarder and multiple trade lanes around the world and we handle well over 1 million customers transactions a year.
Dave: So C H Robinson as well versed in navigating tariff changes and we have proprietary technology that AIDS us in doing so well.
Dave: We will continue to use our unmatched expertise.
Dave: Unrivaled scale and tailored solutions to help our customers strategize on how to make their supply chains, most efficient and cost effective in this environment.
Dave: If that means the origin or destination of their freight changes, we can adapt to that change due to our global footprint.
Dave: If supply chains increased their production in the U S will be ready.
Dave: Because we move more truckload freight than anyone in North America.
Dave: We are a key partner in helping shippers rethink and shifts supply chains, while also being able to help them execute those new strategies, helping us move further up the value stack.
Dave: And while we've been preparing for a variety of market scenarios. We're also intensifying our strategic focus or market outgrowth gross margin expansion and operating leverage improvement I'll turn it over to Michael now to provide more details on our Nast results.
Michael: Thanks, Dave and good afternoon, everyone.
Speaker Change: As Dave mentioned, the Nast team delivered market share growth in both truckload and <unk> in Q1 and further optimized our volume.
Speaker Change: Resulting in year over year expansion of our gross and operating profit margin.
Speaker Change: This outperformance was accomplished in the midst of a historically long freight recession.
Speaker Change: The Q1 Cass freight shipment index was down six 3% year over year and down three 5% sequentially.
Speaker Change: Our overall Nast volume on the other hand declined by only 1% year over year and was up 2% sequentially. Despite there being one less business day.
Speaker Change: Truckload volume was down four 5% year over year and was up three 5% sequentially.
Speaker Change: <unk> volume grew 1% year over year, and one 5% sequentially.
Speaker Change: All of these kpis outpaced the market indices.
Speaker Change: At the same time that market volumes have declined low to truck ratios are higher than they were a year ago and route guide depth in our managed solutions business has increased over the past year, reflecting our continued exit of capacity that has brought us closer to better balancing the market.
Speaker Change: The result of this has been a year over year increase in the truckload line haul cost per mile excluding fuel surcharges.
Speaker Change: Supported by our operating model and armed with industry, leading tools. Our team afraid experts continues to respond to the challenging freight environment with pricing discipline and the 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 improvement in the AGP yield within both our transactional and our contractual truckload business and in our <unk> business, resulting in a 140 basis point year over year improvement in our Nast gross margin.
Speaker Change: Our team continues to dynamically assess the best combination of volume and margin to improve earnings.
Speaker Change: We know we have optionality to pivot towards more volume or more margin depending on the market conditions, and we are making adjustments multiple times per month week and day, while maintaining our discipline.
Speaker Change: Our execution has improved greatly over the past year were making better use of our proprietary digital capabilities and getting actionable data into the hands of our freight experts faster, enabling them to make better decisions and to capture the optimal freight for us.
Speaker Change: These digital capabilities, which are rune will expand on shortly have also enabled us to increase our nast shipments per person per day at a double digit pace over the past two years and this continued in Q1.
Speaker Change: Through higher productivity and lowering our cost to serve our Nast operating margin of 34, 3% in Q1 increased both year over year and sequentially.
Speaker Change: 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. We have invested in our sales organization and in capabilities such as drop trailer cross border and Robinson managed solutions and we will continue to deliver industry, leading solutions to customers and carriers.
Speaker Change: Through their commitment to our customers and carriers and by embracing the CH Robinson operating model and innovative tools. Our people are delivering improved results in a challenging marketplace.
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 and improve our gross margin and operating leverage.
Speaker Change: Thanks, Michael and good afternoon, everyone.
Speaker Change: In Q1, we continued to disrupt from within to transform our business to better serve our customers and to lead the industry forward.
Speaker Change: In line with the strategy that we laid out at Investor Day in December we are scaling our fleet, our proprietary Jenny I agents across the quote to cash lifecycle and to more modes and customers.
Speaker Change: As we recently announced our AI agents have now performed more than 3 million shipping tasks, including over 1 million price quotes and more than 1 million orders process.
Speaker Change: We've also quickly scaled easyjet AI and our L. T L business and in Q1, our orders AI agent took care of his many LCL orders as it did truckload orders.
Speaker Change: Okay.
Speaker Change: All of these improvements are reducing the amount of time it takes us to respond to a quote or for tendered load to be accepted.
Speaker Change: Thereby providing a better and more uniform customer experience.
Speaker Change: Additionally, our proprietary AI is supporting our market share and margin expansion initiatives.
Speaker Change: First the fastest speed provided by our AI has enabled us to respond to more quotes and win more business.
Speaker Change: Thereby augmenting our market share growth.
Speaker Change: Second the continued advancement of our AI is powering our dynamic pricing and costing.
Speaker Change: And we're responding more surgically and faster than ever the dynamic market conditions by performing more frequent price discovery.
Speaker Change: And enhancing the quality of pricing that we deliver.
Speaker Change: Along with our operating model rigor and our revenue management practices. This is contributing to the gross margin improvement that we're delivering.
Speaker Change: And third the growing automation across our quote to cash lifecycle, whether it be in quoting order entry low tenders appointment scheduling or other manual tasks creates business model is scalability.
Speaker Change: This enables us to decouple head count growth from volume growth and to create greater operating leverage.
Speaker Change: Generative AI played a key role and a greater than 30% productivity increase from 2023 and 2024.
Speaker Change: And we expect to continue increasing our productivity in 2025 and beyond to create further operating leverage.
Speaker Change: Despite numerous AI announcements by others in the market customers are not satisfied with subscale technology there.
Speaker Change: They are looking for innovations that can be implemented on a large scale to achieve measurable benefits.
Speaker Change: The advancements that we're bringing to our customer supply chains, such as automation powered by Jenny I have significant impact due to our scale and our information advantage, which comes from moving more truckload freight than anyone in North America and doing more L. T. All shipments at any other three PL.
Speaker Change: But as I've noted before a digital only approach has proven to be ineffective in the logistics industry due to the level of complexity and variation and freight characteristics that necessitate human expertise.
Speaker Change: The active role that our people play from a human in the loop perspective cannot be understated.
Speaker Change: And we are leveraging their deep domain expertise to provide feedback and to improve our algorithms on a regular basis.
Speaker Change: Okay.
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 elevate our offering and drive growth.
Speaker Change: Delivering business model is scalability.
Speaker Change: And driving gross margin and operating margin expansion.
Speaker Change: With that I'll turn the call over to Damon for a review of our first quarter results.
Damon: Thanks, Arun and good afternoon, everyone.
Damon: As you've heard today, we've made further progress in Q1 on the strategic initiatives aimed at our north star of improving operating income.
Damon: This was driven by market share growth continued optimization of our AGP.
Damon: And a reduction in cost through our operational discipline and productivity initiatives, which increased our operating leverage.
Damon: Despite declines in market volume or.
Damon: Our market share gains revenue management, and disciplined procurement of capacity improve the quality of our volume and our E. G P.
Damon: Which was up $15 4 million year over year, driven by a five 3% increase in Nast and a two 5% increase in global forwarding.
Damon: Okay.
Damon: On a monthly basis compared to Q1 of last year, our total company a G. P per business day was up 14% in January up 1% in February and down 2% in March.
Damon: It's worth noting that this trend was attributable to more challenging comps as the quarter progressed.
Damon: And the absolute amount of AGP per business day increased sequentially in both February and March.
Damon: From an expense standpoint, our total operating expenses declined $34 million or six 5% year over year.
Damon: Q1 personnel expenses were $348 6 million, including $1 2 million of expenses related to the divestiture of our European surface transportation business.
Damon: Excluding these charges our Q1 personnel expenses were $347 4 million down $23 8 million due to our continued productivity and cost optimization efforts.
Damon: Our average head count in Q1 was down 11% compared to Q1 of last year.
Damon: We continue to expect our 2025 personnel expenses to be 1.3 dollars 75 to 1.4 dollars 75 billion.
Damon: This includes an assumption that our head count will be relatively flat with our Q1 ending head count.
Although we have a dynamic workforce planning process, they can adjust to changing market conditions.
Damon: And we remain committed to further decoupling head count from volume.
Damon: With low to mid teen turnover rates, we can use attrition substantially to manage head count if needed.
Damon: Our Q1, SG&A expenses were $147 7 million and included $7 4 million of charges, primarily related to a lease impairment charge as part of Subletting a portion of our Kansas City Regional Center.
Damon: Yeah.
Damon: Excluding these charges SG&A expenses of.
Damon: The $143 million were down $6 $3 million year over year.
Damon: We still expect our 2025, SG&A expenses to be $575 million to $625 million, including depreciation and amortization of $95 million to $105 million.
Damon: Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact.
Damon: Shifting back to Q1, our effective tax rate for the quarter was 13, 7%.
Damon: Our tax rate is typically lower in the first quarter of the year due to the incremental tax benefits from stock based compensation deliveries that occur in Q1.
Damon: We still expect our 2025 full year effective tax rate to be in the range of 18% to 20%.
Damon: We generated $106 5 million in cash from operations in Q1.
Damon: And our capital expenditures were $16 1 million.
Damon: We now expect our full year capital expenditures to be $65 million to $75 million compared to our previous guidance of $75 million to $85 million.
Damon: From a balance sheet perspective, we ended Q1 with approximately 1.1 dollars 6 billion of liquidity.
Damon: Comprised of 1.03 billion of committed funding under our credit facilities and a cash balance of $130 million.
Damon: Our net debt to EBITDA leverage at the end of Q1 was 154 times down from $1 six one times at the end of Q4.
Damon: Our financial strength continues to be a key differentiator in our industry as it enables us to continue investing in the bottom of the freight cycle and improving our capabilities.
Damon: While our capital allocation strategy remains grounded and maintaining an investment grade credit rating, our financial strength and improved leverage ratio enabled us to return $175 million of cash to shareholders in Q1.
Damon: Through $97 5 million of share repurchases and $77 5 million of dividends.
Damon: Overall, our Q1 financial results are another proof point of the transformation occurring at C. H Robinson.
Damon: With the disciplined execution that the new Robinson operating model demands and with our strategies to drive outperformance in any market environment.
Damon: I'm optimistic about our runway for further improvement.
Dave: With that I'll turn the call back to Dave for his final comments.
Dave: Thanks Damon.
Dave: As you've gathered from our comments today, we're laser focused on our self help initiatives to increase our market share and to expand our margins.
Dave: While elevating our level of service to our customers and carriers to raise the bar in the logistics industry.
Dave: Given the current market environment I'm grateful for the actions we've taken over the past two years to stand up a new operating model and to get fit fast and focused on.
Dave: Our cost structure is in a much better position with greater than 30% productivity delivered over that timeframe.
Dave: And we're making further process improvements in 2025.
Dave: We're moving with much greater speed.
Dave: And how we are innovating and responding to customers and carriers, but also in how we are identifying the root causes and implementing countermeasures as lean tools are delivered and talk to more of our people.
Dave: And we've driven greater focus of the organization.
Dave: Through industrial pruning through initiatives, such as deprecating or small parcel services and the sale of our Europe surface transportation business.
Dave: And as we lead our industry in AI Tech innovation, we are seeing the benefits and are excited about the future.
Dave: Our advanced AI and machine learning technology is improving our gross margins, while allowing us to better align our capacity and pricing to the specific needs of our customers and to specific market conditions.
Dave: These superior dynamic costing and pricing capabilities will be even more important when we eventually see a turn in overall freight demand.
Dave: Our technology is lifting mundane repetitive tasks, all far people's plates contributing to a greater than 30% increase in productivity and efficiency over two years.
Dave: Our proprietary generative AI tech, which is breaking new ground in the industry is making an especially big impact because it's able to perform tasks that defied automation for decades.
Dave: That frees our people to do more strategic work and enables us to reach more customers garner more wallet share through a full range of services and move up the value stack by leveraging our growing capabilities.
Dave: And finally, we're making it easy to do business with C. H Robinson.
We have a people plus tech approach customers can choose the experience they want with us whether that's taken advantage of our digital platforms or interacting directly with one of our team members.
Dave: Fundamentally this is still a people business and our customers say the number one reason they work with US is our people.
Dave: I want to thank our people for their relentless efforts to provide exceptional service to our customers and carriers for embracing the Robinson operating model and continuing to execute with discipline and for continuing to support each other as we navigate a changing marketplace.
Dave: I am confident in the team's ability to drive a higher and more consistent level of operational execution and to keep pushing the bar higher on our financial performance across market cycles.
Dave: We've built a resilient organization with a multi horizon strategy that looks around corners and is underpinned by an operating model that provides stability by mandating execution of the strategy.
Dave: I believe the strategies disciplines and practices that we have been implemented at Robinson can endure through a prolonged freight recession.
Dave: Through a market inflection and through any part of the freight cycle.
Don: That concludes our prepared remarks, I'll turn it back to Don on now for the Q&A portion of the call.
Don: Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Don: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: First question comes from Jon Chapell with Evercore ISI. Please go ahead.
Don: Yes.
Don: Good afternoon, it's Alex Johnson on for Jon Chapelle.
Don: Maybe sort of maintenance type of question first if I can ask some of the trucking companies and other trucking related companies commented on weather impact.
Don: In the month of March.
Don: Particular.
Speaker Change: I don't think I heard you comment on whether I know volatility in weather and trucking market can have an impact just wondering if you.
Don: You saw any of that how you would sort of frame that.
Dave: Yeah, Hey, Alex This is Dave good to hear from you.
Don:
Don: Yes, we see all types of impacts.
Don: Impact obviously with with.
Don: With weather.
Don: Something we see but the key is how we're really driving towards.
Don: We're really driving towards the impact of of that weather and we've kind of moved to inputs versus output. So that's the key for us so, allowing us to really hit that.
Don: Right upfront versus kind of waiting for that impact and then and seeing that that's kind of the key to our operating model, it's really that speed and immediate visibility, but I'll ask Michael to <unk>.
Michael: Sure a few more details on specifically, but we're.
Michael: We're seeing our operating model manifest and how we handle things like weather, but Michael yes, Alex Thanks for the question.
Michael: What we saw in Q1 was certainly.
Michael: The weather impact in January weather impact in March to the marketplace.
Michael: And certainly as carriers exit were seen that events like weather impacts or other short term events do have an out an outsized impact on short term pricing or short term.
Michael: Impacts to the marketplace, but I think what we showed in Q1 and we see it in our results is the improvement in our operating model and our tools has allowed us to react to those incidents much more aggressively and I would say proactively as opposed to reactively and so well certainly.
Michael: January over January as an example, you had some pretty big storm impacts last year, and we still had a pretty difficult January from a storm impact in this year, but our results were different and it's really how are we getting these tools into our people's hands. How do we get ahead of these events and then really that combination of how are our.
Michael: <unk> and capacity working together with our customers and carriers to build solutions.
Michael: So did the events happen, yes, do I think the team did an incredible job of managing through them and I think that showed through our our numbers in the quarter. Yes also.
Michael: Yeah, and I'd, just say I was happy to see that it was somewhat of a non event I'm happy that our people are building their muscle up around.
Michael: Around dealing with this Alex so thanks, thanks for the question.
Speaker Change: Thank you very much I'll get back in the queue for some more outlook type questions. Thank you.
Chris Weatherbee: Next question, Chris Weatherbee with Wells Fargo. Please go ahead.
Speaker Change: Okay.
Chuck Ives: Chris Your line is live.
Jeff Kauffman: Okay on to Jeff Kauffman with vertical research partners. Please go ahead.
Jeff Kauffman: Thank you very much.
Speaker Change: Well first of all congratulations as terrific result in a tough environment.
Speaker Change: I just like to hone in a little bit maybe it's the tail wagging the dog here, but I wanted to hone in a little bit on the international markets and global forwarding you were one of the top N V occ's out of.
Speaker Change: China Southeast Asia to the U S. There's a talk about customers shifting from air to Ocean. Then there is a talk about what happens if these tariffs go or if they don't and who knows what the answer is but can you kind of talk through some of the scenario planning that you've done and the scenarios you see and how that could potentially.
Speaker Change: <unk> affect the forwarding division, particularly the ocean from Southeast Asia, and the U S.
Speaker Change: Yes. Thanks for the question, Jeff I think you've kind of summarized it well right. There is a lot.
Speaker Change: Boeing on in the international space.
Speaker Change: Right now I would say that.
Speaker Change: There's there's changes almost every week in some weeks theres multiple changes.
Speaker Change: That's certainly created a lack of clarity for.
Speaker Change: For our customers and so certainly that's where.
Speaker Change: Robinson's value proposition shows up best right, when there's there's chaos and theres a lack of clarity.
Speaker Change: Our advanced capabilities, our breadth of services.
Speaker Change: You know really allows our customers to do scenario planning and what if planning at a at a different scale in a different level.
Speaker Change: Now as we've talked about on other calls right theres been a trend.
Speaker Change: For for many years now really post COVID-19 of near shoring and friend shoring and just overall migration.
Speaker Change: Away from dedication to China, and just having a more diverse supply chain to more of southeast Asia to India.
Speaker Change: Two other trade lanes, we're certainly seeing that be a.
Speaker Change: A benefit to our customers and certainly China is still an impact to their business slow, but certainly the diversification of their efforts over the last several years post COVID-19 has lessened that that impact on their on their supply chain.
Speaker Change: And one thing just to note for for Robinson is certainly we're not immune to density of trade lanes, either and we've worked.
Speaker Change: You know hard over the last several years to lessen our dependence on on.
Speaker Change: On the Trans Pacific Trade Lane, as well that used to be 35% of our global forwarding business. It's now 25% post pandemic.
Speaker Change: So we've even seen the benefits of that of that diversification away from specific trade lanes and density of trade lanes over that time as well.
Speaker Change: So what I would say is you know what a what a lead with is certainly times like this is when Robinson really shows up as a value added partner to our customers.
Speaker Change: We've seen that historically and we've certainly seen that as tariffs we look at tariffs as just another disruption for our customers another market disruption.
Speaker Change: But we've had several disruptions over the years right you've had disruptions in the South China Sea, you've had the port strikes.
Speaker Change: Those disruptions I'll show up slightly differently, but they are all disruptions to the supply chain.
Speaker Change: And certainly.
Speaker Change: Our customers have been diversifying to limit those disruptions on the impact to their business and they've certainly partnered with us on creative solutions to lessen that.
Speaker Change: Lessen that impact as well.
Speaker Change: So what I would say, it's certainly we've seen a lot of activity with customers partner with us on.
Speaker Change: Various ways of diversification.
Speaker Change: And I think that's that's that's bode well for our ability to move up the value stack with with a lot of our key customers.
Speaker Change: Just to clarify your comments and thank you for that answer.
Speaker Change: For the purposes of our modeling I guess my takeaway on what you are saying is we we've downshifted transpacific, a little bit and it's possible that.
Speaker Change: South East Asia, the rest of world could offset some of the decline from southeast Asia and the U S. But would tariffs result in higher customs revenue as a result, and then we should think about maybe customs get some support here and then make your own assumptions on air and Ocean.
Speaker Change: Yeah. So so certainly on your first comment we agree that's a that's an accurate understanding of my comment on on the customs activity certainly we've seen a we've seen it uptick in customer activity.
Speaker Change: And certainly we're an expert in that in that area in that field.
Speaker Change: And so certainly that has been an area of increased interest with our customers and certainly we're able to provide that that service and value for them.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks for the question.
Speaker Change: Next question, Brian often back with J P. Morgan. Please go ahead.
Speaker Change: Okay.
Hi afternoon, Thanks for taking the question.
Speaker Change: Maybe just wanted to give you both at once.
Speaker Change: Can you give us any sense of what April looks like so far I know you typically don't do that but we're obviously not really typical sort of market. So anything there would be helpful. And then maybe for Michael.
Speaker Change: Do you think we're finally, starting to get to the point where.
Speaker Change: Truckload capacity starts to exit in and stays out or.
Speaker Change: At least starts to accelerate and that and that trend you're seeing any signs of that and it does seem like perhaps you've got some more volatility with.
Speaker Change: Tariffs and the important cliffs, if it does arrive that could potentially accelerate that but of course lower fuel prices are throwing a lifeline out there as well. So just wanted to see thoughts on April and then if you've got any color on capacity and where that's headed thank you.
Bryan: Hey, Bryan Thanks for the question, Hey, listen you.
Speaker Change: You're right, we don't we don't typically provide guidance on.
Bryan: You know kind of volume AGP our earnings into.
Bryan: And two to.
Bryan: April here, but.
Bryan: Historically Q2.
Bryan: If seasonally stronger quarters.
Bryan: Usually point plus 5% sequentially.
Bryan: Due to higher freight demand in certain verticals as we're coming into food and beverage produce home and garden.
Bryan: And as the weather improves.
Bryan: There are several factors that will.
Bryan: Impact, whether we see normal seasonality in Q2.
Bryan: Including whether consumer confidence and spending are strong enough to support those those key verticals that I just talked about.
Bryan: The first month of the quarter as we look at it is rarely a good predictor of the quarter. So that's why we typically don't comment on it.
Bryan: However, we might be able to give a little bit.
Speaker Change: Color now I'll ask Michael to.
Speaker Change: To weigh in here a bit of it but that's how we thought we typically kind of view this.
Speaker Change: Yes, so Dave correct second quarter, usually is sequentially better than Q1.
Speaker Change: To the numbers that Dave mentioned, but it's a unique quarter in that April is sequentially lower than March and then it kind of increases through May and June as we get some seasonal impacts and just based on our customer mix.
Speaker Change: We've seen is yes, we've seen.
Speaker Change: That sequential decrease from March into April, but it's less than it was last year and so we're we continue to think that the work we're doing.
Speaker Change: Is allowing us to meet customers, where they need to be met and as Damon mentioned in his answer previously I think it's a statement for nast as well the volatility that we're seeing in the marketplace is creating an opportunity for customers to lean into Robinson and the value we bring to the complexity of supply chain is that people are dealing with.
Speaker Change: Now I think there is a.
Speaker Change: Our move to quality in terms of what we're bringing to the marketplace our stability our people our capabilities those types of things and so we feel good that the work we're doing in Q1.
Speaker Change: We expect it to be positive with the work we're doing in Q2 your second question related to.
Speaker Change: Carrier capacity, yes.
Speaker Change: Yes, we're continuing to see capacity exit the marketplace.
Speaker Change:
Speaker Change: No, we're not seeing necessarily market inflections in any meaningful and sustainable way from a costing perspective.
Speaker Change: I mentioned earlier you see it during events you see it during short term impacts.
Speaker Change: Those events are having pretty significant spikes due to the fact that I think theres, a little bit less surplus in the marketplace than there maybe has been in the past and so the hope would be is as demand comes back that we'd see more of an inflection versus an event, but we havent seen that I do think your comment though about.
Speaker Change: What does some of the uncertainty due to overall demand and how would that.
Speaker Change: Impact capacity exit.
Speaker Change: Your comments are probably an accurate reflection of what the carriers looking at re pricing is not improving in a meaningful way some costs are improving from their perspective.
Speaker Change: But at this point Theres been nothing that would say, we're seeing a true inflection in the market and that we're continuing to somewhat bounce along the bottom we've been on for a while.
Speaker Change: Alright makes sense thanks, guys.
Speaker Change: Yes.
Speaker Change: Ken <unk> with Bank of America. Please proceed.
Speaker Change: Hey, good afternoon.
Speaker Change: Dave I guess earlier, you talked about the AGP deceleration right. So from 14% January downturn minus two in March.
Speaker Change:
Speaker Change: Can we talk about that I know you said it was just tougher comps is there is that tariff implications your thoughts on as pricing stays weak here the opportunity to ramp that up and I guess you you lowered capex I guess is that just looking at again same thing to the market deceleration is there something more more to that maybe just your thoughts on on the <unk>.
Speaker Change: Backdrop here.
Speaker Change: Yes, Ken I'll take that one this one this one is David certainly I wouldn't read into anything on the the month to month sequential is that we went through in the prepared statements I think you had.
Speaker Change: As we referenced in the statements right I think you certainly had tougher comps as the months went on but we don't believe that cigna.
Speaker Change: Signals anything of significance right. So I think that's more just just noise in some of the monthly monthly comps.
Speaker Change: So so nothing nothing there that I would that I would focus on.
Speaker Change: On Capex, yeah, Yeah, yeah, sorry, so on Capex look I think it's just more as we're looking at the outlook. We felt that was a more appropriate range just based on the initiatives of the year end and where we see the year shaping up.
Speaker Change: I will tell you is all of the initiatives that support our strategic initiatives are fully funded and there are certainly not part of tightening that range I would say as part of tightening that range was really items, we view as discretionary that that had some fungibility and timing and those we've re prioritized, but just to reiterate.
Speaker Change: Again.
Speaker Change: None of the initiatives needed to support our strict or none of the capex needed to support our strategic initiatives have been impacted by that range change.
Speaker Change: I guess, if I could just tell me if I can just follow up on the first part I guess I'm just trying to balance out what's going on with contract pricing in the middle of bid season here I was trying to ask like how do you balance that I guess with the spot we've seen spot really come in given the weakness in the market are you seeing that weakness are you able to take advantage of we seeing AGP that should reaccelerate given that I'm trying to.
Speaker Change: I'll turn it over to Michael to give you. Some some color there yes. So so I think youre right were seeing contractual rates.
Speaker Change: Prove I'd call it minimally year over year, when we look at it.
Speaker Change: We're continuing to be in a highly competitive environment pricing is very aggressive in the marketplace, but we are seeing the ability to get some small increases on contractual youre right. The transactional market continues to be very very competitive and and depending on the time of the month or two.
Speaker Change: Pending on the week, there is some weeks less freight than than than before and we're battling for that free.
Speaker Change: We feel good though if you look at at Nast topline margins, we were able to to maintain and grow that throughout the quarter and and really I think deliver what is what we've talked about that optionality of the best combination of volume and margin for our business.
Speaker Change: But we're going to continue to keep testing that and and we tested every month week day in a couple of times a day in and I think we I think we found the right combination for what Q1 marketplace gave us and we will we will adapt depending on what Q2 brings us.
Speaker Change: But but generally I think you described it right contractual market.
Speaker Change: Very small improvements transactional market.
Speaker Change: Really.
Speaker Change: Competitive environment, and we're being very selective, but like I said before I think customers are recognizing the value, we're bringing to the marketplace and so ideally we're moving more transactions to not just the price transaction right. We're moving up the value stack and bring in more and more capabilities and services to that customer and I think we're seeing that in our.
Speaker Change: Our results, yes, and Ken I'll, just I'll just add to that.
Ken: To put a bow on it is look we don't we don't view the outgrowth in Q1 is unique we view that as our target condition and we expect that outgrowth every quarter now as Michael mentioned every quarter has different characteristics every quarter has different dynamics and we have to react to those different dynamics to deliver that outgrowth, but we don't view Q1 is unique we expect that that's the baseline.
Speaker Change: Patient going forward.
Ken: Thanks for the time guys appreciate it.
Ken: Thank you.
Ken: Next question, Tom <unk> with UBS. Please go ahead.
Speaker Change: Yes. Good afternoon. So I give you the two upfront so just on head count I think the sequential decline was was a bit greater than we were anticipating so just wanted to see if you could give a sense of does that keep moving down or do we think stable going forward and then I guess to the comments you had about volume and approach to the market I mean.
Speaker Change: We heard some things that may be C. H is getting more aggressive in the market and just going after volume a bit harder and you saw a pretty impressive amount of improvement in.
Speaker Change: Gross margin and profitability over the past year and a half so what kind of makes sense you could shift but.
Speaker Change: I Wonder if that is the case and if so is there also move to maybe leverage the transportation management capability, the TMC and say hey, we can bundle a bit.
Speaker Change: And when some brokerage business leveraging the transportation management as well, so I guess kind of two different questions. There. Thank you.
Speaker Change: Yes, Tom I'll start.
Speaker Change: I'd say part of that that head.
Speaker Change: <unk> head count.
Speaker Change: Being further down than you were expecting as related to ESP right. So.
Speaker Change: The divestiture of that business certainly came with.
Speaker Change: Came with the head count actually in that business as well right. So part of that comp comparison on head count that debt.
Speaker Change: That looks a little a little unique is related to ESP, what I would say.
Speaker Change: Broader on head Count is look we are dynamically managing our personnel expense.
Speaker Change: <unk> expense in our head count.
Speaker Change: Frequently no different than as Michael mentioned done on price and cost of hire.
Speaker Change: We have a dynamic model that.
Speaker Change: That we do workforce planning consistently on N and productivity is as our key kpis of ours as we've demonstrated.
Speaker Change: 30% over the last two years of productivity, we expect evergreen productivity going forward.
Speaker Change: So just to kind of bring that to a conclusion I think the.
Speaker Change: The trend difference you see on head count there is heavily influenced by the exited E. S. T. But we are actively managing head count based on the market environment that we're in with the air to driving evergreen productivity going forward.
Michael: Yeah, and this is Michael in the second half of that question.
Michael: Regarding the aggressive in the marketplace I think we're being smarter in the marketplace. I think we're we're putting the tools into our people's hands more often better information I think our people are making the right decisions more often and you see that in the fact that we're outpacing the market, but we're also managing our top.
Michael: Line margins and bottom line margins your last question or comment around RMS and the role of of how that fits our Robinson managed solutions I'm, probably more excited about that business and the combination of value propositions, we bring from the former TMC team and the RMS team now in whole.
Michael: Bind with Nast and what we're bringing to the marketplace.
Michael: I can tell you we're seeing really strong response from customers about that value proposition and I am probably like I said as excited as I've been around the growth opportunities that that value proposition and service. We bring that is very unique to robinson to the marketplace.
Yes.
Dave: Tom This is Dave.
Michael: Yeah, I was going to say just to.
Michael: Essentially that too.
Michael: Again, I can't stress enough what youre.
Michael: CN is a manifestation of our of our strategy like coming off of our Investor Day, I think we were pretty clear that our goal was to really take market share and expand our margins and I'm proud of what the team is doing by doing that so it's a balance.
Speaker Change: For us at Robinson, and everyday we look at that on everything we're doing to really.
Speaker Change: Take that market share up and drive those margins so.
Speaker Change: What these guys are doing is kind of doing that balance and I think.
Speaker Change: Leveraging what our technology is part of what Youre seeing in the marketplace in the room.
Speaker Change: I would add to that yes, Tom I think it's worth saying that you know kind of reiterating what Michael and Dave just said.
Speaker Change: Our algorithmic realtime algorithmic pricing and costing capabilities enable us to make adjustments constantly continuously so at this point that this notion that we don't we don't go after volume for volume sake, but we have objectives around market outgrowth.
Speaker Change: And our algorithms are continuously discovering the right sweet spot.
Speaker Change: Deliver on that.
Speaker Change: So that's that's one piece of it and again not managed services I think we all I would just echo that it is directly in line with what Dave discussed around moving up the value stack and Michael discussed about moving up the value stack and it's core to our strategy on how we leverage our managed services.
Speaker Change: To defeat other businesses.
Speaker Change: And Tom just to summarize it and then we will let you ask your follow up there is we just like to always remind everyone. Our strategy is about outgrowing the market expanding gross margins and expanding operating margins. While Q1 was a was a great demonstration of that on all fronts and so to your question about getting more aggressive in the market I think we're always.
Speaker Change: Aggressive in the market I think we just make sure we make high quality decisions.
Speaker Change: On what freight we take and we have tremendous optionality and that decision, making process as Michael said, we're getting smarter every quarter. We're still in the early innings of many of our evolutions in Tech development. So I think we're going to continue to get smarter and I think you'll continue to see the results reflect that.
Speaker Change: Yeah, I guess, just a short follow up to make sure I understand it I mean, it seems pretty interesting.
Speaker Change: To leverage the RMS capability when it used to be the TMC and combine that in brokerage and maybe a way that you didn't do in the past. So I think thats. My understanding is this is new and this is it seems like a pretty interesting lever to drive growth is that right to think of it as the new approach, putting those two together or am I not or is that something you did.
Speaker Change: In the past.
Dave: No I think Youre correct right with with our strategy as Dave mentioned, one Robinson at our Investor Day.
Dave: We had historically operated them as separate entities and there was crossover where I would say it happened circumstance and we're being much more deliberate about bringing that combined value to the marketplace and we're listening to customers certainly we're meeting customers, where they want to be met if they wanted to met under certain terms.
Dave: Arms, we will meet them there.
Speaker Change: But I can tell you, bringing the full value and capabilities of Robinson has been really positively received yes, and Tom you've been you've been here. Since we started this transformation a couple of years ago in which that diagnosis was really around people product process and portfolio.
Speaker Change: And as we went deeper in that one of them was was really looking at what we were going to do with TMC in driving this kind of one Robinson approach and ultimately through some really thoughtful work driving into a comprehensive strategy. This is what youre seeing.
Speaker Change: Just the one Robinson approach around RMS so.
Speaker Change: Deliberate very purposeful about how we're going to market with that and that certainly is early innings, but I like the momentum that I am seeing so far in driving that.
Speaker Change: Okay, great. Thank you for the time.
Speaker Change: Youre welcome Thanks for the question.
Speaker Change: Beth <unk> majors with Susquehanna. Please go ahead.
Speaker Change: Yes Arun.
Arun: Still obviously generating quite a bit of progress with with some of the tech projects on both the net revenue line and the operating expense line or operating efficiency within Nash can you talk about you know on both the pricing driven items that are helping you on the net margin.
Arun: And some of the efficiency driven items that are helping you.
Arun: Your operating efficiency, you know what inning or other analogy or you are on some of those projects and maybe Dave if you could cap off that discussion I know continuous improvement never ends and lean but.
Arun: How deep into this do you need to be before we're more in the continuous improvement stage.
Arun: First is the stair step improvement it looks like you're continuing to see here. Thank you.
Arun: Yep Baskin, thanks for the question.
Arun: Let's start with let's break that down and start with our Rone and then I'll come back and answer the second part of question here, Yes basketball.
Arun: The way I would describe it as.
Arun: We published these productivity targets the last couple of years and we deliver them.
Arun: We delivered over 30% productivity in both.
Arun: Nast and global forwarding and if you go back one year on mass, it's actually over 40% productivity.
Arun: I don't think we can we can sustain that level of productivity improvement.
Arun: However.
Arun: With the tools and technologies keep improving.
<unk> AI capabilities and Jenny I capabilities.
Arun: There's this evergreen component.
Arun: I would say like it's it's it won't stop we will continue to deliver productivity improvements every year I think if you just think of it as a.
Arun: Evergreen.
Arun: In terms of gross margin and in terms of gross margin.
Arun: I'd say, it's the same way and then frankly I would connected all back to the waterfall.
Arun: That Damon presented at Investor day, right. So if you're thinking about how much more runway, we have well we have enough runway to deliver on.
Arun: The 2026 targets, we talked about at Investor day, and it won't stop there.
Arun: Yeah I think.
Speaker Change: Bascom this.
Speaker Change: When it comes to these transformations and lean transformations I can't tell you how proud I am of the team. This is.
Speaker Change: You get hit with a lot on these transformations, particularly the lean transformations.
Speaker Change: They're doing a really nice job.
Learning and driving this.
Speaker Change: And so it's really about this discovery is about innovation you hit on it is about continuous improvement, but the key bean.
Speaker Change: Damon said this I said this we continue to say it.
Speaker Change: You were going to have continuous improvement throughout the market cycle. So be it at the low part of the cycle or be it at the mid cycle or high.
Speaker Change: The expectation at Robinson is that we continue to have continuous improvement.
Speaker Change: No matter, what because it's a it's a improve everyday type of mentality.
Speaker Change: That we have and so the 30% compound in two years that's great.
Speaker Change: Now we said, obviously you won't have that double digit type of improvement, but there will be continuous improvement every day, even if this cycle comes up that's part of lean operating systems and Thats what were building here at Robinson, passing them I would just add that.
Speaker Change: Part of our operating rhythm and part of our policy deployment one of our key measures. We manage is the health of our funnel that funnel being all of the ideas, we have around productivity around pricing around cost of hire all of our initiatives and so certainly one of those kpis is keeping the funnel full right. So we don't just fill the funnel then.
Speaker Change: Let it run out rate one of those kpis is ensuring that we're adding projects ideas interrogations.
Speaker Change: Into our process every single week every single month right. So the health of that funnel of ideas is really at the DNA of how we keep the continuous improvement flowing really forever within the within the company.
Speaker Change: Thank you all.
Speaker Change: Thank you. Thank you.
Chris Weatherbee: Next question, Chris Weatherbee with Wells Fargo. Please go ahead.
Chris Weatherbee: Yeah, Hey, thanks, guys good afternoon.
Chris Weatherbee: Maybe a little bit of a bigger picture question as we look out over the course of the next couple of months, we could be seeing some softness certainly from an import perspective and that might be coming through in both your global forwarding, but also maybe your Nash businesses as well I.
Chris Weatherbee: I guess as you think about what we were just talking about with productivity Optionality I guess, how do you think maybe about positioning the business for the next couple of quarters I wouldn't expect you to do something overly dramatic but I guess is do you see that opportunity, where maybe volume is a little bit softer or are there. Some other levers you can pull on the productivity side, a little shorter term that could generate.
Chris Weatherbee: Potential savings down the road here.
Speaker Change: Yeah, Chris. Thank you for the question look I would.
Speaker Change: I would say look the most important levers that we have are the ones that were executing every day every week every month right.
Speaker Change: The what I think is really the backbone of our strategy as it works in all cycles of the market right. It works when there's disturbances it works when Theres inflections. It just works right and we've demonstrated that.
Speaker Change: Over the last.
Speaker Change: Five five quarters, so I would say first of all the most important levers. We have are to continue to do what we're doing on making wise decisions on the volume, we take which has enabled us to outgrow the market.
Speaker Change: The optionality and speed of decision, making that we have on optimizing our pricing and our cost of hire decisions.
Speaker Change: And then we just we never stop looking at ways to improve our efficiency from an operating margin expansion perspective, right. I mean every day, we come up with a different idea on how to drive efficiency through automation eliminating.
Speaker Change: Eliminating processes that don't add value.
Speaker Change: Simplifying processes that are too complex. So what I'd say is the biggest levers we have are the ones. We're already executing right. So we'll just continue to execute those levers.
Speaker Change: In the face of whatever the market conditions do give us just a reminder, certainly.
Speaker Change: Two thirds of our operating expenses are personnel expenses and as I mentioned earlier, we do have a dynamic.
Speaker Change: Workforce planning process right, we have kpis as part of our operating review that that don't allow us to go read and stay read from a productivity perspective. So we will be actively managing our personnel expenses, both headcount related and head count you know adjacent.
Speaker Change: <unk> of what the market market unfolds and gives us.
Speaker Change: Okay. That's helpful. Appreciate it thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you I would like to turn the floor over to Chuck for closing remark.
Speaker Change: Thank you all for joining US today, we look forward to talking to you again and have a great evening.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Speaker Change: Okay.
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Speaker Change: Yeah.
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