NASDAQ:CHRW C.H. Robinson Worldwide Q4 2022 Earnings Report $89.75 -2.28 (-2.48%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$89.95 +0.20 (+0.22%) As of 04/25/2025 05:32 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast C.H. Robinson Worldwide EPS ResultsActual EPS$1.03Consensus EPS $1.35Beat/MissMissed by -$0.32One Year Ago EPS$1.74C.H. Robinson Worldwide Revenue ResultsActual Revenue$5.07 billionExpected Revenue$5.59 billionBeat/MissMissed by -$522.90 millionYoY Revenue Growth-22.10%C.H. Robinson Worldwide Announcement DetailsQuarterQ4 2022Date2/1/2023TimeAfter Market ClosesConference Call DateWednesday, February 1, 2023Conference Call Time5:00PM ETUpcoming EarningsC.H. Robinson Worldwide's Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by C.H. Robinson Worldwide Q4 2022 Earnings Call TranscriptProvided by QuartrFebruary 1, 2023 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Afternoon, ladies and gentlemen, and welcome to the C. H. Robinson 4th Quarter 2022 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. Operator00:00:24As a reminder, this conference is being recorded, Wednesday, February 1, 2023. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Speaker 100:00:36Thank you, Donna, and good afternoon, everyone. On the call with me today is Scott Anderson, our Interim Chief Executive Officer Arun Rajan, our Chief Operating Officer And Mike Zechmeister, our Chief Financial Officer. Scott and Mike will provide a summary of our 2022 Q4 results and our outlook for 2023. Arun will provide an update on our path to a scalable operating model to improve the customer and carrier experience, and then we will open the call up for questions. Our earnings presentation slides are supplemental to our earnings release and can be found on the Investors section of our website at investor. Speaker 100:01:13Chrobinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we will let you know which slide we're referencing. I'd also like to remind you that our remarks Today may contain forward looking statements. Slide 2 in today's presentation lists factors that could cause our actual results to differ from management's expectations. Speaker 100:01:38And with that, I'll turn the call over to Scott. Speaker 200:01:41Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. I'd like to start today's call by expressing my appreciation And the Board's gratitude for the contributions that Bob Biesterfeld made to C. H. Robinson over his 24 years with the company, including his 3 years as CEO. Speaker 200:02:00Under Bob's guidance, C. H. Robinson navigated the challenges presented by the pandemic And the ongoing supply chain disruptions, and he played an important role in positioning Robinson for long term success. We wish Bob all the best. In order to accelerate C. Speaker 200:02:17H. Robinson's strategic initiatives and take the company into its next chapter, the Board felt that a change in leadership was needed. Jody Kozlak, the newly appointed Chair of the Board is leading the search committee to find a new CEO. With Jody's background and I can't think of anyone more qualified to lead the Board and the search process. To give you a little of my background, I've spent over 10 years as a Director here at Robinson and the last 3 years as Chairman of the Board. Speaker 200:02:47I've spent the first 25 years of my career at Patterson Most recently as CEO from 2010 to 2017 and also Chairman from 2013 to 2017. I look forward to working closely with Jody and the Board as well as the whole Robinson team in the coming weeks months. I'm excited to bring my experience and my knowledge of Robinson to the role of Interim CEO. I'm leveraging the relationships I have with the senior leadership to ensure that we continue delivering superior global services and capabilities to our customers and carriers while continuing to execute with great focus on our sustainable growth strategy. During my 1st few weeks as Interim CEO, I've been meeting with our customers and employees who are highly engaged and motivated to win. Speaker 200:03:36And I'm confident in our ability to navigate this transition and deliver for our customers. Throughout the transition, we're increasing our focus on delivering a scalable operating model to lower our costs, improve the customer and carrier experience and foster long term profitable growth through cycles. The current point in the cycle is one of shippers managing through Elevated inventories amid slowing economic growth, causing unseasonably soft demand for transportation services. At the same time, prices for ground transportation and global freight forwarding are declining due to the changing balance of supply and demand. While the correction in the freight forwarding market was certainly expected, the speed and magnitude of the correction in only 2 quarters was unexpected. Speaker 200:04:25With ocean rates on some trade lanes already back to pre pandemic levels, as a result, our operating costs were misaligned. As was announced on our Q3 earnings call, we have taken actions to structurally reduce our overall cost structure. The actions are expected to generate net annualized cost savings of $150,000,000 by Q4 2023 as compared to the annualized Q3 2022 run rate. If growth opportunities or economic conditions play out differently than we expect, We'll adjust our plans accordingly. I believe we're uniquely positioned in the marketplace to deliver for our shippers, Carriers and shareholders through a combination of our digital solutions, our global suite of services and our network of global logistics experts. Speaker 200:05:14Now let me turn it over to Mike for a review of our Q4 results. Speaker 300:05:18Thanks, Scott, and good afternoon, everyone. Our Q4 financial results reflect The price declines and slowing demand in the freight forwarding and surface transportation markets that Scott referenced earlier. Our 4th quarter total company adjusted gross profit or AGP was down $88,000,000 or 10.3% Compared to Q4 of 2021, driven by a 39% decline in Global Forwarding and partially offset By a 5.7% growth in NAST. The market softness was also prominent on a sequential basis With total company AGP down 13%, including a 24% decline in Global Forwarding and an 11% decline in NAST. On a monthly basis compared to Q4 of 2021, our total company AGP per business day was down 10% in October, down 7% in November and down 14% in December. Speaker 300:06:17In our NASTruckload business, Our volume declined on a year over year basis for the first time in 7 quarters with shipments down 4%. Within the Q4, monthly volume declined sequentially from October through December as freight demand weakened. Our AGP per truckload shipment increased 6.5% versus Q4 last year due to an increase in our contractual truckload AGP per shipment. On a sequential basis, however, our truckload AGP per shipment came down 6.5%, but remained above our 10 year average. During Q4, we had an approximate mix of 65% contractual volume And 35% transactional volume compared to a 50five-forty 5 mix in the same period a year ago. Speaker 300:07:09Routing guide depth of tender in our managed services business, which is a proxy for our overall market declined from 1.3 in the 3rd quarter to 1.2 in the 4th quarter, which is the lowest level we've seen since the pandemic impacted Q2 of 2020. The sequential declines in our truckload line haul cost and price per mile that we experienced in Q1 through Q3 continued in Q4 24% year over year decline in our average truckload line haul cost paid to carriers excluding fuel surcharges. Our average line haul rate billed to our customers, excluding fuel surcharges, decreased year over year by approximately 21%. With the cost down 24% and price down 21%, we saw a 3% increase in our NASTruckload AGP per mile on a year over year basis. In our Global Forwarding business, higher customer inventory levels combined with softening demand Contributed to significantly reduced import prices for ocean and air freight. Speaker 300:08:26In Q4, Global Forwarding generated AGP of 100 and $8,700,000 representing a year over year decrease of 39% versus the record high Q4 in 2021, which was up 72%. With these results, our Ocean Forwarding AGP declined $89,000,000 or 43 percent year over year compared to an 86.5% growth in Q4 of 2021. The Q4 results were driven by a 36.5% decrease in AGP per shipment and a 9.5% decrease in shipments. AGP and our airfreight business declined by $33,000,000 or 51.5 percent year over year compared to a 92% growth in Q4 of 2021. This was driven by a 40% decline in AGP per metric ton And a 19.5% decrease in metric tons shipped. Speaker 300:09:28Despite the soft market, the forwarding team continues to add new customers and diversify our industry verticals and trade lanes. In Q4, approximately 50% of our AGP from new business was generated from trade lanes other than the Trans Pacific Lane. Now turning to expenses. Q4 personnel expenses were $427,300,000 up 1.7% compared to Q4 last year, including $21,500,000 of severance and related charges driven by the restructuring that we initiated in November. The restructuring related costs were partially offset by a decrease in equity compensation as we reversed some previously accrued expense due to financial results that came in lower than previously expected. Speaker 300:10:18On a sequential basis, Q4 personnel expenses declined 10,200,000 Excluding the restructuring charges in Q4, personnel expenses declined $31,700,000 sequentially due to lower incentive compensation and lower salaries and benefits associated with reduced headcount. Our Q4 average headcount declined 2% versus our Q3 average. The workforce reduction initiated in November affected approximately 650 employees. While nearly 150 of those employees had left the company Prior to December 31, over 600 had exited as of early January. As we continue to make progress on delivering a scalable operating model, We expect our headcount to decline throughout 2023 as productivity improves. Speaker 300:11:09For 2023, we expect our personnel expenses to be $1,550,000,000 to $1,650,000,000 Down approximately 7% at the midpoint compared to our 2022 total of $1,720,000,000 primarily due to reduced headcount. Excluding the restructuring charges in Q4 of 2022, the midpoint of our 2023 guidance for personnel expenses is down approximately 6% year over year. Moving on to SG and A. Q4 expenses of $176,800,000 We're up $27,900,000 compared to Q4 of 2021, driven primarily by $15,200,000 of restructuring charges and a year over year increase in legal settlements, partially offset by a decrease in credit losses. The restructuring charges in SG and A primarily included an impairment to internally developed software related to the reprioritization of our technology investments that Arun will speak to shortly. Speaker 300:12:13Our approach to investments and investment prioritization is more data driven and more focused on delivering a scalable operating model than in the past, which is improving the value of the benefits we are delivering and allowing us to pivot more quickly if investments are not delivering as expected. For 2023, we expect our total SG and A expenses to $625,000,000 compared to $603,400,000 in 2022. The slight decrease at the midpoint includes an expected decrease in legal settlements in the absence of 2 one time items that occurred in 2022. Those include the $15,200,000 Q4 restructuring charge and the $25,300,000 Q2 gain from the sale and leaseback of our Kansas City Regional Center. 2023 SG and A expenses are expected to include approximately 90 to $100,000,000 of depreciation and amortization expense compared to $93,000,000 in 2022. Speaker 300:13:18Q4 interest and other expense totaled $42,500,000 up $24,100,000 versus Q4 of last year. Q4 of 2022 included $24,800,000 of interest expense, up $10,700,000 versus the prior year, Primarily due to higher short term average interest rates. Q4 results also include a $16,900,000 loss On foreign currency revaluation, up $10,400,000 compared to Q4 of last year, driven by the relative weakness of the U. S. Dollar. Speaker 300:13:54As a reminder, the FX impacts are predominantly non cash gains and losses on intercompany balances, which is why they are not hedged. Q4 tax rate came in at 20.9%, bringing our full year tax rate to 19.4%. We expect our 2023 full year effective tax rate to be 19% to 21%, assuming no meaningful changes to federal, state or international tax policy. Q4 net income was $96,200,000 and diluted earnings per share was $0.80 Adjusted or non GAAP earnings per share excluding the $36,700,000 of restructuring charges was $1.03 Down 41% compared to Q4 of 2021, which was up 61% versus the prior year. Turning to cash flow. Speaker 300:14:47Q4 cash flow generated by operations was a record $773,400,000 compared to $75,900,000 in Q4 of 2021. As we have talked about in prior earnings calls, We were expecting an improvement in working capital when the cost and price of purchased transportation came down. The 698 was driven by a $650,000,000 sequential decrease in net operating working capital in Q4 due to the declining cost and price of ocean air and truckload in our model. Conversely, Q4 of last year included a $200,000,000 sequential increase in net operating working capital as costs and prices were rising. If you look back at the period when cost and price of purchase transportation was rising from the end of 2019 To Q2 of 2022, our net operating working capital increased by approximately $1,500,000,000 Between Q3 and Q4 as the cost and price of purchased transportation has come down, we've realized over $1,000,000,000 A benefit to working capital and operating cash flow. Speaker 300:16:03That benefit has come on a lag basis based on our DSO and DPO. Driven by the increased free cash flow generation in Q4, we returned $507,000,000 of cash to shareholders Through $438,000,000 of share repurchases $69,000,000 of cash dividends. The Q4 cash return to shareholders Significantly exceeded net income and was up by 128% versus Q4 last year, driven by the record cash flow. Consistent with our capital allocation strategy, to the extent that we have excess cash after managing through our commitments, investments and holding to an investment grade credit rating, we are committed to returning that cash to shareholders through share repurchases. Capital expenditures were $27,800,000 in Q4, bringing our full year capital spending to $128,500,000 up $58,000,000 compared to 2021. Speaker 300:17:04The increase was primarily due to an increase in internally developed software. We expect our 2023 capital expenditures to be in the range of $90,000,000 to $100,000,000 Now on to the balance sheet highlights. We ended Q4 with approximately $1,340,000,000 of liquidity comprised of $1,120,000,000 of committed funding under our credit facilities and a cash balance of $218,000,000 Our debt balance at the end of Q4 Was $1,970,000,000 up $55,000,000 versus Q4 last year, primarily driven by our expanded capacity to borrow, Given the strong EBITDA performance, our net debt to EBITDA leverage at the end of Q4 was 1.29 times, down from 1.42 times at the end of Q4 last year. As I mentioned, our capital allocation strategy is based on maintaining our investment grade credit rating, which allows us to optimize our cost of capital. As we anticipate reduced earnings in 2023, Given the strong results in the first half of twenty twenty two, we are planning for a lower level of debt to deliver our leverage targets. Speaker 300:18:20To the extent that we reduce our debt levels, this may reduce the amount of cash used for share repurchases. In December, our board authorized and declared a 10.9% increase in our regular quarterly dividend, Taking it to $0.61 beginning with the dividend that was paid in January. We have now distributed uninterrupted dividends without decline For more than 25 years, over the long term, we remain committed to growing our quarterly cash dividend in alignment with long term EBITDA growth and using our share repurchase program as important leverage to enhancing shareholder value. With that, I'll turn the call over to Arun to walk through our Speaker 400:19:08Thanks, Mike, and good afternoon, everyone. During the Q4, we continued to focus our efforts on working backwards from customers' and carriers' needs to build a scalable operating model. A scalable operating model improves customer and carrier experience and improves service levels while simultaneously reducing our cost to serve. These efforts include operationalizing our information advantage at scale by giving customers insights around price and coverage and providing features to carriers That improve their utilization and cash flow. Increased digitization is a key element of the scalable operating model. Speaker 400:19:45There are a number of data points that demonstrate our progress in 2022, including 183% increase in loads booked digitally by carriers And increased digitization across the board as evidenced by 2,300,000,000 digital transactions with customers and carriers, which represented a 30% increase year over year. In 2023, we will continue to deliver meaningful improvements to our customer, carrier and employee experience By accelerating the digital execution of all touch points in the lifecycle of the load, including order management, Appointments, in transit tracking, cash advances and financial and documentation processes. We made progress on this front in Q4 as well, with the automation of appointment related tasks increasing 34% year over year And in transit tracking automation increasing by 4.50 basis points versus Q3. We are focused on opportunities to automate or make self those processes that are core to our operating model, which we expect will enable us to decouple volume and headcount growth and drive increased productivity, while simultaneously improving the customer experience and service levels. Throughout 2023, we'll provide updates on the progress we're making on shipments per person per day, which is a key metric to measure our productivity improvements. Speaker 400:21:03During the recent restructuring effort, We continued our ongoing evaluation and prioritization of our tech and software projects. Through the assessment of those projects, we determined that some were no longer relevant The acceleration of our scalable operating model and we incurred the restructuring charges that Mike described earlier. The remaining projects are better aligned to improve the customer and carrier experience and reduce our cost to serve and therefore we're allocating more of our investments to those projects. We've also taken steps to align compensation and incentives to support our strategic priority for creating a scalable operating model, which is foundational to being the low cost Operator, which ultimately gives us the pricing flexibility to unlock and accelerate long term market share growth, while delivering our long term operating margin targets. Speaker 200:22:00Growth and freight markets present cyclical challenges. We need to continue evolving our organization to bring greater focus to our highest long term strategic priorities, including keeping the needs of our customers and carriers at the center of what we do, while lowering our overall cost structure by driving scale. I believe in the strategy that the team is executing on to deliver a scalable operating model. We expect this initiative will continue to drive improvements Our customer and carrier experience and amplify the expertise of our people, all of which will drive share gains and growth. And as Arun said, we expect these efforts will also improve our productivity, which will reduce our operating costs and lead to improved returns for our shareholders. Speaker 200:22:45I'd like to close by saying thank you to our employees for persevering during the period of extended market disruption and the market correction that has followed This concludes our prepared remarks. And with that, I'll turn it back to Donna for the Q and A portion of the call. Operator00:23:06Thank you. The floor is now open for questions. In the interest of time, we do ask that you please limit yourself to one question to allow as many people the opportunity to ask questions as possible. Today's first question is coming from Jack Atkins of Stephens. Please go ahead. Speaker 500:23:45Good afternoon and thank you for taking my question. So Scott, if I could address this to you, the change in Leadership at the CEO level would indicate that the Board believes that a change in strategic direction is necessary. But If I listen to the message on the conference call today, it's very similar to the message 3 months ago from the company. So I guess my fundamental question here is, What is actually changing at C. H. Speaker 500:24:10Robinson today? And as you think about the qualities that you're looking for in the permanent CEO, What are those and where does the Board want to take this company over the long term? Thank you. Speaker 200:24:21Yes. Thanks, Jack. Appreciate the question. A few things. First of all, the Board was unanimous in our decision and it really was around An opportunity for this to be an inflection point of performance at the company and new leadership being a component of that In terms of making that happen, as I said in my prepared remarks as well, we were also unanimous in our appreciation of Bob's contribution After the 5 weeks I've spent with our people and in the field, our core strategy of building out our operating model Going forward, I think it's solid. Speaker 200:25:09Obviously, new eyes in terms of a new CEO will give some perspective to that as well. But strategically, we are absolutely in a spot with global supply chains becoming more complex Sort of accelerating performance and moving at a faster pace. Speaker 500:25:37And then in terms of the qualities for the next CEO, can you maybe talk about that for a moment? Speaker 200:25:42Yes. As I mentioned, Jody Kozlak, our Board Chair now, is the Head of the Search Committee. Just for background, Jody was the former Chief HR Officer at Target. So she's familiar in processes like this. We're Using a leading executive research executive search firm that's helping the Board, we're going to take our time. Speaker 200:26:05We're going to be thorough and inclusive, and we're going to be broad in terms of the type of qualities we're looking at for the next CEO. Like I said before, this is a tremendous opportunity for somebody. We're looking for an experienced operator With sharp strategic thinking and someone who really can take Robinson to the next level. I think the next 10 years for Robinson are going to be the most exciting for the company going forward. So The opportunity here is fantastic for the next leader. Speaker 500:26:42Okay. Thank you for the time. Speaker 600:26:44Thanks, Jack. Operator00:26:46Thank you. The next question is coming from Bruce Chan of Stifel. Please go ahead. Speaker 700:26:53Thanks, operator, and good afternoon, everyone. Maybe just a Follow-up on the strategic question, and maybe in a little bit of more of a pointed way. But when you think about Your customer base, how many of them use you for end to end service? How many are both NAST and Global Forwarding customers? And then when you think about Bob's kind of statement before that Global Forwarding was an intrinsic part of Robinson, do you feel the same way Speaker 300:27:33Yes. As we look at the combination of NAST and Global Forwarding, we've seen some great opportunities from a cross selling standpoint Between the 2 and as we pointed out, if you look at the last 12 months, we've had over half of our revenue in AGP Comes from customers who use both Surface Transportation and Global Forwarding Services. We've looked deeper into this. We could probably do a better job Taking advantage of the relationships on both sides, but we have had some pretty compelling results. And I'll share with you one of the studies that we did where We looked at the last 5 years and we looked at customers who use both NAST and Global Forwarding versus customers who use 1 or the other. Speaker 300:28:21And the 5 year compound annual growth rate For customers who use both was 400 basis points better than those who used 1 or the other. So we've been able to leverage customer relationships, bring business from NAST customers to Global Forwarding customers and vice versa. We believe as we think about customers and what they need and what they want, that we can bring a full complement of services that they really need, Where they can get stuff from Center Asia, Center China to Center U. S. With us and do it in a way that is Value added to their supply chain. Speaker 300:29:02So we believe in the ability to leverage both of those businesses, And that's our plans going forward. Speaker 200:29:10Yes. And I'll add on to that. I was on the Board in 2012 when we did the Pfenex acquisition, which really Was sort of the baseline of our modern Global Forwarding business and we have built A substantial business in Global Forwarding and I think have just begun to see those cross selling benefits. I'm a believer that, as I said before, global supply chains are getting more complex and partners that can solve And I've seen that already in customer meetings I've sat in over the last 5 weeks, can create tremendous value for Multiple players, including Robinson. That being said, as a Board, we always stress test the portfolio And challenge ourselves as to the best ways to drive value for customers and shareholders. Speaker 200:30:08I would say particularly, I would say after the last two years, we have a great franchise in our Robinson Global Forwarding business And we have a tremendous opportunity in a world where supply chains are just so much important post pandemic. Speaker 700:30:25And just a quick follow-up there. You all talked a lot about this new, I guess, global platform And some of the tech changes that you're making, Arun, I didn't hear a whole lot about the Global Forwarding side of that. Maybe just some quick comments about what's In store on the technology side for forwarding and ultimately do you feel that Navisphere is the right platform there? Speaker 400:30:50Yes. In terms of scalable operating model, we think of that cross divisionally across NASDAQ and Global Forwarding. The opportunity as it relates to creating a scalable operating model exists in Global Forwarding just as much as NAST. In terms of an increased focus in that context, Global Forwarding is already down the path, but we believe there are acceleration opportunities That the product and tech organization will be focused on starting in the back half of this year. As it relates to Navisphere, I think of Navisphere as a system of record. Speaker 400:31:27There is a lot of much of the work that we're doing It's probably around Navisphere in terms of how we harvest the data out of it, run our algorithms and present it back to customers and carriers in whatever form they choose to consume it. Speaker 300:31:43Yes, I would add on to that, that in the Global Forwarding Business, The opportunity for Tech Enhancements is probably greater. The business is probably further behind. Truckload in the U. S. For sure and LTL. Speaker 300:31:59And so there's more complexity in global forwarding when you get Languages, currencies, culture, customs, that makes it a more challenging environment from tech enhancement standpoint. But that being said, the tech enhancements on the Global Forwarding side have been great. They've done some really nice back house Automation, they've got some customer facing features that have improved services, and they're excited About the tech for 2023, in fact, they've shown the tech to some customers. NAV 2.0 is something that customers are excited about. And it's been a while. Speaker 300:32:39I mean, since our team internally has been excited about the upcoming year with respect to Tech and Global Forwarding certainly is. Speaker 200:32:50Yes. This is Scott. I'll just add on just some perspective from the Global Forwarding team. And When you have basically a stress test that they've had and the amount of volume they moved and the way they did it over the last 2 years, they're very open about Areas where technology can help them improve and to echo what Mike just said, we were with Mike Short earlier this week, who heads up Global Forwarding. And I think he is excited about what's coming, but also excited to drive the change management internally that will get the investment back on the tech investment for the return. Speaker 700:33:27Okay, great. Thanks for the color. Speaker 800:33:29You bet. Operator00:33:32Thank you. The next question is coming from Jeff Kauffman of Vertical Research Partners. Please go ahead. Speaker 900:33:39Thank you very much. A question for Arun. Arun, where when you think of digitalization and digital transactions on the platform, How do you define what's digital versus what's not digital? And thinking about both the forwarding and the NAST businesses separately, Where are you in terms of percent of transactions that are you consider digital today? And where do you want to be by the time we're finished with this change? Speaker 400:34:07Yes. I mean the way we think about digital versus non digital is if there's a manual touch, It's generally not digital, right? So you take in transit tracking as an example. And I think the way a digital first company might approach that might be different than a broker has approached it for the past Couple of decades. And historically, there have been several lots of touches as it relates to in transit tracking. Speaker 400:34:37And the way I think about it is The less we touch the load as it relates to in transit tracking, the better it is in terms of both productivity of our internal people, obviously, And equally, for our customers, it's a better experience because you have less variability in service outcomes and it's a more standardized outcome for them. So that's kind of how we think about it across multiple processes in the life cycle of a load. So think about track and trace, think about document management, payments, Appointments and so on. So it's a matter of driving down the manual touches for each of those processes Systematically, over time, which drives greater productivity and better customer experience and carrier experience. That's kind of how we think about it. Speaker 400:35:27Scott, go ahead. Speaker 200:35:27Yes. I would just add sort of how I talk about it to the employees as sort of an incumbent leader in the space that Is using technology to sort of modernize the businesses through sort of some business examples. I Come from a distribution background, so you look at a company like Grainger and how they've leveraged technology to really drive task, but then Employees who are logistics experts much more productive, and then make technology tools that are sticky to the customer, And that they really appreciate in terms of just making us easier to do business with. And I think Arun's product team is absolutely on that track. Speaker 400:36:15Maybe just to add some color to what Scott said, reducing touches for sure along the lines of what I described, But equally amplifying the abilities of our people, an example might be someone in sales. How do we do targeted sales versus sort of The approach that we might have taken in the past, the ability to take behavioral data and give them insights to be more targeted in their efforts. Speaker 300:36:43And then the second part Speaker 900:36:44of that question, please Arun, where are you today in terms of However you choose to think of it, I was thinking percentage of transactions that are digital. Where do you want to take that in 2 or 3 years? And where do you want to take that long term? Speaker 400:36:58I think the lens to look at it is, these are all inputs and the output that we're looking for is effectively Greater productivity of our people as we measure by shipments per person per day and a better customer outcome or carrier outcome in the case of customers, It's better on time in full performance and greater customer satisfaction, right? So those are the output metrics we look at. And so as a goal for 2023, we have a productivity improvement expectation from these investments Of 15% that we track quarterly, I think it's better for us to look at it that way. And the input metrics might vary because we might see A greater opportunity for productivity in transit tracking versus appointments. And so we'd rather not go there on these calls And just focus on productivity and customer outcomes as the expectations from these investments. Speaker 300:37:55Okay. Thank you very much. Operator00:38:00Thank you. The next question is coming from Chris Wetherbee of Citi. Please go ahead. Speaker 800:38:06Hey, thanks. Good afternoon. Scott, maybe a question here about Global Forwarding. So it sounds like this is something you think is key to the portfolio going forward. So I think it would be helpful to maybe give a bit of a perspective of where you think we are in sort of the normalization cycle. Speaker 800:38:23Obviously, The pandemic boosted rates to extraordinarily elevated levels. And as you noted in the release, we're kind of back down to pre pandemic levels in some of these end markets. Prior to 2020, this business was generating net revenues north of $500,000,000 It peaked out obviously at a multiple of that. What is the right number for Global Forwarding as we start to go forward? I guess, maybe in other words, how much share has been sort of captured there? Speaker 800:38:50What's the cross selling opportunity? If you could give us some perspective how to think about it in the context of normalization, I think that will be great. Speaker 200:38:58Yes, great, Chris. I'll Make a few comments and then turn it over to Mike to dive into a little more granular detail. I would say my statement is Global Exactly that question is what is the run rate of this business on a more normalized rate. I'm super encouraged By Mike Short and his team and what we're doing in the marketplace knowing that we're up against a backdrop of a tougher marketplace this year. But maybe Mike can give some specifics in terms of some numbers to help you with that question. Speaker 300:39:38Yes, Chris, happy to do that for you. So after running Operating income margins of over 50% in Global Forwarding in Q1 and Q2, obviously, we knew that wasn't a sustainable level and the market Come back to us at some point. The normalization, if you call it that, it has surprised us a bit in terms of speed and magnitude Of the correction. And so, I think in that process, we found ourselves with Cost structure that didn't match the business. And so we are in the process of kind of rightsizing that cost structure. Speaker 300:40:17During the pandemic and in some of those periods, we were intentionally investing in our business. There was the ability To get the attention of customers to a greater extent, we were improving customer service, we're investing in technology And the intent all along was to come out of the pandemic in a better place and we feel like we've done that. When you look at the operating income margin, we've still got a ways to go in rightsizing our cost structure and Mike and the team have been getting after that Headcount is down and will be down further as we enter into the New Year. We do think that A 30% operating income margin for the long term is still the right number. And I mentioned The technology and how the technology can help improve the operating margin on a go forward basis, but I'll mention a few other things that I think are key to success And that Global Forwarding business too and things that the team is encouraged for in terms of continuing to gain market share as we go. Speaker 300:41:25But Another one I'd mention is operational uniformity. That's really standardizing a lot of the work and activities that are done There, they have a good start on that, but there is still quite a bit more there that generates efficiency. And the good news is that as they come out of the pandemic The customer excellence scores are pretty solid. Team wants to make them better, but they're in pretty good shape from that perspective. Continuing to build scale, so the pipeline for new customers has been solid. Speaker 300:41:58They're looking at new verticals. They're looking at new trade lanes and building that scale will be important To help us leverage the investments that we're putting in on that business to ensure that they've got a good return, I talked about their Intentions and actions around managing expenses and headcount, that did get out of line a little bit here In the back half as rates in Ocean and Air really came back quite dramatically. And then the last thing I'd mention would be talent acquisition. So there's a lot of talent out in the marketplace. The team has done a pretty good job of bringing in folks That can help us extend into new verticals and extend into new trade lanes and geographies. Speaker 300:42:45And so, continuation of that also Gives us confidence that they can continue to grow market share going forward and that will be the key to success And the key to getting that margin to 30% long term. Speaker 800:43:02Okay. So the idea is relative to that pre Of course of this year and next year on the net revenue line, I guess that's the way to kind of triangulate to the way you think about profitability of the business. Speaker 300:43:20I think that's fair. Speaker 800:43:21Okay. Thank you for the time. Operator00:43:26Thank you. The next question is coming from Jordan Alliger of Goldman Sachs. Please go ahead. Speaker 300:43:31Yes. Hi. I was wondering if you could talk Speaker 1000:43:33a little bit to where you think we are from a spot market perspective for Truckload pricing and sort of based on where you think maybe that bottoming occurs, how are we in terms of contract timing on your Non renegotiated contracts to this point? Thanks. Speaker 300:43:51Yes, Jordan, let me take that. So first of all, The demand has really pulled back here. That's pretty clear. And as a result, the Spot market has really dried up. There's not a ton of opportunity there. Speaker 300:44:08In the prepared comments, we talked about We're sitting at a contract business that the commitments from The customers to be able to deliver the volumes that were inside of those contract agreements are being pressured Because of the overall demand. So the business right now, we were 6535 contract to spot. The spot Opportunities are not there to a great extent. And so we would expect that, that Eventually flattens out here as we go through the year. I'm not sure if you follow the projections that we have In the marketplace around pricing, but we're anticipating a 16% Year over year decline in truckload spot cost per mile in 2023, most of that coming early in 2023. Speaker 300:45:09And then the contract pricing generally follows where the spot market is on a lag basis. And so inside the Contract business, maybe I'll take you back to the beginning of 2022. And so as we were Entering into new contract business and bidding on contracts that were available, We were looking at the potential in the back half of twenty twenty two with COVID shutdowns, the holiday season, Chinese New Year coming, That prices would hold up more than they did. As things played out, there really wasn't a key season. The demand was soft, the prices came down. Speaker 300:45:56And so as we were bidding on contracts in Q1 and Q2, We weren't as successful on a win percentage as we probably would have liked to have been and certainly We would have been better had we known the drop off that was coming. So then you kind of get us to real time here Q4 and into Q1. We're out there in the market on these contracts. We're bidding competitively and we're feeling pretty good about the win rates. But the demand in the volume there from the customer just isn't strong. Speaker 300:46:32So even with our higher win rate from a bid standpoint, the volumes that are materializing are still challenged. We talked about kind of in Q4, The decline in truckload volume that we had seen and obviously delivered a minus 4% in the quarter, it is not our intention To have negative numbers on our truckload volume, we certainly expect to grow, but it was a soft market. And The good news, I think, for us is as we've come into the New Year, we've seen a better performance on the truckload volume side into January here. When you talk about the contracts themselves and what's coming, one of the things I think over the past Few years during the pandemic that we observed was that what was largely a 12 month bid Contracts had transitioned to contracts that were of lesser duration. And what I can tell you in Q4 Is that continued in that about half, roughly half of the contracts that we bid on We're 12 months and the other half were something less than that. Speaker 300:47:51So even as the market has come down, That mix has remained in the contracts that are less than 12 months duration. So I covered a few of the Parts of your question, anything that I missed? Speaker 1000:48:07No, I appreciate the answer. Thank you. Operator00:48:12Thank you. The next question is coming from Jon Chappell of Evercore ISI. Please go ahead. Speaker 1100:48:18Thank you. Good afternoon. Scott, in the answer to an earlier question, you'd mentioned kind of no change in strategic direction, however, Maybe greater sense of urgency and timing. You talked about the annualized savings by the end of 2023. But as you've been in this new role, Have you found either new opportunities or ways to kind of front end load some of the cost alignment that you have planned for the year? Speaker 1100:48:42So therefore, you're kind of Timing that more with the macro headwinds or some of the volume headwinds you see and aren't still cutting in the back half of the year when conceivably things may be getting better? Speaker 200:48:54Yes. No, thanks, John. There's no doubt it was a tough back half of the year. And that being said, I do see a palpable excitement about the future here. But in the short term, I think one of the things I'm trying to do with the management team and I talked about empowering was also simplifying the message, aligning focus on customers and leveraging Arun and his team to show customer benefit. Speaker 200:49:19And We talk about the amplification of our people's expertise in the field, but we're very focused on expense. We're focused on headcount. We're focused on really tightly managing this business through the first half of the year. But also, as I've said to the senior leadership team, making no assumptions that the wind will be at our back throughout 2023. I think there's additional opportunity for us to get sort of more precise in how we go to market And find efficiencies throughout the company. Speaker 200:49:57I'm really proud of the team. It's never easy to do what happened back in November, But the spirit of the folks in the field and the ability to want to get better, faster, stronger is absolutely here at Robinson. Speaker 300:50:10I can add a little color too just on the cost savings front. So we did make some progress against that We are taking The run rate of Q3 and annualizing it and the commitment was that we would get to a net cost reduction of at least $150,000,000 By Q4 of 2023 and if you look at what we delivered in Q4, You take out the restructuring expense and annualize where we're at, you get to a number that's about 2,270,000,000. So the run rate that we were If you take the Q3 and the annualized run rate of that, that was about $2,400,000,000 So that implies that we've already Are already at about $130,000,000 savings versus that original commitment. Now you can't read into that too much because in Q4, As I had spoke to earlier, we did have a benefit to our equity compensation that reduced The overall expense in Q4 and we wouldn't expect that to continue into 2023. But the net of that is We have made some decent progress. Speaker 300:51:34We are, I think, much better focused going forward on headcount and that will be a key since that's such a big part of our cost structure as we roll through 2023. Speaker 1100:51:46Understood. Thanks, Mike. Thanks, Scott. Thank you. Operator00:51:51Thank you. The next question is coming from Brian Ossenbeck of JPMorgan. Please go ahead. Speaker 600:51:59Good afternoon. Thanks for taking the question. Maybe just two quick follow ups then, just on the expense reduction. It's obviously announced A little while ago and implemented in the Q4, but it still seems like things maybe got worse a little bit faster than you initially thought In forwarding, so you can just clarify if there are additional opportunities on the horizon or you're sort of sticking with the 150 For the time being and implementing that. And then just Mike, I think you mentioned on January a little bit In terms of things stabilized, I wanted to see if you could put some numbers behind that in terms of the truckload market, AGP per day, volume or anything like that will be helpful as you start the 1st 3rd of this Q1? Speaker 600:52:42Thank you. Speaker 200:52:44Yes. I'll kick off on Global Forwarding and toss it over to Mike. The Global Forwarding team has a history of managing expenses really well through cycles. Obviously, the last 18 to 24 months was very unique. So I'm confident that they're on point and where they can find expense reduction That makes sense. Speaker 200:53:07They're absolutely going to do it. And then maybe Mike can give some color to that. Speaker 300:53:11Yes. So Try to make sure I get to each part of your question. So first of all, on the cost savings part, we continue with the commitment to the 150,000,000 Dollar net cost reduction by Q4 on a run rate basis annualized. And I'll just point out maybe the obvious there that the inflationary environment That we're in is as high as it's been in 40 years. So the net cost reduction is offsetting our inflation and delivering the savings There are 2, but we will stick with that. Speaker 300:53:43I will also add that if you did the math on the midpoint Of the expense guidance that we just provided, you'd get to $2,200,000,000 for the year. And again, the base run rate that we're going It's $2,400,000,000 So we're guiding to a midpoint of $2,200,000 which is $200,000,000 worth of savings. So let me address that for a second. We are committed to the net cost reduction. That is what we would consider to be more permanent Cost reduction more structural in nature. Speaker 300:54:16We will likely deliver more savings than just that. But the second part of the savings is more, what I would say, transitory related to the softness in the market. And as we've talked about, we've got a history of adjusting our cost structure with the market. And because we are seeing some Softness there, there is some additional savings that comes along with that. I think another part of your question was about AGP trends. Speaker 300:54:49We did give you AGP per business day on an enterprise basis in Q4, Where we were down 10% in October, down 7% in November and down 14% in December, That softness has continued into January. But as I mentioned, the truckload volume That we delivered in Q4, we have seen improvements Speaker 800:55:18on that going into the New Year. Speaker 600:55:22All right. Thanks for all that, Mike. So I guess the difference between the $150,000,000 and the $200,000,000 you guided to that would be Basically, the transitory, the market based impact, is that what you call out there? Speaker 300:55:34Yes, absolutely. Speaker 600:55:36Okay. All right. Thank you for the time. Operator00:55:42Thank you. We're showing time for one final question. The Speaker 1200:55:54I wanted to touch on with this change in strategic direction, I want to know how this change is being reflected in your Capital allocation plan. You called out wanting to deliver on certain leverage targets, but maybe you could speak to how It could make sense to maybe adjust your capital allocation plans, as you look to kind of change the strategic direction of the company. Thanks. Speaker 200:56:22Yes. Thanks, Stephanie. I'll have Mike start and then I'll wrap up and maybe talk about our capital allocation committee a little bit as well. Speaker 300:56:30Yes. So from a capital allocation standpoint, I think one of the major differences here as of late has been The amount of free cash flow that we've had really resulting from the working capital dollars coming back to us. And We had been pointing to the idea that when the price and cost of purchase transportation in Oceanair and truckload would come back down off of the record all Time highs that $1,500,000,000 of absorbed working capital that we experienced from the end of 2019 To earlier in 2022, we'd start coming back. And of course, in Q3 and Q4, we saw over $1,000,000,000 of that Tied up working capital come back to us and therefore began to deploy that in alignment with our capital allocation strategy. And so, of course, we covered our commitments, our investments, our dividend and our policy after that is to As we are managing our leverage to maintain our investment grade credit rating, any money that's left over after that goes to share repurchase. Speaker 300:57:42You saw our share repurchase pick up quite a bit in Q3 and Q4. And then what we experienced after that Was observing those prices coming down across Oceanair and Truckload, which It informs our forward looking view on EBITDA and therefore, informs our forward looking view on the level of debt that we need To maintain the leverage ratio is appropriate to maintaining investment grade credit rating. And so that's a long way of describing a pullback And share repurchase to make sure that we maintain that targeted leverage. But in terms of the overall capital allocation strategy, While there were some differences in activities as a result of a record free cash flow, we haven't changed our philosophy on how we are planning to deploy our capital going forward. Speaker 200:58:38Yes. And Stephanie, I would just add from a Board perspective, We're making our capital allocation committee a permanent committee, and we're also going to be soon adding additional members to that. And I think this is really going to serve as a great partner to the management team in terms of looking at areas that we can drive value across Speaker 1200:59:06Great. Well, appreciate the time. Thank you. Speaker 300:59:09Thanks, Stephanie. Operator00:59:11Thank you. At this time, I'd like to turn the floor back over to Mr. Ives for closing comments. Speaker 100:59:17Thank you, everyone. That concludes today's earnings call. Thanks for joining us today, and we look forward to talking to you again. Have a great evening. Operator00:59:26Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of yourRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallC.H. Robinson Worldwide Q4 202200:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) C.H. Robinson Worldwide Earnings HeadlinesEarnings Preview: What To Expect From C.H. Robinson Worldwide's ReportApril 25 at 7:17 AM | msn.comC.H. Robinson delivers on AI, but investors still skepticalApril 17, 2025 | finance.yahoo.comDOGE officially begins retirement transformationElon Musk's Department of Government Efficiency ("DOGE") just announced the first-ever "fully digital retirement" process . This fired the starting gun on the biggest economic transformation in American history.April 26, 2025 | Altimetry (Ad)Stocks With Rising Relative Strength: CH Robinson WorldwideApril 14, 2025 | msn.comC.H. Robinson price target lowered to $111 from $118 at Raymond JamesApril 11, 2025 | markets.businessinsider.comC.H. Robinson price target lowered to $100 from $110 at JefferiesApril 11, 2025 | markets.businessinsider.comSee More C.H. Robinson Worldwide Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like C.H. Robinson Worldwide? Sign up for Earnings360's daily newsletter to receive timely earnings updates on C.H. Robinson Worldwide and other key companies, straight to your email. Email Address About C.H. Robinson WorldwideC.H. Robinson Worldwide (NASDAQ:CHRW), together with its subsidiaries, provides freight transportation services, and related logistics and supply chain services in the United States and internationally. It operates through two segments: North American Surface Transportation and Global Forwarding. The company offers transportation and logistics services, such as truckload, less than truckload transportation brokerage services, which include the shipment of single or multiple pallets of freight; intermodal transportation that comprises the shipment service of freight in containers or trailers by a combination of truck and rail; and non-vessel operating common carrier and freight forwarding services, as well as organizes air shipments and provides door-to-door services. It also provides customs brokerage services; and other logistics services, such as fee-based managed, warehousing, small parcel, and other services. It has contractual relationships with approximately 45,000 transportation companies, including motor carriers, railroads, and ocean and air carriers. In addition, the company is involved in the buying, selling, and/or marketing of fresh fruits, vegetables, and other value-added perishable items under the Robinson Fresh brand name. Further, the company offers transportation management services or managed TMS; and other surface transportation services. It provides its fresh produce to grocery retailers, restaurants, produce wholesalers, and foodservice distributors through a network of independent produce growers and suppliers. The company was founded in 1905 and is headquartered in Eden Prairie, Minnesota.View C.H. 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There are 13 speakers on the call. Operator00:00:00Afternoon, ladies and gentlemen, and welcome to the C. H. Robinson 4th Quarter 2022 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. Operator00:00:24As a reminder, this conference is being recorded, Wednesday, February 1, 2023. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Speaker 100:00:36Thank you, Donna, and good afternoon, everyone. On the call with me today is Scott Anderson, our Interim Chief Executive Officer Arun Rajan, our Chief Operating Officer And Mike Zechmeister, our Chief Financial Officer. Scott and Mike will provide a summary of our 2022 Q4 results and our outlook for 2023. Arun will provide an update on our path to a scalable operating model to improve the customer and carrier experience, and then we will open the call up for questions. Our earnings presentation slides are supplemental to our earnings release and can be found on the Investors section of our website at investor. Speaker 100:01:13Chrobinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we will let you know which slide we're referencing. I'd also like to remind you that our remarks Today may contain forward looking statements. Slide 2 in today's presentation lists factors that could cause our actual results to differ from management's expectations. Speaker 100:01:38And with that, I'll turn the call over to Scott. Speaker 200:01:41Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. I'd like to start today's call by expressing my appreciation And the Board's gratitude for the contributions that Bob Biesterfeld made to C. H. Robinson over his 24 years with the company, including his 3 years as CEO. Speaker 200:02:00Under Bob's guidance, C. H. Robinson navigated the challenges presented by the pandemic And the ongoing supply chain disruptions, and he played an important role in positioning Robinson for long term success. We wish Bob all the best. In order to accelerate C. Speaker 200:02:17H. Robinson's strategic initiatives and take the company into its next chapter, the Board felt that a change in leadership was needed. Jody Kozlak, the newly appointed Chair of the Board is leading the search committee to find a new CEO. With Jody's background and I can't think of anyone more qualified to lead the Board and the search process. To give you a little of my background, I've spent over 10 years as a Director here at Robinson and the last 3 years as Chairman of the Board. Speaker 200:02:47I've spent the first 25 years of my career at Patterson Most recently as CEO from 2010 to 2017 and also Chairman from 2013 to 2017. I look forward to working closely with Jody and the Board as well as the whole Robinson team in the coming weeks months. I'm excited to bring my experience and my knowledge of Robinson to the role of Interim CEO. I'm leveraging the relationships I have with the senior leadership to ensure that we continue delivering superior global services and capabilities to our customers and carriers while continuing to execute with great focus on our sustainable growth strategy. During my 1st few weeks as Interim CEO, I've been meeting with our customers and employees who are highly engaged and motivated to win. Speaker 200:03:36And I'm confident in our ability to navigate this transition and deliver for our customers. Throughout the transition, we're increasing our focus on delivering a scalable operating model to lower our costs, improve the customer and carrier experience and foster long term profitable growth through cycles. The current point in the cycle is one of shippers managing through Elevated inventories amid slowing economic growth, causing unseasonably soft demand for transportation services. At the same time, prices for ground transportation and global freight forwarding are declining due to the changing balance of supply and demand. While the correction in the freight forwarding market was certainly expected, the speed and magnitude of the correction in only 2 quarters was unexpected. Speaker 200:04:25With ocean rates on some trade lanes already back to pre pandemic levels, as a result, our operating costs were misaligned. As was announced on our Q3 earnings call, we have taken actions to structurally reduce our overall cost structure. The actions are expected to generate net annualized cost savings of $150,000,000 by Q4 2023 as compared to the annualized Q3 2022 run rate. If growth opportunities or economic conditions play out differently than we expect, We'll adjust our plans accordingly. I believe we're uniquely positioned in the marketplace to deliver for our shippers, Carriers and shareholders through a combination of our digital solutions, our global suite of services and our network of global logistics experts. Speaker 200:05:14Now let me turn it over to Mike for a review of our Q4 results. Speaker 300:05:18Thanks, Scott, and good afternoon, everyone. Our Q4 financial results reflect The price declines and slowing demand in the freight forwarding and surface transportation markets that Scott referenced earlier. Our 4th quarter total company adjusted gross profit or AGP was down $88,000,000 or 10.3% Compared to Q4 of 2021, driven by a 39% decline in Global Forwarding and partially offset By a 5.7% growth in NAST. The market softness was also prominent on a sequential basis With total company AGP down 13%, including a 24% decline in Global Forwarding and an 11% decline in NAST. On a monthly basis compared to Q4 of 2021, our total company AGP per business day was down 10% in October, down 7% in November and down 14% in December. Speaker 300:06:17In our NASTruckload business, Our volume declined on a year over year basis for the first time in 7 quarters with shipments down 4%. Within the Q4, monthly volume declined sequentially from October through December as freight demand weakened. Our AGP per truckload shipment increased 6.5% versus Q4 last year due to an increase in our contractual truckload AGP per shipment. On a sequential basis, however, our truckload AGP per shipment came down 6.5%, but remained above our 10 year average. During Q4, we had an approximate mix of 65% contractual volume And 35% transactional volume compared to a 50five-forty 5 mix in the same period a year ago. Speaker 300:07:09Routing guide depth of tender in our managed services business, which is a proxy for our overall market declined from 1.3 in the 3rd quarter to 1.2 in the 4th quarter, which is the lowest level we've seen since the pandemic impacted Q2 of 2020. The sequential declines in our truckload line haul cost and price per mile that we experienced in Q1 through Q3 continued in Q4 24% year over year decline in our average truckload line haul cost paid to carriers excluding fuel surcharges. Our average line haul rate billed to our customers, excluding fuel surcharges, decreased year over year by approximately 21%. With the cost down 24% and price down 21%, we saw a 3% increase in our NASTruckload AGP per mile on a year over year basis. In our Global Forwarding business, higher customer inventory levels combined with softening demand Contributed to significantly reduced import prices for ocean and air freight. Speaker 300:08:26In Q4, Global Forwarding generated AGP of 100 and $8,700,000 representing a year over year decrease of 39% versus the record high Q4 in 2021, which was up 72%. With these results, our Ocean Forwarding AGP declined $89,000,000 or 43 percent year over year compared to an 86.5% growth in Q4 of 2021. The Q4 results were driven by a 36.5% decrease in AGP per shipment and a 9.5% decrease in shipments. AGP and our airfreight business declined by $33,000,000 or 51.5 percent year over year compared to a 92% growth in Q4 of 2021. This was driven by a 40% decline in AGP per metric ton And a 19.5% decrease in metric tons shipped. Speaker 300:09:28Despite the soft market, the forwarding team continues to add new customers and diversify our industry verticals and trade lanes. In Q4, approximately 50% of our AGP from new business was generated from trade lanes other than the Trans Pacific Lane. Now turning to expenses. Q4 personnel expenses were $427,300,000 up 1.7% compared to Q4 last year, including $21,500,000 of severance and related charges driven by the restructuring that we initiated in November. The restructuring related costs were partially offset by a decrease in equity compensation as we reversed some previously accrued expense due to financial results that came in lower than previously expected. Speaker 300:10:18On a sequential basis, Q4 personnel expenses declined 10,200,000 Excluding the restructuring charges in Q4, personnel expenses declined $31,700,000 sequentially due to lower incentive compensation and lower salaries and benefits associated with reduced headcount. Our Q4 average headcount declined 2% versus our Q3 average. The workforce reduction initiated in November affected approximately 650 employees. While nearly 150 of those employees had left the company Prior to December 31, over 600 had exited as of early January. As we continue to make progress on delivering a scalable operating model, We expect our headcount to decline throughout 2023 as productivity improves. Speaker 300:11:09For 2023, we expect our personnel expenses to be $1,550,000,000 to $1,650,000,000 Down approximately 7% at the midpoint compared to our 2022 total of $1,720,000,000 primarily due to reduced headcount. Excluding the restructuring charges in Q4 of 2022, the midpoint of our 2023 guidance for personnel expenses is down approximately 6% year over year. Moving on to SG and A. Q4 expenses of $176,800,000 We're up $27,900,000 compared to Q4 of 2021, driven primarily by $15,200,000 of restructuring charges and a year over year increase in legal settlements, partially offset by a decrease in credit losses. The restructuring charges in SG and A primarily included an impairment to internally developed software related to the reprioritization of our technology investments that Arun will speak to shortly. Speaker 300:12:13Our approach to investments and investment prioritization is more data driven and more focused on delivering a scalable operating model than in the past, which is improving the value of the benefits we are delivering and allowing us to pivot more quickly if investments are not delivering as expected. For 2023, we expect our total SG and A expenses to $625,000,000 compared to $603,400,000 in 2022. The slight decrease at the midpoint includes an expected decrease in legal settlements in the absence of 2 one time items that occurred in 2022. Those include the $15,200,000 Q4 restructuring charge and the $25,300,000 Q2 gain from the sale and leaseback of our Kansas City Regional Center. 2023 SG and A expenses are expected to include approximately 90 to $100,000,000 of depreciation and amortization expense compared to $93,000,000 in 2022. Speaker 300:13:18Q4 interest and other expense totaled $42,500,000 up $24,100,000 versus Q4 of last year. Q4 of 2022 included $24,800,000 of interest expense, up $10,700,000 versus the prior year, Primarily due to higher short term average interest rates. Q4 results also include a $16,900,000 loss On foreign currency revaluation, up $10,400,000 compared to Q4 of last year, driven by the relative weakness of the U. S. Dollar. Speaker 300:13:54As a reminder, the FX impacts are predominantly non cash gains and losses on intercompany balances, which is why they are not hedged. Q4 tax rate came in at 20.9%, bringing our full year tax rate to 19.4%. We expect our 2023 full year effective tax rate to be 19% to 21%, assuming no meaningful changes to federal, state or international tax policy. Q4 net income was $96,200,000 and diluted earnings per share was $0.80 Adjusted or non GAAP earnings per share excluding the $36,700,000 of restructuring charges was $1.03 Down 41% compared to Q4 of 2021, which was up 61% versus the prior year. Turning to cash flow. Speaker 300:14:47Q4 cash flow generated by operations was a record $773,400,000 compared to $75,900,000 in Q4 of 2021. As we have talked about in prior earnings calls, We were expecting an improvement in working capital when the cost and price of purchased transportation came down. The 698 was driven by a $650,000,000 sequential decrease in net operating working capital in Q4 due to the declining cost and price of ocean air and truckload in our model. Conversely, Q4 of last year included a $200,000,000 sequential increase in net operating working capital as costs and prices were rising. If you look back at the period when cost and price of purchase transportation was rising from the end of 2019 To Q2 of 2022, our net operating working capital increased by approximately $1,500,000,000 Between Q3 and Q4 as the cost and price of purchased transportation has come down, we've realized over $1,000,000,000 A benefit to working capital and operating cash flow. Speaker 300:16:03That benefit has come on a lag basis based on our DSO and DPO. Driven by the increased free cash flow generation in Q4, we returned $507,000,000 of cash to shareholders Through $438,000,000 of share repurchases $69,000,000 of cash dividends. The Q4 cash return to shareholders Significantly exceeded net income and was up by 128% versus Q4 last year, driven by the record cash flow. Consistent with our capital allocation strategy, to the extent that we have excess cash after managing through our commitments, investments and holding to an investment grade credit rating, we are committed to returning that cash to shareholders through share repurchases. Capital expenditures were $27,800,000 in Q4, bringing our full year capital spending to $128,500,000 up $58,000,000 compared to 2021. Speaker 300:17:04The increase was primarily due to an increase in internally developed software. We expect our 2023 capital expenditures to be in the range of $90,000,000 to $100,000,000 Now on to the balance sheet highlights. We ended Q4 with approximately $1,340,000,000 of liquidity comprised of $1,120,000,000 of committed funding under our credit facilities and a cash balance of $218,000,000 Our debt balance at the end of Q4 Was $1,970,000,000 up $55,000,000 versus Q4 last year, primarily driven by our expanded capacity to borrow, Given the strong EBITDA performance, our net debt to EBITDA leverage at the end of Q4 was 1.29 times, down from 1.42 times at the end of Q4 last year. As I mentioned, our capital allocation strategy is based on maintaining our investment grade credit rating, which allows us to optimize our cost of capital. As we anticipate reduced earnings in 2023, Given the strong results in the first half of twenty twenty two, we are planning for a lower level of debt to deliver our leverage targets. Speaker 300:18:20To the extent that we reduce our debt levels, this may reduce the amount of cash used for share repurchases. In December, our board authorized and declared a 10.9% increase in our regular quarterly dividend, Taking it to $0.61 beginning with the dividend that was paid in January. We have now distributed uninterrupted dividends without decline For more than 25 years, over the long term, we remain committed to growing our quarterly cash dividend in alignment with long term EBITDA growth and using our share repurchase program as important leverage to enhancing shareholder value. With that, I'll turn the call over to Arun to walk through our Speaker 400:19:08Thanks, Mike, and good afternoon, everyone. During the Q4, we continued to focus our efforts on working backwards from customers' and carriers' needs to build a scalable operating model. A scalable operating model improves customer and carrier experience and improves service levels while simultaneously reducing our cost to serve. These efforts include operationalizing our information advantage at scale by giving customers insights around price and coverage and providing features to carriers That improve their utilization and cash flow. Increased digitization is a key element of the scalable operating model. Speaker 400:19:45There are a number of data points that demonstrate our progress in 2022, including 183% increase in loads booked digitally by carriers And increased digitization across the board as evidenced by 2,300,000,000 digital transactions with customers and carriers, which represented a 30% increase year over year. In 2023, we will continue to deliver meaningful improvements to our customer, carrier and employee experience By accelerating the digital execution of all touch points in the lifecycle of the load, including order management, Appointments, in transit tracking, cash advances and financial and documentation processes. We made progress on this front in Q4 as well, with the automation of appointment related tasks increasing 34% year over year And in transit tracking automation increasing by 4.50 basis points versus Q3. We are focused on opportunities to automate or make self those processes that are core to our operating model, which we expect will enable us to decouple volume and headcount growth and drive increased productivity, while simultaneously improving the customer experience and service levels. Throughout 2023, we'll provide updates on the progress we're making on shipments per person per day, which is a key metric to measure our productivity improvements. Speaker 400:21:03During the recent restructuring effort, We continued our ongoing evaluation and prioritization of our tech and software projects. Through the assessment of those projects, we determined that some were no longer relevant The acceleration of our scalable operating model and we incurred the restructuring charges that Mike described earlier. The remaining projects are better aligned to improve the customer and carrier experience and reduce our cost to serve and therefore we're allocating more of our investments to those projects. We've also taken steps to align compensation and incentives to support our strategic priority for creating a scalable operating model, which is foundational to being the low cost Operator, which ultimately gives us the pricing flexibility to unlock and accelerate long term market share growth, while delivering our long term operating margin targets. Speaker 200:22:00Growth and freight markets present cyclical challenges. We need to continue evolving our organization to bring greater focus to our highest long term strategic priorities, including keeping the needs of our customers and carriers at the center of what we do, while lowering our overall cost structure by driving scale. I believe in the strategy that the team is executing on to deliver a scalable operating model. We expect this initiative will continue to drive improvements Our customer and carrier experience and amplify the expertise of our people, all of which will drive share gains and growth. And as Arun said, we expect these efforts will also improve our productivity, which will reduce our operating costs and lead to improved returns for our shareholders. Speaker 200:22:45I'd like to close by saying thank you to our employees for persevering during the period of extended market disruption and the market correction that has followed This concludes our prepared remarks. And with that, I'll turn it back to Donna for the Q and A portion of the call. Operator00:23:06Thank you. The floor is now open for questions. In the interest of time, we do ask that you please limit yourself to one question to allow as many people the opportunity to ask questions as possible. Today's first question is coming from Jack Atkins of Stephens. Please go ahead. Speaker 500:23:45Good afternoon and thank you for taking my question. So Scott, if I could address this to you, the change in Leadership at the CEO level would indicate that the Board believes that a change in strategic direction is necessary. But If I listen to the message on the conference call today, it's very similar to the message 3 months ago from the company. So I guess my fundamental question here is, What is actually changing at C. H. Speaker 500:24:10Robinson today? And as you think about the qualities that you're looking for in the permanent CEO, What are those and where does the Board want to take this company over the long term? Thank you. Speaker 200:24:21Yes. Thanks, Jack. Appreciate the question. A few things. First of all, the Board was unanimous in our decision and it really was around An opportunity for this to be an inflection point of performance at the company and new leadership being a component of that In terms of making that happen, as I said in my prepared remarks as well, we were also unanimous in our appreciation of Bob's contribution After the 5 weeks I've spent with our people and in the field, our core strategy of building out our operating model Going forward, I think it's solid. Speaker 200:25:09Obviously, new eyes in terms of a new CEO will give some perspective to that as well. But strategically, we are absolutely in a spot with global supply chains becoming more complex Sort of accelerating performance and moving at a faster pace. Speaker 500:25:37And then in terms of the qualities for the next CEO, can you maybe talk about that for a moment? Speaker 200:25:42Yes. As I mentioned, Jody Kozlak, our Board Chair now, is the Head of the Search Committee. Just for background, Jody was the former Chief HR Officer at Target. So she's familiar in processes like this. We're Using a leading executive research executive search firm that's helping the Board, we're going to take our time. Speaker 200:26:05We're going to be thorough and inclusive, and we're going to be broad in terms of the type of qualities we're looking at for the next CEO. Like I said before, this is a tremendous opportunity for somebody. We're looking for an experienced operator With sharp strategic thinking and someone who really can take Robinson to the next level. I think the next 10 years for Robinson are going to be the most exciting for the company going forward. So The opportunity here is fantastic for the next leader. Speaker 500:26:42Okay. Thank you for the time. Speaker 600:26:44Thanks, Jack. Operator00:26:46Thank you. The next question is coming from Bruce Chan of Stifel. Please go ahead. Speaker 700:26:53Thanks, operator, and good afternoon, everyone. Maybe just a Follow-up on the strategic question, and maybe in a little bit of more of a pointed way. But when you think about Your customer base, how many of them use you for end to end service? How many are both NAST and Global Forwarding customers? And then when you think about Bob's kind of statement before that Global Forwarding was an intrinsic part of Robinson, do you feel the same way Speaker 300:27:33Yes. As we look at the combination of NAST and Global Forwarding, we've seen some great opportunities from a cross selling standpoint Between the 2 and as we pointed out, if you look at the last 12 months, we've had over half of our revenue in AGP Comes from customers who use both Surface Transportation and Global Forwarding Services. We've looked deeper into this. We could probably do a better job Taking advantage of the relationships on both sides, but we have had some pretty compelling results. And I'll share with you one of the studies that we did where We looked at the last 5 years and we looked at customers who use both NAST and Global Forwarding versus customers who use 1 or the other. Speaker 300:28:21And the 5 year compound annual growth rate For customers who use both was 400 basis points better than those who used 1 or the other. So we've been able to leverage customer relationships, bring business from NAST customers to Global Forwarding customers and vice versa. We believe as we think about customers and what they need and what they want, that we can bring a full complement of services that they really need, Where they can get stuff from Center Asia, Center China to Center U. S. With us and do it in a way that is Value added to their supply chain. Speaker 300:29:02So we believe in the ability to leverage both of those businesses, And that's our plans going forward. Speaker 200:29:10Yes. And I'll add on to that. I was on the Board in 2012 when we did the Pfenex acquisition, which really Was sort of the baseline of our modern Global Forwarding business and we have built A substantial business in Global Forwarding and I think have just begun to see those cross selling benefits. I'm a believer that, as I said before, global supply chains are getting more complex and partners that can solve And I've seen that already in customer meetings I've sat in over the last 5 weeks, can create tremendous value for Multiple players, including Robinson. That being said, as a Board, we always stress test the portfolio And challenge ourselves as to the best ways to drive value for customers and shareholders. Speaker 200:30:08I would say particularly, I would say after the last two years, we have a great franchise in our Robinson Global Forwarding business And we have a tremendous opportunity in a world where supply chains are just so much important post pandemic. Speaker 700:30:25And just a quick follow-up there. You all talked a lot about this new, I guess, global platform And some of the tech changes that you're making, Arun, I didn't hear a whole lot about the Global Forwarding side of that. Maybe just some quick comments about what's In store on the technology side for forwarding and ultimately do you feel that Navisphere is the right platform there? Speaker 400:30:50Yes. In terms of scalable operating model, we think of that cross divisionally across NASDAQ and Global Forwarding. The opportunity as it relates to creating a scalable operating model exists in Global Forwarding just as much as NAST. In terms of an increased focus in that context, Global Forwarding is already down the path, but we believe there are acceleration opportunities That the product and tech organization will be focused on starting in the back half of this year. As it relates to Navisphere, I think of Navisphere as a system of record. Speaker 400:31:27There is a lot of much of the work that we're doing It's probably around Navisphere in terms of how we harvest the data out of it, run our algorithms and present it back to customers and carriers in whatever form they choose to consume it. Speaker 300:31:43Yes, I would add on to that, that in the Global Forwarding Business, The opportunity for Tech Enhancements is probably greater. The business is probably further behind. Truckload in the U. S. For sure and LTL. Speaker 300:31:59And so there's more complexity in global forwarding when you get Languages, currencies, culture, customs, that makes it a more challenging environment from tech enhancement standpoint. But that being said, the tech enhancements on the Global Forwarding side have been great. They've done some really nice back house Automation, they've got some customer facing features that have improved services, and they're excited About the tech for 2023, in fact, they've shown the tech to some customers. NAV 2.0 is something that customers are excited about. And it's been a while. Speaker 300:32:39I mean, since our team internally has been excited about the upcoming year with respect to Tech and Global Forwarding certainly is. Speaker 200:32:50Yes. This is Scott. I'll just add on just some perspective from the Global Forwarding team. And When you have basically a stress test that they've had and the amount of volume they moved and the way they did it over the last 2 years, they're very open about Areas where technology can help them improve and to echo what Mike just said, we were with Mike Short earlier this week, who heads up Global Forwarding. And I think he is excited about what's coming, but also excited to drive the change management internally that will get the investment back on the tech investment for the return. Speaker 700:33:27Okay, great. Thanks for the color. Speaker 800:33:29You bet. Operator00:33:32Thank you. The next question is coming from Jeff Kauffman of Vertical Research Partners. Please go ahead. Speaker 900:33:39Thank you very much. A question for Arun. Arun, where when you think of digitalization and digital transactions on the platform, How do you define what's digital versus what's not digital? And thinking about both the forwarding and the NAST businesses separately, Where are you in terms of percent of transactions that are you consider digital today? And where do you want to be by the time we're finished with this change? Speaker 400:34:07Yes. I mean the way we think about digital versus non digital is if there's a manual touch, It's generally not digital, right? So you take in transit tracking as an example. And I think the way a digital first company might approach that might be different than a broker has approached it for the past Couple of decades. And historically, there have been several lots of touches as it relates to in transit tracking. Speaker 400:34:37And the way I think about it is The less we touch the load as it relates to in transit tracking, the better it is in terms of both productivity of our internal people, obviously, And equally, for our customers, it's a better experience because you have less variability in service outcomes and it's a more standardized outcome for them. So that's kind of how we think about it across multiple processes in the life cycle of a load. So think about track and trace, think about document management, payments, Appointments and so on. So it's a matter of driving down the manual touches for each of those processes Systematically, over time, which drives greater productivity and better customer experience and carrier experience. That's kind of how we think about it. Speaker 400:35:27Scott, go ahead. Speaker 200:35:27Yes. I would just add sort of how I talk about it to the employees as sort of an incumbent leader in the space that Is using technology to sort of modernize the businesses through sort of some business examples. I Come from a distribution background, so you look at a company like Grainger and how they've leveraged technology to really drive task, but then Employees who are logistics experts much more productive, and then make technology tools that are sticky to the customer, And that they really appreciate in terms of just making us easier to do business with. And I think Arun's product team is absolutely on that track. Speaker 400:36:15Maybe just to add some color to what Scott said, reducing touches for sure along the lines of what I described, But equally amplifying the abilities of our people, an example might be someone in sales. How do we do targeted sales versus sort of The approach that we might have taken in the past, the ability to take behavioral data and give them insights to be more targeted in their efforts. Speaker 300:36:43And then the second part Speaker 900:36:44of that question, please Arun, where are you today in terms of However you choose to think of it, I was thinking percentage of transactions that are digital. Where do you want to take that in 2 or 3 years? And where do you want to take that long term? Speaker 400:36:58I think the lens to look at it is, these are all inputs and the output that we're looking for is effectively Greater productivity of our people as we measure by shipments per person per day and a better customer outcome or carrier outcome in the case of customers, It's better on time in full performance and greater customer satisfaction, right? So those are the output metrics we look at. And so as a goal for 2023, we have a productivity improvement expectation from these investments Of 15% that we track quarterly, I think it's better for us to look at it that way. And the input metrics might vary because we might see A greater opportunity for productivity in transit tracking versus appointments. And so we'd rather not go there on these calls And just focus on productivity and customer outcomes as the expectations from these investments. Speaker 300:37:55Okay. Thank you very much. Operator00:38:00Thank you. The next question is coming from Chris Wetherbee of Citi. Please go ahead. Speaker 800:38:06Hey, thanks. Good afternoon. Scott, maybe a question here about Global Forwarding. So it sounds like this is something you think is key to the portfolio going forward. So I think it would be helpful to maybe give a bit of a perspective of where you think we are in sort of the normalization cycle. Speaker 800:38:23Obviously, The pandemic boosted rates to extraordinarily elevated levels. And as you noted in the release, we're kind of back down to pre pandemic levels in some of these end markets. Prior to 2020, this business was generating net revenues north of $500,000,000 It peaked out obviously at a multiple of that. What is the right number for Global Forwarding as we start to go forward? I guess, maybe in other words, how much share has been sort of captured there? Speaker 800:38:50What's the cross selling opportunity? If you could give us some perspective how to think about it in the context of normalization, I think that will be great. Speaker 200:38:58Yes, great, Chris. I'll Make a few comments and then turn it over to Mike to dive into a little more granular detail. I would say my statement is Global Exactly that question is what is the run rate of this business on a more normalized rate. I'm super encouraged By Mike Short and his team and what we're doing in the marketplace knowing that we're up against a backdrop of a tougher marketplace this year. But maybe Mike can give some specifics in terms of some numbers to help you with that question. Speaker 300:39:38Yes, Chris, happy to do that for you. So after running Operating income margins of over 50% in Global Forwarding in Q1 and Q2, obviously, we knew that wasn't a sustainable level and the market Come back to us at some point. The normalization, if you call it that, it has surprised us a bit in terms of speed and magnitude Of the correction. And so, I think in that process, we found ourselves with Cost structure that didn't match the business. And so we are in the process of kind of rightsizing that cost structure. Speaker 300:40:17During the pandemic and in some of those periods, we were intentionally investing in our business. There was the ability To get the attention of customers to a greater extent, we were improving customer service, we're investing in technology And the intent all along was to come out of the pandemic in a better place and we feel like we've done that. When you look at the operating income margin, we've still got a ways to go in rightsizing our cost structure and Mike and the team have been getting after that Headcount is down and will be down further as we enter into the New Year. We do think that A 30% operating income margin for the long term is still the right number. And I mentioned The technology and how the technology can help improve the operating margin on a go forward basis, but I'll mention a few other things that I think are key to success And that Global Forwarding business too and things that the team is encouraged for in terms of continuing to gain market share as we go. Speaker 300:41:25But Another one I'd mention is operational uniformity. That's really standardizing a lot of the work and activities that are done There, they have a good start on that, but there is still quite a bit more there that generates efficiency. And the good news is that as they come out of the pandemic The customer excellence scores are pretty solid. Team wants to make them better, but they're in pretty good shape from that perspective. Continuing to build scale, so the pipeline for new customers has been solid. Speaker 300:41:58They're looking at new verticals. They're looking at new trade lanes and building that scale will be important To help us leverage the investments that we're putting in on that business to ensure that they've got a good return, I talked about their Intentions and actions around managing expenses and headcount, that did get out of line a little bit here In the back half as rates in Ocean and Air really came back quite dramatically. And then the last thing I'd mention would be talent acquisition. So there's a lot of talent out in the marketplace. The team has done a pretty good job of bringing in folks That can help us extend into new verticals and extend into new trade lanes and geographies. Speaker 300:42:45And so, continuation of that also Gives us confidence that they can continue to grow market share going forward and that will be the key to success And the key to getting that margin to 30% long term. Speaker 800:43:02Okay. So the idea is relative to that pre Of course of this year and next year on the net revenue line, I guess that's the way to kind of triangulate to the way you think about profitability of the business. Speaker 300:43:20I think that's fair. Speaker 800:43:21Okay. Thank you for the time. Operator00:43:26Thank you. The next question is coming from Jordan Alliger of Goldman Sachs. Please go ahead. Speaker 300:43:31Yes. Hi. I was wondering if you could talk Speaker 1000:43:33a little bit to where you think we are from a spot market perspective for Truckload pricing and sort of based on where you think maybe that bottoming occurs, how are we in terms of contract timing on your Non renegotiated contracts to this point? Thanks. Speaker 300:43:51Yes, Jordan, let me take that. So first of all, The demand has really pulled back here. That's pretty clear. And as a result, the Spot market has really dried up. There's not a ton of opportunity there. Speaker 300:44:08In the prepared comments, we talked about We're sitting at a contract business that the commitments from The customers to be able to deliver the volumes that were inside of those contract agreements are being pressured Because of the overall demand. So the business right now, we were 6535 contract to spot. The spot Opportunities are not there to a great extent. And so we would expect that, that Eventually flattens out here as we go through the year. I'm not sure if you follow the projections that we have In the marketplace around pricing, but we're anticipating a 16% Year over year decline in truckload spot cost per mile in 2023, most of that coming early in 2023. Speaker 300:45:09And then the contract pricing generally follows where the spot market is on a lag basis. And so inside the Contract business, maybe I'll take you back to the beginning of 2022. And so as we were Entering into new contract business and bidding on contracts that were available, We were looking at the potential in the back half of twenty twenty two with COVID shutdowns, the holiday season, Chinese New Year coming, That prices would hold up more than they did. As things played out, there really wasn't a key season. The demand was soft, the prices came down. Speaker 300:45:56And so as we were bidding on contracts in Q1 and Q2, We weren't as successful on a win percentage as we probably would have liked to have been and certainly We would have been better had we known the drop off that was coming. So then you kind of get us to real time here Q4 and into Q1. We're out there in the market on these contracts. We're bidding competitively and we're feeling pretty good about the win rates. But the demand in the volume there from the customer just isn't strong. Speaker 300:46:32So even with our higher win rate from a bid standpoint, the volumes that are materializing are still challenged. We talked about kind of in Q4, The decline in truckload volume that we had seen and obviously delivered a minus 4% in the quarter, it is not our intention To have negative numbers on our truckload volume, we certainly expect to grow, but it was a soft market. And The good news, I think, for us is as we've come into the New Year, we've seen a better performance on the truckload volume side into January here. When you talk about the contracts themselves and what's coming, one of the things I think over the past Few years during the pandemic that we observed was that what was largely a 12 month bid Contracts had transitioned to contracts that were of lesser duration. And what I can tell you in Q4 Is that continued in that about half, roughly half of the contracts that we bid on We're 12 months and the other half were something less than that. Speaker 300:47:51So even as the market has come down, That mix has remained in the contracts that are less than 12 months duration. So I covered a few of the Parts of your question, anything that I missed? Speaker 1000:48:07No, I appreciate the answer. Thank you. Operator00:48:12Thank you. The next question is coming from Jon Chappell of Evercore ISI. Please go ahead. Speaker 1100:48:18Thank you. Good afternoon. Scott, in the answer to an earlier question, you'd mentioned kind of no change in strategic direction, however, Maybe greater sense of urgency and timing. You talked about the annualized savings by the end of 2023. But as you've been in this new role, Have you found either new opportunities or ways to kind of front end load some of the cost alignment that you have planned for the year? Speaker 1100:48:42So therefore, you're kind of Timing that more with the macro headwinds or some of the volume headwinds you see and aren't still cutting in the back half of the year when conceivably things may be getting better? Speaker 200:48:54Yes. No, thanks, John. There's no doubt it was a tough back half of the year. And that being said, I do see a palpable excitement about the future here. But in the short term, I think one of the things I'm trying to do with the management team and I talked about empowering was also simplifying the message, aligning focus on customers and leveraging Arun and his team to show customer benefit. Speaker 200:49:19And We talk about the amplification of our people's expertise in the field, but we're very focused on expense. We're focused on headcount. We're focused on really tightly managing this business through the first half of the year. But also, as I've said to the senior leadership team, making no assumptions that the wind will be at our back throughout 2023. I think there's additional opportunity for us to get sort of more precise in how we go to market And find efficiencies throughout the company. Speaker 200:49:57I'm really proud of the team. It's never easy to do what happened back in November, But the spirit of the folks in the field and the ability to want to get better, faster, stronger is absolutely here at Robinson. Speaker 300:50:10I can add a little color too just on the cost savings front. So we did make some progress against that We are taking The run rate of Q3 and annualizing it and the commitment was that we would get to a net cost reduction of at least $150,000,000 By Q4 of 2023 and if you look at what we delivered in Q4, You take out the restructuring expense and annualize where we're at, you get to a number that's about 2,270,000,000. So the run rate that we were If you take the Q3 and the annualized run rate of that, that was about $2,400,000,000 So that implies that we've already Are already at about $130,000,000 savings versus that original commitment. Now you can't read into that too much because in Q4, As I had spoke to earlier, we did have a benefit to our equity compensation that reduced The overall expense in Q4 and we wouldn't expect that to continue into 2023. But the net of that is We have made some decent progress. Speaker 300:51:34We are, I think, much better focused going forward on headcount and that will be a key since that's such a big part of our cost structure as we roll through 2023. Speaker 1100:51:46Understood. Thanks, Mike. Thanks, Scott. Thank you. Operator00:51:51Thank you. The next question is coming from Brian Ossenbeck of JPMorgan. Please go ahead. Speaker 600:51:59Good afternoon. Thanks for taking the question. Maybe just two quick follow ups then, just on the expense reduction. It's obviously announced A little while ago and implemented in the Q4, but it still seems like things maybe got worse a little bit faster than you initially thought In forwarding, so you can just clarify if there are additional opportunities on the horizon or you're sort of sticking with the 150 For the time being and implementing that. And then just Mike, I think you mentioned on January a little bit In terms of things stabilized, I wanted to see if you could put some numbers behind that in terms of the truckload market, AGP per day, volume or anything like that will be helpful as you start the 1st 3rd of this Q1? Speaker 600:52:42Thank you. Speaker 200:52:44Yes. I'll kick off on Global Forwarding and toss it over to Mike. The Global Forwarding team has a history of managing expenses really well through cycles. Obviously, the last 18 to 24 months was very unique. So I'm confident that they're on point and where they can find expense reduction That makes sense. Speaker 200:53:07They're absolutely going to do it. And then maybe Mike can give some color to that. Speaker 300:53:11Yes. So Try to make sure I get to each part of your question. So first of all, on the cost savings part, we continue with the commitment to the 150,000,000 Dollar net cost reduction by Q4 on a run rate basis annualized. And I'll just point out maybe the obvious there that the inflationary environment That we're in is as high as it's been in 40 years. So the net cost reduction is offsetting our inflation and delivering the savings There are 2, but we will stick with that. Speaker 300:53:43I will also add that if you did the math on the midpoint Of the expense guidance that we just provided, you'd get to $2,200,000,000 for the year. And again, the base run rate that we're going It's $2,400,000,000 So we're guiding to a midpoint of $2,200,000 which is $200,000,000 worth of savings. So let me address that for a second. We are committed to the net cost reduction. That is what we would consider to be more permanent Cost reduction more structural in nature. Speaker 300:54:16We will likely deliver more savings than just that. But the second part of the savings is more, what I would say, transitory related to the softness in the market. And as we've talked about, we've got a history of adjusting our cost structure with the market. And because we are seeing some Softness there, there is some additional savings that comes along with that. I think another part of your question was about AGP trends. Speaker 300:54:49We did give you AGP per business day on an enterprise basis in Q4, Where we were down 10% in October, down 7% in November and down 14% in December, That softness has continued into January. But as I mentioned, the truckload volume That we delivered in Q4, we have seen improvements Speaker 800:55:18on that going into the New Year. Speaker 600:55:22All right. Thanks for all that, Mike. So I guess the difference between the $150,000,000 and the $200,000,000 you guided to that would be Basically, the transitory, the market based impact, is that what you call out there? Speaker 300:55:34Yes, absolutely. Speaker 600:55:36Okay. All right. Thank you for the time. Operator00:55:42Thank you. We're showing time for one final question. The Speaker 1200:55:54I wanted to touch on with this change in strategic direction, I want to know how this change is being reflected in your Capital allocation plan. You called out wanting to deliver on certain leverage targets, but maybe you could speak to how It could make sense to maybe adjust your capital allocation plans, as you look to kind of change the strategic direction of the company. Thanks. Speaker 200:56:22Yes. Thanks, Stephanie. I'll have Mike start and then I'll wrap up and maybe talk about our capital allocation committee a little bit as well. Speaker 300:56:30Yes. So from a capital allocation standpoint, I think one of the major differences here as of late has been The amount of free cash flow that we've had really resulting from the working capital dollars coming back to us. And We had been pointing to the idea that when the price and cost of purchase transportation in Oceanair and truckload would come back down off of the record all Time highs that $1,500,000,000 of absorbed working capital that we experienced from the end of 2019 To earlier in 2022, we'd start coming back. And of course, in Q3 and Q4, we saw over $1,000,000,000 of that Tied up working capital come back to us and therefore began to deploy that in alignment with our capital allocation strategy. And so, of course, we covered our commitments, our investments, our dividend and our policy after that is to As we are managing our leverage to maintain our investment grade credit rating, any money that's left over after that goes to share repurchase. Speaker 300:57:42You saw our share repurchase pick up quite a bit in Q3 and Q4. And then what we experienced after that Was observing those prices coming down across Oceanair and Truckload, which It informs our forward looking view on EBITDA and therefore, informs our forward looking view on the level of debt that we need To maintain the leverage ratio is appropriate to maintaining investment grade credit rating. And so that's a long way of describing a pullback And share repurchase to make sure that we maintain that targeted leverage. But in terms of the overall capital allocation strategy, While there were some differences in activities as a result of a record free cash flow, we haven't changed our philosophy on how we are planning to deploy our capital going forward. Speaker 200:58:38Yes. And Stephanie, I would just add from a Board perspective, We're making our capital allocation committee a permanent committee, and we're also going to be soon adding additional members to that. And I think this is really going to serve as a great partner to the management team in terms of looking at areas that we can drive value across Speaker 1200:59:06Great. Well, appreciate the time. Thank you. Speaker 300:59:09Thanks, Stephanie. Operator00:59:11Thank you. At this time, I'd like to turn the floor back over to Mr. Ives for closing comments. Speaker 100:59:17Thank you, everyone. That concludes today's earnings call. Thanks for joining us today, and we look forward to talking to you again. Have a great evening. Operator00:59:26Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of yourRead morePowered by