C.H. Robinson Worldwide, Inc. — 2023 Q3

Yes. Chris. I'll have Mike break in and just kind of give you some details of what we're seeing. You set that question up well, then let's just jump in.

Yes. Overall, we're seeing a soft freight market. We referenced that. I think you've been hearing that from others. It seems to be lingering. We're not seeing any meaningful inflections yet in volume or rates. But I would also add that the way we approach this is regardless of where we are in the cycle, our pursuit is to outperform the market. And we remain focused on providing exceptional service to our customers and streamlining our processes, amplifying the expertise of our people with our tech, improving our operating leverage, gaining market share. We feel like in Q3, we made progress on all those fronts.

Yes, Jack, let me touch on some things there. So first of all, just maybe I'll cover the capacity side. The carrier capacity is contracting, but I think less so than we would have expected at this point in the process. And when the market has been bouncing along the bottom like it has, pricing is really -- we're really pricing at or near the breakeven cost for the carriers.

Yes, good question. It's something that we talk about often. First of all, I'll start and say I feel really strong about our capacity, and it's something that we execute on each day. As a matter of fact, we're building ourselves up, as you know, for the eventual rebound of the market. And that eventual rebound, we need to have the capacity while keeping our headcount in check.

Yes, Scott, let me chime in on those. So first of all, we kind of talked about the marketplace and where we're at. You're right. I think it's Slide 8 in the deck that points to where we are in the cycle, and at this point, we've been bouncing along the bottom for quite some time. And so we've -- what's unusual, I think about this point in the cycle is we've had an opportunity to reprice our contracts pretty much across the board, so we've kind of reset them now. And it's a question about when the rebound comes. And when it comes, a couple of things happen, as you know.

Yes. So on the second part of that, the -- I think you were talking about Convoy going out of the market and how does that impact the market? I'll make a couple of comments on that.

LTL guidance. Temporarily leaving.

Yes, LTL capacity temporarily leaving the market. Yes, thanks for picking up on that point. The idea there was while Yellow went out of business and that capacity then came out. There is a process there where the assets that are still useful will be redeployed by new ownership and through the new hubs and probably come back into the market at some point. And so that was the intent of the word temporary to the extent that the assets are still viable and useful they'll find a new owner, a new home, and probably make their way back into the system.

Yes. On the LTL side, I think what we've seen in the near term has been positive in terms of an increase in AGP per shipment related to that move because they were a bigger part of that market in terms of the capacity to serve. And so I think that, unlike the Convoy example is a more meaningful impact and it did -- we did certainly see it.

I can start. In terms of productivity improvements, we're at 15% -- 18% year-to-date, and we expect to end the year at 15%. Having said that, we feel pretty confident in setting targets for subsequent years at a similar rate. So we're working on our 2024 operating plans, and I would expect we target a similar productivity improvement, compounded that would be over 30% by the end of next year in terms of productivity improvements. So I feel pretty good about that. Productivity is -- and the way I said this in my prepared remarks, productivity ultimately is a measure that considers volume, right?

Jon just to add on that. And Arun hit it is that the key there is we're laser focused on driving productivity as well as growth, whichever one will do it in combination in driving that. So that's super important. And it's -- and that laser focus extends to the rebound as well. I can't express that enough that as we get ready for this market rebound. This will be -- this is super important from a productivity perspective and separating that headcount and volume growth.

Yes. Let me take that one. I think your observations are accurate. Generally, when you talk about the industry and price transparency and I would even perhaps add length of load being pressures on AGP that are kind of realities in the marketplace. Now what we're focused on are other things that help us in that regard. So in our plans, the ability to buy better. And also, I talked a little bit about the competitiveness that we're seeing right now.

Yes. Let me hit that a little bit and then pass it over to Arun. We've got a great pipeline. We've been executing on the pipeline. I think you can see it in our results. If you go back to some of the cost savings initiatives we talked about. We started at $150 million cost savings against Q3 run rate last year. We increased that to $300 million. We're now talking about $360 million.

Yes. The way we look at it is just continued focus on operating leverage, and we've got a whole bunch of new tools in our toolbox. We got Gen AI, we've got Lean. And the point is what we've -- when we talked about this, we said this is a multiyear roadmap of opportunities. We got to 15% productivity improvements this year, and we have -- to Mike's point, we have a big backlog where we believe that we can continue to unlock significant productivity improvements in subsequent years, and we would target another 15%, like I said, in 2024.

Yes, Jordan, this is Dave. I'll just add on to there. The -- and I feel really good around the teams embracing the kind of new clock speed initiatives, just really driving more definitive, more speed of decisions. I think it really sets us up well in driving waste out, less manual touches. Everyone's really locked arms on that. And so we feel good about that. So it's a good question.

Yes, Dave, thanks for the question. It's a super important question. Let me be clear that our pursuit is both market share gain and margin. So it's profitable market share. When I talk about beating the market, I'm talking about being able to maintain our margins given the market that we're operating in, while also gaining market share.

Yes. Tom, let me take your -- the first part first, which I think we've covered a variety of elements around that. But I think you've characterized it fairly within that contract space as prices come up, there is some ability to get squeezed. And whether this cycle is like the past cycles, what will really matter is the pace or the magnitude at which those pricing increases come back as the market normalizes.

[indiscernible] GF I think generally, we have to hit bottom on GF and what I would say to that is, we haven't seen any meaningful changes from Q3 on the GF side. We feel great about our business there and the share that we've been growing and the work that the team has been doing and the preparations for when that demand comes back. But no green shoots to speak of there yet.

Yes. Let me give you a couple of examples. One example might be appointment automation. We work with a lot of customers. A lot of customers have different systems into which we have to go to make appointments for our carriers to go load and unload, right?

Yes, that concludes today's earnings call. Thank you for joining us today, and we look forward to talking to you again. Have a great evening.