CHRW - Earnings call transcript Q2 2018 | C.H. Robinson Worldwide, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson Second Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode.

Following today's presentation, Bob Houghton will facilitate a review of previously submitted questions.

As a reminder, this conference is being recorded, Wednesday, August 1, 2018. the Relations. to turn President Houghton, now Investor of will conference Bob over Vice I

Robert Houghton

Donna, Relations good Chief you, Biesterfeld, be Clarke, Thank and Financial Chief John today our Chief President Wiehoff, will quarter website be Operating call Officer Chairman John, that accompany slides chrobinson.com. Andy, Transportation. provide found of Surface Presentation and and Officer; the Bob will Executive our and Andy commentary remarks results. can section on American and morning, our at Officer; in Bob everyone. Investor XXXX North On of second their

follow X responses yesterday. expectations. call we I'd to will will today's that factors in contain our our the release received remind I turn to the pre-submitted may you that presentation results management's lists We questions from that cause to with differ like remarks And could earnings Slide after actual over that, statements. our with today to forward-looking John.

John P. Wiehoff

and Thank the about. headline opening you'll good to of remarks, some Thanks, my Bob, hearing us highlight be morning, I In joining Thanks, you our themes quarter call. everyone. bob, want earnings second talk for that

tax performance on Bob in reform, operating and in income us financial pleased strong financial more quarter. quarter. XX% U.S. trends volume in basis increase shareholders increase with both prepared results in operating and First, provide remarks. color this our and returns Volume income, lines. with the we in of of XX growth Combined will to point our the a this quarter nearly our their most double-digit increase with performance improved by margin. in service are delivered overall We benefits the to net enabled revenues our cash Andy

see very high the We continue freight in marketplace. demand to

the healthy Demand more customer is it's a our for driven obviously Our the of supply of year. by high volatile relationship. the the reflect and and expectations through July reflect economy, of continued side the demand demand that for interactions and remainder results part equation

new equipment, supply lanes On the owners side, logging significant and adjust and we impacts preferences realigning certain of their freight shortages, device driver market. the lot to capacity a orders for high networks and to see on

show the our business price quarter. in have conditions our approximately do of remain most contributed off of tight cost This double-digit escalate. some lines to We America quarter the significant We the in in leveling XX.X% continues the net increases of truckload the revenues. price year-over-year our charts In portfolio. now reflective market cost pricing sequential marketplace of portion increases, carrier cost quarter, across increases. pricing expect year. of to pricing service the and for improvement we remainder another our of this significant with increased experienced While business, line North and Pricing to our across

second price the globe. customer while the around Our between a in increases resulting strength of guides current increase all rapidly to shift spot chain opportunities, delivering carriers in both is freight a freight to participate rising portfolio reflect to model supply volume that our also contractual typical of environment. in shippers routing market. deteriorate, In we market environment, and the shipper seeing spot into expertise are freight the ability long in and our quarter business an is our relationships market standing price balance The ability activity spot

people, technology process, drive focused also helping market are and to spot our when fulfilling they financial to it the I'll committed to With spot world, customers Andy commitments leverage turn right growth opportunities our while over over our supply is shippers business customer secure chain believe We and expertise firmly honor while market time, comments those our to around model to to continuing build our We balanced on with leveraging available. capacity. review relationships become also introductory the statements. long-term carriers

Andrew C. Clarke

everyone. Thank morning, and John, good you,

work Let begin network in our team Robinson entire this global by volatile across hard of the recognizing the me freight environment.

performance new push then as greater was them to even best continue we milestones, ones. through Your to in reach class,

always it continuing better, say important revenues and operating work. organization doing but good for both future up significant in We a to ways make investments profit, Our it striving of growth. also saw increase is double-digit the keep you is for and thank while net to

Congratulations margin expansion Forwarding on a delivered improvement. which Global in grew Services team, operating operating basis Surface European our businesses. margin year-over-year and significant NAST, sequential also We Managed operating to and Transportation income the made

work and award to improve impact team environment, his segment to an of will continues have out-sized had challenging profits this While Bob on fell profitability Robinson Fresh. short the plans Robinson business management in this exceptionally hard of share in remarks. ELDs prepared Fresh our expectations. negative

to on results. and Now slide our financial four

Forwarding, revenues net by and services, Total Second led driven the costs. LTL LTL higher $XX billion fuel million, $XX volume or and quarter was most increased total lines, company revenues up higher Net $XXX increased million, to XX% significantly in truckload growth in by $X.X XX.X% up quarter. pricing Global growth service million. and nearly revenue across services,

variable Total see of primarily investments improved million, a the in versus XX% the operating increase is expenses as the align in period. Personnel the benefits our increased revenues increase to our which year Global $XX in way best quarter, We our shareholders. compensation, or increased where million employees net performance-based the on performance. result financial XX.X% continue XX.X% our increased expenses pay the of interest of to based Forwarding We an business, prior quarter. is believe with the our in $XX

$XXX Total the count and primarily services SG&A partially $XXX occupancy, by opportunities to were in and travel in and decrease Fresh for offset million maintenance. increases head in the million, doubtful quarter, quarter, expect in to quarter head allowance These stronger equipment X.X% increased slightly entertainment to partially last rental were and second our versus in up count the year, second XX.X%, percent given Global of by full as income purchased was up XXXX operating led accounts XXXX. in Total year. for by elevated compensation expenses. in a this the acquisition performance head in XX.X% increased over XXX improvement the versus year's of was expenses Robinson be average These point and as Milgram. a well offset quarter, growth count as company the net We versus quarter revenues last XX Forwarding, declines a by Operating variable of basis year. a driven income first basis support increases point NAST. the improvement and were

than equal still have we is to And this greater to grow our Our while income do net operating to revenues. nice a objective at this made area, work in in quarter. strides rate or teams

processes, and technology in to will and growth make We to drive efficient. people, our invest continue to our our our operations our business, in more

benefit reform includes up Second and quarter $XX.X On impacting U.S. XX.X%, the December of $X.XX second increased $X.XX year. million last passed $XXX from net share the produced tax which an from of per quarter, items net in income. other income in XXXX. five We act of to million diluted earnings slide

corporate tax by down was the tax year. reduction the tax effective U.S. from rate. lower The rate last quarter was primarily rate XX.X% XX.X%, driven second in The

tax to expect Our our year-to-date between for XX.X%, continue effective XX% was be we to tax rate rate year. XX% the and and full

this for call, adopted recognition revenue of quarter earnings the As update noted accounting first standards in we new quarter in the year. first our

our year, result, in included financial decrease do to significantly was a a this As our operating and Robinson We the does material $XX second results. impact are not of There that it shipments to however, approximately in-transit net policy this revenues gross on are, revenues. no million. sourcing, impacts in now our however, overall have quarter expect impact in results, Fresh

country last Every revalue other from our capital quarter, we and $X.X strengthened loss hold statement. U.S. quarter U.S. against million, against we is where business dollars. the resulting $X conduct impact The dollar this and revaluation. million on line gain interest functional resulting due our quarter, expense valuations by and cash our Second on increased to U.S. of year. gain reflected the Future The will to million are $X.X and income. in The debt interest the and several dollar an was currency or balances working income down totaled required interest rates. on continue currency in offset currency higher decrease peso, from variable movements Mexican levels have this expense, key higher Euro currencies in our partially the RMB, net each to an including

compensation Our by in nearly partially share down X% of our count the activity plans. was as in were quarter equity the repurchases share impact offset

operations to driven year, last by quarter, six, from in growth net income. up XX% flow second in the cash totaled $XXX Turning slide versus primarily million

flow earnings capital improvement. A and flow from operations increased performance first the to year-to-date drove cash six of cash the combination $XXX working improved increased For months, million. XXX%

We expenditures the to expect for the of half with million capital Capital dedicated totaled and $XX.X full strong between continue to expenditures back to continue of flow expect cash million, quarter, majority to $XX technology. the in drive year million year. the $XX and we performance

over million increase X. have in is to the a combination dividends period. million over a shareholders increase. returned $XXX Our repurchases returned shareholders, to capital distribution XX% share on we summarized and $XXX a through slide year-ago of Year-to-date, We versus XX% quarter, the

and our performance. for We and that to culture fit priority our in Acquisitions value continue financial us. ways top capital a opportunities that to add to model improve business customers our deploy evaluate both remain strategies,

the last and over our five returned distributions have We shareholders billion over we continue years, reward shareholders capital to forward. moving to $X.X will with

recognition revenues, on reflect capital adoption contract increased accrued of sheet the XXXX, the revenue assets activity gross increased the on increase accordance receivable. fourth lines balance policy. balance and transportation driven accounts expense X, The the slide sheet to in in by the resulting the on with quarter working of versus Now in-transit X.X% and

million periods. improvement of fact QX to increased revenue XXXX both continue despite and versus end XXXX, We both over the experience in of that $XXX the in gross DSOs

weighted Our end comments current up our morning placement debt, in debt will with senior AR average credit wrap quarter. billion. our balance private at and securitization, our a Across rate facility, the I was X.X% notes, my was look this trends. $X.X interest quarter at

share one of X% period X%. increased practice business approximately additional July versus decreased global Truckload the day year. volume XXXX XX%. volumes per-business-day year-ago per comparison day has business has the July consistent increased Our where net This net versus revenues. has prior is the to revenue

performance in volume revenue sequential net We truckload and with per do We our in revenue of August improvement growth the tightening towards continued are end weather-related July. our growth the began net company in total quarter, the our of from day expect begin strong in rate to pleased lap XXXX. week we of moderate as the the truckload last market to which disruptions

per XXXX in XX% quarter and third reminder, August, in X% increased business a September. July, net revenue in day As X%

Robinson and at from call Before the work I transportation express competitive. shareholders fellow an our like customers, turn our suppliers, the successful. globe over Global Bob, that to across make I'd that will to logistics people our has volatile our to been of and both all day extremely industry be and to and always thanks every our is colleagues, the

Our performance is every evaluated day.

We excellence you. Your this listening these turn results has commitment will appreciate in context over shown And our thank to you and I additional now all to provide it performance. to we through morning. on Bob segment in

Robert C. Biesterfeld, Jr.

morning, America the I nature Andy. Thank To performance the stage to the mile for represent North segment Good have update gray market. customers the since discussion, services. highlight on cost all set and and lines slide fuel I'm provide and the revenue blue today you, the On logistics you of speak net opportunity all to costs the the percent of change our everyone. volatile both with rate to operating first an for of carriers, want excited performance. per net transportation line in XX, The XXXX. light represents to truckload margin dark and

around As the and North This in cost in decade. the quarter. highest level increase levels per his both mile XX% change were rate mentioned remains remarks, opening seen this near America truckload of in we've per this John mile

through are that to see freight the in these level high cycles. our maintain we market, freight margins You able can extended the despite of volatility

versus points have transportation increased quarter XX.X% million of years net time basis revenues during up second over revenue five Our same period. annual is ago, period the $XXX and this our five-year margin net XX

is second volatility Services of that guide depth a shipper's was average X.X, capacity guide routing our that In from the Managed One executing depth we the second to guide average in on routing market quarter, representing quarter and metrics use is guide of was average also The carrier routing measure market business. routing the By in guides balanced of the a most shipment routing to cases. the and in country, weeks parts roughly the in depth X localized between where certain comparison, both indicating included X.X. displacement supply spiked demand. the periods

capacity North America The a it motor increases challenging great chart working marketplace customers experience that pricing We to across of number environment. serve degree think do been job customers this tight help and four these to American like does carriers bring in solutions across our that our fact cyclicality provide innovative and quarters this trucking our increasing and past the a So, the Robinson in dynamic environment. choose and high in work have industry to consistently I'd North great volatility of recognize illustrating are market. market to C.H. us fast-changing that network. this to the carriers broad-based a for makes with possible for navigate our we our remain The employees in customers. our over

last change in per mile and the price absolute increase. continue cost versus per to While slide mile year-over-year slightly XX price the chart moderated and the that cost quarter, indicates on

introducing data per for price shows C.H. slide. slide graph the new and this previous since cost a XX mile mile truckload the cost are on per Robinson. America The and We that quarter slide average shows price XXXX from North underlying

have cost slide the mile per on excluded per scale We to proprietary data. protect mile actual price our and the

quarter The pricing chart adjust marketplace mile. since second of inflation. volatility, fifth we've of mile per to cost, changes increases response This quarter between also customer rate to both rough freight over significant a our XXXX periods costs have even that truckload consecutive generally continued and pricing a We've in gap carrier market represents price conditions. period. maintained shows X% and our high cost and in North levels per in Despite at America the increased time consistent annual of price average in sequential this

pricing in continued $XXX strong led Surface Turning business. sharp to have In contractual contractual quarter, to led our freight. across by demand commitments of of NAST adjust worked In quarter we reflect in and the XX.X% capacity the portfolio tight rising costs. the while to to to lines. our slide with our in freight our growth increases our net North XX revenues another market, each service our environment continuing and increased Transportation to America business, cost million double-digit honor truckload of customers

declined transactional volume shipments. our failed. volumes million in Repricing Our in declines also in as contractual were transactional offset growth routing XX% and for secure the the and in versus the versus truckload an increased by by period approximate negatively higher active net volume to capacity declines XX% helping revenues did quarter, teams in in contractual as volume Led volume The customers mix the XX.X% volume transactional quarter. XX% year-ago of contractual guides activity within X%. spot year-ago our and NAST increased contractual of XX% double-digit mix a X.X% quarter, in where period. the resulted combination $XXX the pricing, market were impact the growth transactional shipments the

trends month per into improved start and volume day in in and has X% this volume the just truckload declined the sequentially third the quarter. July. of improved every Truckload Our quarter year second

quarters repriced couple the successfully our have confident over opportunities execute this our contractual contractual we're of We last and much through ability our the portfolio year. to of remainder in against of

disciplined remain the that to the volume pricing At conditions. we improve our same time, will continue balance we as our and So, on performance we through adjust move of market will to XXXX. expect will reflect pricing

business close the in remains the ELD above We took quarter mandate adoption. growing our a long-term NAST volumes hard benchmarks this started within balanced enforcement X July. is industry of market not industry effect versus benchmarks. The that on focus volume and our goal taking share April of slowing new on second Our to rate in growth truckload gap and and carrier

first a X,XXX pricing fact, year. in of X% improvement increase to to our new this new carriers successful rate of In moved motor we business, quarter service our and our versus shipments quarter for approximately the needs a company strong of quarter Robinson growth to carriers last a The logistics carriers the our of and continue increased by sequential higher and e-commerce. pricing by them XX,XXX adoption $XXX owners. intermodal increasing. addition freight for Robinson every that in thousands in allows driven was is new Within and This in carrier increases volume, third-party customers. volume to as second sequential allows see increased in and another securing a million, C.H. XX.X% second is contributing net meets driven expand roughly X% delivered XX% manufacturing a of quarter, XX.X% In solutions truckload their in and Carriers primarily C.H. added driven in increase which largest to revenues quarter. carriers motor North be volume. in year's the the life over for of America network us in Net improvement choice revenues double-digit We These quarter, performance. new performance. less-than-truckload X.X% business quarter to line, bring increase by our

results network benefiting income to efficiently launched NAST the us new Slide within technology the more are customer's allows that our operating performance. move to outlines quarter XX from Our rail. we road that from freight our last

to way XX.X% for Andy of quarter XX.X% variable higher impact mentioned, environment. Operating is NAST also $XXX results to Second employee and challenging reflected I'd well. performance-based and NAST interest, against is and quarter performance best shareholder the navigate basis points this as to continue thank our progress make this improved This believe this to and pay basis operating performance our organization margin we strong productivity income our customers increased like as initiatives of strong expense. efficiency entire in operating freight the financial to improved and quarter. million. XXX compensation points includes and strong NAST, align sequentially. And we another NAST helping Within carriers our XX performance for the

productivity investments and office continue improve technology tools further our driving match Our selectively that scale. to and profitably activities both ability shippers across maximize our our to network through automate carriers. interactions customer are and locations our consolidating and carrier our to We're

the result, down and quarter. the As a count growth head to NAST was in decline rate nearly in X% continues of

full NAST modestly expect to continue flat for We count be down to to year. head the

business. increased in Forwarding of growth volume Global our revenues service in quarter, and the lines. XX million each pricing slide to Global to and with net Forwarding $XXX Turning our XX%

Milgram Our combination Canada wins. percentage Milgram acquisition contributed X.X Ocean quarter new of through and points in increased growth existing shipments with quarter. XX.X% to net business points X% of & in revenues the contributing a percentage approximately approximately Company in to quarter in Ocean's the that growth. customers X growth the the increased with

business With year. over the pipeline existing our in continued robust balance of do both of the sales expect we Ocean and new customers, growth this

Second approximately X% gateway to and quarter cities. Air to Milgram contributing benefit from air grow points. we X in quarter with net density investments Air revenues in continue shipments percentage volume increased our XX.X% approximately the increased as

also this across adjustments approximately our we service in expanding Milgram the portfolio to strategy to Customs our our second second the contributing increased that quarter customs include transactions quarter the as broadening revenue pricing and continue globe. growth. Our to presence results Customs with quarter market points in reflect percentage net of XX.X% execute increased XX current conditions. XX%

to business offering an Forwarding geographic and expanded from Global continues Our footprint. benefit service

quarter Forwarding seventh revenue our the operating of Forwarding double-digit represents net outlines Global XXXX by income consecutive growth. our Slide of performance XX is Global quarter terrific performance. team. This second The

XX.X% percentage the year-over-year variable $XX accounted count higher in expenses XX.X%. by basis to X.X% head increased of points Operating count and margin XXX income for compensation declined million. driven X.X operating quarter in Milgram increase the approximately Operating points quarter, primarily growth. expense. head a to XX.X% increased Second

a their expectations. the results to call, we for and first As our business Global quarter improving rose plan our to challenge. they earnings stated We organization quarter's Global performance profit on last Forwarding rapidly well fell Forwarding challenged deploy below

revenue sequential see X%, the can operating sequential a lines and by SG&A you income count improved second led sequentially bad XX, in on quarter As declined slide quarter basis tighter service X,XXX lower increased Forwarding's and basis head sequential operating expense controls. all operating Global average XXX% points. while declined margin and Net on debt versus X% increased prior

congratulations Forwarding with pleased very offer this turnaround are this for I'd quarter. entire Short very like We their Global Mike and to outstanding profitability and rapid of the a team execution strong to

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Over to continue to the be we our segment. margin Forwarding leading Robinson the Global segment companies Transitioning to of market. other Fresh our with slide operating consistent performance and in long term, XX the expect

XX year-ago $XX were was our levels. by an performance. income net committed in outlines and were Truckload net there promotional year. business from revenue. increase of impacted Fresh costs the no impact compression business fresh recognition Higher net but strategic the partially to as in for in revenue to X%, $XX quarter, last volume volumes in business revenues operating our XX.X% revenue contributed revenues revenues shipment approximately below revenue by $XX within transportation million, transactional LTL business. due the to the purchased policy total declined were activity Case levels margin net million X.X% Robinson volume produce negatively exiting of and well sourcing change the as down retail. growth customer Slide The customer declines also per lower Transportation decline. primarily Sourcing our offset a million

Robinson to XX.X% partially million claim. head reduction SG&A XX.X%. X% offset as reduction basis auto declined compensation income by Operating were count expense. operating quarter in and a the $X a in profit performance ELD this over on well mandate are greater the last has hard business quarters. a To the enforcement are the impact clear, a temperature-controlled quarter XXX below the increased expenses contingent loads fell of in we this quarter level common slightly not Second million. variable also satisfied and with points the profitability X% The expectation declined include results several had our $X Fresh the to of in fresh produce be second and Operating erosion decreased multi-fit that multi-stop, of margin liability business. of

Our customers Robinson more set our Fresh contractual a segments. relationships business has concentrated business of other than with longer-term

marketplace as business for exited and controls. we the certain business office same operating invested progresses. of in in Many facilities the reprice long-term opportunities technology reflect Robinson We've not offset So, to amount within expense margin were efficiency, conditions NAST quarter look continue committed stringent committed to our do during business. our improve on the network, Fresh implemented our year have we'll to also to sourcing customers the transactional to as and compression second the repriced portfolio

to Moving corporate and other all our slide XX. businesses on

still in America, enabled The nearly control driven Services corporate allows customer required all miscellaneous and $XX to increased of As system, to The Managed complex selling of result revenues lines the in not pricing North additional highly combination revenues Freight our carrier-selection customers to billion. quarter in which X.X% investment process us their under Customers without our the their $X quarter for and new to growth management truckload manage income European increases includes expand automated chains supply basis reminder, X% wins. a Other a to XX.X% management by them other was technology. quarter, to value and XX net increase primarily of and Transportation increased existing Services operating but transportation the invest service by only revenues, this in our million. Transportation outside margins customer geographic $XX.X Surface million business. the unallocated business, business of increased net expenses. other Managed in nature the Surface points.

new trends business, pipeline in quarter. strong We throughout volume expect and improve this have also the of a we third business to

and and call delivered some wrap final margins. growth commerce take Before in significant marketplace with profit environment, quarter and a We the business top strong we back on Through overall to line dynamic section a our this them performance. assisted challenging business I'll their helped businesses. in our freight I the and expanding for navigating turn bottom John the customers to up minute accelerate unit comments, results

move we of and energized of balance by opportunities XXXX beyond, As the through us. the I'm ahead

address We will our focused deliver and services XXX,XXX innovation will logistics capabilities highly our I'm I'll will to deliver our Thank our industry our to and to some success closing to accelerate value customers be customers analytics technology leverage we technology. this questions. processes global and comments shareholders. strong remain before continue carriers you pre-submitted offering turn continue and add back digital our continue transformation, your and via how to our active our investments advanced to listening emerging comprehensive leading on Driving make morning, to people, confident productivity of we and to further We this our to expertise driving carriers. and we'll carriers. and ecosystem capabilities XX,XXX and for to now our our we John transform in of it for over and returns customers

John P. Wiehoff

Thanks, Bob.

Before we XXXX. expectations of remarks those comments wrap the I'll with our balance up for our prepared on questions, some move to

freight As market we With for demand healthy strong. the remain in year. will place believe a of fundamentals remain that stated earlier, economy, the for remainder the will current freight

continue with capacity, equipment ELDs of demographics of an drivers to new the suggest will increase driver aging truck truck in new enforcement impact the the believe in may April and increase an While X orders of we combined declining constrain hard capacity. number

our market on the are expect did the closely tight The to half current we impact not an We're monitoring have escalating adverse in tariffs tariff first So, activity. results. place through financial XXXX. that remain

to and enacted We're for has to impacts focus proposed of proper Our also customers them some quantify working or tariffs. understand our ensure work of been tariffs. the help impacts to with compliance primary all the potential

shipper, the our supply of that cost the customers' global borne impacted redesigning resulting could any impacts negatively slowdown the business While by global our chains or trade of negatively be activity. tariff ultimately by in shipment is

adapt this we We required our monitor commitments and and continue to closely and both customers achieve to remain ensure will them with market the any of understand focused our customers marketplace to help to pricing work conditions. with to situation meet our the and customer on closely reflective changes. working We

the We our remain to expertise deliver service increasing levels deliver shareholders. to value people, higher we processes and and we our for execution in expanding that efficiency, our carriers. the chain And customers to driving and and insights focused operating our to of of invest capabilities returns continue our an our increase employees, technology set on cost of supply

in people, with the and can to in the to processes, increased to confident answer it to C.H. in double-digit to able Lastly, to carriers, operating a delivered the operator, We operating our quarter that this the I team comments, so provide I'll share deliver were we we employees a efforts questions. and concludes and the win returned too profit, technology shareholders. back strong XX,XXX we our quarter, customers, in and revenues, shareholders delivered net transformation operating outstanding in us personally I'm in that quarter. and $XXX have to continuing That would flow. the continue rapidly around In members We significant this to and pre-submitted like the invest our earnings right the while value results strong cash growth delivering results per Robinson million digital marketplace. for enables turn environment, their prepared over world changing thank that, improvement freight to

Operator

the question-and-answer is Houghton, Mr. you. floor yours for the Thank session.

Robert Houghton

Donna. you, Thank

and taking the to after earnings many our would I release thank the yesterday. for analysts submit like questions to investors First, time

to of then persisting remainder the into XXXX XXXX? that a perspective there from believe freight comments cycle? Your session, of frame for Bob is Stephens. from on well and anything you how first today's a disrupt strong For the could response. turn demand current And do comes view are with will the question or outlook supply Andy, around you for up the cycle I but horizon the John, or the duration from Q&A potential Atkins it over question a John, Jack the encouraging,

John P. Wiehoff

the know and today, we lot predict. just than all the always that share equations. an some of, maybe really spike is by tipping more marketplace a in more the the in variable markets the but year and even supply believe to believed continue in the demand harder of on, little color are moving fall to demand ago. capacity the kind of trigger faster to that constraints where ever, and volatile a our point expedited and the Evidenced we of ways hurricanes have two the view demand or of the ELDs a current of more important clearly As are But the this the services and point was cycle relationship, factor, in

like a So we of healthy overall the cycles, tight. the that remainder predict internally that the planning these on the do continue cause while the recession that. to demand, demand we is and than the look likelihood that nobody what Many freight do better it's but our base I that feel of hard to will year for across know economy, and would market or is for what will in significant change keep outcome, know probably customer a the you

freight a the expect at and for tight pricing market to of the with into year. remainder continue next dynamics we similar fundaments and least year kind of So, heading

Robert Houghton

John. Thanks,

Next Forwarding number Global analysts about margins. Andy. question asked of operating A for

normalized in combination Forwarding? in more first operating or Global results. productivity leverage Forwarding simply you provide second solid a quarter quarter Your Global improvement a two? in scale, relative to of Is initiatives, results to the a or the it your Can show path

Andrew C. Clarke

And of explaining a job improvement performed. the Yeah, team sequential great that did the thank Bob you.

into but decided in won't an give if really we I you to to view, segments. historical segment reporting into our go of so, that, go clearer reportable our XXXX take different a And investors view

on our the side Global operating And the so, high you three-and-a-half at kind on a – years, of XX%, if has of last XX% between income average. low on those as Forwarding percent varied revenue the side net given look that, of

within in And because so, is amortization that if thirdly Milgram, a those this it's acquired of that XX.X% really at non-cash secondly the those lot year, Phoenix, numbers, in APC, figures. there for band. Included QX look we first, you and of obviously,

the in, roughly of that X% as percent XX% add line, to and the you XX%, it's operating X% income on it's revenue. when So, a back that

make, margins does a they Global of we Forwarding and have do And that strides really operation. will, really to a continued that those believe are so, while strong and team reflective nice

Secondly was quarter-over-quarter on that, revenue XX% that in up nearly organization to just on if regard. net growth you you think QX our XXXX, so two years that basis back a that about the has had, ago, go of if

So, we are scale. growing

services. organically are our We some of additional growing with

we So, leverage to operating we do as continues to significant be believe for continue opportunities there grow. margin

Robert Houghton

Thanks, Andy.

Todd Bob Next what revenue contracts adverse questions. pressure on would segment the can line Fresh. trends reprice that Robinson Atkins Jack Fowler the to Fadi improved in being top were in But able Robinson of thought speak the driving claim. to at have revenue first Stephens from after impacted results BMO you net its margin Fresh question asked KeyBanc I would Chamoun similar of insurance customer negatively by is and see is net for Fresh? the of half.

Robert C. Biesterfeld, Jr.

Thanks.

one of the the rising business same In that interpret ways is this Fresh environment. experiencing Robinson Robinson freight Robinson. both it's unique report and companies closely business, many manufacturing today the product difficult produce in at is I results to other. of we within experiencing are challenges And linked. the many our times food other the Fresh think really transportation they're how many sourcing and So, separately within business a revenues And impact while

delivered when into a And demand future. forecast impacted. transportation can a both Our and the produce of the the at or be to fixed forecast, cost product food business provider beyond profitability the that is sale service rises of to price working tend either to a retailer

for really of that driven retail. So, is across case many sell, sales commodities we at demand the our demand promotions for the by

supermarket to when So, grapes if versus $X.XX a $X.XX. per to that for about going pound, flier consumers pound advertises buy more they're you tend $X.XX think are that

escalate, impact volume business, IRI, QX goes negative down. XXX costs promotion basis really promotions last When and demand. about strictly our ultimately cases at product on freight sold. points quarter, year. overall demand sold of on was our QX So, drives down to that retail According this in of second in consumption drive promotional has prices a during escalate, And versus and

freight to sale the freight not price tied a to just we're Additionally, reprice is ultimately so volume it's that of that the component, of the product. as of of Robinson that Fresh priced that of produce, the much portion but freight, difficult repricing is delivered in and advance

cost Fresh in rapidly do both demand side decreased we business a product within rising potential for in side Robinson freight So, the margin compression RF. the on see potentially environment and the on

Robert Houghton

pathway as doing margins from further below asked of quarter levels. Oppenheimer second so, EBIT regarding QX Thanks, also for a of so? strong improve Bob. and The but Wadewitz from And results historical EBIT net and Schneeberger Can to of the NAST levels what margins were recent next segment question comes NAST R.W. NAST quarter, to remain second XXXX Ben margins of if Baird. highs? percent and second and margins. XXXX EBIT is Scott NAST UBS is during Hartford also quarter Bob about the EBIT revenue XXXX Tom return

Robert C. Biesterfeld, Jr.

constant data net really those long NAST. our driving effectiveness we additional core the services, peak leadership as fine-tuning customer percentage really – I model of enhancing don't of driving from margins the NAST. all our efficiency four geared our NAST margins improve towards goals and state experience, at long-term around evaluation the expanding of EBIT and think differently, a of mid The to of is a of effectively How the under are leveraging revenue. of that reinvention we're and our

we're I is gets important gets call our by done. how about success past about driven NAST of where this in future network So, we've in optimizing the really, spoken only done, piece footprint, think our but also and the being on not how work and this an success, work but

uplift from opportunity around us the gaining ongoing more work, really centers how centralizing we've But workflows is So, seen and steps real done, gets our processes. evolving advanced re-engineering work building eliminate evolve analytics artificial our machine and we of even leverage learning, how and our the out effectively some of more task-oriented scaled intelligence, scale to our within footprint, and for excellence.

NAST we continue So, commercially-facing more out task-oriented as we maintaining the to engineer be focused head continue count add to on flat work. roles and within

margin. and Our our our we get how that and IT about EBIT we how business engineers, done differently teams, really work are thinking leaders and impact active positively

Robert Houghton

Thanks, Bob.

still during Additionally, provide second in the growth Next moderates Andy from day an growth? operating quarter? business acceleration Reustle the can Sachs. in income show the net question revenue half of Goldman trends Matt of for while revenue you Please back year, monthly net per

Andrew C. Clarke

XX% Our in to XX% per I'm now in monthly net XXXX comparison. going day give revenue and And in April, in the May, growth was June. you XX%

how As was was you time we talked June XXXX X%. XXXX challenging XXXX and May down down X%, all recall, this was, XXXX of and was April of last of QX about year down of X%,

better on net give hopefully day. per historical you revenue will a monthly perspective the So, that little

did team $XX quarter income the but As sequentially what and periods. of which latter a I to second of growth, job year-over-year the also XX% operating nearly in we've of driving we the the is we grew million, think in income clearly, basis previous operating seen question, part great a on reflective

nice was are really Bob count, in a as investments have, statistics driving driving doing mentioning better head We that regard. making productivity, that on of job

our like be I doubtful way that other. the or SG&A the thing or continued think one that level across other accounts that much pretty impact and one only would number claims, for that which liability out, board the seen auto you've change would would way or allowance issues

as strong growth, will that believe as we drive well. revenue income do we to continue growth that translate operating into net So,

Robert Houghton

Thanks, Andy.

Bob, COO vision productivity you the on Bascome improve from quarter Majors been in now. how do you've focus compared a years comes job Susquehanna. the your three few opportunities see two the for been to your role with the quarters? company, Robinson on to look in question will during months for Based than your more today? what in Next first to and coming What's different

Robert C. Biesterfeld, Jr.

beginning of Well, few and I've I the since as tour thanks for question March. take on role the months, February end guess of quick a you the been I'll this in Bascome. there, last over

about strong So, Mike's Global Neill. continue well new drive couple as of basis. reinvention. team say really foremost weeks path services, wanted strong of for leaders the can drive of guidance first team and Technology our NAST people. to I've time, we the to our Forwarding I've fact to balancing been Europe share that strong and XXX,XXX closely really determine team looking with Transportation Robinson we the focused Chad in excited provide between to a working I a in growth spent Lindbloom's think my engineer we and maintenance about about and inherited succession XX spending as Chief to really global first North few on we with businesses. great where go-to-market to I've terms down from I'd the and been a with synergies European on a that been between on Fresh, greater Forwarding really years, for leader team, Officer working months is continuing that our software discussing I've of commercial have customers. named One he's as and been with in as we're Robinson our that that NAST Mike and teams a really I've a all rest strategy refining that IT of Global our organization output levels And continue those ways time broader American serve I'm retirement. fortunate Surface our been

will to of core overall architecture, as executive add the infrastructure, at platform. out I'm our and vision a business, team, of mid- the been line and to software. Mike's leadership help great be speed of building in of established Navisphere add drive well bottom and Across top the and future So, the our both confident growth. and plans, our roadmaps, the and several Mike to development and product we'll we've long-term Mike our really other for support reaffirmed to as deployment we've opportunities talent his to accelerate our of parts continue identified growth

of future to areas that be continue to in investments and going continue each In process believe vision, to the are years. But and company. really I and coming evolve people, in terms my a to those shift technology-oriented we're of our the going

our history, it I proud about really our incredible in chapters. and of story three this and Robinson, terms about excellence, evolution it's and think I As of future, transformation. And think

all history spirit, in The and entrepreneurial deregulation. of and serve closely position. changes to a it defined customers transportation, taking Robinson first of new our to these system beginning it, Each the from chapter the the suppliers. throughout brought XXXX, truck highway interstate to And XXXX, really mirrored our of we leadership refrigerated new first in of ideas, were ways there

the publicly it Europe, our to further evolution in and living will and our we're in went global transformation, Our XXXX chapter Today launch strengthening the next traded global our truly opportunity most really clearly South becoming in establishing our expansion a economy. technology about and and that from company and ever of next chapter our and that don't we to than be is our and in America, competitive global have we the environment culture of and platform, was that believe dynamic Navisphere, Asia, capitalize slower beginning change and that history, really and shift the in reach. today. We're digital of this writing

new ways value opportunity of our create by this basis shareholders of of new way So, us to and creating got and the enhance and to deliver global incredible our value. we've that ways customers, in front we on acting, a leveraging our thinking, carriers,

to growth, in going commitment new line ways. as both and top serving our down bottom and double said, So, Andy to we're our innovative and on customers

exactly look our is years? continue What artificial to Bascome's areas will advanced analytics, technology, in that I experiences. expanding our leading to advantage carrier customer in like to improve intelligence to C.H. the commit project centricity, going on and we're in question, I focused three of While and Robinson can what can't be to customer

enhance footprint to to by acquisitions our within services geographic or our as So, the in be add future strategic that add continue or a of mix as organic fueled to our is portfolio. well growth going

a committed investing And great of people-oriented going lead going in is most do the staff we're this we're business, having by that people. and keep to industry. capable and to So, the in to I experts believe continue supply chain

Robert Houghton

asked The business you next favor repriced John. in for the contract strategy your much volume has begin Several drive Bob. point how over where price Is analysts of book Thanks, of market question with long-term to the to would cycle year? gains? is consistent your this this share

John P. Wiehoff

and or generally that the we our metric shared half conditions. substantial we've of repriced business the two-thirds of half more kind portion the the that one-third of our than in half in current of historic latter first the a has Also, more market is of prepared year. likely reprices around is reflective committed Our of it it and in comments, shared more year, that

of is still fresh I work a adjustment the about think lot clearly a activity right. do. of require the is But Bob it still of around repriced. we've and portion, guidance two-thirds probably analysis activity, got that to activities maybe in to still that and account market. there referenced and there That to continue network some significant more is the management

Robert Houghton

deceleration in asked Thanks, in rising basis in Merrill with ramped XXX year-over-year. we the & Andy, costs? points results? personnel about personnel there any of QX, up America Is a in catch-up second Hoexter Ken Bank comp Company quarter sequential and should incentive If from John. costs Jason Cowen in personnel so, see QX Seidl expense.

Andrew C. Clarke

to it's our as our often incentives length and compensation. shareholders. And we've important about talked think, incentive values with and that I culture. talked, aligns And of we've at often it our our our

accrue on So, year-to-date those we expenses a basis. quarterly specifically, and

decelerated, accelerating where or in we see we performance catch-up in would in of in you and slight would experienced of Nothing what QX consider investor did was you a year, there we QX. the amount a a would of last this conversely, So, that our consider XXXX there performance material. versus had year periods of like QX as we bit from see takeback in QX be And, opposite QX.

that in was with think was and that acquisition. despite so, in part was point reflective talked growth by in based and a we quarter-to-quarter that driven actually on large fact more X% as only variable head of One things QX our out alignment of The sequential that our decreased, we was there QX that we count of Milgram our increase performance, the I'd QX, like amount and the culture of to is to versus compensation, the saw shareholders. our about fixed in compensation, it that's year compensation values, of QX this our

Robert Houghton

Fadi next The tighter Bob Does trucking to exposure BMO. comes compared recent question market current Andy. Thanks, history. of Chamoun contractual from is freight? proving mix it about exceptionally versus The you how for change your of spot think

Robert C. Biesterfeld, Jr.

made overall really wanted years strategy the a brokers really a that with spend at our their to believe that conscious on. customers to focused XPL more important spot as to just So, in were about market in we ability we in traditionally participate we our participate time as much ago XX that an And ingredient and that than part of truckload our today our transportation is decision success.

the more same two efficient much wear looks plans to allows that able spot market really and we're like more dedicated one fail. a hats and today and one for really the and guides routing that's And customer, fixed-asset-committed flexible to shippers when carrier, much so, access feels

contractual marketplace of markets mix conscious we towards So, business our tend rapidly, that they and is much tend and a our it's decision more business goal when – will to the as a towards changing see our decisions more a overall engage freight. is contractual markets grow how between of higher a ahead not a by-product to to well customers choose transactional overall necessarily we us. see our spot percentage the marketplace become market of at from to or continue lean of when that rate as The lean choice transactional. make, and contractual, to will both that make on stabilize, growth we are and come Over growth, time, volume

Robert Houghton

update Wetherbee Todd the Citi next Chris on also of provide asked you competitive the any competitors of more tech-based active on are competition. newer to John for brokerage? Bob. landscape And Ravi and impact competitive Fowler question KeyBanc Morgan Shanker about seeing an pricing? Can truckload and are in Thanks, the you asked landscape. Stanley of

John P. Wiehoff

association, true know than that we industry anybody substantially motor we larger clout pricing have fragmented. more that members we that There One move of XX,XXX more incredibly things. we impact than the things than carriers of can't most that know that is TIA there's don't and to remains of else, our and the a still is while are XXX,XXX we're sort

impact the answer specific competitive is really the the or see this any So, no. a current or pricing. any Obviously, cyclical might impact of is of environment, evolving. changes evolution trumping measurable around competitive digital landscape don't landscape be on secular in start-ups We transformation kind causing how the the

Now, there all going believers of I some to in of that is a and not Bob shared, really apps sure who that working in at dismiss, location think that big of is to different competitors and that to we're market in ways platform are make differentiator, know coming are menu lot investing is a the in competitive landscape. and ahead new tools we're competitive better-than-ever to the but stay a we we Navisphere on scale it mobile services, and a our keep

been, ever, impact but it's one as change. it's than likely see handful of entrants. of not new It's So, has competitive fragmented really measurable a always as or more it to lots and therefore, from

Robert Houghton

Fowler And complete? associated integration. will duplicative during John. At the there the quantify? of point Milgram so, you Milgram. update Andy, on be please Are costs KeyBanc about provide quarter? if an asked integration with integration Thanks, what Todd can the

Andrew C. Clarke

they've in a a we're Yeah, integration most that Milgram in There behalf XXXX. overall starting are go organization has as organizations with say the of Forwarding platform, this I a on job done the Navisphere Global in those tremendous would teams, put just great agents of picked into with operating which We've synergies year up see net get our a updraft of integrating great the our I and performance significant and that done job performance efficiency nothing earlier, all a that's costs onto APC of revenue finally as some there, I both the are And few offer few recently terms there. of you've that pleased overall as of driven, XXXX integrating we efforts there. as into we part of our the seen more the duplicative and growth. still income when material. into XXXX, in well latter and referenced would platform, Milgram into you'll

Robert Houghton

Thanks, Andy.

is How ELD much regulation Schneeberger in supply the John of your for from an view? of is having impact on question Oppenheimer. Next Scott

John P. Wiehoff

interesting. what, X%, speculation projection You of Prior the know, of whether about a capacity the what requirement. implementation, exit of percentage have thinking was to of and their it's ELD any, trucks would result renew the registration X% or marketplace the leave lot market if not around a it and impact X%, as would might

we we've seen really that. of As any haven't shared,

new capacity We and continue really to have capacity very know anecdotally meaningful we marketplace. healthy leaving of of signup don't the much

repositioning the a of networks come impact, lot freight and with a are Fresh the their of of has of and division types I like the tweener and uncertainty around ways reference. what variety freight in how pricing think the lanes that that preferable the changed other and which the has corridors that especially been is those meaningful, shared pricing, that capacity behavior certain was they or has how is we've certain

So, the meaningful to current changed. of hard part the side a because it's but really that the of it the of been of a quantify It's there's and tight supply. what definitely contributor impact know is, clearly types cycle to ways and

Robert Houghton

in next Sachs. Thanks, way? your than from Reustle differently Matt contract John. changing for you question in any act also is terms of Are customers Are seeing previous cycles? Goldman The John

John P. Wiehoff

a price been current supply that the is no. and it's overall of to since we've kind I route-guide deterioration chain. think think, about in you answer inflation had this environment, the When the while

an escalation have costs like industry, this, we on puts the all lot whenever the lot a of a pressure it of in on and especially of So, of us shippers.

things relationships, would of just the definitely past. seen type seeing committed with price to this on greater like this the all of those portion of in cycle spot increase to we're compliance, with contractual refocus in the the market, have emphasis, we So, aversion

of emphasis renewed the probably five, cycle. and years, this adjustment reactions last So, overall, of to and maybe kind of reaction the to new spirit a some part but compared predictable six a

Robert Houghton

is on margins impact from changes the in revenue The Thanks. year-over-year Brian Ossenbeck and first in question next of second net surcharges was JPMorgan. what Andy, fuel of quarters? the

Andrew C. Clarke

Yeah, given is on our fuel of and points this in recall of and our it QX, margin margins drag net revenue had that a on drag XX increase impact to of cosmetic revenue margins. year had net it XX fuel, the QX a revenue In percentage. net points basis in basis the a

Robert Houghton

Thanks, Andy.

July decline in volume of comps, truckload or C.H. Jason asked function Bob. is improvement also combination? easier results more direct to a the at Seidl a Now Robinson, favorable

Robert C. Biesterfeld, Jr.

a really both. of function It's

in the If back front at XXXX, last the Looking the had than first even sequential see every total basis in on per-day volume we of of look stronger much growth. we of of we fourth improvement XXXX, we did volume being half year quarter the year a months the at growth negative month. seven in year half volume with back in terms

half a on to compared easier volume the July on the of June, we a per-day second sequentially comps do basis while in year-over-year is basis So, year. have up

Robert Houghton

Bob. Thanks,

Landry coming any Bob for anticipate capacity truck online question elevated, With Suisse. Credit do in you that of from orders meaningful Another remain Allison way?

Robert C. Biesterfeld, Jr.

into meaningful our coming rate, that overall don't network. necessarily at to an as North network our We remarks carriers to new this see prepared continue the American new mentioned add but we accelerating we in capacity

their per size As act carriers onboarded drivers likely X.X those much and is about the is of we as we as average added last own out businesses carriers it if fleet. company that drivers on or think fleet quarter, trucks you owner-operators, that to the right lease expanding start around that

to owner-operators either or Robinson, are industry, to truly the are new new these both. that So,

increase market. drivers I I full capacity So, environment meaningful the and overall employment, given an to a larger see trucking talk retaining the and in companies driver entering the shortage mid-sized that all in nearly the challenges that and don't recruiting of report, of

Robert Houghton

Thanks, Bob.

Our paydown? credit last AR Bank $X.X Ken your and you EBITDA? question increase down debt you times leverage is would for or in look on just to exposure debt, to America facility are debt would you below pay two Andy of the billion look that from your securitization Now of debt to What thoughts keep Merrill. have to Hoexter

Andrew C. Clarke

evidenced that the we proud things as sheet $XXX our down when our be earlier investment-grade this the is capital a of One debt. million way, in access to ability of balance meaningful strength and of we took continue year to of

the borrow. envision about just at rates credit just wouldn't and the down, on we relatively which rates at under lower we're If given you AR that facility the at we think X.X% paying our X.X%, paying securitization those

between about X.X level, strategic opportunity to net other this, times Our that our EBITDA, X came absent debt talked comfort we've is way. and and at any

Robert Houghton

portion concludes earning call. the That our call Investor time replay AM Relations Q&A available today's of at be today. A section will website the of in Eastern approximately at of chrobinson.com XX:XX today's

call. quarter a have you phone questions, additional If in can second I Have participating XXXX reached for be day. by good Thank you conference again e-mail. or our

Operator

Ladies and gentlemen, conference. that concludes today's

lines your at time this wonderful day. disconnect may a You and have

C.H. Robinson Worldwide (CHRW) 1 Aug 182018 Q2 Earnings call transcript