Good morning, everybody. Welcome to day two of our Bank of America Industrials, Transportation, Airlines, Key Leaders Conference. I am Ken Hoexter, Bof A's Air Freight and Surface Transportation and Shipping, or Marine Analyst. This morning, we open up day two with C. H. Robinson, a leader in freight brokerage and global forwarding. We welcome CFO Damon Lee and Chief Strategy and Innovation Officer Arun Rajan to the stage. Also in the audience is Chuck Ives from investor relations. This is Damon and Arun's first time joining us, and Chuck's second. We welcome C. H. Robinson back for the ninth time in the 24 years we have hosted the event. We look forward to your thoughts in today's rapidly changing backdrop. Damon, let me turn it over to you to start.
Yeah.
If you want to provide your thoughts on the market today, which shifted certainly from yesterday and the day before, but what key three themes do you want us to walk away with today?
Yeah, so thanks, Ken. And good morning, everyone. You know, look, I'd say, you know, it's a difficult market, I think that goes without saying. You know, certainly the early April tariffs created, you know, for a lot of categories, essentially an embargo between the U.S. and China. So you just had a huge disruption in cargo freight because of those tariffs. Certainly, that puts our customers in a difficult spot on how do you plan. And it's always a delicate balance between not having stock outs in your stores versus inventory you can't sell in the wrong mix of inventory. They all lived through that during COVID, right? And so a challenging environment, certainly a challenging environment for our customers. But look, that's what we get paid to do at C.H. Robinson, right? Difficult market.
You know, we provide solutions to help our customers get on the other side of that, right? With our breadth of services we offer across the modes, you know, the history that we have, just the global presence that we have, right, we can put solutions together that others just cannot. I would say to your point, you know, now we're three days in. Now with the tariffs being reduced, now you've got another dynamic going on, which is you've got several customers and several industries trying to get as much inventory back into the system as they can before the 90 days is up, right? We kind of referred to that first impact of the tariffs in early April as kind of an air pocket that was created by this embargo of goods. Now I think we've got a second air pocket.
The second air pocket is now you have got a lot of inventory entering the system. You know, and whether or not that displaces future demand, or whether or not the consumer and GDP can keep up with that demand or that inventory level, that is yet to be seen. I would say, you know, where we thought a week ago we were dealing with one air pocket and how to help our customers through that, now I think we are dealing with two potential air pockets, and that is just more complication to help our customers through. I think the three key takeaways, Ken, I would say, is look, it is a difficult market. Visibility is reduced. It is a challenging market to plan in. What I would say is our strategy is based on helping our customers solve difficult problems.
Regardless of the market backdrop, you know, we're focused on outperforming the market. In our NAST business, we've done that for eight quarters in a row. We've had solid results as an enterprise for five quarters in a row. Outgrowing the market, regardless of the aggregate market, is a key takeaway for us. I'd say the other one is we use this displacement in the market as an opportunity to grow our margins as well, right? Certainly, you know, we use our strategy and our technology and our people to try to find unique solutions that allow us to generate a quality of earnings in times of difficulty. I'd say that's takeaway number two.
Number three, you know, I would say is the productivity and all the efforts we've put into automation and technology and really change in how the businesses run through our operating model that allows us to perform at very high levels during times of uncertainty like this. That would be the three takeaways I would give, Ken.
That's great. Great wrap-up. Arun, it sounds like technology, a lot of weight. I think you mentioned it twice in the last two buttons, so a lot of weight on your shoulders. Let me just follow up there on the rules of the game changed on Sunday with those lowered tariffs. On ocean, I know we're going to jump away from brokerage for a second to start. Just to understand, what has been the impact on the tariffs? Initially, did we see a lot of pre-shipping come in? We're okay. This mother of all restockings now that we'll have this three-week air pocket might not happen because we have enough stuff? Or do we have to catch up? Maybe just set the stage there.
Yeah, so what I would say is for the early April tariffs, before we get into the revised tariffs, right, I'd say certainly there were customers that were positioning inventory, pulling volume ahead of those anticipated implementations, right? There was certainly that activity going on, right? It's never easy to say how much of that was a finite number, right? Because the customers don't tell you, I'm placing an order, or I need to move freight because I'm pulling ahead of tariffs. You don't get that level of visibility. You have to use your own analytics to kind of determine, here's the historical level of demand, and here's the ordering patterns, and how much do we feel is pull ahead or replacement of inventory ahead of tariffs. Certainly, we do believe customers did some of that activity.
Now, I think it was lessened because, as I mentioned earlier, the lessons we all learned from COVID, we've had many of our customers for the last five years that have spent a tremendous amount of effort, a lot of them partnered with us, on how to make their supply chains more diverse, more robust, more strategic, and so they have optionality when disruptions hit the marketplace. To us, a tariff is just another level of disruption, right? It's not unique in its own. I think that inventory replacement and actions, I think, was lessened by a lot of the strategic initiatives that our customers have done over the last five years. Nonetheless, certainly some of that activity went on. I think it's more evident now.
Now, whether it shows up in actual bookings, we're only three days in, so there's not a lot of empirical data to support this, right? Certainly, we're getting a lot of inquiries from customers that want to do movement of freight now in this next 90 days, right? Certainly that activity is picking up. Once they get more data, once they get more assessment of their own supply chains and their inventory levels, we'll see how much of that actually sticks and materializes into pull ahead freight demand. Certainly, I think it's more evident in this, what I call secondary pocket of activity, that there is pull ahead activity versus just the tariffs on their own.
Just to beat that 90 days.
Just to beat that 90 days.
That's interesting. Yeah, yeah.
I think what the market's been clamoring for is some level of certainty or visibility. You do not know what's going to happen in the next 90 days, but at least they've been given something. Now they can plan to something. When the tariffs first were rolled out, there were a lot of people thinking the tariffs were just a negotiating tactic. When that did materialize, nobody expected the rates to be as high as they were. They certainly did not expect them to be as high as they were outside of China. I think this time around, you've at least got a more condensed set of data and a more defined period of time to react. I think that's given customers a little bit more visibility.
I hear you. It just seems like in those 90 days, if we start getting some deals like the U.K., like whatever China is getting, it seems like they are more likely to be at least, if you get a bunch of them signed, it seems like that 90 days becomes let's just extend it for another 30, 60, 90 days to keep going. I guess you are right there. You are certainly with the inertia to plan. That was an ocean discussion, I guess. I just want to ask you a quick one on air, because we talked a lot yesterday and the night before about the end of de minimis. Just to understand kind of on the air side, have you seen how is that movement of, because we had a huge drop-off of e-commerce goods. What are you seeing on the air side?
Yeah, so I'd say the dynamics between ocean and air for our business are going to follow similar trends, right? Our business, we do not have a material business in de minimis type shipments. Our air freight customers are more your traditional higher value type goods, right? For us, de minimis really did not impact our book of business. We've seen, I would say, like trends in ocean and air versus a company that may have a higher materiality for de minimis.
Okay. All right. So Arun, in December, you hosted your first analyst day in seven years. Dave set out a goal to benefit from AI, automation, and grow no matter the market, as Damon just talked about. I think in bullet point number one, right, was to grow. You executed the plan. So Arun, talk about that path to automate the process. I guess maybe more on the brokerage side, what enables you to scale the business without growing people, and how well are you adapting that?
Yeah. You know, the story that we've kind of been on for the last three or four years is simply to say, look, from the quote to cash lifecycle of an order, the way to think about that is our business, we've got all this telemetry and instrumentation that tells us in that quote to cash lifecycle, at every step of that lifecycle at a very granular detail, we understand sort of like how many touches there are on an order, like from the time you quote it, from the time you enter the order, to setting appointments, to tracking and booking the truck. We have this granular instrumentation that tells us when there are manual touches and how much time those manual touches take, right? You know, we have clarity around how much manual labor goes into the quote to cash lifecycle.
Then we work backwards from that to say, okay, where are the biggest opportunities to automate these things? We have been on this journey, and AI is a new tool in this toolbox to further give us runway on that particular path to say, okay, we continue automating down that path. We have unlocked 30% productivity improvement over the past two years in 2023 to 2024. If you roll back to 2022, it is 40% productivity improvements. The runway continues to exist. Damon presented the chart at investor day where we said, you know, we will continue to get operating leverage, which is going to be largely a function of this automation combined with our operating model. Now, you know, what Dave talked about using AI and automation in general, there are sort of like three distinct components to it, right?
There's the actual automation and productivity improvement that delivers operating leverage. Equally, there's this notion that decoupling headcount growth from volume growth, let's call it business model scalability. I mean, operating leverage is on the financial side, but we also have this business model scalability as a result of decoupling headcount growth from volume growth, which means every step of the way, volume growth should significantly outperform labor growth, right? Finally, it is a better customer experience with all this automation, right? We can respond faster to customers. Customers get a more uniform experience. We can respond 24/7 to customers because machines are doing so. Back to Dave's point around our doubling down and focus on this, we're on that track. We continue to deliver. The operating model that Dave sort of instituted has sort of accelerated our journey down this path.
Ken, can I just add a little bit to that one? Because I think it's just really important to our story and our strategy, right? When we talk about technology, I think usually people immediately go to the productivity side, right? You're using technology to get productivity. We say, yes, but, right? Our technology has actually given us opportunity on three different levels. One is certainly on the productivity and cost avoidance. We're more efficient and less touch time than we did before. Therefore, we're generating more operating leverage and operating profit than we did as a company. Second, though, I would say, and this is one that I think gets missed sometimes, is the gross profit improvement, right? Much different than the operating profit improvement.
Through the use of technology, coupled with our people, we're able to price better now than we ever had before. We're better to procure freight better than we ever did before. That has all been enabled by giving our expert people better technology to have a more frequent touchpoint on how we price loads. The one that I think we've got to do more job educating people on is the outgrowth piece. Dave's given this example before, where before we adopted the technology we have today, many, many times the folks at the desk, there were quotes that were in their inbox that they never got to, right? Therefore, somebody else got that freight, right? Today, we get to every quote, right? That is a substantially different approach to service our customers than we did historically.
We're getting to every quote today, and that's actually enabling our market outgrowth. If you think about our technology, it enables our market outgrowth. It enables our gross margin expansion through price optimization and cost of hire optimization. It drives operating leverage through productivity. We're getting a triple benefit from the technology that Arun and the businesses are implementing.
Yeah, just to connect the dots on what Damon just said, we've talked about dynamic pricing and costing that allows for price discovery, real-time price discovery and cost discovery in this marketplace and the scale of our data and information advantage, key input to that, right? I think it's really important to break those two things out: operating leverage and operating margins, gross margins, dynamic pricing and dynamic costing, that allows us to optimize the cost side and the price side of the equation, combined with our revenue management muscle that we talk about, all kind of wrapped into our operating model.
It answers so many questions that I was ready to ask you, right? I mean, how do you keep taking market share? How do you get better margins, right? It's all interesting. Let me dig into the margin one just for a second, right? Let's go. Last 10 years, you've averaged a 350 basis point sequential improvement in net operating margin from 1Q to 2Q, right? You had 27.5% in the first quarter. Consensus is somewhat looking for flattish overall. Just wondering, is that just pressure from global forwarding and everything we just talked about to open? Is there any other thoughts? I guess help me understand the near-term dynamic.
I'd say that the historical trend is certainly influenced by, I would say, cyclical elements of the market, right? There is some macro backdrop to that historical Q1 versus Q2 trend. As you know, Ken, we don't guide, so I'll stay short of that. What I would say is what I said, look, it's a difficult market for sure, right? We're not immune to the aggregate impacts of a difficult market, right? Look, our relentless focus on outperforming hasn't changed, right? I think different than the Robinson of the past, we really are agnostic to the market conditions, right? Our strategy, it works at every market condition, right? In a prolonged freight recession that we've been in, mid-cycle, peak, we're highly confident that our strategy will work on outperformance in all elements of the market.
We do not view Q2 as any different, right? You couple that outperformance expectation on both outgrowth and margin expansion with a difficult macro backdrop, but I would say our focus on outperforming does not change.
Yeah. That was different in my discussions with Chuck. It is the consistency of that message that we're going to grow no matter the market, which I think is a change from C.H. where it was more of the market's down, we'll be down. Now it's we're going to outpace the market. I think Arun's commentary on the ability of the technology to get you there.
Yeah, and I would just add a little bit of color there. I think it'll sound simple, but it's so meaningful and its impact is. I think in the past, we had an "or" strategy.
You had what? OR?
or versus and, right? So I think.
No, that's OR. That's operating ratio.
No, we're not there yet.
Now you're bringing us to relevance.
Get there in a question or two. Yeah, I think in the past, it was we had a strategy to grow almost at all cost. I think that over-indexed. We had a strategy to grow margins at all cost.
Agree.
That got over-indexed, right? I think Dave came in and said, look, we're going to do both, right? How simple that is, right? You can do both. We have demonstrated now for five quarters in a row that we can do both, right? We look at those five quarters and say, look, that's just us getting started, right? That's the early innings of what this company's capable of doing, right? If you sit in our operating reviews, what you would see that's different is, and I joke with Arun all the time, because that team generates outstanding results. As soon as they're in the books, I looked at Arun and said, what are you going to do next, right? That's done. I need the next evolution of continuous improvement, right?
That operating rhythm, coupled with our tech, coupled with our people, I mean, it just drives this machine that says, what I did last quarter is not going to be good enough. I have to get better relative to the market every single quarter. That is why you hear us talk about relative performance in almost every breath, because I think it is a dangerous approach when a company says, I am going to do this regardless of kind of macros, right? Because I think it can lead you to bad decisions. We are laser-focused on relative performance, and we have demonstrated that, and we will continue to demonstrate that.
Yeah, that message is definitely coming across and echoing. Let's talk about the truck brokerage sector for a second, right? I clearly understand you want to take sure a few years ago, digital entrants were the rage, right? We heard everywhere we turn, we have a panel called Broker Wars because a few years ago, it was digital versus the incumbents, right? Now we have had Coyote sold, or Coyote, I am sorry, Convoy shut down. Coyote was sold to RXO. Uber Freight now seems to be focused on making money as opposed to just growing. I do not know, Amazon is still out there. You are winning relative share despite all this noise. What do you think is the state of the market? Is there something going on behind the scenes?
We had a shipper up yesterday talking about some of the smaller guys are now disappearing from the market, and so they're hurrying to cover that. What are you seeing in the marketplace?
Yeah, so I'll start, and this is certainly in Arun's wheelhouse. I'll start with forwarding, where I think, look, scale is so important on the forwarding side. I think you've seen a lot of consolidation on the forwarding side. I think you'll continue to see consolidation. I think the larger players understand the benefits of scale, and I think they'll continue to strive to get bigger. I think the smaller players understand that it's a difficult operating environment at their level, and they'll probably look to consolidate as well. I think in forwarding, you are going to see further consolidation of that industry as we move forward. On the brokerage side, what I would say is, look, we communicated during investor day, we have roughly 12.4% or 12.5% of the domestic 3PL market, right?
We have continued to grow that share every quarter. I think what allows us to be differentiated there is just the pace in which we view the market, right? Arun can jump in here, but as I mentioned before, it is a three-party equation for us, right? It is our operating model that drives the discipline. It is the technology that enables our people. Then ultimately, it is our people, right? What has allowed us to grow that share and will continue to grow that share is just the, I would say, the amount of times we are touching the customer and the amount of times that we are touching our strategy. If you take pricing, for example, I would say in the historical Robinson approach, we would set a pricing strategy for the quarter, and then after the quarter was over, we would say, how did we do, right?
Today, 8:00 A.M. Monday morning, we set a pricing strategy. By 8:10 A.M., we're already checking to see if that strategy is yielding what we expected. If it's not, we change the strategy. 8:30 A.M., we change it again. 8:50 A.M., we change it again. We're changing that pricing versus volume versus margin equation hundreds of times a day, right? We feel like that is automated.
Automated or is that something you're changing manually?
It is automated. We do have humans in the loop that are overseeing those transactions, but it is a highly automated process. We feel like that is a differentiator that others cannot bring to the marketplace. You couple that with our expert people and the discipline in our operating review that says, hey, last quarter, I may have generated X buying benefit versus the market. This quarter, I expect more because that is what continuous improvement means, right? We do not have a mindset that allows us to plateau on any of these elements of improvement. Our mindset is to always get better, right? Arun, I do not know if there is any color you want to add to that.
Yeah, I think so, all great points. Kind of building on that, I think if you think back to a few years ago and the digital freight broker situation, I think if there's one thing we've learned, that pure technology approach doesn't necessarily work in brokerage. The transaction is way more complicated compared to like a simple consumer-to-consumer transaction or a B2C transaction. There are exceptions. Pure technology-first approach doesn't always work, right? We've held that it's the combination of the technology and science combined with our scale and information advantage combined with our domain expertise, our logistics domain expertise. You'll see those themes come up multiple times when we talk.
If you consider that it is all of those three things that matter, and then you say, okay, working backwards, working in conjunction with that, the digital disruptors, when they came to the market and they brought certain things that are sort of characteristics of digital freight marketplaces, they have some good attributes, right? Now, if you think about what we have done, we have said, okay, the technology and science, the great attributes of a digital marketplace are the things that we have incorporated and we talk about, right? When we talk about operating leverage and we talk about gross margin expansion with automation. If you think about the world that I grew up in, Travelocity and e-commerce and Amazon and Zappos, you had a machine that operated incredibly efficiently, which delivered operating leverage and business model scalability, right? That is what drives our operating leverage and our scalability, right?
We have talked about that. These businesses are extremely good at driving price and cost discovery with dynamic pricing and dynamic costing. We have invested in that, and that is what drives our gross margins. Those things have a dual benefit. First of all, you apply those things to our scale. You get this sort of marginal cost advantage of all those fixed costs, the marginal return of all those fixed costs that we invest, right? Because of our scale. Equally, you have this data advantage to fuel the algorithms that drives even better price and cost discovery, right? The bottom line is we expect and we are great at our technology and science in line with the digital-first kind of player, but that combined with our scale and data advantage and our people is what we believe is driving the results.
You're able to co-opt the digitization into your network and, given your scale, benefit from it.
Exactly.
Not lose to just the new entrant because they're just digital.
Yeah, and back to that and/or comment earlier, I think the digital entrants, it was all about volume, kind of no matter what.
Yeah, that's right.
Right? I think they would have benefited from an end strategy, right? Certainly, as Arun said, we've learned from all the capability they brought to the industry, but then also the mistakes they made, right? We've built all of that into how we have the human in the loop that we talk about so much. I mean, make no mistake, our technology would not be the differentiator it is today without our expert people that are training the technology, that in some cases are overseeing the technology. Without that human in the loop and getting that right mix, I think the technology on its own would still be challenged.
I think that's where people lost it, is you can digitize everything and have nobody involved, but then the customer still wants an expert when something goes wrong.
That's right. From a humility perspective, look, on the small and medium business side, we got it wrong, right? We tried to push a digital-only solution to them. That's not what they were ready for, that's not what they wanted, and we lost share, right? Now we've gained a lot of that share back. We're poised to gain even more share than we had historically. It's using technologies and our expert people to meet the customer where they're at. We can do both. We can actually drive efficiency and optimization while giving the customer a better experience than they had historically, right? We're always looking at if our technology doesn't enable a better customer experience, then we got to revisit technology. We've had some of the best customer service scores we've ever had while we've developed a massive rollout of new technology.
Damon, let me bring it again back to near-term. If I think about on the NAST side, right? We talked about the forwarding to open. NAST truck pricing was above cost for five consecutive quarters. Now enables the expansion of gross margins, right? We are talking about the systems enabling even better gross margins while you grow that. Talk about one, we have seen spot rates stabilize kind of at this cost per mile level of $1.50. One, what does share look like in that environment? What do margins look like in terms of that balanced out market? Maybe talk about as we went through bid season, how things are shaping up?
Yeah, so a lot in that question, Ken . I missed a piece.
I'm an analyst. We have to get them all.
As I mentioned before, right? I mean, we did reference our share in investor day at 12.4% for the domestic 3PL market. We will use that as kind of a market share gauge. As you have seen from our performance, we continue to outgrow the market. That number continues to inch up. Look, certainly we have had a great run of gross margin improvement. We absolutely expect that to continue. If you go back to our investor day materials, for 2025 and 2026 combined, we committed to $220 million of incremental OI improvement. Of that, $90 million was specifically related to gross profit, right? Arun walked you through kind of the technical side of that through price and cost optimization, right? We are in the early innings of that journey as well.
We still believe there is tremendous runway for us to continue to expand our gross margin in that business. Now, what I will say is, and we have mentioned this on earnings calls and investor day and other events, we have tremendous optionality now, right? On an every 15-minute, every 10-minute, every 30-minute basis, we are trading volume for margin all the time, right? I would just, we have optionality to either over-index to margin if we want to. We have an ability to over-index to volume if we think there is a competitive rationale to do so. All of that is still under the guise that we have committed to expand our gross margins from a dollar perspective, another $90 million in 2025 and 2026. We are here to reaffirm that commitment today.
All right. And then bid season, is there any comment on how pricing is going now in terms of?
Yeah, I'd say it's a bit bifurcated in that, as I mentioned earlier, you've got a lot of customers post-COVID that they view supply chain interactions more strategically than they did pre-COVID, right? I'm talking sophisticated customers that could lean more transactional on pricing. Post-COVID, they value the partnership. They value less volatility. They value predictability. They're willing to pay a larger price for all of those elements, right? I think we have seen a shift where on the contractual side that we're able to have proactive discussions with customers kind of ahead of the market trend to say, here's what the dynamics are today. Here's where we think they're going. If you want all these elements of a mature and a strategic supply chain, it'd be in your best interest to lock into a different price now versus where the markets might go.
You still have customers, some of them large, some of them medium, some of them small, that still view supply chain as purely a transaction, right? Therefore, they are looking for the best price they can possibly get. There is always tension and pressure on those prices. I would say the bid season is always bifurcated. What I would say is kind of pre-COVID versus post-COVID, there is certainly more attention for the customers that view supply chain as a strategic capability, and they are willing to pay a higher price to have that capability versus what they would have done back in 2019, 2018.
Gross profit fell from a 14% growth in January to negative 2% in March. I know you're not forecasting and you don't provide April updates anymore, right? You used to give like that one month out. Anything you can talk to us, just given the backdrop, maybe setting the stage, given that disruption of the tariffs and the rebound, the time it would take to flow through or kind of maybe set the stage of directional.
Yeah, I think the best I can do there, Ken, is clarify. If you guys go back to my prepared comments, right? That significant comp in January was due to a soft comp the previous year. If you looked at my prepared statement, sequentially, both February and March, AGP per business day increased, right? With that said, there's no change in our strategy or direction there as far as the way we view margins, right? What I would say is that noise you had from a year-over-year perspective for one month versus sequential is really created by January, not February or March.
All right. NAST count, Arun, has declined for 11 consecutive quarters. Your thoughts on kind of scalability of that? Is there a floor given the productivity you can achieve?
Yeah, I mean, like I said earlier, the productivity is going to be evergreen. I do not think we'll get to 15% productivity year- over- year like we have in the past couple of years. I think it'll slow down in terms of productivity improvements. Having said that, ultimately, we look to separate the rate of volume growth materially from the rate of headcount growth with our productivity and operating leverage. As a result, if we grow, then we'll add headcount. If growth does not materialize, then obviously we would continue to lose headcount in line with our productivity expectations.
Yeah. Not because of the market gyrations, more on productivity.
Absolutely on productivity, right? I mean, the volume is going to go up and down, right? The way it works through the operating model is that we have what we call PAR, like a productivity number that is a target based on the technology work we have done, right? We monitor that, which means headcount goes up and down based on whether we are meeting that productivity level based on our volume.
Yeah, we do not target headcount per se, right? Headcount is not our KPI for us. Productivity is, right? As Arun said, in fact, I know the headcount reductions have gotten most of the attention, but we have actually increased headcount in many of our customer-facing areas. The headcount declines you have seen have purely been related to we had a process before that was manual. We have now automated that process. Therefore, that role has fundamentally changed, right? Certainly, we have committed to evergreen productivity. We have no intention of giving back any of the gains that we have had the last couple of years. We expect to have more gains as we go forward. It really is a function of we are going to generate productivity. We have productivity targets that we are moving to. It is a function of market and process automation.
To that point, will that trend continue for NAST? Really depends on volume at that point.
All right. So we hit on a lot in terms of kind of NAST. You talked about global forwarding needing scale. Talked about margins without getting forecast. If I think about global forwarding, let's talk about just margins there as we wrap up. It did what, mid-23% gross margin in the first quarter. I just want to understand not the forecast for second quarter, but given the rate pullback, how do we think about that margin swing? Does it go back to the 20% range just given that's what historical was? Is that just given the spike up in global rates and shipping pricing? Maybe just explain the gross margin on global margins.
Yeah. As I said earlier, certainly the global forwarding business's profitability is more tied to rates than it is directly on the NAST side, right? Look, we're not immune to the market, right? If there's an aggregate change in the market, be it volume or rates, right? Our global forwarding results aren't immune to that. Now, with that said, we have a set of initiatives that are in place that do not change based on market dynamics, right? The operating rhythm demands improved results. The strategy demands focus on margin enhancement and growth. Certainly that does not change for Q2 as it relates to global forwarding. As I said, we're not immune to the market. As volume and rates change, right, certainly we're going to have some impact to that.
Now, what I would say, how I would have answered that question three days ago versus now is before it was significant pressure due to the April implementation of the tariffs. Now you have got some volume that is re-entering the system. I think it is too early to tell, but I think the litmus is how much of that pressure that was introduced in early April gets offset with some of the benefit that may come in in June. Do I think it offsets it one for one? No, I do not think there is time for that to materialize. It is certainly a consideration we have to look at.
All right. Let me wrap- up. I think we've just run out of time. The and strategy, not the or on margin and volumes, goal to expand gross margins. I think you threw out $90 million. You're going to grow regardless of the market, grow with margins, increase productivity, take the digital and apply it to your scale, still have humans in the loop, but keep winning on both margins and volume.
I think that's a pretty good summary.
Anything else you want to throw in?
No. Look, as I said before, I think we have a strategy that we believe works in all market conditions, which is why we may sound like a broken record when we talk, but it's not a script. It's not a line. It's actually how the company performs right now. And our strategy, it does work in all elements of the market trends. We're very anxious to demonstrate that in an up market. I think we all are. We believe everything we've been able to do in this prolonged freight recession will translate to a higher market as well.
Great. Damon, Arun, thank you so much for joining us this morning.
Thank you, Ken.
Thanks, Ken. Thanks.