Okay, great. Thanks. Good morning. We are powering away through what's been a great morning so far on the transportation side. We are very pleased to be joined by C.H. Robinson. Joining us from Robinson, we have David Bozeman, President and CEO, Damon Lee, Chief Financial Officer. I think Chuck is in the back, Senior Director of Investor Relations. Gentlemen, thanks so much for joining us. Really appreciate you being here.
Thanks for having us. Thank you.
Yep. Probably the best way, Dave, maybe kind of kick it over to you to start, maybe give a little lay of the land of what you're seeing in the markets. There's lots of stuff that you look at. You know, maybe a quick synopsis of kind of what you're thinking, and then we can dig into the individual businesses and what's going on specifically at Robinson.
Yeah, absolutely. First of all, thanks for having us.
Absolutely. My pleasure.
Glad to be here. I was, I woke up today and was getting a lot of messages. You know, time flies, right? It's like, happy anniversary, Dave, on your second-year anniversary with,
I should have started with that. There you go.
Yeah, that's all right. I don't know where the time went, right? So,
That's amazing.
It has been two years. I guess I would open up by saying I'm really proud of the team at Robinson. We've introduced a lot of changes over the last couple of years, and I think the team has not only responded, but they've grown from it. We feel good about that in our performance in 2024 and certainly in this last quarter in 2025. As you said, Chris, we see a lot. We have 83,000 customers, and for us, we're a little bit different. We not only have our NAST business here in North America, but we also have our global forwarding. We see a range of different customers that are out there, and it won't surprise you that there's a lot of uncertainty in dealing with those customers. We've been working with them.
A lot of people think that things happen, and there's a one-time thing. You know, supply chains have really been affected ever since the financial crisis. And Robinson's been on the forefront, in working with customers. There's a lot of uncertainty right now. Certainly, we're paying attention to what's going on in London, and right now, our customers right now are just in this kind of wait-and-see mode, and we're helping them to really navigate these kind of waters. I'd say coming back, we feel pretty good that we're driving a fit, fast-focused approach at Robinson. That was really important, really get our cost-controlled expenses to be more fit, drive a fast innovation and decision-making, and then be focused on the things that we do well in. For us, that's truckload, LTL, ocean, and air. Just drive that everyday focus.
Finally, we just take an approach that, from our recent investor day, we said we're gonna do two things. One, we're gonna grow market share. Two, we're gonna expand margins. I think we're setting out to do that. We're gonna do that by making sure that we have these higher highs and higher lows, have relative market outperformance. That's what we wake up every day to do. We've aligned our incentives and everything to go with that to help us achieve that. There's a lot that we can double-click on, but that's kind of the opening that I would see, overall. Still continues to be a 38-39 month freight recession that's happening in here, and we have to deal with it. That's what we're doing every day.
Helpful comments there. Let's sort of dig in a little bit and maybe just think about what you've seen over the course of the second quarter. There was a lot of discussion over the course of the first day and a half of the conference, particularly coming from the truck side, that maybe the worst-case scenario of 2Q has been sort of taken off the table. You know, immediately coming out of the tariffs, there were concerns about a material dip in activity that could have happened. Doesn't seem like it's happened. It may mean that we won't get a surge following now that the tariffs on China have been dropped more materially. What do you guys think?
Is that sound about right for you guys in terms of the overall activity, both in seeing it both from the ocean side as well as the surface side here in North America?
Yeah, Chris, I, I'll start, and Dave can, can jump in. I'd say it is a bifurcated discussion, right? Certainly on the trucking side. For us, truckload and LTL, you know, I think it has been, as you mentioned, I think the worst-case scenario is off the table. I think we have not seen the volatility that would have come with that worst-case scenario. I think what we've seen for trucking has been kind of more of the same, right? Where we've continued to kind of bounce along the trough of this freight recession in Q2 has been another example of that without the worst-case volatility that some expected. The forwarding side is a different, is a different animal, right?
I mean, certainly, if you take our forwarding business, you know, when the tariffs were announced in April, I mean, you essentially had an embargo between the two largest trading partners in the world, right? Between China and, and the U.S., right? And so for many categories of goods, they stopped flowing altogether. So we saw, you know, essentially a cliff event in departures that took place, you know, after those tariffs were put in place, you know, that created a lot of demand destruction in that period of time. Now, with the, you know, 90-day pause, we have seen, you know, order activity spike and come back. What I would remind everyone specific to Q2 is there's significant lead time between a departure and an arrival from a revenue recognition perspective.
Even though we've seen booking activity increase, we started to see departure activity increase, there's a three to four-week lead time between a departure and an arrival from a U.S. port perspective. From our perspective, you know, forwarding's gonna see some of that bounce-back benefit, call it the second half of June, mid-June to end June. I think you're gonna see the majority of that benefit fall into early, early Q3.
Right.
Really a bifurcated discussion between our trucking business and our forwarding business. Certainly, the forwarding business has incurred a lot more volatility in Q2.
Yep.
related to the tariffs. I think the trucking side has been a lot more muted.
Yeah. I think if we jump back to the, I think that that's right. We're gonna jump back to the trucking side of the house, and I'm sure you would have probably asked me this, is there, there's the carrier capacity.
Yeah.
We're still seeing, there's still an elongated, in this elongated market, we're still seeing excess carrier capacity more than I think should still be in the market. That is burning down, but it's not yet at a level that we think would be kind of normalized. At the current burn rate, with carrier capacity, we think early 2026 that that'll be kind of in a normalized state of capacity right now.
I wanna dig in on both sides. Maybe we'll start with forwarding 'cause that's obviously a little bit more volatile and then come back to the truck side of the house. On the forwarding piece, it sounds like the way to think about it is that, you know, 2Q captures some of the downside of the immediate aftermath of the tariffs, but only a part of the upside of the sort of eventual swing back. In just very simplistic terms, that's the right way to think about it.
That's it.
Okay. That, that's helpful. And then I guess as we think about, and so maybe we'll, you know, you see make some of that up potentially in 3Q if we do see some degree of surge kind of coming through.
Yeah.
Rates have been generally better. That's volume. Rates have generally been kind of moving up a bit. I think there was an initial dip and now moving up. Is that the same cadence to think about in terms of recognition, of what we're seeing with ocean rates?
Yeah. I'd say, you know, rates kind of follow that same demand dynamic, right? Certainly when trades slowed dramatically, you know, in April and early May, you know, rates followed that trend, of course. Now we've seen rates, you know, pick up again, fall in demand. I'd say rates have, you know, followed and lagged demand like they normally do. I'd just remind everyone that certainly coming into 2025, we did expect a normalization of ocean rates to begin with. We expected rates to be down for 2025. We still expect rates to be down for 2025. We don't believe anything that's happened, you know, in this Q2, early Q3 period has distorted that longer trend of a normalization of ocean rates for 2025 versus 2024.
Chris, and if you recall, in our investor day, we built that into our scenario planning as well.
Yeah. Bouncing back over to NAST and thinking about the truck space. I guess in the context of what you said, still some excess capacity. We've had a couple of the truckload guys come through over the course of the last day and a half or so. The general feedback is bid season, you know, kind of again going back to that theme of avoiding the worst-case scenario, bid season, which started okay, has ended okay without a meaningful disruption because of the sort of volatility around tariffs in the interim. You know, how would you characterize contract rates over the course of bid season so far?
Yeah, I think that's right. I think that's the right characterization. I would say, you know, one area though that we're laser-focused on is, I think that's right from a macro perspective. But as we've been able to demonstrate over the last several quarters is our ability to, you know, to realize price in this marketplace, right? And so, that doesn't change with the bid season. We still feel like we're in a really good position to continue to get accretive pricing, you know, in this marketplace. It's just a deployment of our strategy, right? As Dave mentioned, you know, we're laser-focused on outgrowing the market, laser-focused on expanding our operating margins. And part of expanding our operating margins is expanding our gross margins as well. We've had great success on price discovery. And, you know, we're continuing to have that success in Q2.
We expect to continue to have that success going forward. What I'd say is I would agree with that comment from a macro perspective, but I think you'll see Robinson will continue to differentiate itself from a pricing perspective.
I think you, I wanna dig into the margins and all of that as well. In terms of volume, I think you saw that in the last quarter, you guys were able to maintain your AGP margins. You also ended up outperforming on a volume basis. That strategy continued to sort of work effectively as we're in this sort of market here in 2Q as well?
You know, first of all, you know, we do not wanna guide on, on expenses.
I do.
We're not gonna guide on that. What we would say is we feel confident in the strategy that we have. The strategy we have is, it's an input-based strategy versus output. You and I have talked about this before. At Robinson, we wake up every day and we really fuel and look at our inputs and operate effectively, now with a level of speed that's different than how we've operated before. That's our lean operating model in action along with what we think is industry-leading technology. Those two give us the confidence of driving, as Damon said, volume and pricing leverage that we have.
I guess as we think about the rest of the, I guess maybe zoom out a little bit and think about margins in NAST and some of the opportunities you guys have had. You've done a, I think a wonderful job managing the resources of the business relative to the market that you've been in. It's obviously been challenging. I think you mentioned, you know, we're in the 30-plus. I always lose count of how many months this has been a downturn.
Call it 39, but we're counting.
Yeah. Who's counting, right? So, we've had an extended downturn, I guess. How do you think about sort of the levers to pull on productivity as we move forward from here? We, we're, I don't think we're expecting to get double-digit kind of improvements in that again, but, you know, what's the opportunity set?
Yeah, I think it's a good question. To be able to hear this, we obviously felt really good about our 30% over the last couple of years.
Yeah.
Of productivity. What we also, we've been very open about that is, is going forward, we really start talking about single-digit productivity. The key is that this is not a period. It's a comma when you start talking about productivity the way we look at it at Robinson. Meaning, the markets will come back. Even at the high, the expectation in our company now is that we're still gonna have productivity. There's a productivity expectation every year as we go along, and it's evergreen productivity. Meaning that once we do that productivity, we're not giving it back. What you saw was that kind of compound initial grab of productivity as we go into this year. You can argue a really tough year. That doesn't sway where we're going. The team does still expect it to drive single-digit productivity.
I think we're on track for that.
Yeah. I'll just add to what Dave said there is our operating model doesn't allow our productivity to plateau, right? Our target setting conditions keep going up and up and up. What we did last quarter to achieve our target doesn't get you to next quarter's target, right? Therefore, it forces our teams through that rigor and discipline to always think about what's the next level of tech evolution, what's the next level of operating rigor, what's the next level of process improvement that's gonna drive productivity, right? We talk about our tech deployment a lot, but I think just as important in our success is the deployment of our operating model because that operating model doesn't let the tech get stale, and it doesn't let the tech, you know, plateau. It forces the tech to get better.
When we talk about, look, we're focused on evergreen productivity. You know, there is no end state on when we believe productivity runs out 'cause we don't believe it will run out. It's also forcing our tech to get better. I think that's a key leg of our stool to our strategy. It's about our people. We think we have the best people in the industry. We do believe we have the industry-leading tech, and AI is a big piece of that. The discipline and rigor that the operating model brings, we think is just as important as the technology.
A lot in that. You know, think about it. Great people. We think the best logisticians in the world, great technology, but a super disciplined and very important operating rhythm and model. You can have the greatest technology, you can have one of those individually, but you need to have 'em all together, we think. That is the performance that we're driving. Just having great technology without an operating rhythm that surfaces problems, that drives execution, that technology may just fall on its face.
I've been thinking about this more. We've seen the way you've managed the business, generated productivity in a down market.
Mm-hmm.
Does that opportunity change when the market turns up? I mean, you know, does it make it easier? Does it make it harder? The same? I guess, how do you think about that?
Yeah, it's a great, it's a great question. I, I, I'm gonna say this. I'll, I'll throw it to Damon as well. The structure, we think there's a structural change in Robinson. We feel like, you know, yesterday, I always talk about it in yesterday and today. Yesterday, 2018, where the company was versus today, there's been structural change, within the company. Whether I'm here or not, I mean, that structural change doesn't go away. That's kind of evergreen. We also feel like the model and the system and the technology that we have, the more you put into it, the more it outputs. And you know, I feel instead of a linear improvement, there's an exponential improvement as you continue to drive more and more, into the system.
I did a gemba walk, which is something we do at Robinson where you go to the work. I really did a test to see if the people were looking at this technology and looking at it as a threat. You know, was it a problem? I just, yeah, I surprised people. I sit at the desk with people and just talk to 'em. This one gentleman I thought did a really nice job. We took our large language models out on quoting, and he's looking and saying, "Hey, listen, Mr. Bozeman, I, you know, I may have gotten to like 60% of those quotes." I mean, we get thousands and thousands of quotes a day in this business. In this business, as you know, time is money.
You know, he looked and said, "Hey, I may get to 60% of those quotes, and I would've probably gotten back what they number.
Mm-hmm.
You know, Charlotte to Fort Worth, I'd give you a number. Now our large language models are putting the heuristics and the details much more than we've ever done. It's responding back to Chris in a conversational manner, and it's doing it in 90 seconds, and it's responding to every quote we get. And then he can operate as a human in the loop, continue to make it learn and continue to drive it. That can, that's game-changing for us because now we're able to get more loads that we would not have possibly gotten in the past. And so when you pump more into that, you're gonna get more out of it. That's how I'm answering your question.
Yeah, it sounds like maybe a good volume environment or a better volume environment is not a bad thing for that.
Robinson would love more volume, but we're saying if we don't get more volume, we're still gonna perform.
Yeah. I'll just add to that. You know, we're excited to demonstrate what we can do in a higher market environment, right? We're not waiting for it. We're performing today regardless of the market, but we're excited to show what we could do. I think the question we get on specifically the NAST business a lot of times is, well, how do we know you're not just gonna flood people back when the volume returns? Our answer is there's no reason to flood people back when the volume returns in those areas that are related to operational task, right? Because the processes themselves have fundamentally changed.
Fundamentally changed.
The process that required, you know, a human touch before no longer requires the human touch, right? You know, for us, we always have to kind of pause and think about it because, you know, for us, it goes without saying, right? There is no reason to bring the people back because the technology. In this favorite session, or it will show up as increased operating leverage when volume returns. As Dave mentioned, right, we are extremely confident that regardless of the market cycle we are in, the productivity focus we have will translate.
It, it's allowed us to invest, in headcount from a customer-facing perspective.
Mm-hmm.
Right? You know, as you know, we've focused on SMB, the small, medium business segment, along with some key verticals. It has really allowed our people to do what they do best. Instead of chasing down some of these manual tasks, it is spending time with customers and solving problems on their topology and where they move their freight and how they solve really difficult problems. We've invested in that space in bringing people in from a customer-facing perspective.
That's a great point 'cause our headcount reductions have not been blind headcount reductions.
No.
They've been very systematic. I automate a process. I no longer need the headcount, right? It hasn't been a, I will just reduce workforce by 10%, right? It's been very systematic as we deploy technology, then certainly the headcount trends go along with that. As Dave mentioned, in many customer-facing areas of our business, we've actually increased headcount while we've been in this freight recession, right? It is a bit of a bifurcated story. Certainly on the operational processes that have been transformed, that's where the vast majority of the headcount has come out. On the customer-facing, and where we're moving up the value stack with the customer, we've actually added headcount to facilitate that.
So, let's kind of bridge from what you did in the first quarter from a margin perspective. I think you've talked about 40% or so kind of, you know, mid-cycle EBIT margins in the NAST business.
Yes.
You know, how much of this is gonna be generated through productivity, you know, volume growth? Do you need it to get there? How much does that help? How do you think about, you know, whether it be GP per load or however you wanna kind of, you know, think about the pricing piece of this, of the business as well?
Yeah.
I think it's important too.
Yeah.
To, just do a quick reminder, again, our December 12 investor day, the scenario that we post.
Yes.
Right? Which was a scenario that talked about not something that we're actually seeing right now, but we talked about a zero growth.
Mm-hmm.
In the market, a mid-growth, which was 2-2.5%, then a more high-growth scenario, 5%. We did not model out a negative growth, right, in the market, which is, you can argue, is what we are seeing now. For us, it does not matter. We are still moving forward on that. I just want to reset, remind everyone what that was.
Yeah.
That 350-450 was on that, that zero kind of mid and then 5%.
Yeah.
market growth, perspective.
Yes.
Now you can.
I'll just take that and run with it. I think that the way I would bridge kind of current levels of NAST profitability to what we presented at investor day is, first of all, market is a piece of that, right? Certainly we're not in a mid-cycle market. Our commitment to 40% margins for our NAST business was, you know, predicated on a mid-cycle market. I think that's just kind of bullet number one. I think, also from a rate perspective, we do expect rates to, you know, be accretive by 2026. What we discussed in investor day was rates returning to pre-COVID levels, so 2019 levels for truckload. That was part of the equation to get to 40%.
As Dave mentioned, I think the big part of the center core of the target was, you know, $220 million at the enterprise level. That was NAST and Global Forwarding, of self-help initiatives.
Mm-hmm.
Right? So of that $220 million, and again, these are enterprise, not just NAST, you know, $40 million of contribution from market outgrowth by 2026, $90 million of gross margin expansion by 2026, and $90 million of cost reduction and cost avoidance by 2026, right? And then we had a headwind that we are, we're proud of because it means we win, which is we had $60 million of cost inflation, which is rewarding the people that help us succeed, right? So if you add up all those pieces with that $220 million of enterprise initiatives really at the core, you know, that's the path to the 40%, right? And, as we've mentioned, that's a mid-cycle path.
The other commitment we made in investor day as part of, you know, the ancillary comments is, look, we're committed to whenever we return to any market dynamic that we've had historically, we will outperform what we've done historically.
Right.
Forty percent is not the cap for our NAST business, right? You know, it's what we've estimated and what we've committed to at mid-cycle. At any time in the future when we replicate a historical set of market conditions, we are highly confident we will outperform what C.H. Robinson's done in those conditions. We feel very good about our 2026 commitments. We get that question a lot with all the market volatility.
Yeah. Yep.
A lower-for-longer scenario, but we feel very good about the commitments we made in the past.
Still very committed to those numbers.
And the gross margin piece, I tend to spend a lot of time thinking about productivity, you know, in terms of generating more, you know, shipments per day per person. The gross margin side, the buy side, you guys have also talked about the opportunity there and technology is a key there.
Yeah.
I guess, you know, early days here, and I guess the market's been reasonably stable from a, at least a spot rate perspective.
Mm-hmm.
Over the course of much of 2Q. Just any thoughts around sort of gross margins and how you guys have been able to navigate that and the bigger picture, how you think the opportunity continues to play out?
Yeah. As Dave said, of course, we do not guide, so we will not go too specific there. What I would say is, you know, what has got us here thus far has not changed in Q2, right? When we talk about expanding operating margins, expanding our gross margins is a subsect of that, you know, and we continue to do those same behaviors in Q2 that we have done for the last five quarters. You know, we feel really good about our price and cost of hire discovery. I use this example a lot where if you take Robinson of three to five years ago, you know, we would set a pricing strategy at the beginning of the quarter, and then a hundred days later we would see how we did, right?
Today, with our technology, with our operating rhythm, with everything that we've brought to the table on gross margin performance, we'll set a pricing strategy at 8:00 A.M. By 8:10, we're already testing that strategy.
Right.
By 8:15, we're testing it again. If margin's coming in a lot better than I thought, I'm trading that margin for volume. If volume's coming in lighter than I thought, I'm trading margin for volume. The amount of optionality that we have now on managing price versus cost, it's just exponentially higher than we've ever had. That's driven, you know, great price discovery for us, great cost-to-hire discovery. Dave gave an example of the person at the desk that wasn't getting to all their quotes, and when they did, it was an unsophisticated response, right?
Mm-hmm.
Today, look, Robinson's always had one of the best data sets in the industry, right? Historically, we just didn't have the ability to use it in real time. Today we do. When our technology is responding to that quote, it's not responding in a simple manner looking at one or two data points, right? It's looking at hundreds of characteristics of the carriers, of the loads, of the customers, of the lanes, and it's making a much more precise decision on how to service that load. That precision and frequency of testing is allowing us to scrape more price, scrape more cost to higher advantage, and allowing us to expand our gross margins. There's many examples of where at a very simple level, a load didn't look attractive because we were matching the wrong load to the wrong carrier, right?
Today we're matching the right load to the right carrier, and that's actually a profitable load for us. That's a load before we would've passed on because it didn't meet our profitability requirements. Today, through the sophistication of our tech, through the frequency in which we're interrogating data, that's now a positive load for us.
Yeah. That kind of goes, Chris, to what I said about inputs versus outputs. That is a big difference in the company. Most of the industry would look at output base, and you are almost doing autopsy on what happened. You know, as you know, on an autopsy, the patient is dead already, right? You know, like.
That's right.
You don't get a shot at that. This is why we look, this is why we look at input, and as Damon said, we look real time, and it allows us to interrogate and prosecute the business and not the person, and we could do it in real time. That has kind of changed that execution and that muscle and that prowess, which is a fundamental difference in our company.
I wanted to touch before we run out of time on the industry dynamic because I think that's super important. I think a lot has changed over the course of the last five or so years where I think the perception was brokerage was under attack from a lot of sort of outside forces that were using technology to get into the business, were pushing, you know, margins lower in pursuit of market share.
Yeah.
You know, interest rates went from zero to 4 or 5%, and some of that became more difficult for those folks to do. So.
Mm-hmm.
You know, how do you think about it? We've heard recently that, you know, double-digit declines in brokerage capacity.
Yeah.
Over the course of the last year or so, just, you know, your view on the industry as it stands today.
Yeah. It's a, it's a lot in that question just to, to.
Yeah.
Break it apart a little bit. Some of the facts on brokerage itself, we have seen over an 18% decline in brokerage over the last couple of years.
Yeah.
There is a burn down there. Now, when I look at that and Damon looks at that, we do not look at that and say, "Oh, wow, that is great." It is kind of a so what, to us because this industry that we are in, let us face it, a number of folks in this room can start a brokerage in a week or two with off-the-shelf software in doing that. The barrier to entry in the brokerage space is pretty low. The difference is you have to finish the sentence in the conversation. The barrier to sustainability and growth is very high, right? Really, large customers, even mid-size customers, they are not going to look at Chris and Bozeman's brokerage and trust and give you that consistent rent.
It's really hard to stay at this realm in doing that. We have seen kind of that bow down. What you talked about on the digital disruptors coming in, we saw how that played out.
Yeah.
Damon talked about a number of these things are why. Why? Because this industry is difficult. It has variability. And the thesis was a pretty simplistic thesis. Everyone understood it. I would argue that it actually made some things better. This is not the only industry that that happened in. It happened in the airline industry.
Mm-hmm.
For discovery and a number of other industries where that just drove the competition to do that. We look at that and say, "Okay, fine," you know, kind of game on, on doing that. What I think the thesis missed is what we've been talking about up here now. You have to have people that understand this business. And sometimes it just comes down to experience.
Yep.
There are things that break, and how are you gonna fix that? As I was sitting at the desk talking to someone one time and they were booking a load, and he said, "I'm sorry, Mr. Bozeman, I have to go cancel that load." I said, "What do you mean you have to cancel that load?" He said, "I just realized, that carrier with that load is not gonna work. It's a loose load and it'll be bad, right? People will come, we'll have to double price it, all that." He knew that off of experience in dealing with that. Took him 30 seconds to take that back, put the right carrier on there. In the model that you talked about with the digital disruptors, that wouldn't have happened, right? Because variability in here is what kind of killed that thesis.
This is why we feel like we've got the right mousetrap. Greatest logisticians in the world, greatest technology we think within the industry, allowing it to always evolve, get smarter, and customers sometimes wanna make sure that you're taking care of their loads. Chris and Dave's transmissions, that pays the bills, right? A really large customer, beverage customer, they're talking bot to bot with us right now. We just booked a lot of loads, right, over the last minute or two. Now medium to small customers get that same sophistication in the way we're operating the business. I think that's where the thesis was missed, and we feel good about it. Human in the loop, and that's gonna make a difference. It is making a difference, especially now when there's a call on quality.
Got it. That's very helpful. We have run out of time, so we're gonna have to leave it there. But thank you, gentlemen, both very much.
Yeah. Thank you.
For joining us. Really appreciate it.
Yeah. Appreciate it.
Thank you.