Good afternoon, ladies and gentlemen, and welcome to the C. H. Robinson First Quarter 2021 Conference Call. At this time, all participants are in a listen only mode. Following the company's prepared remarks, we will open the line for a live question and answer session.
As a reminder, this conference is being recorded, Tuesday, April 27, 2021. I would now like to turn the conference over to Ives, Director of Investor Relations. Please go ahead.
Thank you, Donna, and good afternoon, everyone. On the call with me today is Bob Biesterfeldt, our Chief Executive Officer and Mike Zuckmeister, our Chief Financial Officer. Bob and Mike will provide a This change to live Q and A From our previous practice of responding to pre submitted questions is in response to valued input from our analysts and shareholders. Our earnings presentation slides are supplemental to our earnings release and today's comments and can be found in the Investor Relations section of our website at chrobinson.com. I'd like to remind you that our remarks today may contain forward looking statements.
Slide 2 in today's presentation Factors that could cause our actual results to differ from management's expectations. And with that, I'll turn the call over to Bob.
Thank you, Chuck, and good afternoon, everyone. We're proud of our Q1 results. As global shipping markets remain disrupted, Our team around the globe stayed focused on serving the needs of our customers and delivering innovative solutions to keep global supply chains moving. During the quarter, we delivered strong financial results while continuing to deliver against many of our initiatives related to growth, productivity and of our digital strategy. I'll highlight some of these areas of progress as I walk through my prepared comments surrounding our Q1 results.
In the Q1 of 2021, we generated 125% growth in earnings per share due to profit growth Our 2 largest business segments, North American Surface Transportation and Global Forwarding. Our NAST business generated double digit growth in both adjusted gross Call. These results were driven by a 23% improvement in AGP per truckload in our truckload business, coupled with continued strong market share gains in our less than truckload business, where volume per business day increased 17% year over year. Bolstering these results were continued benefits of our technology investments, which continue to unlock productivity gains and deliver customer value in new and exciting ways. The macro environment in the Q1 continued to be one of tight capacity and increased pricing in the marketplace driven by several supply side constraints, including the ongoing challenges of driver availability coupled with robust demand.
The weather events in February demonstrated how Supply chains can get disrupted in this capacity constrained environment. For the quarter, our NAST truckload volume was down Approximately 6.5% or 5% per business day compared to Q1 of last year. While our business in the spot market increased Significantly, our volume in the contractual business declined as we continued to pursue profitable volume growth by reshaping our through repricing the book of business with new and existing customers. It's our belief that given the current structural constraints around expansion of truckload supply, Coupled with additional government stimulus, a back half reopening of the economy and potential infrastructure spending, the market conditions that were Existing today have the potential to remain out of balance for the next several quarters. For Q1, we saw routing divestiture in our managed services Business maintained between 1.7 and 1.8, which is consistent with Q4 of last year.
As one of the world's largest logistics platform and the largest provider of truckload capacity in North America, we are uniquely positioned to help both customers and carriers navigate these market conditions. One of the ways that we do this is by leveraging our scale and the size of our carrier network. In the Q1, we welcomed 6,900 new carriers to network, which represented a 72% increase year over year and represents the most carriers added in the quarter in our history. Coupled with these new carrier ads, we also saw record use and adoption of our carrier facing digital products, Navisphere Carrier and Navisphere Driver, further advancing our digital initiatives. Our average truckload line haul cost per mile paid to carriers, excluding fuel surcharges, increased 33.5% compared to the Q1 of last year.
Our average line haul rate billed to our customers, excluding fuel surcharges, Increased 33% year over year. And for the Q2 in a row, we saw a sequential change in price per mile That exceeded the change in cost per mile as we continue to reprice our contractual truckload business to reflect the current environment. Our first quarter rate per mile billed to customers increased 2%, while our cost per mile to carriers increased 1% sequentially. We closed the quarter with an approximate mix of 55% contractual volume and 45% transactional volume versus the 60 five-thirty 5 mix in the year ago period and consistent with our mix in the Q4 of 2020. NAST's less than truckload service continues to grow volume faster than the market with 17% year over year growth in volume per business day in Q1.
Our value proposition that combines a full suite of LTL services, including common carrier, warehousing and retail consolidation, Temperature control, parcel, home delivery and reverse logistics continues to resonate with customers across industries and we to benefit from the tailwinds in some of the fastest growing customer segments, including retail, e commerce and manufacturing. Within LTL, we're winning new business and growing our existing business with customers of all sizes, from small businesses that utilize our Freightquote by C. H Robinson platform To large enterprise shippers that look to us as a strategic partner to manage and optimize their LTL freight networks. In total, NAST's overall volume per day grew 7% year over year. This was slightly below industry volume growth during the quarter of approximately 7 point Half percent as measured by the Cask Freight Index.
Turning the page to Global Forwarding. Our Global Forwarding business once again delivered excellent results in We delivered 118% increase in total revenues within the Forwarding segment, a 67% increase in adjusted gross profits a 6 58% increase in operating income. The forwarding team at Robinson successfully worked with customers across the globe to navigate a difficult and Market leading to increased award sizes from customers and thousands of new commercial relationships. The airfreight market continues to be impacted by reduced cargo capacity and we continue to position charter flight capacity to support demand from both existing and new customers. Our customers continue to value working with Robinson's local experts in offices around the world that can deliver a full suite of global logistics Services and Technology Solutions.
The resulting market share gains combined with the strength of the market produced a 27% increase in ocean volumes during the quarter And a 7% increase in air shipments. Candidly, 3 to 5 years ago, we wouldn't have been able to deliver these types of results in our forwarding business, but we've made substantial structural and strategic changes and have increased our investments over that time. We've invested in technology, data and analytics, as well as our global network and leadership team, and we've bolstered our commercial sales teams in forwarding to strengthen our customer relationships and to support emerging vertical strategies, while creating sustainable High value revenue streams. Additionally, we've expanded our geographical strength in areas such as Europe, Oceania, Latin America and South Asia, While we continue to grow our core transpacific and transatlantic business. Within Forwarding, we've implemented a more centralized global pricing framework That combined with an increased use of data and analytics is enabling us to employ improved and agile pricing strategy leading to growth in market share.
We believe that these strategies and competitive advantages will enable us to create more value for customers and in turn win more business and sustain the market share gains that we've achieved And we'll continue to have Forwarding contribute and drive parts of our long term growth. Because of the efforts of our C. H. Robinson team members around the world, Our total company adjusted gross profit per business day improved by 11% sequentially in Q1 and 26% year over year. Related to technology, we continue to make progress on our strategic initiatives and transformation efforts.
As I've stated in the past, The 3 primary areas of investment in technology are focused on creating value for customers, value for carriers and driving productivity improvement for our teams, which in turn drives improvements to both our top and our bottom line results. Looking at the impacts of technology through the lens of customers and carriers, The number of daily and monthly average users across our customer and carrier facing platforms continues to grow. An area that we've invested heavily in is the ability to deliver real time pricing for truckload shippers Through digital channels that are most convenient for our customers to use. Enabling these digital connections improves efficiency for our customers, it improves our response time to requests, It improves our win rates. Today, more than 30% of our transactional business is being priced via our proprietary transactional pricing engine, which we call TPE.
Today, we're delivering real time pricing with capacity assurance from the largest network of truckload capacity. Volume driven through our transactional pricing engine has more than doubled when compared to last year's Q1, and the volume executed Digital connections via API and EDI has grown 4 times over that same time. We continue to add customers at an accelerated pace With over 100 new customers connected via TMS and ERP connections in the Q1 of 2021 alone, The pipeline for adding both direct customer connectivity and TMS connections is robust and we expect to achieve strong growth in our platform connections And tenders throughout 2021. Our customers now have access to real time pricing via our Navisphere customer web portal, Direct through their TMS or ERP integrations as well as via freight quote by C. H.
Robinson. In total, we've enabled these dynamic pricing capabilities Over 85,000 customers across these points of connection. Small businesses continue to see the value in our freight quote by C. H. Robinson platform As the number of customers utilizing this has grown 30% year over year and the adjusted gross profit generated through Freightquote is up 137%.
We've had over 1,000,000 unique visitors to the Freightquote platform just since the product launched. And we continue to be excited about Total addressable market of small businesses and our ability to serve them in a fully digital and frictionless manner. Earlier this quarter, I hope that you saw that we launched Emissions iQ, the first free self serve tool for customers that will instantly allow a customer to view their carbon emissions Across all modes of transportation globally. This product was created in our innovation incubator Robinson Labs and built in response to the growing priority around Sustainability. Emissions IQ includes partial truckload emissions methodology that was created in collaboration with MIT's Center For Transportation and Logistics and the U.
S. EPA. This collaboration focused on developing a standardized way To measure the emissions of LTL for the first time, by putting useful technology and data at our customers' fingertips, we're not only increasing the transparency of emissions in our But we're surfacing the best strategies for customers to make meaningful carbon reductions. On the carrier side, We continue to deliver new capabilities and benefits to our carriers through our web and mobile versions of Navisphere Carrier and Navisphere Driver. During the quarter, we saw significant increases in the occurrence of fully automated bookings in our NAST Truckload business via the web and the app.
Approximately 90% of our North American truckload freight is now available to be booked via Weber app in a fully digital and frictionless manner. The number of carriers that adopted this capability was up 50% sequentially from Q4 of last year to the Q1 of this year. And finally, as it aided by the 1270 point favorable spread in our NAST productivity index, which represents the difference between the year over year change in NAST volume And the change in full time equivalents and NAST. Another key metric that we review is shipments per person per day. We're making on our technology journey and the impacts that these investments are delivering for our customers, for our carriers and the impact to our overall results.
I'll now turn the call to Mike to review the specifics of our Q1 financial performance.
Thanks, Bob, and good afternoon, everyone. As Bob mentioned, we delivered solid financial results during the quarter due to strong profit growth in NAST and Global Forwarding Despite lower truckload volume in NAST, where we work to improve AGP per load by addressing unprofitable loads in the tight freight market. Our total company AGP per business day was up 26% compared to Q1 of 2020, driven by performance from our ocean And truckload service teams. As a reminder, our Q1 had one less business day compared to Q1 of last year. On a sequential basis, All of our business segments and service lines delivered increased AGP per business day compared to Q4.
Our truckload service line delivered the Largest absolute increase on a sequential basis with a 6% increase in AGP per load and a 4% increase in truckload volume per business This sequential volume growth was achieved despite the negative impact of winter storm Yuri in the U. S, which we estimate had a net decline of a half a day of truckload volume and a full day of LTL On a monthly basis compared to 2020, our total company AGP per business day was up 34% in January, up 17% in February and up 26% in March. Q1 personnel expenses were $360,800,000 Up 9.3% versus Q1 of 2020, primarily due to higher incentive compensation costs that are aligned with our expected 2020 1 results. Q1 average headcount declined 2.9% compared to Q1 last year, including the Prime
acquisition, which added 1 percentage point.
The which added 1 percentage point. The Q1 growth in our business with reduced headcount shows Our technology and process improvement investments are delivering efficiency to our business model. We continue to expect our full year 2021 personnel expenses Approximately $1,400,000,000 including the higher incentive compensation, the impact of our ongoing long term cost savings efforts and Q1 SG and A expenses of $118,200,000 were down 7.9% compared to Q1 of 2020, driven by reduced travel and improved credit losses. We continue to forecast 2021 total SG and A expenses to be approximately $500,000,000 including the expectation that travel expenses will Build in the back half of twenty twenty one as the impact of the pandemic subsides. 2021 SG and A is expected to include approximately 80 $5,000,000 to $90,000,000 of depreciation and amortization, which is down from $102,000,000 in 2020, primarily due to the completion of Amortization related to a prior acquisition.
Regarding our long term cost reduction efforts, through Q1, We delivered approximately 90% of the $100,000,000 per year of long term or permanent cost savings. We expect to deliver the remaining $10,000,000 of long term savings by the end of Q2. In the back half of twenty twenty one and beyond, we will continue our long term cost savings efforts primarily through process redesign and automation across the enterprise. Our first quarter adjusted operating margin was 31.8%, An increase of 12.50 basis points compared to Q1 last year, primarily due to the increase in adjusted gross profit and success of our cost savings The Q1 adjusted operating margin delivered on our 30% long term enterprise margin expectation. Our first quarter effective tax rate was 18.3%, up from 17.1% in Q1 last year due primarily to the higher income this quarter.
Recall that our Q1 typically has a lower effective tax rate due to the tax benefits related to the delivery of our annual stock based compensation in the quarter. We continue to expect our 2021 effective tax rate to be 20% to 22%, assuming no 2021 impact from changes to U. S, state or international tax laws. Q1 net income was $173,300,000 Up 122% compared to Q1 last year. And as Bob highlighted, diluted earnings per share finished at $1.28 Up 125% versus Q1 last year.
Turning to cash flow. Q1 cash used by operations was $56,700,000 compared to $58,500,000 provided by operations in Q1 of 2020. The $115,000,000 decrease in operational cash flow versus Q1 last year was driven by a $468,000,000 sequential increase in accounts receivable and contract assets compared to Q4, which was partially offset by a $216,000,000 increase In total, accounts payable and the $95,000,000 year over year increase in net income. The 17.7 percent sequential increase in accounts receivable and contract assets was driven primarily by a sequential increase In total revenue, that was more concentrated in the last 2 months of Q1 compared to Q4 as well as the mix shift associated with higher total revenue growth In Global Forwarding, where our DSO runs almost double that of our NAST business, it's important to note that we are not Seeing a deterioration in the quality of our receivables. Q1 results included sequential and year over year improvements in Credit losses and percent of accounts receivable that are past due.
Over the long term, we expect working capital to grow at a slower rate Then our adjusted gross profit. Q1 capital expenditures totaled $13,500,000 compared to $14,700,000 in Q1 last We continue to expect our 2021 capital expenditures to be $55,000,000 to $65,000,000 We are seeing solid results from our investments and we'll continue to prioritize the highest returning technology initiatives on a risk adjusted basis. We remain committed to our $1,000,000,000 investment Technology from 2019 to 2023. We returned approximately $221,000,000 Cash to shareholders in Q1 through a combination of $151,000,000 of share repurchases and $70,000,000 of dividends. That level of cash returned to shareholders represents a 45% increase versus Q1 last year when we paused our share repurchase late in quarter to assess the impact of the pandemic.
During Q1 this year, we repurchased approximately 1,600,000,000 shares At an average price of $92.84 per share. At the end of Q1, we had approximately 6,400,000 shares of capacity remaining On our 15,000,000 share repurchase authorization from May of 2018. We continue to be committed to Disciplined capital stewardship, maintaining an investment grade credit rating and returning excess cash to shareholders through dividends and opportunistic sharing purchases. Now on to highlights from the balance sheet. We finished Q1 with $218,000,000 of cash and cash equivalents, Down $77,000,000 compared to Q1 of 2020.
Over the long term, we intend to carry only the cash needed to fund operations And efficiently repatriate excess cash from foreign entities. We ended Q1 with $968,000,000 of liquidity comprised of $750,000,000 of committed funding under our credit facility, which matures in October of 2023 And our Q1 cash balance. Our debt balance at quarter end was $1,340,000,000 up $250,000,000 versus Q1 last year. Our net debt to EBITDA leverage at the end of Q1 was 1.3x. I'll close by saying that I have great confidence in our team And their ability to build on the solid results from Q1 by continuing to execute our plans that generate sustainable long term growth in our total shareholder returns.
We're proud of the results that we delivered in the Q1. We delivered record revenues, adjusted gross profits, net income and EPS relative to all past 1st quarters. We grew adjusted gross profit in the quarter by 24%, while operating expenses increased by less than 5%. This demonstrated the strength and the earnings power of our non asset based business model. Looking forward, we'll stay the course with our strategy of pursuing market share gains that align And we'll continue to invest back into the business in order to drive innovation and improve service to our customers and to our carriers.
Within our NASS business, based on what we know today, we expect tight market conditions to continue through the balance of the year. Customers across our global suite of modes and services. We're very pleased with the results from Global Forwarding, where we've built sustainable competitive advantages Due to the structural changes that we've made over the last few years, across the board as one of the world's largest aggregators of this highly diverse carrier base on multiple continents. We're committed to creating better outcomes for our customers and carriers by delivering industry leading technology that By and for supply chain experts. As shippers and carriers continue to increase their adoption of our new digital capabilities, We expect to see continued productivity benefits and to grow market share across our service lines as we create value for customers in new ways.
As an organization, we're committed to continuous improvement, driving further efficiencies into the model and leveraging our unmatched combination of experience, Scale, technology and information advantage to create better outcomes and to unlock growth. We're also firmly committed to being Corporate citizen and we're proud of the tools that we can now offer to advance sustainability across the logistics industry. Over the past year, all of our lives have been challenged in unforeseen ways and the priority to build more flexible and adaptable supply chains is a top priority For shippers and receivers globally, we are uniquely positioned as an organization to offer solutions and to innovate by leveraging our non asset based business model, Our global suite of services and the most capable team of supply chain experts in the world. The team at Robinson is excited by the opportunities in front of us and committed to providing solutions to the most difficult challenges facing our industry. Lastly, I'd like to thank the team at Robinson around the world for
the interest of time, we do ask that you limit yourself to one question and one follow-up before re queuing for any additional questions. Our first question is coming from Jack Atkins of Stephens. Please go ahead.
Great. Good evening. Thanks so much for taking my questions. So I guess, Bob, first Questions for you. When I think about the volume decline of 6.5%, I guess It's more like 5%, 5.5% on a per business day within the truckload operations in the quarter.
And I understand that it gets a more challenging Year over year comparison in the Q1. How do you think about when we're going to see an inflection in volume growth. I mean, the productivity gains are there and they're real. We can see them in the slides that you're presenting. You know, is it a headcount issue?
Do You need more more folks to to be able to attack the volume. I guess one of the biggest pushbacks I get from investors is that they're they're just struggling to understand why Such a strong transactional market isn't translating into more robust volume growth for C. H. Robinson. Can you help explain what sort of Limiting that for you guys over the last several quarters.
Yes. Thanks, Jack. It's a great question. And your assessment is right. The volume per day was down About 5%, I guess a relatively frankly a really difficult comp.
Q1 of 'twenty was our 3rd highest truckload volume on record. But let's peel it back a level because if you look at just the spot market business, we had robust growth in the spot market, double digit growth in that But the shift between contractual and spot is an important one that we peel back. And so I want to talk a little bit about the efforts that we took To reprice our contractual business in the Q4 and in the Q1 and frankly ongoing into the Q2, I'll start with pricing. If we look back to where we were in the back half of twenty twenty, we had negative files at a record level, right? Some 15% of our loads were resulting in a negative outcome and that cost us somewhere north of $100,000,000 in the back half Of last year and negative adjusted gross profit.
So we had to stare that down 1st and foremost and target a yield and an adjusted gross profit Our contractual business that was more sustainable. The second piece of that is that as we thought about where the markets were going to unfold in 2021, We had to take a position. We had to take a position because by nature, we sell long largely and buy short. And as I stated in some of my prepared comments, we There is some sustainability to the market that we're in right now. Given the driver shortage, given some of the delays on the order to build delivery cycle Class 8s, given the continued inventory restocking, given the upcoming produce season, etcetera.
And so what we saw through our bidding In Q4 and into Q1 in the contractual was we took that position believing that to be correct That impacted us somewhat negatively in terms of our awards on a year over year basis with some of those customers. So we improved Our adjusted gross profit per shipment in Q1, as I think I said in the earlier remarks, about 23%, Certainly significantly off the trough of Q3 of last year and we're back into a more normal range of that adjusted gross profit per load. What we've seen as the quarter has progressed, Jack, is that the market seems to be coming back a bit to our thesis. And so it now does appear, at least based on where we sit today, that this market does have some legs on it. We're seeing opportunities come back to us either through the spot Market or kind of this gap between what is spot and contractual where we're able to provide dynamic pricing.
And additionally, seeing contractual opportunities come back to us with a more Favorable AGP profile that's sustainable for us to help those customers through the course of the next year. I mean, I was involved in a lot of customer conversations And the point is that we wanted to put pricing in front of our customers that we could stand behind that were good for us and good for the customer Without transferring the risk at the level that we did in 2020, because that number of negative files and those negative outcomes just simply wasn't sustainable.
Okay. That definitely helps clarify that. And just I guess for the follow-up, I mean, do you feel like now the market Coming back to you, do you feel like you're at a point now where volume growth can turn positive and you've eliminated a lot of the issues around these negative files? And as we sort of look prospectively here with the strong freight market at our back, we should be expecting truckload volume growth Beginning of Q2.
We absolutely expect truckload volume growth through the balance of this year, Jack. As you know, the comparisons are a little bit wonky, for lack of a better term, as we go through the next few months, given the impact of the pandemic last year and the ups and downs With the freight market there, but we do expect to deliver truckload volume growth through the balance of the year.
Okay. That's great. I'll turn it over from there. Thanks so much, guys.
Thanks, Jack.
Thank you. Our next question is coming from Todd Fowler of KeyBanc Capital Markets. Please go ahead.
Great. Thanks and thanks for going back to the live format. Bob, just piggybacking on Jack's question, I think coming into the first Quarter, you talked about $1,600,000,000 of the book being up to reprice. Can you talk about how much of that progress you had made in 1Q and also where you're seeing contract Pricing coming at and is it at a level right now where it's exceeding where the spot market is?
Yes. Thanks, Todd. Good to be back in the live Q and A format.
Yes, I agree.
So if I think about the whether it's the $1,600,000,000 or whatnot, maybe I'll phrase it a little bit And we think about the contractual market that we have or our book of business, we believe that we have priced and implemented About a half of our contractual business in what I'll call current pricing or pricing that was delivered in either Q4 or Q1 of this year. We've priced more that hasn't quite gone live yet and we'll continue to price more in the Q2. Based on our forecast run rate right Now, by the end of the second quarter, we'll have about 75% to 80% of our contractual book repriced in either the 4th, 1st or second quarter. So for all practical purposes, we'll call that current truckload market pricing.
Okay, got it. That helps. And then that's at a level that's exceeding where the spot market is right now or at least it's more current with where kind of industry pricing is?
I would call it more current with our thesis of where we see the market going and where we see the market today. The Stock market does continue to pull the contractual market up and not necessarily down. It's our expectation that over time as routing Guides continue to perform a bit better given the increase in pricing that perhaps that spot market does Drop below the contractual market, but we'll bet you have to be seen.
Okay, understood. And then just for my follow-up, the slides are help On the productivity gains, do you think that NAST is at the point where volume growth can permanently outgrow head Count growth and what are your expectations for NAST headcount for the remainder of the year? Thanks for the time.
Yes. Thanks, Todd. And I'm going to tie back to your question and Jaks, we do think that over time that NAST volume in aggregate will grow at a pace above headcount growth. I do think though there may be times where we need to add some headcount to fuel the fire perhaps just in certain pockets of the business To unlock opportunity and that's not a forecast that there's going to be a significant headcount at, but there could be quarters or periods where those two things come closer together or move further apart. But over That long range goal of growing volume out ahead of headcount is applicable for NAST as well as forwarding.
Great. And then just any thoughts on the remainder of the year at this point for NAST?
We would anticipate headcount being relatively flat in NAST for the balance of this year.
Okay. Thanks so much for the time.
Thank you. Our next question is coming from Thomas Wadewitz of UBS. Please go ahead.
Yes. Good afternoon. Wanted to, I guess, get your thoughts on kind of the progression in NAST. I guess if I go back 2018, and I know that's not a perfect analogy, but I think it's kind of the best prior cycle year I think of. I think you tended to build stronger net revenue growth as you priced up more of the contract business.
I think Since the challenges of Q3 last year, you have been building momentum in terms of, I think, it's gross profit load you're talking about, but how do we think about that in, say, Q2, Q3? Would you expect Further momentum in terms of net revenue growth in NAST driven by stronger higher contract rates or other factors? How would you look The next couple of quarters?
Well, I think the comparison to call it late 2017 into 2018 is an important one. And I agree with you. It's kind of the 2 cycles that we can refer to. If I think about kind of the I'm not going to call it peak to peak, but let's go back To Q1 of 2018 compared to Q1 of 2021. And in aggregate, what we've seen over that time period for us is Customer pricing is up about 12%.
Carrier cost is up about 15%. Right, so let's call it on Average 5% a year on the cost side and 4% a year on the customer side. So while that's a bit higher than the If you go back to our results in 2018, where our adjusted gross profit per load is today is probably much more reflective of the back half of 17. And you did see that build through that cycle as we saw Pricing of the cost of purchase transportation start to drop in the back half of 'eighteen and the first half of 'nineteen. I'm nervous about Trying to draw too many parallels between 2018 and today because it does feel like there are some things today that are structurally very different than what was happening in 2018.
Felt like in 2017 'eighteen, there were a lot of that was built on buying the news around electronic logging devices and the potential disruption in the marketplace How that was going to have some artificial constraints around capacity. And today, this does feel much more Driven by supply chain dislocation, driven by inventory restocking, driven by a real sustained pressure On hiring and maintaining drivers. And so I'm not in a position where I feel comfortable kind of calling the ball on how long the cycle is going to go or in what But those would be maybe the parallels I draw between the two periods.
Okay. So It's a reasonable parallel, but maybe not perfect tracking. My second Question would just be how you think about sustainability, the really high level of performance in forwarding. Obviously, you're just doing executing well and the market's giving you a lot of opportunity in forwarding. Do you think we can stay at the kind of level of Gross profit and operating income you produced in Q1, can you stay at that level throughout 2021 or You think that that's unrealistic?
And I mean, I wouldn't think you have much visibility on 'twenty two, but just how you think about the forward looking In forwarding, given how strong your results are?
Tom, part of why we don't give guidance is because of The challenges of forecasting just those exact things that you're asking, we're committed to delivering industry leading operating margins in our forwarding business. We've been on record several times saying that we think is sustainable. 30% operating margin is really within our reach in forwarding and that we can get there over time. Clearly, the market has been a tailwind for us on a lot of these parts of forwarding, but I do really want to hammer home the fact that Mike Short and his forwarding leadership team has just done amazing work over the course of the last few years around process standardization, about leveraging technology, around the centralization of pricing, strengthening the relationships With the steam ship lines and the airlines that we really do think that we've unlocked something pretty special here, ahead of where we probably thought that we could.
Okay, great. Thanks for the time.
Thanks, Tom.
Thank you. Our next question is coming from Scott Group of Wolfe Research, please go ahead.
Hey, thanks. Good afternoon, guys. So Can you give us the monthly net revenue trends for NAST? And then when I look at NAST Gross revenue, it's up 14%, but truckload pricing is up 33%, LTL volumes up 17%. I know truckload volume is down 6%, but I guess I'm struggling with why the gross revenue is not up more.
Sorry, Scott. I'm looking for the monthly Here real quick. So let me see if I can get that.
I can ask another I can ask my second one if you want to come back to that. Yes, I can go ahead and
add that. Mike, if you could find that monthly,
Okay. And just on the productivity slide, it's helpful. Is there any way to think about Shipment per person at LTL versus truckload, is there a big difference there? Because clearly, we're seeing A lot more LTL growth and truckload growth. I'm just trying to understand if that's having an impact on some of the overall productivity metrics.
Yes. So Clearly, the outsized growth in LTL is having an impact on that blended metric of shipments per person per day. But I think it's also just Net of the LTL, we've removed about 900 to 1000 heads from Over the course of the last couple of years. And so that in itself, I mean, taking headcount down by about 12% has
And what we provide is our company AGP per business day, and there we're up 34 In January, up 17% in February and up 26% in March year over year.
Okay. Thank you, guys.
Great. Thank you.
Thank you. Our
It is nice to be back live. A couple of quick questions. One, on the NAS side, how should we think about your 3Q comparison in terms of your gross margins, because if I recall last Q3, just the pace that Spot moved up was just something that I have never seen before. And so I would imagine that would have impacted your ability To adapt in the marketplace, so if we just assume spot continues to remain strong but doesn't move up as much as it did last year, Should we expect more improvement in your gross margins in 3Q on a year over year basis?
Yes. 3Q for us last year was the trough in terms Our truckload earnings from an adjusted gross profit per load, I mean, that was the absolute low point in frankly the last decade. And so it would be likely that we would expect improved operating margins relative to that.
Okay. Want to switch over a little bit now on your forwarding side and talk a little bit about any ocean business you may have. It seems like some of The ocean shipping lines are actually changing the length of some of the contracts that they're giving to some of their customers. How does that impact the business, if at all, going forward?
Our ocean procurement strategy is really a blend of long And so we haven't seen any noticeable impact from some of the stated changes around length in terms of contracts. One of the things that I think we've seen as a byproduct of the way that some of the carriers have been managing pricing is a greater demand for the need For NBOs like us, because of the complexity, because of the change in the environment, we're seeing larger shippers, larger BCOs come to us To help them navigate the ever changing global ocean landscape, which is we've seen that's driven up our average award sizes, that's driven up the Average size of our customers. So that's been a nice win for us there.
That's good color. So in terms of your overall Length of your contracts on the blend, you haven't really seen any change
in that?
We really have not.
Okay, perfect. Those are my 2. I appreciate the time as always, gentlemen. Be safe out Great, Jason. Thanks.
Thank you. Our next question is coming from Chris Wetherbee of Citi. Please go ahead.
Hey, thanks. Good afternoon, guys. I guess I want to come back to NASH and maybe ask a sort of market dynamic Trunkload volume was down. Margins were impacted presumably by sort of the move in spot rates that we So intra quarter. I guess you guys obviously talking about sort of reducing some of the negative loads, but it feels like the combination of loads and margin Doesn't necessarily square as well as maybe you would have thought if you were sort of preserving price And not necessarily ceding chair.
So I guess I just wanted to maybe understand what you see as the competitive market dynamic In the brokerage market right now, specifically as it pertains to truckload, because we are seeing some management of margins and some volume gains coming from admittedly Smaller carrier competitors, but I guess I just wanted to make sure I understood sort of where you see yourself in the market and maybe how you think you can kind of grow into this market.
Yes. So again, I'll start with the comparison as a point here. In Q1 last year, I think our truckload volume was up about 7.5%. Again, we've used the industry dynamic CAS being down about 9%, and we were very counter to the rest of the industry or to much of the industry in Q1 last year in terms of that metric. And so we've got a little Different starting place.
Our primary focus has been on profitable market share gains, right? And again, evaluating that portfolio, Getting the adjusted gross profit back into a normal range, through the quarter here In Q1, we saw positive volume growth in January. And then as we implemented some of these newer bids, that started to turn negative in February March, which landed us at that 5% down per business day. But like I said earlier, we do expect to be able to drive Volume growth throughout the balance of this year at much more appropriate adjusted gross profit per shipment, which we think the right decision to make for our customers because it allows us to be more sustainable for them where and when they need us. And we also think it's the right decision for our shareholders.
Eliminating, taking swings of that $100,000,000 of negative files that occurred in the second half of last year, we think is in the best interest of everybody because it's just not
Sustainable. Okay. Okay. That's helpful. And when you think about that sort of approach, particularly as you think about the book of business that maybe wasn't profitable, how much do you think that actually can come back on to your network?
Or does that mostly get seeded out to other people who are willing to maybe take a little bit of a lower The kind of business that can ultimately come back to Robinson to drive volume growth in the future for you?
Yes, there's not an easy answer To that, just given the number of customers that we work with and the different customers, the way that they approach the market, I would tell you that there are a number I've had some really good conversations with customers where the conversation has simply been, look, we may just disagree at this point in time about the direction that the market is moving. And if our award has to be cut back because of that, that's fine. We'll figure out the way to best serve that customer and It may not end up being primarily in the contractual marketplace. That's where we've got the benefit of pivoting and saying, if you've got somebody That you believe can move that freight for less at the same service level for some period of time, that's the customer's prerogative to certainly make that choice. But if that doesn't work out, And we're there to step in on the backside and that's what's driven a lot of the spot market growth over the course of the Q1 here as well and we would expect that to continue.
Okay. Okay. That's helpful. Thanks so much for the time and thanks for doing
a lot of
Q and A.
Yes, absolutely.
Thank you. Our next question is coming from Bascome Majors of Susquehanna. Please go ahead.
Thanks for taking my questions here. Earlier you talked about the gross profit per load in truckload today looking more like the second half of 17 and 2018 in a cyclical context. Can you let us know how far below sort of the peak profit period in 2nd half twenty eighteen, one half twenty nineteen we're tracking now. And is there a potential path back to that level If the cycle and the execution conspire in your favor over the next few quarters?
We're Kind of within mid single digits, mid to high single digits of what I call that trailing average right now, Bascome, right? Now that's if you throw out Q3 2018, Q4 2018, Q1, Q2 2019, kind of that 4 quarter period, Those are really the outliers. I mean, if you look at our business over the course of the last 15 years, those 4 quarters were absolute outliers In terms of the adjusted gross profit per shipment. And I don't know that there's a path back To those numbers in the immediate future and I think we found that the market conditions were very unique there. I mean literally the costs Absolutely fell out of the market for whatever reason and that we've seen now this incredibly violent whip back over the course of the last four quarters.
And so I don't know that we get back to those numbers, but we want to get back closer to that average and kind of play in what is typically a much More tightly bound range of our margins, our net revenue dollars or sorry, adjusted gross profit dollars Flexing up 10% one direction or down 10% the other direction and trying to eliminate some of those peaks and valleys.
Thank you for that. And to an earlier comment as a follow-up, On the contractual business and some of your comments that you've made previously and today about contract duration maybe getting a little shorter in some cases to Clear those discussions, can
you talk about how much
of your contractual business is on a 2, 3, 6 month, whatever that number is contract versus your traditional 1 year? And how that could impact some of the cyclical volatility in your margins?
I don't have an exact percent right now, Bascome, but I would tell you that it's a much 3 months kind of bridge pricing commitments. We've seen that more frequently here as of late than Any point that I can recall. And I think that's been a good thing for both shippers and transportation service providers such as us to try to de risk in the short term in order to get A better long term commitment that works for both parties. I'd be guessing to give you a number there and I just don't want to go on record with that.
Thank you.
Thanks, Matthew.
Thank you. Our next question is coming from Bruce Chan of Stifel.
Bob, maybe the first one here for you. You talked A little bit earlier about fully digital bookings in NAST and uptake on the TPE engine. And I'm wondering how you think about Freight forwarding in that context, is there a goal or even the ability to digitize Ocean, for example, to that same extent? And if so, how far behind is forwarding from
It's a really good question and my short answer is yes. We believe that there is an opportunity there To introduce more digital capabilities between the customer and Robinson on the forwarding side, We have not invested significantly in that space up to this point and it's an area where we continue to discuss how and where To prioritize that, given
the kind of
the process that we go through in terms of prioritizing our technology investments where they can have greatest impact. We think that there's a there there. We haven't gotten too far down that path as of yet, would be the best way that I'd characterize that.
Okay. That's fair. And then maybe my related follow-up here. You gave a headcount outlook for NASS as roughly flat for the balance What is that for Global Forwarding this year? And then maybe just in general, where does that number go long term in Global Forwarding versus NASS?
Yes. If you look at our forwarding business, as it relates to headcount, We tend to spend most of our time talking about headcount and NASS, where NASS headcount has been down, I think, 7 quarters in a row. But looking at forwarding, they've been down Slightly in each of the past 5 quarters as well. And against that, we're delivering double digit growth in ocean over the past couple of quarters Now strong ocean hair growth this quarter. Enterprise wide really, Bruce, we're pretty focused on trying to keep that headcount Level kind of flattish this year.
I think that that's in the playbook for forwarding as well. You've We've seen forwarding even through their acquisitions, they've still been able to keep relatively flat headcount. So I think that speaks to some of the progress that they're making around operational uniformity and using technology internally to deliver better outcomes, but flat is kind of the general tone.
Okay. So maybe if I could just sneak in one more follow-up there. I guess the expectation would be that you'd be keeping Revenues at an elevated level on top of that flattish base of headcount in order to kind of maintain these target margin levels. Is that fair?
Yes. I certainly think that the revenue run rate will kind of play out over the course of the next couple of quarters. We have given guidance, if we call it guidance around our personnel expense and our SG and A that we've provided in past quarters of Yes, personnel around $1,400,000,000 and SG and A around $500,000,000 We still think that holds together, as we look at our forecast through the balance of the year. And that's obviously an enterprise number.
Okay, terrific. Very helpful. Thank you for the time.
Yes. And then maybe just one other point that I'd We've talked a lot about flat headcount, but I really want to go back again to the thesis that it's about growing volume ahead of headcount. We're not afraid to add headcount. We're not holding back on any headcount. Just a matter of making that commitment that we believe that we can deliver volume growth in excess of whatever that headcount add is.
Thank you. Our next question is coming from Ken Hoexter of Bank of America. Please go ahead.
Hey, good afternoon, Bob, my Chuck. And again, I agree. Thanks for returning to the live Q and A and congrats on solid results. Just to clarify, Bob, your comments on pricing and spot, are you suggesting that we're at or near a peak? Or I just want to because it sounded like you were going back This may be as good as it gets or but then you also threw in, it's going to hold out a couple more quarters.
So just maybe thoughts on that. And then The question I want to ask was your percent of transactions that are now fully digital on the NAS side. Can you maybe give us a little more detail on that?
Yes. I'm not forecasting whether we're at a peak or not at a peak. I mean, everything that we see today in our model is that Spot market pricing is still elevated relative to contractual pricing. And in my experience, spot always tends to lead contract. And so that would tell me that there's potentially still some room to run on the upside on the contractual pricing.
So To me, peak is maybe defined when that spot starts falling beneath the contract. But anyway, that's kind of My opinion on where we're at there and realizing I'm not a very good prognosticator at where these markets go. In terms of the fully automated or fully digital, Yes, it's a difficult question to answer and I'm not trying to be elusive just because there is no universal definition of what a fully automated shipment Looks like. And I could give you statistics on the customer side that say everything on the customer side is fully automated and then on the carrier side, things are fully automated and those Two lines may not cross perfectly. We've made significant increases if I just talk about the carrier side and the fully digital bookings.
I think the run rate was 50% more carriers in kind of the auto booking functionality on Navisphere Driver and Navisphere Carrier this quarter than we did last quarter. Every week, it seems as though we're taking we're making a step change in terms of the amount of our business that is moving in a fully digital Manner, if I were to put an estimate against it, I'd say we're still probably sub-twenty percent of our total truckload volume that's moving in a fully automated Manner with our carriers and that could be the automated booking, auto tenders. There's multiple ways in which we automate that with carriers, That would be my estimate of where we sit today.
That's great. And then just a follow-up then on your thoughts on the progress. If we're going to stay tight For a couple more quarters in this market, it doesn't seem to be lining up in the near term. How do you think about NAST margins as you progress through that?
Yes. We've repriced 50% of our contractual business by the end of second quarter and implemented that pricing. We'll be at 75 Percent by the end of Q3 or Q2 rather. And that's aged old pricing, right, that we're replacing with that was quoted Middle of last year in very different market conditions. So as we reprice that, that should deliver an uplift in HEP per load.
I think One of the things that we saw in February, Ken, was the impact of the winter storm Yuri and How dislocating that was for the marketplace. I think as we look through the Q2 and we think about the CVSA road check and the impact So that on carrier costs, as we think about Mother's Day rush, as we think about the produce season and how that unwraps, I think we'll all learn a lot about the fragility or the stability of this market As some of these things roll in and we'll see how able the capacity network is to respond to those in kind. So I think that will set the tone for the balance of the year.
Great. Thanks a lot.
Thank you.
Thank you. We're showing time for one last question Today, our final question will be coming from Amit Mehrotra of Deutsche Bank. Please go ahead.
Hey, thanks guys. Bob, just a Quick question about the weather in the quarter. Just wondering if the weather, particularly in Texas, allowed you guys to maybe pull forward some contract repricing, it seemed like a pretty real force majeure bend. I'm just not sure if that gave you guys the opportunity to revisit the contracts earlier. If I think about shipper behavior during kind of a crazy period like this, are you seeing shippers kind of move more towards Or gravitate towards carriers with actual assets, given kind of the deeper the depth of the routing guide and maybe that may explain some
of the market share shift.
If you could just talk a little bit about that.
Yes. So related to the storm in February, I think what that really did was It took a period of time that was normally kind of a cooling off period in the market and it just drove it right out of town, right? And it eliminated that time when rates We come back a bit in the spot. It didn't cause us to call force majeure with any contracts. It certainly influenced Some of the conversations on the other side of that, if there was wide gaps between when pricing was submitted, say in late Q4, early Q1 and Wasn't being implemented until later in the quarter.
It brought to life some conversations there about where we saw the market going and it certainly influenced of our thoughts of where we saw the market going. The impact of the business though, we believe we lost about a day of revenue in LTL and about half a day of revenue In truckload, net net, once we figured out one day of LTL, half day of truckload. Net net, once we Kind of figured out the pull forward and the lost shipping. So that's kind of what I comment about that. In terms of The thesis that the market is shifting more towards asset based players, we've certainly not seen that in any way.
I mean, The demand for our services has been robust. I can't think of many instances where we've been excluded from a large bid. Quite the opposite of that, I would say.
Okay. That's helpful. And just as a follow-up, we talk a lot about technology and Digital freight matching, you guys obviously have a platform that can match demand and supply, a digital But I'm just wondering how you guys measure how well you're buying capacity programmatically, if you can help us think about that in terms of Maybe identifying backhaul capacity or just however you look at it that maybe can programmatically drive down the buy rates and improve the margins.
Yes. We continue to monitor the buy rates that we achieve in the marketplace against couple of different publicly available indices and we look at how that moves both on our digital bookings, our manual bookings and we continue to Tune our engines to try to keep those things in line. We know that given our size, given the density of our freight network that we We do purchase transportation at less than those publicly available benchmarks are, mostly because we're eliminating so many empty miles for these carriers that Net net, it's better for the carrier and better for our customers as well.
And last follow-up here, if Good. Do you think that this volatility over the last 6 months or so, really over the last year, has made shippers in great Digital marketplaces a little bit more wholeheartedly. And just related to that, like what is your assessment of where you think take rates or gross Kind of continue to grow in scale. I mean, that would be really helpful because I think we're all trying to figure out where the terminal value of this is. And it would be helpful if you had If you could offer a sense of where you think that where net revenue margins kind of play out over time?
Yes. So like I've seen it a couple of times. I talk to a lot of our customers and I don't know that any of the customers that I talk to think that the future of surface Base transportation is a 100% digital only play. I think quite the opposite, the volatility of the course of the last year has shown the The importance of having really, really good people coupled with really, really good technology and a really, really big base of carriers that allows you to converge those things Supply chain where nobody else can or is either willing or able to do those things. And we do that through digital, but we also do that through Old school rolling up their sleeves and making sure that the promises that we make are promises delivered for our customers.
So there's a value to that. And I don't think the terminal value of that is 5% margins 5 years from now. I think that the value that we create is very unique and we'll continue to make that more digital, but digital is just part of the story, Right. Our rush is to provide the best service we can for customers at a fair value that helps them to de risk their supply chain without us taking all that risk on And doing that in a more efficient and more effective way through great people, great technology and evolving digital experience, but not a digital only experience.
Sure. Yes, it makes sense. Okay. Thank you for taking the questions. Appreciate it.
You bet. Thank you.
Thank you. At this time, I'd like to turn the floor back over to Mr. Thanks for closing comments.
Yes. Thanks everybody. That concludes today's earnings call. Thank you everyone for joining us today and
we look forward to talking
to you again. Have a good evening.
Ladies and gentlemen, thank you for your participation. You may disconnect your lines or lock off the webcast at this time and have a wonderful day.