C.H. Robinson (CHRW) Q2 2026 earnings call transcript

I've seen your director of the best of relations Thank you operator and good afternoon everyone on the call of me today is Dave Bozeman our president and chief executive officer Michael Kastignetto our president of North American surface transportation Arun Rajan our chief strategy and innovation officer and Damon Lee our chief financial officer I'd like to remind you that our remarks today contain forward-looking statements Slide two in today's presentation list factors that could cause our actual results to differ from management's expectations Our earnings presentation slides are supplemental to our earnings release and can be found in the investor section of our website at investor dot CH Robinson dot com Today's remarks also contain certain non-GAT measures and Reconciliations of those measures to get measures are included in the presentation with that.

I'll turn the call over to Dave Thank You Chuck.

Good afternoon everyone and thank you for joining us today I want to begin by thanking our people for their relentless efforts to provide exceptional service to our customers and carriers For embracing the Robinson operating model and continuing to execute with discipline These efforts contributed to the high quality earnings. We reported today When I became CEO three years ago We committed to delivering higher highs and higher lows across freight market cycles Our second quarter results are yet another example of delivering on that commitment Despite being in the trough of the freight market demand cycle with the cast freight shipment index declining on a year-over-year basis For the 15th consecutive quarter. We hit our mid-cycle operating margin targets in both NAST and global forwarding in Q2 We achieved this through discipline execution of our lean AI strategy Which has enabled us to identify and remove waste and to automate manual processes in the quote-to-cast life cycle of an order The result has been evergreen productivity improvements of over 60 percent since the end of 2022 in both NAST and global 40 The execution of our strategy has also enabled us to build a scalable model with significant Operating leverage which contributed to the 20 percent year-over-year increase in our adjusted operating income But our lean AI strategy isn't just about generating higher productivity First and foremost it needs to result in better service to our customers and carriers And our scores related to customer satisfaction are accessibly strong As we continue to purposefully engineer our work to drive higher automation an Industry-leading cost to serve and service to our customers and carriers that is better than ever We've consistently gained market share in our NAST business Q2 was the 13th consecutive quarter in which our year-over-year NAST volume growth outpaced cast freight shipment index Our team also continued to exercise our discipline revenue management practices While the North American trucking market reflected a period of significant supply-driven tightening This tightening caused our truckload line-haul cost per mile to increase 29 percent year-over-year Putting significant pressure on our contractual margins and we still delivered a truckload AGP per load That was approximately flat year-over-year As we've said consistently We're not immune to in an increase the spot rate But our revenue management disciplines and our improved price and cost discovery Enable us to manage through spot rate inflections better than we ever have in the past In our global fording business the team continues to help our customers navigate ongoing disruptions across global shipping networks And they continue to implement the same revenue management disciplines that have been successfully deployed in NAST Additionally, they are moving from manual reactive work that is dependent on manual handoffs Towards automated workflows that are faster more connected and easier to manage at scale While this journey is still ongoing We're already seeing encouraging progress in several areas And as a result the global fording team delivered year-over-year productivity improvements of more than 15% in Q2 And achieved an adjusted operating margin excluding restructuring of 33.4% Our ability to consistently deliver secular earnings growth over the last two-plus years is a result of focusing on controlling what we can control and the strength of our lean AI strategy Lean AI is our unique disciplined approach to AI innovation that is transforming supply chains It combines the principles of our Robinson operating model rooted in lean methodology with the power of custom built AI And the expertise of our people to maximize value minimize waste and drive better outcomes for our customers and carriers We'll continue to focus on providing differentiated service and solutions to our customers and carriers Executing with discipline and approving our business model and our cost to serve We're highly confident in our ability to continue executing on all of our strategic initiatives and the strategies that our team is executing Are built to be effective in any market environment?

We're excited about the prospects for a possible return to a healthier demand environment Our industry leading cost-deserved model is highly scalable and we expected to strengthen further as we harness AI's capabilities to automate more of the quote-to-case life cycle of a load AI is changing the way the world works We recognize that early on and embrace it as an important part of transforming Robinson into a different and better company and We also recognize that it can amplify the expertise of our people and help them thrive in more strategic roles As the industry pay set up for cutting-edge innovation and differentiating solutions We will continue to use our domain expertise to build technology that delivers on our customer promise and drives higher value For all of our stakeholders and while we're pleased with our secular earnings growth over the past two plus years Our transformation is still in its early stages We have significant runway remaining as we continue to strengthen the lean mindset and scale custom-built AI agents across the enterprise I'll turn it over to Michael now to provide more details on our NAS results Thanks Dave and good afternoon everyone I'm very proud of the team's execution in Q2 which again demonstrated our improved ability to offset the pressure of significantly higher spot rates on our profitability and Displayed our ability to hit our mid-cycle operating margin targets despite still depressed freight demand Let's dig into everything that the NAS team accomplished in Q2 As Dave mentioned for the 13th consecutive quarter our total NAS volume outgrew the cast freight shipment index Our focus on winning a higher percentage of contractual bids has been a primary driver of our sustained market share gains And we expect they will continue to be going forward Similar to Q1 our contractual truckload volume grew year over year as a result of a higher win rate on contractual bids Our mix of contractual truckload volume held sequentially at approximately 70 percent but increased from 65 percent in Q2 of last year at the same time Multiple enforcement actions and events such as Road Check Week have reduced the supply of carriers in the market and caused truckloads spot market cost to increase sharply Excluding fuel DAT spot rates in Q2 increased approximately 34 percent year over year up from approximately 19 percent in Q1 As a result load to truck ratios and tender rejection rates remained elevated which continue to create opportunities for transactional volumes at higher margins Equipped with stronger disciplines and tools our freight experts effectively captured the right transactional volume at a substantially higher AGP per ship And compared to last year Combined with an ongoing re-pricing of our contractual business to reflect the new market realities We were able to offset the pressure on our contractual margins and deliver a truckload AGP per shipment that was flat year over year This is quite remarkable given the dramatic increase in spot rates and the increase in our contractual volume It's also different than what we've been able to accomplish during historical spot rate inflections Which is a testament to our revenue management disciplines and our improved price and cost discovery capabilities as Truckload contracts continue to be repriced across the industry We've seen improvement in contractual route guides and overall route guide depth decreased in Q2 versus Q1 Absent an inflection and freight demand we expect this will lead to less transactional opportunities This and the fact that 75 to 85% of truckload freight moves on contracts is why continuing to win contractual bids is critical to sustainable market share growth and We will continue to stay focused on the long game rather than chase short-term volume bumps While we did maintain our truckload AGP per shipment our NAS gross margin percent did experience some compression in Q2 This was due to the sharp increase in spot rates and due to the higher cost of fuel Which is a pass-through cost in our truckload brokerage model?

Why higher fuel costs have a very minimal impact on our gross profit dollars in our truckload business? It does reduce our gross margin percentage due to the pass-through nature Similarly while we were able to hold our truckload profit per shipment flat year over year that profit level was on a higher revenue per load Resulting in the reduced gross margin percentage Our contractual re-pricing activity is continuing into Q3 as spot rates are expected to remain at elevated levels and spike again during the Q4 holidays As I mentioned earlier the NAS team outgrew the cast freight shipment index for the 13th consecutive quarter Our total NAS volume grew 1.5% year over year compared to a 3.3% decline in the index Our LTL volume increased approximately 2% year over year while our truckload volume grew approximately 0.5% year over year Reflecting market share gains in both modes as truckload rates continued to move higher through Q2 Some of what we refer to as bubble shipments those that sit on the margin between LTL and truckload and had previously Migrated to truckload during softer market conditions have moved back into LTL networks Having leading solutions in multiple modes is a competitive advantage for Robinson We'll continue to drive the best solutions for customers and move their freight in the most optimal way that fits their supply chain One of the keys to our consistent market share gains has been volume growth and key verticals that we specifically targeted During Q2 we continue to deliver year over year truckload volume growth in the automotive retail and technology verticals These results reflect the strength of our expanded capabilities that directly support these segments and evolving customer needs Such as our leading drop trailer cross-border expedited and short-haul capabilities In our more than $3 billion LTL business where we move more LTL freight than any other 3PL in North America We delivered year over year volume growth for the 10th consecutive quarter Underscoring our sustained out performance versus the broader LTL market our deep long-standing carrier relationships and proven ability to manage service variability At scale enables us to deliver reliable high quality service for customers as a result Customers continue to rely on Robinson to reduce LTL complexity improved service outcomes and lower costs Across NAST we continue to expand the use of our proprietary digital capabilities Giving our freight experts faster access to actionable data and AI-powered tools So they can make better decisions and capture the optimal freight for our business Those digital capabilities also enabled us to continue delivering double-digit increases in mass shipments for person per day with a 15% year over year increase in Q2 and a greater than 60% increase since the end of 2022 in shipments per person per day measured across the entirety of our NAST organization This enhanced efficiency is not only lowering our industry leading cost to serve But is also elevating the customer experience by enabling faster more reliable service Looking ahead to Q3 market volumes are typically comparable to Q2 With the 10-year average of the cast freight shipment index excluding the pandemic impacted year of 2020 Reflecting a 0.2 sequential volume decline in Q3 On a year on year basis.

We expect to continue outperforming the market index Truckload spot rates are expected to remain elevated and we're now forecasting a 34% year-rear increase in drive-and-spot rates for the full year Up from 17% only three months ago As we look forward, we will remain focused on what we can control and we will continue to deliver industry leading solutions and flexibility to our customers and carriers We also continue to appropriately exercise our optionality on a monthly weekly and daily basis to pivot toward volume or margins as market dynamics evolve Making disciplined data-driven adjustments in order to optimize for the most effective combination that drives earnings growth and long-term value creation Our people and their unmatched expertise enable us to deliver exceptional service create greater value and drive sustained improvement We remain in the early innings of our transformation journey with significant runway for improvement still ahead With that, I'll turn it over to Arun to provide an update on the durable advantages of our lean AI strategy Thanks Michael and good afternoon everyone Last quarter I shared some of our thoughts and why we believe our approach to AI is differentiating We call it lean AI because it pairs our AI transformation with our proven lean operating model What further sets us apart is that we own our application layer We have a builder culture supported by more than 450 in house engineers and beta scientists And our AI engines are powered by proprietary data Deep logistics expertise and an engineered context layer that simply cannot be purchased or built overnight Today, I want to focus on how those advantages enable us to continually operationalize and scale innovations across our business This is not about automating tasks or taking people out of the process It is about fundamentally improving how work gets done Raising the level of service we provide to our customers and improving the quality of work and experience for our employees All our neighboring businesses scale more efficiently and drive sustainable operating performance in any market environment A critical element of our strategy is that we don't just treat AI as another tool We make it part of how we run the business The companies creating lasting value from AI are not experimenting at the edges of their business or chasing the latest technology They own it and AI becomes part of the foundation that the business operates on At th Robinson, we own the application layer and we embed our AI agents directly into the workloads across our spoke to cash life cycle Tearing them with the same discipline operating model has driven our broader transformation And measuring the success by the outcomes they deliver our AI strategies already shown up to sustain productivity gains of more than 60 percent since the end of 2022 margin expansion and consistent market our performance But the benefits also go well beyond productivity It's also improving decision making expanding revenue opportunities and enhancing the customer experience What are the most important lessons in scaling AI if an autonomy needs structure and this is where a lean operating model is a crucial role It acts as the guardrails of our AI framework enabling our technology to generate real results One year at real problems Our agentic AI is not designed to improvise or operate without boundaries We have hundreds of AI agents trained to perform very specific jobs across the shipment life cycle We defined responsibilities clear guardrails and access to the operational context needed to do those jobs well By design this reduces the risk of experimentation Humans remain in the loop where judgment Exception management and customer nuance matter most The result is a system that is tailored controlled and grounded in real logistics operations As I said before AI is only as valuable as with data context and workloads behind it Supply chains are dynamic fragmented and highly interconnected Which makes them one of the most challenging environments for AI to operate and effectively It is also what makes ph Robinson's position unique We are not applying AI from the outside looking in we are building it from within the daily reality of global logistics at scale That real world foundation enabled us to launch the world's first close loop agentic logistics system Designed to operate a global supply chain autonomously while continuously improving In our 4pl managed solutions business our new technology called lean AI engineer Works in concert with our lean AI planner to create one connected system They have uniquely enhances a supply chain as it runs The lean AI engineer can assess an entire supply chain in 25 to 30 minutes and determine improvements before performance has impacted Compared to supply chain assessments that typically take up to four weeks and look backward at what has happened Instead of what should happen While the lean AI engineer delivers and tells the lean AI planner manages shipments through hundreds of interconnected AI agents And in turn feeds more data back to the lean AI engineer to develop even smarter requirements So those capabilities are embedded directly into customer workloads The outcome is faster decisions smarter execution and better performance even as complexity increases Global forwarding is another example of our lean AI strategies in action The first half of 2026 and global forwarding has been about making a deliberate shift and how work gets done across the network We are simplifying and standardizing workflows Engineering the necessary context and developing AI powered capabilities that can be deployed at scale Across global forwarding we are rolling out AI powered automations Designed to reduce manual effort improve data quality And enable our teams to focus on higher value work These capabilities connect activities that have historically been manual and fragmented They allowed work to begin earlier Information to move more accurately and potential issues to be identified sooner That enables our teams to operate more coactively and creates a faster more consistent and more predictable experience for our customers Importantly the objective is not simply to remove work It is to improve the work For our employees, this means spending less time on repetitive and reactive activities And more time applying their expertise to complex problem solving managing exceptions and strengthening personal relationships It also means giving them better information And workflows that make their work more efficient and rewarding As they operate in one of the most complex environments in the world supply chains We are delivering real tangible results that demonstrate our approach to AI is not theoretical And we are still in the early innings of our VNI transformation The substantial runway across NAFS and global forwarding Our innovation is moving to broader deployment As we continue to combine our proprietary data Engineer context logistics expertise and mean operating model We can continue to widen our competitive modes and deliver better outcomes for all our stakeholders With that, I'll turn the call over to David for review of our second quarter results Thanks Arun and good afternoon everyone Our Q2 results demonstrate again how disciplined execution and our lean AI strategy are driving secular earnings growth And meaningful progress against our strategic priorities Including markets share gains gross profit optimization and improved operating leverage Despite continued macro environment pressure in q2 With the cast freight shipment index down 3.3 percent year over year Total revenues increased 19.3 percent and AGP increased 6.5 percent year over year This was due to NAFS continued out performance versus the index Higher pricing in NAFS and global forwarding and improved profitability in all of our business segments For the total company on a monthly basis our AGP per business day compared to the prior year Was up 9 percent in April up 7 percent in may and up 3 percent in june However on a sequential basis our absolute amount of AGP per business day Increased each month primarily reflecting and improving trend in global forwarding throughout the quarter Turning to expenses q2 personnel expenses for 338.5 million Including 8 million of restructuring charges related to workforce reductions Excluding restructuring charges our q2 personnel expenses for 330.5 million down 1 million are 0.3 Primarily due to our continued productivity improvements and cost optimization efforts The benefit of those efforts was partially offset by higher incentive compensation in alignment with our strong results Our average head count was down 10.8 percent year over year in q2 And was down 2 percent sequentially Illustrating how we continued to decouple head count growth from volume growth while growing volume Due to an expectation that our people will be rewarded for our strong 2026 performance We believe that higher incentive compensation will push our 2026 personnel expenses Towards the higher end of our range of 1.25 to 1.35 billion This includes an expectation that incentive compensation will be higher in q3 And lower in q4 In line with our sequential earnings trend and seasonal demand trends It also still includes an expectation that we will continue to generate double-digit productivity improvements in both NAST and global forwarding as we continue to implement agentic AI solutions across our quote-to-cash lifecycle of an order Our q2 sgna expenses totaled 143.8 million Excluding a 0.5 million net gain driven by the favorable termination of an operating lease sgna expenses were up 2.7 million or 1.9 percent year over year Primarily due to increases across several expense categories Based on our first half execution and greater visibility into the remainder of the year We are narrowing our sgna range by 10 million and now expect our 2026 sgna expenses to be in the range of 540 to 580 million Compared to our prior range of 540 million to 590 million Although most of our sgna expenses are subject to inflation We expect continued cost improvements to partially offset the inflationary impact Within the revised sgna expense range.

We now expect depreciation and amortization to be towards the lower end of previously stated range Of 95 to 105 million for the year As they've mentioned both nast and global forwarding achieved their mid-cycle operating margin targets in q2 This is the result of our rononson operating model and lean ai strategy at work Which has created greater operating leverage in our model In q2 This manifested itself in a 96 percent incremental operating margin with 96 percent of our year over year increase in agp falling to our adjusted operating income By segment nast expanded its operating margin excluding restructuring costs by 280 basis points year over year to 40.9 percent Global 40 and expanded its operating margin excluding restructuring costs by 470 basis points year over year to 33.4 Moving below operating income our effective tax rate for the quarter was 21.5 And we are maintaining our tax rate guidance of 18 to 20 percent for the full year That said I'd like to provide some additional color on the tax rate for the next two quarters In q3 We expect our effective tax rate to be similar to q2 or slightly higher And in q4 we expect our effective tax rate to be lower due to incremental tax benefits From stock based compensation deliveries that occur in the quarter similar to q1 Turning to cash and our balance sheet.

We generated 35.9 million in cash from operations in q2 Cash flow was negatively impacted by the significant increase in freight rates Which caused our receivables balance to increase substantially Driving up our net operating working capital Our capital expenditures were 18.2 million during the quarter And we are lowering our 2026 capital expenditures expectations To be in the range of 65 to 75 million down from the previous range of 75 to 85 million We ended q2 with approximately 900 million of liquidity Our financial strength continues to be a key differentiator in our industry Giving us the ability to invest throughout the freight cycle to further enhance our capabilities And to return capital to our shareholders Our net debt to EBITDA ratio at the end of q2 was 1.64 times Up from 1.32 times at the end of q1 As we opportunistically deployed capital for share repurchases and strategic M&A investment While our capital allocation strategy remains grounded in maintaining and investment grade credit rating Our balance sheet strength enabled us to return 301.3 million of cash to shareholders in q2 This represents an increase of approximately 88 compared to q2 of last year And includes 226 million of share repurchases and 75.3 million of dividends We also allocated 79 million of capital for acquisitions in q2 Including the acquisition of the spirit logistics in june Despair brings differentiated expertise in premium transportation solutions for high value freight Which when combined with ch robin's and scale We expect to deliver superior results for our customers carriers and shareholders We will continue to deploy capital in a disciplined manner Investing in high ROI organic initiatives returning capital to shareholders And pursuing strategic M&A opportunities All aimed at maintaining a high quality of earnings for all of our stakeholders Based on our first half performance We remain confident in our ability to achieve our 2026 operating income target within the range that we raised in october of 2025 Which is on slide 17 in our earnings presentation That range was originally based on an assumption that market volume growth would be zero to five percent in 2026 Which seems increasingly unlikely given that the cast freight shipment index Was down 4.7 percent in the first half of 2026 But the consistency of our disciplined execution and continued progress in growing market share Optimizing gross profit improving productivity And expanded operating leverage reinforces our confidence in both our operating model And our path to achieving our 2026 target We have strong conviction in the strategy we are executing and in the intrinsic value of the business There is tremendous runway for improvement ahead And our operating model our technology and our people continue to differentiate robinson And widen our competitive modes With that i'll turn the call back to dave for his final comments Thanks daman As you've heard in our prepared remarks today We've continued to deliver higher highs and higher lows from the disciplined execution of our strategy In an industry where disruption is constant and agility is essential Our differentiating lean AI gives us a unique ability to create new ways to solve complex challenges at scale Helping our customers build supply chains that are smarter Faster and more resilient In my first three years leading this company i'm proud of the progress We made to transform CH robinson into the global leader in lean AI supply chains And I want to thank our people for embracing the culture shift that has fundamentally changed this company With our lean operating model Our commitment to continuous improvement And our AI innovations at the core of our transformation I continue to be even more excited about what we believe we could deliver in the coming years The strength of our strategies our technology our people and our operating model disciplines Are differentiating and sustainable in any market environment Including an inflecting spot rate environment like we've seen recently or eventually an inflecting demand environment Finally, I want to address the evolving legal environment regarding trucking accidents These accidents are tragic and every loss of life On our nation's highways is one too many But acknowledging that a terrible tragedy occurred.

It's not the same As having called it Last week or jury in texas issued an advisory verdict that we strongly disagree with And will immediately appeal if the jury's verdict is entered as final CH robinson did not act negatively and should not be held liable in this case The carrier safely delivered nearly 270 loads for our customers And they held the highest rating from fm csa when we selected it and after a federal review of this accident The carrier is an independent motor carrier And the driver worked for them CH robinson does not employ drivers Safety is core to how we operate and always has been We go beyond federal requirements and apply multiple layers of safety and risk criteria That we continuously reevaluate and strengthen the extreme nature of this verdict Means it is even more imperative That congress and the federal government act with urgency to establish clear and proper Accountabilities across the transportation industry that enhance highway safety and support the uninterrupted flow of goods across the united states Events like this also reinforce white scale and financial strength matter Customers and carriers rely on and benefit from providers like CH robinson that have the resources and financial stability to manage complex legal and regulatory environments while continuing to invest in service Technology safety and compliance These verdicts also highlight the risk shippers take on when purchasing freight services and underscore the value of working with the provider That helps manage that complexity Reducing risk and customers transportation networks is an important benefit of the solutions we provide As we uphold our standards We will continue to lead with purpose And move with urgency to disrupt ourselves and the industry And we expect to drive sustainable out performance Profitable growth and long-term value for all of our stakeholders That concludes our prepare remarks.

Thank you Hey, tom. Thanks for the question. This is michael Maybe i'll clarify some of the comments because I think it's important We certainly feel good about our position in the contractual space and we continue to win business in that space and i'm really proud of how the team executed That work in q2, but we absolutely Participated and feel really good about our transactional performance in the quarter and so You know our transactional performance was significantly up year over year. It's significantly up sequentially from q1 to q2 But as the cast frayed index shows there's still not a lot of demand growth in the marketplace And so as companies like ourselves Reprised contracts that was necessary in q2 that naturally starts to raise acceptance levels And then a number of transactional loads in the marketplace does lower as re pricing continues And so I think it's super important We feel really good about our transactional performance in q2 And and feel like we are you know our win rates in that space are healthy and and really Focused on that optionality of when in the right freight with the combination of our contractual business Our comment was more specific to the fact that longer term Especially in a marketplace that's still supply driven in terms of why rates are up It's important that we continue to win share in the contractual space if we're going to see long-term Market share outgrowth But we absolutely take advantage of the t space transactional space And and did so in q2 at that levels were very proud of and tom I'll just add to that discussion before dave jumps in as is locally as michael mentioned.

We feel very good about Our spot market wins.

We spoke very good about our contractual market wins as michael mentioned Uh, you know, we're in this for the long game, right? We re re pricing our book For not just one quarter or the next quarter, right? But for the next six 12 18 months Of continuing market share gains at a creative pricing What I would tell you is different about us and I think a lot of companies we compete with is We're making good margins in the contractual space with our revenue management capabilities The way the team is managing this squeeze I think you're going to see sustained Repricing and profitability efforts at a robinson that you see nowhere else and certainly that you haven't seen from robinson historically Hey, tom.

This is dave. Hey, thanks for the call out on the quarter really proud about what the team did Tom i'm going to go a bit deeper give give some more color to your question as I I feel there might be others that Have a version of the question that you act so i'll go a little bit deeper and give you guys some color on here first of all You know, we we really believe this case was decided based on emotion Rather than the law We believe the law and the fact support our position And we strongly disagree with the juries verdict in this case as I said previous I mean if the juries advisory verdict has entered as final we will immediately appeal And we are very confident in the facts and the law on appeal It's important to know The carrier in this case is an independent motor carrier that worked with many brokers and shippers And the driver worked for the carrier not ch robinson He did not communicate with ch robinson And we did not supervise direct or control his actions The ch robinson does not employ or control drivers A carrier only having one million dollars in insurance doesn't make a brokerage company with a strong balance sheet liable Now based on the facts of this case We and our insurance carriers were not willing to settle Based on the plane of fraternities demands We and our insurance carriers who had a pellet council present at the proceedings Expect to be successful on appeal Since this is an ongoing legal matter We're not going to discuss any other details of this case Or our defense, but a juries advisory verdict This is to your question is only one step in the legal process The advisory verdict does not determine what ch robinson will ultimately pay if anything Any final outcome remains subject to post trial motions appeals And other legal proceedings We're also not going to get into the details of our legal docket as i'm sure there are some questions there ch robinson has been named in court cases in a normal course for many years And we've successfully defended ourselves against many negligent hiring and vicarious liability claims And we expect to continue doing that And i'm sure many of you have talked to our competitors Both brokers and asset base carriers and shippers in the industry One thing i want to make clear is that as much as the whole industry tries to be safe As much as we all work to continuously improve our vetting There will inherently be trucking accidents Nuclear verdicts such as this are a transportation issue overall Not just a robinson issue not just a brokerage issue It's an issue for all transportation providers and shippers Now if nuclear verdicts like this one are the new normal and by the way, I don't think that is the case The movement there will be an impact to three key things the movement of goods Will be substantially impacted within the country service levels will be significantly impacted And of course the cost of transportation will certainly soar But you know while risk grows from more complex industries, you can see that We're super confident in our scale our technology and expertise And as stewards of the industry And our ability to adapt and deliver solutions for our customers and all our stakeholders And I think we've shown that today in the outstanding results that the team have done So appreciate the questions and I wanted to just add that color and I may answer Some of the other questions that were on there.

You know the types of growing environment that may lie ahead of us Yeah, jeff, thanks a lot and appreciate that um that call out You know from uh We we started when we started this three years ago and you're right. I can't believe it's been um three years um We started off with a strategy and You know that strategy was real simple. It was You know go and grow market share, um expand margins And and do that with an operating model and discipline And and just drive Our say do ratio higher and I think We did that and we continue to do that Um, and we continue to get get stronger And right now I'm really happy with where we are but more so where we're going As much as it's been Really fun and successful jeff in the past three years, you know, I can tell you We have a whole lot of grass to cut it.

It really is early innings Um, and the the difference in the company right now Uh, we continue to learn and drive our our lean prowess our technology prowess Uh, it continues to be early days the things we see on the docket and what's coming forward Um are really exciting at robison. So Uh, growth is part of that strategy and and I think hopefully you're seeing that Uh quarter after quarter, uh, and we continue to show that and this quarter was Was no different in showing.

Uh, can i'll uh, i'll start here. Uh, no, I would say our our capital allocation Strategy has not changed and this verdict does not influence that That strategy is and certainly um, you know, a large portion of that strategy for consideration is mna And so you mentioned Um the acquisition that we closed on in the quarter be into spirit logistics. Uh, as we've mentioned and that one fits perfectly in our strategy Right, we we mentioned that Um, one of our target areas for mna is to acquire, you know niche tucking companies that have incredible capabilities Um, but yet we are I would say they're underscaled, right? And so you can take that incredible capability you put robots and scale behind it You know, we think that creates a tremendous amount of ROI and and benefit And certainly we're very excited About being able to demonstrate what we can do with uh with the spear logistics, right?

Um, you know, we've also said that look we're looking at larger Acquisitions as well and that's still part of our part of our strategy now The thought that's on everybody's mind is is one. I'll just address which is certainly as part of our due diligence We go through every legal docket of any potential acquisition target Um get comfortable with that docket and certainly take you know, any provisions and In the process related to that docket. So we'll certainly Um, you know execute that diligence with any with any deal we do but but make no mistake, right? This verdict as as Dave mentioned, we feel very good about Um the law in this verdict.

We feel very good about the facts of the case on this verdict And we feel very good Uh about the appellate process and so to summarize it does not at all change our Our capital allocation strategy nor does it change our our focus on m&a Yeah, can just to put a bow on that, uh, you asked about timing And i'm i'm glad you said that's the only thing i missed in Um But listen these things There's there's judicial discretion on on the timing of post trial motions and you know, this this could be years Um from a from a an appeal perspective Because there's various stages of appeal as well And so that's what I would say on that it's um, uh, and hopefully that's helpful Thank you And our next question comes from the line of bass come majors with the steven's Please receive with your question Thanks for taking my questions.

Thank you Yep, thanks basket. Um, appreciate the question. Um, you know, look I would say, you know, we we are there Right now as we've mentioned it is optionality which means Um, you know the the market conditions the freight conditions dictate when we apply that optionality, right? And so we've been very clear that You know, this is not Something that you know on a ratable basis is going to have kind of an equal You know up into the right graph, right? Is is when we see freight conditions that justify getting aggressive on price to take Share that we want In desirable freight that we want. Um, now that we're above that threshold specifically on mass Um, you know, we'll we'll execute that strategy, right?

But as we've said many many times and again, I think this is a different philosophy than How this industry and quite frankly even C. H. Robinson has operated historically Um, you know, freight is different every day, right? What was this, you know, there's a certain percentage of desirable freight on Monday and that percentage changes on Tuesday Just based on the dynamics of the freight market end And you know, by by putting that optionality in places, we're not going to put ourselves in a box To, you know, hit an artificial target. We don't need to define or hit Right. What we have committed to is we will use that optionality above Those targets that we've now achieved To drive, you know, incremental earnings growth and incremental return for our For our shareholders, right?

It gives us now one more weapon in our toolkit Uh to drive earnings growth, right? And I'd argue before we got to those margin levels Right, that was one constraint that we had now that that constraint has been achieved and we believe You know, that is uh, you know, that is a sustainable level of margins right now We have one more weapon that Michael can use Um, you know in the in the nast business to drive to drive growth, right? And so um, you know, I would say as we Continue to execute the strategy Um, you know, we'll certainly comment on areas where we've used that optionality and where we haven't but Uh, I don't know that there's a specific metric other than just what we've continued to demonstrate which is earnings growth And in markets your outgrowth.

I think my last comment and I'll see if Michael has any color here is I think the thing that gets missed With our outgrowth is that it's been for 13 consecutive quarters And we've done that for 13 consecutive quarters while growing earnings Over that same period of time while expanding operating margins Over that same period of time while delivering demonstrable productivity over that same period of time, right? And we believe that recipe Of the outgrowth that we're generating the productivity we're generating the revenue management capabilities That's driving a creative price and cost of transportation advantages We think the combination of all of those things Is what makes Robinson special, right? The outgrowth is just one piece of those, but I think when you compare us Versus others It goes well beyond one quarter, right?

Find somebody else that's out growing the market For 13 consecutive quarters.

I think that's a pretty pretty tall bar to uh to climb Yeah, bask in this Michael. I'll just I think from from my perspective I'm just really proud about the team handled what was a unique quarter in terms of a significant cost increasing marketplace Almost exclusively supply driven right as the cast freight index showed you still had a declining marketplace Um, but we showed out growth and actually positive year over year growth in both modes Doing so while navigating Uh, you know a version of the squeeze and and and so the team reprised Significant business getting our route guides back into position of positive growth Um as well as taking advantage of a transactional marketplace Uh that That we took advantage of where we could and so feel really good about being able to deliver all of those things and then deliver You know the mid-market or mid-cycle targets Um, while cost was up 30 percent and so, um, I think it's important Context I think is is something that's really important in a quarter like this and just super proud of what the team accomplished During a very difficult external environment Thank you And just to mention the company has decided to extend the call by a few minutes beyond 6 30 p. m. Easton time And our next question comes from the line of scot group with wolf research Please proceed with your question Hey, thanks.

Yeah, I'll try to remember them all here scot So let's talk about the monthly sequence because as you know that one we've we've come in on before which is look we we don't Uh, and we don't recommend you spend a lot of time trying to do the math on the monthly sequence, right? I mean at the end of the day Um, you know monthly sequential performance doesn't mean that it's going to continue into the next Quarter, right? It is a data point, but it's just that it's a data point and that every month's not the same And certainly you know one month exiting one quarter Doesn't mean that that trajectory continues into the first month of the next quarter So take it as a data point, but I wouldn't take it much beyond much beyond that um Related to our 2026 operating income target.

Um, you know, I think what the the key takeaway from our update is Um, you know is that we've we've kept the same operating income range of 964 To a billion zero four. Uh, I think the key difference is if you remember the lower end of that range Was based on market being flipped right and the high end of that range was based on 5 percent You know what we've updated in our revised slide is now that we're committed to the low end of that operating income range On a market at minus three percent Right and that is on the back of generating another 40 million dollars of of self-help initiatives Uh that did not exist when we entered this this year So I think the key takeaway is you know, certainly the math will get you to get you to an EPS number But the key takeaway is you know, we've committed to the same operating income range But with a quite substantially different backdrop from a market perspective Now being able to achieve the low end of that range At at minus 300 basis points of market contraction versus the requirement there being flat When we originally set the the updated target Yeah, and then thank you for the uh question on LTL Great to get a question on on that group who've who've done just incredible work over the last several years Um, you know, really it's a combination of a couple factors You know, we we mentioned the past through nature of fuel in truckload where LTL You tend to see benefit on LTL margins as fuels go up not just ourselves, but you see that with the LTL carriers as well Uh, so the higher cost of shipment and LTL we certainly benefited from Um Secondly, I'd say, you know, we we showed market outgrowth as well as some some really strong performance and key verticals of Landing customer business, uh that we're really proud of and then the last part is just there's a mix of of kind of more standard LTL shipments and complex Uh, you know shipments and we saw some growth in some of our larger complex businesses that that have a bit higher margins in that business So, um, feel really good about our LTL performance in the quarter But to be honest, feel really good about that team and what they've produced for the better part of it So we said 10 quarters in a row of positive volume growth, um, and feel really good about where we're heading Yep, it's good.

I'll just put a bow what michael said Uh, you know, we've said this for a while now, right? Having both truckload and LTL capabilities is a significant competitive advantage for for CHROM. It's in both External to our customers, but it also allows us to optimize performance between those two modes To generate the ultimate performance for for CHROM. It's right. So so having two businesses Of the scale and the performance nature of both our truckload and our LTL business We think combined there's there's really a synergistic benefit of having both of those both those modes under one under one roof Thank you And our next question comes from the line of Jonathan shapel With ethical or ISI Please receive your question Thank you.

So just one point of the clarification there and then I do the follow-up Yeah, so Stephanie i'll start and certainly Jump in here if you uh, if you want to um, you know, look first of all, I would just state by saying we don't think this Nuclear verdict is unique to ch Robinson. Right as Dave mentioned earlier Um, you know, if these are the type of verdicts that are going to be Pronounced right they will happen to others, right brokers and assets alike, right? There's nothing unique in this case Um that is unique to ch Robinson, right? So as Dave kind of ended his opening statement Um, you know, if you think about the the facts of this case, there is nothing unique to ch Robinson And we do believe this is a transportation industry Um issue that has to be dealt with not a ch Robinson issue Um as it relates to go forward operating cost related to insurance Um, you know, certainly we know insurance is going to inflate Uh year over year and as we've mentioned we're on a calendar year as far as insurability Uh, we are covered through the end of of 2026 Um We are just now starting to have preliminary discussions Uh with the various insurance carriers that we deal with on insurance coverage Um, you know, but but as we've said before Um, the higher insurance cost Uh is just another headwind Right, we we get paid to solve problems and headwinds every single day every single week every single month Higher insurance cost is just another problem.

We have to go solve, right? And we're confident as a business That you know higher insurance costs will not derail Uh, or uh, impede the progress that we've had Um in our lean AI journey, right? So again, it'll affect the industry It'll affect us. We'll solve that problem like we solve Uh, many other problems, right? As we've mentioned historically Our insurance stack has been I'd call it more like a asset carrier Uh, than a broker historically, right? And we think certainly that prudence that we've had around risk management Uh is going to make this transition into a post Montgomery world Uh, an easier transition than say a broker that has very de minimis Insurance, right?

We feel like again, our insurance coverage today Um, you know is more like an asset provider than it is a broker and and again, we'll make that transition Um, uh, an easier transition than somebody that's coming from a much lower base Thank you And our next question comes from the line of rich uh hard name from butcher back Please see what your question Okay, thanks for the time.

Thank you Hey, richa Thanks for the the call out and the uh and the question Listen just real quick on that that timing again that and I'll repeat this the You know the judicial discretion on the timing of post trial Motions that that happens. I mean there is just judicial discretion with that for post um post trial motions, so we really Don't know on that but I would say that when that happens We feel really strong again About the facts of this case on appeal Um and we'll be we'll be set for that so that timing again There's just discretion in that within these these post trial motions Yeah richa this michael and and thank you for the second question on margins, you know, first of all I think the team did a really Really good job managing what was a difficult environment to get agp per load back to flat On a year over your basis and and really fuel was a factor certainly in truckload And we covered that But but really what I'd say is is it was the impact of the contractual Book and the squeeze that that felt that we were you know really managing that re-pricing process during the quarter As well as then taking advantage of the transactional marketplaces We mentioned earlier to expand margins where we could But it is a unique marketplace right now and that you have cost skyrocketing while Demand stayed, you know where it did negative 3.3 percent according to cast and so um a very unique Squeeze in environment and so I would tell you our expectation of our revenue management capabilities as we continue to get better and better at it Is to push margins back upwards But it's really going to be as Damon mentioned the uniqueness of each each day each week each month in the marketplace on how we do that Um, but again, I'd point back to I feel really good about how the team managed this process and was able to deliver the bottom line results That we did during the quarter, but feel very strongly that our revenue management practices as we go forward Um will allow us to manage through this process.

Yeah, and rich. I'll just put a bow on michael said I mean I think it's it's critical to hear agp per load was flat Was spot cost up over 30 percent in the quarter I don't think you're going to find another company that's going to demonstrate that level of performance while outgrowing the market At the same time, right? So I think you got to look at agp per load and gross margins in in concert With the outgrowth and the date the dynamic nature of the the spot market increase within the quarter And you're common on the contraction of gross gross margins. I would say historically Robinson's gross margins would have contracted hundreds of basis points in the environment that we just went through Right into cycle time in which we're getting through this squeeze I think you'll find out when we get on the other side of it is going to be quite demonstrable as well.

So Um, so I would say to michael's point. I think we feel really good About what we've demonstrated versus the marketplace for for the quarter Um, and we're going to continue to demonstrate that revenue management capability as we get on the other side of the squeeze Thank you And with that ladies and gentlemen, this does conclude the question and answer session I would like to turn the call back over to chuck eyes for closing comments Yeah, thank you.