The operator introduces the C.H. Robinson Third Quarter 2023 Conference Call and reminds participants that the call is being recorded. Chuck Ives, Director of Investor Relations, introduces the speakers and outlines the agenda for the call. Dave Bozeman, President and CEO, will provide introductory comments, followed by updates from Arun Rajan, COO, and Mike Zechmeister, CFO. The presentation slides can be found on the company's website and non-GAAP measures will be discussed. Dave Bozeman thanks everyone for joining the call.

The global freight market continued to be weak in the third quarter, resulting in low spot rates and a loose market. The freight forwarding market also saw excess capacity, leading to suppressed rates. Despite these challenges, the company remains focused on providing superior service to customers and carriers, streamlining processes, and investing in tools for enhanced visibility and automation. This has resulted in positive feedback from customers and high net promoter scores. Customers value the company's stability and reliability, especially in comparison to other financially unstable transportation providers.

C.H. Robinson is a desired partner for companies looking for innovative solutions and a strong customer and carrier experience. They have achieved significant cost reductions and productivity gains through streamlining processes and reducing manual touches. In the North American Surface Transportation business, they are on track to meet or exceed their target of 15% improvement in shipments per person per day. Operating expenses have also decreased significantly in both the North American Surface Transportation and Global Forwarding businesses, despite a slight increase in the number of shipments. The company is focused on preparing for a rebound in the freight market by growing volume without adding headcount and increasing their speed in decision making and improvement efforts.

The company's CEO asked employees to share what was slowing down their work and identified areas for improvement. This led to the creation of work streams to eliminate productivity bottlenecks and improve the customer experience. The leadership team is focused on making changes and driving growth, and the company is utilizing generative AI to improve efficiency. The CEO is confident that these efforts will result in a more agile and successful company. The next speaker, Arun, will provide more details on their efforts to strengthen the customer and carrier experience and improve efficiency.

The company has identified several work streams to improve productivity and customer experience. These work streams are led by experienced business process owners and have dedicated resources assigned to them. One example is using generative AI to automate and speed up the quoting process, resulting in a significant reduction in response time. The company plans to further leverage this technology to gain a competitive advantage.

The company's efforts to improve customer service and engagement have also resulted in increased digital execution and reduced manual tasks, leading to productivity improvements and operating leverage. The company has surpassed its goal of a 15% year-over-year improvement in shipments per person per day and plans to continue delivering additional productivity improvements with technology. In the third quarter, the company saw a 28% decline in total revenues and adjusted gross profit, driven by decreases in NAST and Global Forwarding, but partially offset by increases in other business units.

In the third quarter, NAST truckload volume declined 6% year-over-year, but increased 2% sequentially. The mix of contractual and transactional volume remained consistent and truckload line haul costs continued to decline. LTL orders were down 2% year-over-year, but increased 0.5% sequentially. AGP per order declined due to market conditions and lower fuel prices, but increased 2% sequentially due to capacity exiting the market. NAST was able to meet customer needs in the LTL market with high service levels.

In the third quarter, the Global Forwarding business experienced a 32% decline in AGP due to weak demand and excess capacity in the market. Ocean forwarding specifically saw a 35% decline in AGP, but has managed to increase market share through various strategies. Personnel expenses were down 21.5% compared to the same period last year, and the company expects to further reduce expenses by 2023. SG&A expenses included restructuring charges related to divesting operations in Argentina due to challenging economic and political conditions.

The company is divesting its operations in Argentina and seeking a local agent to ensure continued service to customers. SG&A expenses declined due to cost-saving measures, and the company expects to save $360 million in costs by 2023. Interest and other expenses increased, but the tax rate decreased due to lower pre-tax income and foreign tax credits. The company now expects a lower effective tax rate for the full year of 2023.

In Q3, the company reported adjusted earnings per share of $0.84, a 53% decrease from the previous year due to restructuring charges. Cash flow from operations was $205 million, down significantly from $626 million in Q3 of last year due to changes in net operating working capital. Capital expenditures were $16.7 million and the company plans to keep 2023 expenditures towards the lower end of their previous guidance. $76 million was returned to shareholders through dividends and share repurchases, but this was down 88% from the previous year due to using $153 million to reduce debt. The company ended Q3 with $1 billion in liquidity and a debt balance of $1.58 billion, resulting in a net debt to EBITDA leverage of 2.1 times. Their capital allocation strategy focuses on maintaining an investment grade credit rating.

The company's debt pay down has helped maintain their liquidity and credit rating. They are committed to growing their dividends and share repurchase program to enhance shareholder value. The company's productivity initiatives and use of generative AI and machine learning will further reduce waste and increase value for shareholders. The company's secret sauce is their people, technology, and data, which allows them to provide innovative solutions for customers and carriers. The company's strong balance sheet and investments in improving customer and carrier experience, as well as increasing clock speed and productivity, should position them well for future market rebound and improved returns for shareholders.

The speaker believes that the company has the potential to create more shareholder value by improving their value proposition, increasing market share, accelerating growth, improving efficiency and profitability. They are excited about the company's future. During the Q&A portion of the call, they were asked about the monthly breakout of AGP and how October is trending. They mentioned that the freight market is soft, but they are focused on outperforming the market by providing exceptional service, streamlining processes, utilizing technology, and gaining market share.

The speaker discusses the progress made in Q3 and the potential impact of the upcoming holiday season on consumer spending and spot rates. They also mention the bid season process and how they are balancing capturing market share with preserving profitability in the face of potential capacity contraction and a turn in the pre-market in 2024.

The speaker discusses the current state of the market and how it is affecting their business. They mention factors such as competition, record high prices, and brokers going out of business. They also mention their strategy for the upcoming bid season and the importance of protecting margins. The speaker feels confident in their company's capacity to handle potential increases in volume without needing to add more employees.

The speaker discusses the company's strategy for preparing for the market rebound and their confidence in their installed capacity. They also address a question about personnel costs and the current state of the market, noting that they have been able to reprice contracts. They believe they are at the bottom of the cycle and are well positioned for the eventual turnaround.

The company expects prices and costs to increase when demand returns, which will have different impacts on the contract and spot markets. Currently, the company's volume and truckload mix is heavily tilted towards contracts, but this will shift as the market turns. Personnel costs have been reduced by $60 million at the midpoint, but there will still be a 4.5% increase in Q4 over Q3.

In the third quarter, the company had lower incentive costs and expects headcount to be lower in the fourth quarter due to ongoing productivity initiatives. The fourth quarter is typically a lighter quarter for the company in terms of volume. In the LTL market, the company noted that temporary capacity has exited, but they are assuming a rebound in capacity. The NAST gross margin was 12.5% and the company is not seeing any easing of capacity constraints in the brokerage squeeze, despite Convoy exiting the market. The company is not seeing any signs of improvement in the weak market as they enter the holiday season and prepare for the bid season.

The speaker discusses the impact of a recent business acquisition on the market. They explain that the size of the business does not significantly affect their results, but they have participated in winning profitable volume. They also mention that the temporary exit of a competitor from the market may lead to pricing pressure, but the assets may be redeployed and re-enter the market at a later time.

The speaker discusses the temporary loss of capacity and the potential impact on the market when it returns. They also mention their current and future productivity goals, with a focus on volume and headcount.

The company is focused on driving productivity and growth in order to prepare for a market rebound. They are also aware of the structural pressures on AGP, such as customer price discovery and digitization trends, which may lower AGP in the future. However, the company is implementing strategies to counteract these pressures, such as improving their ability to buy better.

The speaker discusses the current competitiveness in the market and the strain it is putting on brokers' balance sheets and income statements. They also mention the decrease in capacity and demand and how it may eventually lead to a return to long-term averages for AGP per shipment and AGP margin. Additionally, the speaker mentions the company's efforts to improve their buying through automation and how it may benefit their AGP margin. A question is then asked about digital processes and optimizing processes.

The company has a strong pipeline of projects and initiatives that have already shown results in terms of cost savings and productivity improvements. They have a multi-year roadmap for further improvements and do not expect to increase their technology spend, but will continue to stay at current levels and execute on their plans.

The speaker, Mike, is addressing a question about the company's performance in the market. He explains that the company's goal is to gain both market share and maintain margins, or profits. He also mentions that the company has faced challenges, such as a decrease in volume, but this is reflective of the overall market, which has also seen declines.

The speaker is discussing the company's plans for growth and improving their margin. They mention the competitive dynamics in the broker set and how their strong business model allows them to invest during tough times. The speaker also addresses concerns about the NAST gross margin potentially coming down when spot rates eventually bottom and move up.

During a recent earnings call, a question was asked about the company's net revenue and forwarding. The CEO responded by saying that the current market conditions are causing some pricing pressure, but it will depend on the pace and magnitude of the pricing increases as the market normalizes. He also mentioned that the competition in the broker network is stronger than in previous cycles. The CFO added that they believe they have hit bottom in terms of GF, but have not seen any significant changes since Q3. They are focused on growing their share and preparing for when demand returns.

Stephanie Moore asks for examples of tech changes implemented by the company and if they will help control headcount during market rebound. Mike Zechmeiste gives examples such as automation of appointment scheduling, track and trace updates from carriers, and using Gen AI to parse emails and respond with quotes and enter orders without human intervention. These changes not only increase productivity but also improve customer experience.

The speaker, Dave Bozeman, thanks a question from Stephanie and the operator then turns the floor back over to Chuck Ives for closing comments. Chuck Ives concludes the earnings call and thanks everyone for participating. The call is then ended by the operator.

This summary was generated with AI and may contain some inaccuracies.