C.H. Robinson Worldwide, Inc.

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson Third Quarter 2020 Conference Call. At this time, all participants are on a listen-only mode. Following today's presentation, Chuck Ives will facilitate a review of previously submitted questions. If anyone needs assistance at any time during the conference, please press star followed by the zero on your telephone keypad. As a reminder, this conference is being recorded Wednesday, October 28, 2020. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations.

Thank you, Donna, and good morning, everyone. On the call with me today is Bob Biesterfeld, our Chief Executive Officer, and Mike Zechmeister, our Chief Financial Officer. Bob and Mike will provide a summary of our 2020 third quarter results. We will follow their comments with responses to the pre-submitted questions we received after our earnings release yesterday. I'd like to remind you that our remarks today may contain forward-looking statements. 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 chrovinson.com. Slide two in today's presentation lists 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 morning, everyone. Our third quarter was a quarter of transition in the U.S. freight markets and a quarter of progress at C.H. Robinson, with our team continuing to deliver against our key initiatives. I'm proud of their efforts that helped deliver solid results and position the company to emerge stronger from the volatility that we've experienced over the last seven months. At the time of our second quarter earnings call in late July, I painted a picture of the current market conditions that included a sequential degradation of routing guide performance, an adaptive tender that increased from 1.1 in May to around 1.5 in late July, and a decline in first tender acceptance rates from the high 90% range to around 70%. In the third quarter, this dynamic continued to play out as demand recovered faster than carrier capacity returned to the marketplace. Sequential demand growth outstripped supply growth in the contractual market, and routing guide depth in our managed services business rose to 1.8 by quarter end. This is a level we haven't seen since mid-2018. We believe that these trends we see within the managed services are a good proxy for what's happening in the broader North American truckload market. Consequently, more loads moved up to the spot market, which caused spot pricing to increase and drove sharp increases in our cost of purchase transportation. During the quarter, truckload cost per mile paid to our contract carriers excluding fuel increased 16.5% compared to the third quarter of last year, while price per mile billed to our customers excluding fuel increased 10.5%. Against this backdrop, we delivered on our contractual commitment with acceptance rates that were above the industry average, while also serving many customers' needs in the spot market. In response to the volatility in the freight market and our record high percentage of loads with negative margins, we also initiated selective mid-contract cycle repricing efforts in collaboration with some of our customers. And we'll continue to have opportunities to reprice our book of business in our regular cadence as annual contracts expire and renew through the balance of 2020 and into 2021. Despite a dislocated market with a constrained capacity base, we were able to deliver solid performance across our diversified business portfolio and improve our results as the quarter progressed due to the efforts of our C.H. Robinson team members around the world. After reaching a trough in July, our total company net revenue per business day improved sequentially in both August and September, and so far in October, total company net revenue per business day has inflected positive on a year-over-year basis. We continued to make progress on our strategic long-term initiatives around profitable market share gains, productivity improvement, and technology advancements. Our results included a seventh consecutive quarter of market share gains in NAST, with a half a percent and 13.5% volume increases in truckload and LTL, compared to an 8% year-over-year decline in industry volumes as measured by the CAATS rate index. Excluding volume and headcount from our 2020 acquisition of the Prime Distribution Services, Our productivity metrics continue to improve, as indicated by a 2,400 basis point favorable spread between the year-over-year change in NAS volume and the change in full-time equivalents in our NAS business. This builds upon the 1,050 basis point favorable spread that we delivered in the second quarter of 2020. As we've said in the past, this is an important metric and a key focus of our technology investments and our transformation efforts. Our technology initiatives also continue to provide opportunities to engage our customers in new and innovative ways. In September, we launched ProcureIQ, which allows shippers to discover more efficient and more effective ways to purchase transportation based on the unique characteristics in their network, rather than solely buying in bulk during an annual bidding process. We reinforced the position of Navisphere, our multimodal transportation management system, as the most connected logistics platform, with simultaneous connectivity to an unprecedented 19 transportation management systems and ERP systems, backed by the unrivaled truck capacity assurance that our teams offer around the world. In the last few months, we've announced alliances with Microsoft and Intel that will help shippers digitally transform their supply chains. and we delivered a number of new technological capabilities to Frankfurt by C.H. Robinson, which is geared to help small businesses in this time of need. All of these advancements are part of our billion-dollar technology investment that's delivering innovative solutions built by and for supply chain experts for our customers and for our carriers. Our tech investments also continue to drive improvements in automation and the number of users on our platform. A few examples of this include a 40% increase in fully automated truckload bookings compared to the third quarter of last year. Our digital transactions were up 56% compared to a year ago, and we've already exceeded over a billion digital transactions for the year. And the daily and monthly average users of our customer and carrier-facing applications continue to increase. Our global forwarding business performed well in the third quarter, as customers worked to replenish low inventory levels amidst continued market uncertainty from the pandemic. The air freight market was again impacted by reduced cargo capacity, and we augmented our capacity with several charter flights to support demand from both existing and new customers. In the ocean market, our gross revenue increased 32% due to widespread increases in ocean pricing across the industry, which was driven by higher demand. Our balanced portfolio of both contractual and spot business enabled us to optimize net revenue margins in the quarter, while shippers continued to rely on Robinson's global supply chain expertise and our data and scale advantages to ensure that critical goods are moved as quickly and as inexpensively as possible. This resulted in a 16% year-over-year growth in our global forwarding net revenue. As we've discussed since the onset of this pandemic, we've taken steps across our organization to ensure both the health and the safety of our employees and to reduce our costs. The cost controls demonstrate our ability to flex our structure as business cycles change. We've learned a lot as we've managed through this pandemic on how to be more agile, how to work and sell differently, how to collaborate and communicate more effectively, and how to serve our customers and carriers in new ways while we work in virtual teams. As a result of this, and our ability to harness the benefits of our technology investment and our network transformation, we now expect to achieve our long-term annual cost reduction target of $100 million by the middle of 2021. This is half the time that we previously communicated. But we're not going to stop there. We're continuing to evaluate our global business operations to ensure we're managing our business in the most efficient manner. We'll continue to invest in technology to unlock both growth and efficiency, and we'll continue to create better outcomes for our customers and carriers by utilizing our unmatched combination of experience, our global suite of services, our scale, and our information advantage. I'll now turn the call back to Mike to review some of the specifics of our third quarter financial performance.