C.H. Robinson Worldwide, Inc.

Good afternoon, ladies and gentlemen, and welcome to the CH Robinson first quarter 2021 conference call. At this time, all participants are on a listen-only mode. Following the company's prepared remarks, we will open the line for a live question and answer session. To ask a question, please press star 1 on your telephone keypad. If anyone needs assistance at any time during the conference, please press star 0. As a reminder, this conference is being recorded Tuesday, April 27th, 2021. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Please go ahead.

Thank you, Donna, and good afternoon, everyone. On the call with me today is Bob Biesterfeld, our Chief Executive Officer, and Mike Zuckmeister, our Chief Financial Officer. Bob and Mike will provide a summary of our 2021 first quarter results, and we will then open the call up for questions. This change to live Q&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 chrobbinson.com. I'd like to remind you that our remarks today may contain forward-looking statements. Slide two in today's presentation is 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 first quarter 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 the advancement 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 first quarter of 2021, we generated 125% growth in earnings per share due to profit growth in our two largest business segments, North American Surface Transportation and Global Forwarding. Our NASC business generated double-digit growth in both adjusted gross profits, or AGP, and operating income in the quarter. NASC's AGP per business day increased 15%, and operating income was up 39% compared to the first quarter of last year. 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 first quarter 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 quickly 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 first quarter 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 portfolio 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 first quarter, we saw routing guide depth of tender in our managed services business maintain between 1.7 and 1.8, which is consistent with fourth quarter 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 first quarter, we welcomed 6,900 new carriers to our network, which represented a 72% increase year over year and represents the most carriers added in a 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 first quarter of last year. Our average line haul rate billed to our customers, excluding fuel surcharges, increased 33% year over year. And for the second quarter 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 a 65-35 mix in the year-ago period, and consistent with our mix in the fourth quarter 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 LPL 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 continue 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 freight quote 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. The March 2020 acquisition of Prime Distribution Services, coupled with our existing retail consolidation network, has made us the largest and most comprehensive provider of retail consolidation services in the industry. In total, NASP's overall volume per day grew 7% year over year. This was slightly below industry volume growth during the quarter of approximately 7.5% as measured by the CAASPP rate index. Turning the page to global forwarding. Our global forwarding business once again delivered excellent results in first quarter. We delivered a 118% increase in total revenues within the forwarding segment, a 67% increase in adjusted gross profits, and a 658% increase in operating income. The forwarding team at Robinson successfully worked with customers across the globe to navigate a difficult and a disrupted market, leading to increased award sizes from customers and thousands of new commercial relationships. The air freight 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. resulting market share gains combined with the strength of the market produced a 27 percent increase in ocean volumes during the quarter and a seven percent increase in air shipments candidly three to five 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 and strategic 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 trans-Pacific and trans-Atlantic 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 will continue to have forwarding contribute and drive parts of our long-term growth. Because of the efforts of our CH Robinson team members around the world, our total company adjusted gross profit per business day improved by 11% sequentially in first quarter 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 three 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, and 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 first quarter. And the volume executed through digital connections via API and EDI has grown four 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 first quarter 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 boat by C.H. Robinson. In total, we've enabled these dynamic pricing capabilities for over 85,000 customers across these points of connection. Small businesses continue to see the value in our FreightQuote 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 million unique visitors to the FreightQuote platform just since the product launched. And we continue to be excited about the 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 US 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 industry, 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 NAS truckload business via the web and the app. Approximately 90% of our North American truckload freight is now available to be booked via web or app in a fully digital and frictionless manner. The number of carriers that adopted this capability was up 50% sequentially from fourth quarter of last year to the first quarter of this year. And finally, as it relates to productivity, we've highlighted a couple of key metrics for NAST on page four of our earnings presentation. We continue to show year-over-year improvement in productivity, as indicated by the 1,270-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 in NAST. Another key metric that we review is shipments per person per day, and this metric is up 13% in first quarter compared to the same quarter last year. Both charts show very clearly the relationship between the timing of our increased technology investments and the impact to these key business metrics. We are encouraged with the progress that we're making on our technology journey and the impact 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 first quarter financial performance.