C.H. Robinson Worldwide, Inc.

Good afternoon ladies and gentlemen and welcome to the CH Robinson third quarter 2021 conference call. At this time all participants are in a listen only mode. Following the company's remarks we will open the line for a live question and answer session. To ask the 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, October 26th, 2021. I would now like to turn this conference over to Chuck Ives, Director of Investor Relations.

Thank you, Laura, and good afternoon, everyone. On the call with me today is Bob Biesterfeld, our President and Chief Executive Officer, and Mike Zechmeister, our Chief Financial Officer. Bob and Mike will provide a summary of our 2021 third quarter results, and then we will open up the call for live questions. Our earnings presentation slides are supplemental to our earnings release and can be found in the investor section of our website at investor.chrobinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on any of the slides, we will first let you know which slide we're referencing. I'd also like to remind you that our remarks today may contain forward-looking statements. Slide 2 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 afternoon, everyone, and thank you for joining us today. The third quarter was another quarter of progress and strong execution, resulting in record quarterly financial results. The trajectory of our business is heading in the right direction as we continue to leverage our Tech Plus strategy to help customers navigate through an extremely challenging and capacity-constrained environment, which we expect to continue. Demand for our global suite of services and for the benefit of our powerful technology platform continues to be strong, and the digitization efforts continue to take hold and be ingrained in an increasing percentage of our business. In our North American truckload business, we've made steady progress in a sustained tight capacity environment. Through the continued repricing of our contractual portfolio and higher volumes of spot business, our adjusted gross profit, or AGP, per truckload returned to our five-year average, and our AGP per mile in Q3 exceeded both our five-year and 10-year averages. We accomplished this while growing our truckload volume 4.5% year-over-year and 3.5% on a sequential basis. Within the quarter, we saw an acceleration of truckload volume per business day in each month of the quarter, with 7% year-over-year growth in September, and that growth trend has continued into October. For the quarter, NAST truckload grew AGP by $83 million, or 36% year-over-year, through a 4.5% increase in volume and a 30% increase in AGP per load. This included a 14% increase in spot market volume year over year due in part to an 85% increase in volume that was driven through our proprietary dynamic pricing engine, which is now on pace to generate $1 billion in spot truckload freight for the year. Nearly half of our spot or transactional business was priced via integrations with our dynamic pricing engine in the third quarter, delivering real-time pricing with capacity assurance from the largest network of truckload capacity in North America. We closed the quarter with an approximate mix of 60% contractual volume and 40% transactional volume, which is consistent with our mix in the year-ago period. Our average truckload line haul cost per mile paid to our carriers, excluding fuel surcharges, increased 26% compared to the third quarter of last year. Our average line haul rate billed to our customers, again, excluding fuel surcharges, increased 27% year-over-year. This resulted in the highest cost and price per mile on record, and a 33% year-over-year increase in our NAST truckload adjusted gross profit per mile. This, combined with a 2% decrease in the average length of haul, resulted in the 30% increase in AGP per truckload. During the quarter, we saw routing guide depth of tender in our managed services business increase slightly from 1.6 in June to 1.7 in September, indicating slight deterioration of shipper routing guide performance during the quarter. Given the current structural constraints around expansion of truckload supply, coupled with a continued strong demand as we head into the holiday season, we expect capacity to remain tight, and we expect to perform well in that environment, with over half of our contractual truckload business stated to reprice in the fourth quarter of this year and the first quarter of next. During the third quarter, we continued our effort to expand our carrier network, and we launched an effort to recognize truck drivers for their extraordinary efforts, and we had incredible engagement. This led to a new record of 9,500 new carrier sign-ups and increased utilization of our carrier technology and apps. Our NASP LTL business grew adjusted gross profits by $14 million, or 12% year over year. This was delivered through a 1% increase in volume and a 10.5% increase in adjusted gross profit per order. This increase in volume was on top of a 13.5% volume growth in the comparable quarter last year. Overall demand in the LTL market remains strong, driven by growth in e-commerce, resulting in capacity remaining at a premium. Our value proposition in LTL continues to resonate with shippers of all sizes across multiple industry verticals. Turning now to our global forwarding business. The third quarter was our sixth consecutive quarter of strong year-over-year growth in total revenues, AGP, and operating income. Based on low inventory to sales ratios and the robust pipeline of business from new and existing customers, we believe the strengths in this business will continue into 2022. In our ocean forwarding business, we grew our adjusted gross profits by $126 million, or 142% year over year. This came through a 12% increase in shipments and a 116% increase in adjusted gross profit per shipment. Demand continues to be stronger than what the overall industry can meet with limited vessel and container capacity. And although some ports are working to implement expanded operating hours, other market constraints such as the shortage of truck drivers, drainage capacity, and inland warehouse space continue to be bottlenecks, and port congestion is likely to continue into 2022. Our forwarding team has done a great job of strengthening our carrier relationships and procuring incremental capacity to best serve our customers, as well as working with shippers to better plan their shipping needs and to consider ultimate modes or ports. Finally, our international air freight business delivered adjusted gross profit growth of $26 million, or 76% year over year. This was driven by a 51% increase in metric ton shift and a 17% increase in adjusted gross profit per metric ton. demand for air freight remains incredibly strong, partially driven by continued conversions of some ocean freight to air. Air freight capacities continue to be strained, and we continue to position charter flight capacity to support demand from both new and existing customers. The forwarding team is continuing to add new commercial relationships with strategic, multinational customers that are leading to increased award sizes, while also ensuring that our existing customers have access to the capacity that they need to meet their needs. Our customers and our results are benefiting from the investments that we've made in digitization, data, and analytics, as well as our global network that's supporting our expanded geographical and vertical presence. We believe that these strategies and competitive advantages of C.H. Robinson will enable us to create more value for customers and, in turn, win more business, sustain the market share gains that we've achieved, and deliver solid returns for our shareholders. Our digital investments continue to deliver customer value and unlock growth in new and exciting ways. The latest example of this is our introduction of market rate IQ during the quarter. This brings pricing transparency to shippers by allowing them to compare their rates to the market averages and then using the information advantage of C.H. Robinson, break down their rates to see potential savings opportunities. When we bring these Robinson Labs innovations to the market, we see increased engagement with our customers, higher win rates with those customers that are truly realizing the value from these new products. As I mentioned earlier, the amount of volume that's being delivered through our real-time dynamic pricing tools has grown significantly. Enabling these digital connections improves efficiencies for our customers, improves our response time for quote requests, and improves our win rates. We also continue to add digital connections with our customers at an accelerated pace with 100 new customers connected via TMS and ERP connections in the third quarter of 2021. The number of daily and monthly average users across our customer and carrier facing platforms also continues to grow. with 24% year-over-year growth in daily average users of our carrier platforms as we continue to deliver new capabilities and benefits to our carriers through both the web and mobile versions of Navisphere Carrier and Driver. During the quarter, we had over 340,000 fully automated bookings in our NAS truckload business, which was an increase of nearly 80% year-over-year. And finally, as it relates to productivity, we've again highlighted a couple of key metrics for NAST in our earnings presentation. During the third quarter, we invested in hiring and building our bench to support growth. On a year-to-date basis, we continue to show year-over-year improvement in productivity as indicated by the 880-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 NAST headcount. Shipments per person per day is another metric that clearly shows the relationship between the timing of our increased digital investments and the impact to NAF productivity, with an over 25% increase in productivity since the beginning of the increased investment period. We are encouraged with the progress that we're making on our digital investments and the impacts that these investments are delivering to our customers, for our carriers, and the impact to our overall results. Across our global suite of services, we believe that our Tech Plus strategy that combines our tailored, market-leading technology solutions with our global network of logistics experts and an information advantage created from our scale and our data is the right strategy and one that is aligned to the needs of our shippers and partners as we help them to navigate these highly disrupted markets and deliver for their customers. I'll now turn the call to Mike to review the specifics of our third quarter financial performance.