C.H. Robinson Worldwide, Inc.

Good morning, ladies and gentlemen, and welcome to the CH Robinson fourth 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 on your telephone keypad. As a reminder, this conference is being recorded Wednesday, February 2, 2022. 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 President and Chief Executive Officer, Arun Rajan, our Chief Product Officer, and Mike Zuckmeister, our Chief Financial Officer. Bob and Mike will provide a summary of our 2021 fourth quarter results and outlook for 2022, and Arun will outline the innovation and development occurring across our platform, and then we will open the call up 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 the slides, we will 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 morning, everyone, and thank you for joining us today. Within our industry, 2021 will be remembered as a year with some of the greatest disruption and tightest capacity ever seen. For me, it will be remembered as a year in which the global supply chain was at the forefront of conversations and where our organization effectively helped our customers and carriers navigate the unprecedented level of supply chain disruption, allowing us to provide the superior level of service that global customers have come to expect from C.H. Robinson. The strength and the resilience of our model was evident in the fourth quarter and the full year as we generated record annual financial results in 2021. The positive momentum of our business remains strong as demand for our global suite of services and for our digital freight platform continues to grow. Now let me turn to a high-level overview of the results. In our NAS truckload business, we saw strong demand for our services with a 6% year-over-year volume growth in the fourth quarter. Our adjusted gross profit, or AGP, per load continued to improve in both truckload and LTL as we repriced more of our contractual portfolio and focused on profitable market share. This repricing enabled us to reduce the amount of truckloads with negative margins in Q4 to their lowest level since Q2 of 2020. Yet that level does remain above our historical averages, and we remain focused on reducing them further. For the quarter, NAST truckload grew AGP by $57 million, or 22% year-over-year. This was driven by a 6% increase in volume and a 15% increase in AGP per load. This was the third consecutive quarter that we delivered year-over-year growth in both NAST truckload volume and NAST truckload AGP, demonstrating balanced growth in an extremely tight market. Truckload volume growth was driven by a 2% increase in contractual volume and a 12% increase in spot market volume, due in part to an 85% increase in volume that was driven through our proprietary dynamic pricing engine. Nearly half of our spot or transactional business was priced through our dynamic pricing engine in the fourth quarter, where we delivered real-time pricing with capacity assurance from the largest network of truckload capacity in North America. For the full year, approximately $875 million of revenue was recognized through this digital channel, which was 193% increase over 2020. During the fourth quarter, we had an approximate mix of 55% contractual volume and 45% transactional volume in our truckload business, which is consistent with our mix in the year-ago period. We saw routing guide depth of tender in our managed services business remain at 1.7 in the fourth quarter, as it did for most of 2021. As a proxy for the industry environment, this occurred despite all of the repricing actions that occurred throughout 2021, reflecting the extended period of market disruption. In Q4, our average truckload line haul cost per mile paid to carriers, excluding fuel surcharges, increased 18% compared to the fourth quarter of last year. Our average line haul rate billed to our customers, excluding fuel surcharges, increased 18.5% year over year. This again resulted in the highest cost and price per mile on record and a 19% year-over-year increase in our NAST truckload adjusted gross profit per mile. In the fourth quarter, we continued our efforts to attract carriers to our platform and achieved a new record of over 10,000 carrier sign-ups. Carrier utilization of our Navisphere platform continued to increase as well, with a 40% year-over-year increase in both daily and monthly average users of our carrier products. As we continue to introduce enhancements to our digital products, we expect the carry experience to improve and the usage to continue growing. Looking at the market, load to truck ratios still remain at historic highs, driven by the structural constraints around the expansion of truckload capacity, strong import demand, persistent congestion at the ports, and the impacts of COVID and winter storms. We do expect truckload capacity to remain tight, and we expect to further increase the volume we handle in this environment. In short, we expect stronger for longer as we look at the market into 2022. In our NAST LTL business, fourth quarter AGP grew by $21 million or 18% year over year. This was delivered through a 23.5% increase in adjusted gross profit per order that was partially offset by a 4% decline in volume. The Q4 decrease in LTL volume was mainly driven by a normalization of business levels as our LTL volumes in the fourth quarter of 2020 were bolstered by a few large customers that benefited significantly from some of the stay-at-home trends during COVID, which contributed to roughly 20% LTL volume growth in the comparable quarter last year. Overall demand in the LTL market remains strong, with capacity remaining at a premium. Our value proposition in LTL continues to resonate with shippers of all sizes and across industry verticals. For the full year, I'm proud to announce that our LTL adjusted gross profit exceeded $500 million for the first time. Now transitioning to our forwarding business. The team here continues to execute well and provide creative solutions in an environment in which demand still exceeds capacity. This resulted in year-over-year AGP growth in Q4 of $130 million, or 72%. and marks the seventh consecutive quarter of year-over-year growth in total revenues, AGP, and operating income. Based on low inventory-to-sales ratios, robust demand expectations, and the potential for further disruptions at West Coast ports due to upcoming labor negotiations, we believe the current forwarding environment will continue through at least the first half and potentially through a greater portion of 2022. In our ocean forwarding business, we grew our AGP by 97 million, or 87% year-over-year. This was delivered through a 78% increase in AGP per shipment and a 5% increase in shipment volume. Ocean demand continues to exceed the industry's overall capacity with limited vessel and container availability, compounded by a continued backlog of ships waiting outside of U.S. ports to unload cargo. Strong U.S. import demand is expected to persist as the ports work to de-bottleneck, which will likely cause ocean pricing to remain elevated and conversions from ocean to air to continue. Our team is the existing foundation to continue to provide excellent service to our customers and to work with them to develop flexible, multimodal solutions for their shipping needs. Finally, our international air freight business delivered AGP growth of $31 million, or 92% year-over-year. This was driven by a 38% increase in metric tons shipped and 40% increase in AGP per metric ton. Air freight capacity also remains strained, but Robinson has been supporting our customers' needs by leveraging our broad network of air services providers. The forwarding team continues to have a large backlog of new business to implement from both new and existing customers and expects to continue to grow wallet share. Our customers and our results are benefiting from the investments we've made in digitization, data and analytics, as well as our global network, which supports our expansion of initiatives in targeted geographies and industry verticals. Before I transition to Mike to go deeper into the results, I would like to welcome Arun Rajan, our Chief Product Officer, to walk you through the innovation and the development occurring across our platform today and into the future. We continue to believe that through combining our digital products with our global network of logistics experts and our information advantage driven by our scale and data, that we are uniquely positioned in the marketplace to deliver for our shippers and partners regardless of market conditions. We believe our strategies and competitive advantage will enable us to better create value for our customers and, in turn, win more business and increase market share while delivering higher profitability and return on invested capital. A key unlock in our ability to effectively deliver on this strategy at scale, allowing us to lead in a digital environment, lies within how we are reorienting at the intersection of our growth strategy, our engineering and technology strategy, and the needs of our customers and carriers by really evolving to being a more product-led organization. As I searched for the right person to lead this change and to be our chief product officer, it was critical for me to find someone who had experience at leading digital companies that participated in two-sided marketplaces. Arun's a seasoned and inspiring leader who brings nearly three decades of product and technology experience, developing and deploying products that enrich the customer experience and creating value at industry-leading companies such as Whole Foods, Zappos, and Travelocity. Arun's deep product and leadership experience will be invaluable as we drive the next generation of innovation for our company while creating sustainable, long-term value for our customers, our carriers, and our shareholders. With that, I'll turn the call briefly to Arun.