C.H. Robinson Worldwide, Inc.

Good afternoon, ladies and gentlemen, and welcome to the CH Robinson second quarter 2024 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 Wednesday, July 31st, 2024. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations.

Thank you, Donna, and good afternoon, everyone. On the call with me today is Dave Bozeman, our President and Chief Executive Officer, Arun Rajan, our Chief Strategy and Innovation Officer, Michael Castagnetto, our President of North American Surface Transportation, Mike Zuckmeister, our Chief Financial Officer, and Damon Lee, our incoming chief financial officer. I'd like to remind you that our remarks today may contain forward-looking statements. Slide two in today's presentation lists factors that could cause our actual results to differ from management's expectations. Our earnings presentation slides are supplemental to our earnings release and can be found in the investor section of our website at investor.chrovinson.com. Our prepared comments are not intended to follow the slides, If we do refer to specific information on the slides, we'll let you know which slide we're referencing. Today's remarks also contain certain non-GAAP measures, and reconciliations of those measures to GAAP measures are included in the presentation. And with that, I'll turn the call over to Dave. Thank you, Chuck.

Good afternoon, everyone, and thank you for joining us today. Having been in this seat for a little over a year now, I'm pleased with the progress we've made on evolving our strategy. improving our execution, and evaluating and enhancing the company's four P's, people, products, processes, and portfolio. We've brought in some new leaders, and we're arming our people with better tools to execute on our profitable growth strategies. We're delivering innovative products to provide greater value to our customers and carriers. We're streamlining our processes, applying lean principles, and leveraging generative AI to drive out waste and optimize our cost. And we're making changes to drive focus on the four core modes in our portfolio. All of these changes are aimed at our north star of generating incremental operating income and delivering higher highs and higher lows over the course of freight market cycles. Our second quarter results reflect a higher quality of execution and performance as we continue to implement the new Robinson operating model. And although we continue to fight through an elongated freight recession, we are winning and executing better at this point in the cycle. Our people are delivering exceptional service and enhanced digital experience and differentiated value for our customers and carriers. And I thank the team for their efforts. Our truckload business grew market share for the fourth consecutive quarter. And we took share the right way with margin improvement in mind. and our adjusted income from operations increased 32% year over year for the full enterprise. On our first quarter earnings call, I discussed that we had begun deploying a new operating model that is rooted in lean methodology to improve the level and consistency of our operational execution. Today, I would like to share more about how the Robinson operating model is coming to life, which would hopefully help investors understand how things are evolving. The Robinson Operating Model starts with an enterprise strategy map that lays out the key strategies that we need to execute on to drive profitable growth and improve the operating income of the business. Growth and operating income will come from margin expansion by improving our cost structure and operating leverage, and from market share gains by igniting profitable growth in targeted market segments and industry verticals. Our enterprise strategy map converts to a balanced scorecard for the enterprise and cascades down to strategy maps and scorecards for each division and for the functional support areas. These scorecards include the key metrics that each area of the business needs to deliver on and be accountable to. As examples, these metrics may be related to driving growth, meeting customer expectations, optimizing AGP, optimizing cost, managing our talent, or improving our cash conversion cycle. Through a regular cadence of operating reviews on at least a monthly basis, but in some cases weekly or even daily, scorecard metrics are reviewed and there is a binary view of whether they are on track. The metrics are green if they're on track and red if they're not on track. There is no yellow. We're coaching our people to embrace and attack the red with countermeasures or action plans to solve problems faster, which is driving improvements in execution. This may show up in improvements such as more disciplined pricing, better decisions on the volume that we're seeking, or how we're servicing our customers and carriers. These operating reviews prosecute the problem and not the person, as we want our people to embrace the red as an opportunity for improvement. Since we began implementing the new operating model in Q1, We're getting better at being vocally self-critical and driving transparency and accountability. And we've been able to shine a light on some error states that negatively contributed to our results. We're also getting better at making decisions faster and taking quick action on countermeasures to correct those error states and improve our performance. We are still early in our journey, but the operating model is helping us execute a solid strategy even better. And we expect further improvement as we continue to cascade the new operating model deeper into the organization and as our team continues to embrace it and build operational muscle. I know from my past experiences of implementing lean operating models that improvement isn't always linear. And we still have a lot of grass to cut. I'm confident in the team's willingness and ability to drive a higher level of discipline in our operational execution. As the global and North American freight markets fluctuate due to seasonal, cyclical, and geopolitical factors, we remain focused on what we can control, including deploying our new operating model, providing best in class service to our customers and carriers, gaining profitable share in targeted market segments, and delivering tools that enable our customer and carrier facing employees to allocate their time to relationship building and value-added solutioning. Our continued focus on productivity improvements is one part of our plan to address and optimize our enterprise-wide structural costs. We continue to eliminate or automate certain tasks to enable our teams to handle more volume. In 2024, we expect these initiatives will help drive a 15% increase in shipments per person per day in NAST and a 10% increase in global forwarding. both of which would result in compounded productivity improvements of 32% or better over 23 and 24 combined. We also took an important step yesterday on our journey to get fit, fast, and focused when we announced that we've reached an agreement to sell our European surface transportation business. This move is consistent with our strategy to drive focus on profitable growth in our four core modes of North American truckload and LTL and global ocean and air. Growth needs to be highly scalable within our model to create the most value for our stakeholders. As such, our global forwarding and managed services businesses in Europe will continue to execute on the breadth of global services that we provide to customers and that feed our core modes. With ongoing efforts to improve the customer experience, and our cost to serve, we continue to focus on ensuring that we'll be ready for the eventual freight market rebound with a disciplined operating model that decouples headcount growth from volume growth and drives operating leverage. I'm also excited about the changes that we've made on my senior leadership team. Being able to attract Damon Lee as our new CFO is a big win for Robinson. With his proven track record of financial discipline, while delivering results as an operational leader and a strategist with a lean and continuous improvement mindset. I look forward to Damon's contributions to our strategy and execution. I'm also greatly appreciative that Mike Zegmeister graciously agreed to extend his time with us to facilitate a seamless transition for CH Robinson and for Damon. I thank Mike for his five years of service and dedication to Robinson and wish him the best in his upcoming retirement. We also recently announced that Arun Rajan transitioned from the role of COO to a new role of Chief Strategy and Innovation Officer. This change enables Arun and his team to focus their continued efforts on building our digital and operational capabilities and uphold tight alignment between our business teams and our digital investments. We're at a pivotal point as a company. And with a single-threaded leader at the helm of strategy and innovation, we can accelerate efforts already underway to bring industry-leading products, technology, solutions, and ways of working to our company and the global logistics marketplace. Working closely with the senior leadership team, Arun will oversee our enterprise strategy and innovation process from creation to implementation and measure our performance against our strategic goals. I have high expectations for how this new role will benefit Robinson and all our stakeholders as we continue our transformation. And finally, it's been great to have Michael Castagnetto leading and driving further improvement in our NAS business. He has a proven record of building strong relationships with our people and our customers, driving operational excellence and delivering exceptional results. Michael has joined us on today's call And I'll turn it over to him now to provide more details on our NAS results.