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F500-2021-191-C.H. Robinson Worldwide

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C.H. Robinson Worldwide, Inc. is a global logistics firm offering freight transportation and supply chain solutions across all major travel modes. Founded in 1905, the company works with 450,000 contract carriers and handled 37 million shipments in 2024, making it the top revenue earner in its sector.

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C.H. Robinson Worldwide (CHRW): Company Profile, Stock Price, News, Rankings

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C.H. Robinson Worldwide

c.h. robinson worldwide

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Worldwide third quarter 2025 conference call. At this time, all participants are in 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 one on your telephone. If anyone needs assistance at any time during the conference, please press Star zero. As a reminder, this conference is being recorded Wednesday, October 29, 2025. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, and good afternoon, everyone. On the call with me today is Dave Bozeman, our President and Chief Executive Officer; Michael Castagnetto, our President of North American Surface Transportation; Arun Rajan, our Chief Strategy and Innovation Officer; and Damon Lee, our Chief Financial Officer. I'd like to remind you that our remarks today contain forward-looking statements. Slide 2 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.chrobinson.com. Today's remarks also contain certain non-GAAP measures, and reconciliations of those measures to GAAP measures are included in the presentation. With that, I'll turn the call over to Dave.

Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. I've met with many investors over the past year, and as you know, we don't normally start our discussions or spend a lot of time on the macro environment due to the exciting lean AI transformation that is occurring at C.H. Robinson Worldwide. After a really strong third quarter performance that I and the team are really pleased with, I do want to start off, however, by sharing a little bit of context around the macro conditions that we're not immune to and that I'm proud of our employees for navigating with discipline and ingenuity. The third quarter of 2025 was marked by a continued soft freight environment with the Cass Freight Shipment Index declining year-over-year.

For the 12th consecutive quarter, the Cass index reading was the lowest Q3 reading since the financial crisis of 2009, and despite a fairly steady exit of trucking capacity over the past three years, truckload spot rates continue to bounce along the bottom due to low demand. International freight has been impacted by global trade policies, which caused previous front loading and a dislocation of shipments and a softer than normal peak season combined with excess vessel capacity. This caused ocean rates to decline substantially versus a year ago, consistent with the expectations that we laid out at our investor day in December. Ocean rates also declined substantially during Q3, causing our adjusted gross profit per ocean shipment to decline 27% from June to September. The setup for global transportation companies was certainly unfavorable in Q3.

We are not immune to the market, and the volume and rate dynamics in global forwarding are certainly headwinds we are facing. This is a new C.H. Robinson Worldwide, and we don't use the macro environment as an excuse. We are a fundamentally different company than we were two years ago, illustrated by the company's consistent outperformance versus the market. Make no mistake, this consistent outperformance does not just happen, and it's not easy for others to replicate. We're changing the culture of the company, which is really hard work. We've shifted to a culture of solving problems with speed, and the implementation of a lean operating model has contributed greatly to this change. A lean operating model is about building the habit of getting better every day through innovation, failing fast, and discovery. We certainly encounter challenges along the way, but how we solve them now is different.

With the discipline and tools that we've armed our people with, we solve those challenges with a lean mindset, with experimentation, and with urgency. The Robinson operating model helps us focus on what matters most to eliminate waste and deliver more value to our customers faster. Our people have embraced our lean operating model and the discipline needed to generate higher highs and higher lows across market cycles. While we've made considerable progress, we are still in the early innings of our lean transformation, and significant runway exists as we continue to deepen the lean mindset and methods across the organization. Shifting to our Q3 results, that provides another proof point of the disciplined execution of our strategy. In NAST, we grew our combined truckload and less-than-truckload volume by approximately 3% year-over-year and demonstrably grew market share versus a 7.2% decline in the Cass Freight Shipment Index.

This was accomplished while expanding gross margins for the eighth consecutive quarter and further increasing productivity and operating leverage while growing volume. This resulted in a 39% adjusted operating margin in NAST and further progress toward our 40% mid-cycle adjusted operating margin target for NAST. In Global Forwarding, we expanded gross margins by 380 basis points year-over-year through improved revenue management discipline. We also continued to improve our productivity, which has now increased by more than 55% in Global Forwarding since the end of 2022. This improvement in our operating leverage enabled us to achieve our 30% mid-cycle adjusted operating margin target in Q3 despite the difficult market conditions.

With seven consecutive quarters of consistent outperformance through the disciplined execution of the strategy that we shared at our 2024 Investor Day, there is no doubt in our minds that we are on the right path to deliver sustainable outperformance. We are not waiting for a market recovery to improve our financial results, and the strategies that our team is executing are built to be effective in any market environment. With our strong balance sheet and cash flow generation, we are comfortable operating in an environment that is lower for longer. In today's environment, there is a flight to quality, and that is Robinson. We're also highly confident in our ability to continue delivering exceptional value for our customers and to continue executing on all of our strategic initiatives, including further increasing our operating leverage where the market eventually inflects.

Our model, with an industry-leading cost to serve, is highly scalable, and we expect it will improve further as we harness the evolving power of AI to drive automation across the quote-to-cash life cycle of a load. We're still in the early innings of our Lean AI journey. Call it third inning in NAST and first inning in Global Forwarding. Lean AI is our unique, disciplined approach to AI innovation that transforms supply chains by combining the principles of Lean methodology in our Robinson operating model with the power of AI. Lean AI is designed to maximize value and minimize waste for better outcomes. It is uniquely enabled by our leading AI technology, our expert logisticians, and our Lean operating model that drives continuous improvement.

Our fleet of AI agents are not only improving our productivity and operational performance by automating tasks that free up our industry-leading talent to focus on more strategic, higher-value work, but they are also enhancing the service and value we deliver to our customers and contributing to our market share gains. We are pioneering new ways to eliminate tasks, augment our capabilities, and supercharge our talented people with industry-leading technology that materially elevates the customer and carrier experience, and our Lean operating model enables us to do this in a disciplined and cost-effective way that delivers the most value to all our stakeholders. Our AgentIQ supply chain solutions are enabling a new era of logistics, and we're leading the way for customers and carriers overall. The progress on our strategic initiatives remains on track.

The consistent, disciplined execution of our Lean AI strategy, supported by the Robinson operating model, makes us stronger, and we continue to believe that the next two years for C.H. Robinson and our stakeholders will be more exciting than the last two years. I'll turn it over to Michael now to provide more details on our NAST results.

Thanks Dave and good afternoon everyone. Our Q3 NAST results demonstrate the strength of our execution, the expertise and discipline of our team, and the resilience of the Robinson operating model in a difficult freight environment. The team once again delivered market share growth in both truckload and less-than-truckload (LTL) in Q3. Additionally, by strategically optimizing our volume, we not only drove year-over-year but also sequential expansion in both our gross and operating profit margin. For more context, the Cass Freight Shipment Index declined on a year-over-year basis for the 12th consecutive quarter in Q3 and was down 7.2%. In contrast, our combined truckload and LTL volume delivered positive growth of approximately 3% year-over-year, outperforming the Cass Freight Shipment Index for the tenth consecutive quarter. Truckload volume rose approximately 3% year-over-year and LTL volume increased approximately 2.5% year-over-year.

We continue to build strong momentum across key verticals that we highlighted as growth areas at our investor day, which include retail, energy, automotive, and healthcare. During the quarter, we delivered year-over-year volume growth in each of these verticals in addition to growth in cross border and short haul volume and with small and medium sized customers. These results reflect the execution of our strategic focus and our expanded capabilities that directly support these segments and evolving customer needs. We introduced several value added solutions in recent months, including our new Drop Trailer Asset Management system, cross border freight consolidation, as well as our AI-driven Always On Logistics Planner. These solutions are designed to simplify complexity, reduce costs, and deliver consistent high quality service across the supply chain.

In our over $3 billion LTL business, we delivered year-over-year volume growth for the seventh consecutive quarter, and we continue to outperform the broader LTL market through our deep, long-standing relationships with LTL carriers and our proven ability to manage service variability among the carriers to deliver a consistently high level of service to our customers. They continue to turn to us to simplify the complexities of LTL freight and to reduce their costs. Our ability to consistently provide the best combination of price and service to our LTL customers continues to result in more freight for us. Our team of freight experts once again responded to a challenging freight environment, supported by a resilient operating model and industry-leading tools.

Through disciplined pricing strategies and a sustained cost of hire advantage, we delivered yield improvements that translated into a 70 basis point year-over-year improvement in NAST gross margin and a 20 basis point sequential increase. Our team continues to actively assess the market and optimize for the most effective combination of volume and margin to enhance earnings performance. With strategic agility built into our model, we have the flexibility to pivot toward volume or margin as market dynamics evolve, making disciplined, data-driven adjustments in real time, all while staying focused on long-term value creation. We're also making smarter use of our proprietary digital capabilities and getting actionable data and AI-powered tools into the hands of our freight experts faster, enabling them to make better decisions and to capture the optimal freight for us. These digital capabilities have enabled us to continue delivering double-digit productivity increases in NAST in 2025.

Since the end of 2022, we have delivered a more than 40% increase in shipments per person per day, and this is measured across the entirety of our NAST organization rather than a subset of employees. This enhanced efficiency is not only lowering our industry-leading cost to serve, but is also elevating the customer experience by enabling faster, more reliable service. While shifts in market dynamics and regulatory changes continue to occur, we remain confident in the strength and reliability of our carrier network. Our diversified carrier base and thorough vetting give us a high degree of comfort in our ability to navigate these changes without disruption and to maintain a high level of service quality for our customers. Looking ahead to Q4, it is typically a seasonally weaker quarter compared to Q3.

The 10-year average of the Cass Freight Shipment Index, excluding the pandemic-impacted year of 2020, reflects a 3.5% sequential volume decline from Q3 to Q4 regardless of market conditions. We remain focused on what we can control, and we will continue to deliver industry-leading solutions and flexibility that only a scaled broker can provide to customers and carriers. Our people and their unmatched expertise enable us to deliver exceptional service, greater value, and the team is relentlessly driving improved results. With that, I'll turn it over to Arun to provide an update on the innovation we're delivering to strengthen our customer and carrier experience and improve our gross margin and operating leverage.

Thanks, Michael, and good afternoon, everyone. As Dave mentioned, to better serve our customers and widen our competitive moat, we are continuing to scale several innovations, including our fleet of secure proprietary AI agents across every aspect of the extensive quote-to-cash lifecycle of an order and to more modes and customers. One example is our recently launched Always On Logistics Planner, a coordinated service model that brings together more than 30 connected agents. Our AgentIQ supply chain solutions automate routine tasks, surface strategic insights, and enable seamless global coordination across every mode and region. This launch is the first step in a broader expansion of AgentIQ AI across our Managed Solutions portfolio. Our fleet of AI agents is growing fast, and we're building a future where AI agents enable our logistics professionals to orchestrate supply chains with greater predictability, efficiency, and operational excellence.

By leveraging and scaling the use of game-changing AI technology such as Agentic AI to power new capabilities that are backed by unmatched data and scale, we are continuing to disrupt from within. The advanced reasoning capabilities of Agentic AI enable us to unlock the value trapped in unstructured data such as phone calls, emails, and tribal knowledge due to Agentic AI's ability to understand context and make decisions in real time. It is also important to understand that most transformative technologies and innovations rarely emerge fully formed. They evolve through cycles of experimentation, feedback, and iteration. Along these lines, innovation and pioneering in Agentic AI is not a straight line due to the complex, iterative, and unpredictable nature of the technology and its development. Unlike linear automation that follows predictable rule-based scripts, Agentic AI operates with a degree of autonomy and unpredictability, making its progress nonlinear.

The journey is marked by cycles of advancement and retrenchment, shifting challenges, and the continuous need for human-in-the-loop oversight. Our lean AI process of building, learning, and discovering where missteps and the resulting learnings are milestones is not just necessary, it's the best path to success and uncovering what truly works. As Dave mentioned, our lean operating model enables us to develop and implement innovations in a disciplined and cost-effective way that delivers the most value to our stakeholders. Our in-house team of over 450 engineers and data scientists with their rich domain expertise have been empowered to develop and implement our proprietary AI agents. This enables us to deliver optimized AI solutions at a faster pace and a lower cost.

We have not increased our overall tech spending to implement AI, and our only incremental cost to scale AI is the cost of tokens, for which the price continues to decline as we continue to improve our service with cost-efficient AI task agents that listen, learn, and act all day, every day. Agentic AI has the ability to ignite a revolution and empower systems to think, adapt, and act differently, enabling us to deliver fast, accurate, and personalized service at scale and in any market. All of these innovations are reducing the amount of time it takes for us to respond to a quote, for a tender load to be accepted, or for an appointment to be set, thereby providing a superior customer experience. Additionally, the faster speed provided by our AI has enabled us to respond to more quotes and run more business, thereby accelerating our market share growth.

The continued advancement of our AI is also powering our dynamic pricing and costing, and we're responding more surgically and faster than ever to dynamic market conditions by performing more frequent price discovery along with our operating model rigor and our revenue management practices. This is contributing to the gross margin improvements that we're delivering. Finally, the growing automation across our quote-to-cash lifecycle, whether it be in quoting, order entry, load tenders, appointment scheduling, or other manual tasks, creates business model scalability. This enables us to decouple headcount growth from volume growth and to create greater operating leverage. Our ability to successfully leverage technology and automation has played a key role in our greater than 40% productivity increase since the end of 2022, and we expect to create further operating leverage as evergreen productivity improvements continue in 2025 and beyond.

Ultimately, we are focused on three items that are key to our strategy: transforming the customer and carrier experience to elevate our service offering and drive growth, delivering business model scalability, and driving gross margin and operating margin expansion. Technology continues to evolve, and we have and will continue to disrupt from within to stay at the forefront of that evolution and to further widen our competitive moat. With that, I'll turn the call over to Damon for a review of our third quarter results.

Thanks Arun and good afternoon everyone. In Q3 we continued to execute with discipline and focus, advancing our strategic initiatives in alignment with our North Star of growing operating income. Q3's results demonstrate our sustained strong momentum driven by market share growth, continued optimization of adjusted gross profit or AGP, disciplined cost management, and further productivity gains, all supported by our lean operating model and rapidly advancing AI capabilities. Due to significant year-over-year declines in ocean rates and the February 2025 sale of our Europe surface transportation business, our total revenue and AGP declined approximately 11% and 4%, respectively. An 18% decline in Global Forwarding's AGP, driven primarily by the lower ocean rates, was partially offset by a 6% increase in NAST AGP. NAST continued to outperform, growing volume 3% year-over-year, significantly outpacing a market that was down 7% while expanding gross margins and improving operating leverage.

Global Forwarding's AGP was lower year-over-year due to lower ocean rates, but gross margins expanded year-over-year and sequentially due to disciplined pricing and revenue management on a monthly basis. Compared to Q3 of last year, our total company AGP per business day was down 3% in July, flat in August, and down 9% in September. This was primarily driven by lower ocean rates, which caused Q3 ocean AGP per shipment to decline 27.5% year-over-year. Turning to expenses, Q3 personnel expenses were $349.3 million, including $9.7 million of charges related to workforce reductions. Excluding these charges, our Q3 personnel expenses were $339.6 million, down $19.1 million. Due to the divestiture of our Europe surface transportation business and our continued productivity and cost optimization efforts, our average headcount was down 10.8% year-over-year in Q3 and was down 2.3% sequentially, illustrating our continued decoupling of headcount growth from volume growth.

Based on year-to-date personnel expenses of $1.02 billion excluding restructuring charges and current expectations for Q4, we still expect 2025 personnel expenses to be in the guidance range of $1.3 billion-$1.4 billion but above the midpoint of the range. Our Q3 SGA expenses totaled $135.9 million. Excluding 2024 charges primarily related to the divestiture of our Europe surface transportation business, SGA expenses were up $0.9 million or 0.7% year-over-year. Based on year to date SGA expenses of $417.7 million excluding restructuring charges and current expectations for Q4, we still expect our 2025 SGA expenses to be in the range of $550 million-$600 million but above the midpoint of the range. This guidance includes depreciation and amortization that is expected to be $100 million-$105 million versus our previous guidance of $95 million-$105 million.

Shifting back to Q3, our effective tax rate for the quarter was 20.6%. We continue to expect the full year 2025 tax rate to be in the range of 18%-20%. We generated $275.4 million in cash from operations in Q3 and our capital expenditures were $18.6 million during the quarter. We still expect our full year capital expenditures to be $65 million-$75 million. From a balance sheet perspective, we ended Q3 with approximately $1.37 billion of liquidity, including $1.23 billion of committed funding under our credit facilities and a cash balance of $137 million. Our net debt to EBITDA leverage at the end of Q3 was 1.17x, down from 1.40x at the end of Q2. This financial strength is a key differentiator in our industry, giving us the ability to continue investing through the bottom of the freight cycle and further enhancing our capabilities.

While our capital allocation strategy remains grounded in maintaining an investment grade credit rating, our financial strength and improved leverage ratio enabled us to return approximately $190 million of cash to shareholders in Q3 through $115 million of share repurchases and $75 million of dividends through the disciplined execution of our strategy. With our lean operating model and AI innovation at its core, Q3's results further validate the lean AI transformation underway at C.H. Robinson Worldwide. As we carry this momentum forward, we are well positioned to continue outperforming in any market environment while creating long term value for our stakeholders. That covers our Q3 results and now I would like to give an update on the financial targets that we originally shared at our 2024 Investor Day in December.

Based on the confidence in our strategy, our disciplined execution and our significant runway for further improvement, we issued a separate press release today announcing an increase in our 2026 operating income target. We originally expected to increase our 2026 operating income by $350 million-$450 million versus our 2023 adjusted operating income of $553 million. Today we increased that expectation by roughly $50 million, despite market dynamics that have created greater headwinds than we originally anticipated. This results in a new 2026 operating income target range of $965 million-$1.04 billion. The bottom end of this range, which assumes zero market volume growth, equates to approximately $6 of earnings per share.

The full range of market volume growth assumptions includes an expectation that if the market does return to year-over-year growth, it likely won't occur until the second half of 2026, in line with the market predictions of external sources such as ACT Research. Let's talk about what's behind the higher target. In our December Investor Day, we estimated that our strategic initiatives to grow market share, expand gross margins, and increase operating leverage would deliver $220 million of adjusted operating income growth in 2026 versus 2024. Today we are raising that expectation to $336 million, reflecting stronger benefits from our lean AI strategy, resulting in additional productivity improvement and operating leverage as well as additional benefit in 2026 from continued gross margin expansion and market share growth.

Embedded in our operating leverage target is an expectation that the disciplined execution of our lean operating model will deliver a baseline of single-digit productivity improvements every year. As we incorporate certain innovations into our operations such as proprietary AI-driven innovations, we expect there to be additional waves of productivity for 2026. This translates to an expectation that we will again deliver double-digit productivity increases in both North American Surface Transportation (NAST) and global forwarding, and we expect these benefits to be over-indexed to the second half of 2026. Although we are at or nearing our mid-cycle operating margin targets at the bottom of the market cycle, we have not increased those targets. We believe our margin targets represent a high quality of earnings and we want to retain optionality in how to best deliver shareholder value.

In other words, we may choose to invest operating margins above those targets to deliver demonstrable outgrowth if we believe that will deliver higher earnings and a better return for C.H. Robinson Worldwide and our shareholders. To further enhance shareholder value, our Board of Directors has authorized a $2 billion share repurchase program, which we currently intend to execute over approximately three years. The new authorization is in addition to the existing share repurchase authorization, which has 4.5 million shares remaining on it. As we have said several times over the past year, we are still in the early innings of the transformation that is occurring at C.H. Robinson, with significant runway remaining on the execution of our Lean AI strategy.

We are proud of the progress we have made and even more excited about what's ahead and about our ability to deliver sustainable, profitable growth and long-term value for our customers and carriers, our people, and our shareholders. With that, I'll turn the call back to Dave for his final comments.

Thanks, Damon. As you've heard in our prepared remarks today, we've made significant progress on the transformation of C.H. Robinson Worldwide into the global leader in lean AI supply chains. We're redefining what a logistics company can be, and our differentiating Lean AI gives us a unique opportunity to create a new era in logistics, the era of Agentic supply chains. It's the next chapter in how we solve complex challenges and at scale, helping our customers build supply chains that are smarter, faster, and more resilient in a world where disruption is constant and agility is essential. As I mentioned in my opening remarks, and as Arun expanded on, there's an imperfection to our journey. A lean transformation and innovation includes failure and discovery. Innovation is not a single spark, it's a series of sparks, often messy, sometimes misdirected, but always instructive.

As Arun shared, most innovations are never right the first time. We have to build, learn, and discover our path to succeed. That is where the lean operating model is so important. As lean tools continue to be deployed broadly across our organization, our teams are becoming increasingly equipped to identify root causes of problems, implement countermeasures, and drive meaningful improvements. That's how we've consistently delivered outperformance for seven consecutive quarters and how we're positioned to continue doing so regardless of market conditions or cycle. As we lead our industry and stay on offense with our Lean AI strategy, we've never been more excited about the future. Our technology is lifting manual repetitive work off our people's plates, freeing them up to use their expertise to do more strategic work, to reach more customers, to garner more wallet share, and to move up the value stack.

By leveraging our growing capabilities, our technology is improving our gross margins by allowing us to better align capacity and pricing to the specific needs of our customers and to specific market conditions. These superior dynamic costing and pricing capabilities will be even more important when we eventually see a turn in overall freight demand. As you just heard Damon talk about, our technology is augmenting our evergreen productivity initiatives and improving our industry-leading cost to serve. I want to thank our people for their relentless efforts to provide exceptional service to our customers and carriers, for embracing the Robinson operating model and continuing to execute with discipline. We've reinvigorated a winning culture and we're getting our swagger back. We have no hubris and we're not resting on our laurels.

We are the new disruptor and we will continue to disrupt ourselves and this industry to lead with purpose, move with urgency, drive sustainable outperformance across market cycles, and build a company that future generations will be proud to inherit. That concludes our prepared remarks. I'll turn it back to the operator now for the Q and A portion of the call.

Thank you. As a reminder, please press star 1 on your telephone keypad if you would like to ask a question. One moment while we pull. Our first question comes from the line of Richa Harnain from Deutsche Bank.Please proceed with your question.

Hey gentlemen. Thank you. Lots of questions. I guess maybe we can start with the obvious one. You know, there's been a lot of talk around how very low end capacity is exiting the market. Curious if you saw it in these results you put up, which are pretty remarkable. The strong gross margin expansion was in spite of that. At our conference in August, Damon, you guys talked about how you're excited to show off your ability to offset what's normally a squeeze when purchase transportation rates start rising. I just wonder if this played out in this quarter and it demonstrated how you can do not just in a down market but also in maybe stabilizing a better market.

Hi Richa, this is Dave. Thanks for the shout out, we appreciate it. It was good to be at your conference as well. I'll start and then have Michael go a little bit deeper. What we are seeing is, you know, there's been some, obviously some policy changes recently. The U.S. pause on, you know, truck driver visas is creating what we see as some localized uncertainty, especially in some key markets. We're watching that, key markets like Southern California. The way we look at this is a little bit different. It's really more of a stacked type of issue with a number of things just kind of stacking on top. We think we understand that stack. I want Michael to double click into that a little bit more to give you some more context.

Yeah. Thanks, Richa. To kind of keep going where Dave was heading, we've seen several regulatory changes or policy changes, and individually or on an island, each one of them hasn't had a material impact. As they have started to stack on top of each other, whether it was the English requirement, what Dave mentioned in terms of the pause on visas, non-domiciled CDLs, that stacking effect does have an impact. I'd say the way we're seeing it is similar to what we've said on past calls: when there are events or when there's pressure in very localized markets or geographic areas for short periods of time, we are seeing more volatile spikes in costing. That's where we're leaning into our AI-driven pricing engines, our ability to match the right carriers to the right loads, and just making sure we really manage our customer supply chains in the right way.

We're not immune to these changes. We do think this is having an impact. It's not a long-term impact so far. It's more of a squeeze in certain places for very specific periods of time.

Richa, I would only add that back to my comments at your conference was around we get opportunities to test our capabilities against these micro squeezes all the time, whether it be holidays, whether it be various disruptions in the supply chain, and we continue to perform much better both in severity and duration on these mini squeezes than we ever have historically. What Michael's describing is slight variation to that, but a similar example where we truly believe not immune to the squeeze dynamic. Right. It's the physics of our industry, but the way in which we handle it, both in duration and severity, we feel like we're in really good shape versus our own historical capability and versus the industry.

I think just to put a period on that, Richa, when you look at the company and where it was yesterday versus today, it's just structurally different on how we go about these squeezes. That is the conversations with our customers, the relationships we've built with them. Michael and team have done a fantastic job at really managing that along with the technology that we've often talked about. Thanks for the question and we appreciate it.

Thank you. Our next question comes from the line of Tom Wadewitz with UBS. Please proceed with your question.

Good afternoon. Congratulations on the strong results. It's, again, such a tough rate backdrop. It's especially impressive. Wanted to get your thoughts on just volume growth and truckload. I think that skeptics have maybe said, well, hey, they're cutting a lot of costs at C.H. Robinson, but what are they going to do when, how are they going to show volume growth? That's kind of really another proof point. It does seem that you're showing that. Just wanted to get a sense of maybe how you're doing that. Is that really price driven? Is it driven by more aggressive behavior in some bids that maybe are having an early effect with enterprise customers? Is that something which you would expect some further acceleration, that, you know, truckload volume up 3% can go up 5%, up 7%, up 10%, if you look at a couple quarters?

With some thoughts on the volume growth and just kind of what's driving that and how we can look for that going forward.

Hey Tom, this is Michael. Thank you for the very nice comments. What I'd say is we've seen positive volume growth in many of the key areas we discussed at our investor day a year ago. When we were there, we talked about targeting some key verticals that we thought fit what we do well: retail, energy, automotive, healthcare, and all of them grew year-over-year in Q3. Tagging that to the additional areas we talked about, whether it's drop trailer, the work we've done in cross border, and specifically reigniting our small and medium business focus and segment, all of those key areas were up in the quarter. I wouldn't say it's one thing that's driving the volume. It's a combination of, first of all, our people just doing a really good job.

Second, combining our people with the advances we've made in our tech, specifically our AI price driven modeling. I think what we're getting right when you ask about RFP is we're better understanding what freight we want to win and under what terms we win that freight. I think we're finding a nice balance between what our customers are looking for and what we think is the right volume for us going forward. I'm going to keep going back to that term optionality that we've used in the past. We want to be very careful to make sure that we win the right volume. We don't just chase volume for volume's sake. I think if the right volume, Tom, continues to be available at the right combination of service and value we can bring to our customers, we'll go take it.

We also want to make sure that we're very smart about it. The volume year-over-year growth is something we're really proud of, but the market outperformance is pretty demonstrable. We want to make sure that we're smart in how we do that each quarter.

Is that occurring with SMB2 or in the volume growth, and where some of your quick pricing tools are having a factor or is that really driven more by enterprise?

No, it's across the board in both enterprise customers and in small and medium business.

Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.

Thanks so much. I think I heard you say SG&A for the year is going to be above the midpoint. If I'm looking at this right, that's like a $20 million, over $20 million increase from Q3 to Q4. Just want to make sure I heard that right. I think you said September net revenue down 9% year-over-year. Is there something unusual about September? Is that the right run rate to be thinking about for Q4? Obviously, that would be a pretty sharp drop from Q3 to Q4 levels. I don't know that that's right, but just any sort of helper or color there.Thanks.

Yeah, Scott, thanks for the question. As it relates to SG&A, the $20 million is a little high. What I would say is, as we've said many times, there's always project spend that's in our SG&A line, and it's not as linear as personnel cost on average is. Right.

We feel good about our forecast on SG&A, as we've said, and I think our productivity and our earnings growth shows this. We interrogate every dollar of spend and require that our spend is yielding a benefit, whether that be in personnel costs or in SG&A cost. We are forecasting to be above the midpoint of that range, and we feel like we've got a plan to yield good return on that spending level. Specifically to your question about September, as we covered in prepared comments and certainly we'll speak to on any global forwarding question, as you know, ocean rates have normalized greatly throughout this year and significantly in the quarter, and they continue to normalize. If you think about the impact we had in Q3, where the AGP related to our ocean rates was down over 27%, we don't feel like Q3 is the bottom of that normalization.

That normalization of ocean rates will continue through Q4. That is certainly having an impact on the month-over-month comps that you referenced. As you look at our results as we head into Q4, it's a very challenging market for global forwarding, as we've talked about many times before. Trade policy has created a lot of uncertainty. It's created a tremendous amount of volatility. Volume has been displaced, peak seasons have been completely displaced, and I would argue reduced. That level of uncertainty, reduced volume, and overcapacity that we spoke to has all created a very challenging market in global forwarding that you saw in our results for Q3. That challenging market will certainly continue into Q4, but what I would say is our team is performing extraordinarily well. Right.

Our productivity numbers for global forwarding keep impressing and keep generating substantial results. Our revenue management within global forwarding is ensuring a really high quality of win on the business that we're capturing. The team's doing a great job on what we can control. The market is very challenging for global forwarding and I believe that's what you're seeing showing up at the September comps you referenced.

Thank you. Our next question comes from the line of Bascome Majors with Susquehanna.Please proceed with your question.

Thanks for taking my questions, Arun. If it was easy to do what you're doing, we'd see other people doing it and generating similar results. With the AI-driven productivity and the return that you earned on that financially, there's certainly going to be a lot more people seeking to try. Can you talk in a little more length about how you stay ahead of sort of copycat strategies and maybe address from other brokerage businesses seeking to do that in house and separately, third party software vendors, be they sort of TMS, supply chain type specialists or even startups seeking to kind of sell something off the shelf that can deliver some of the value that you've delivered for shareholders. Thank you.

Hey, Bascome, this is Dave. Thanks for the question. Good to hear you. I'll start with this. There's three things that we always bring forward on what we're doing, and I think we've been pretty consistent about it. One is our people or our logisticians. They truly are, we feel, some of the best in the industry in what they do. The technology that we're going to talk more about and double click on, that technology is in the hands of those logisticians. It certainly is augmenting and superpowering and allowing them to do their jobs even better. The third one is our operating model. Those three together, we certainly feel, are creating this separation and this consistency in our results of what we're doing.

Each one by itself, I think you start being average, and what we are doing here is something different. It's showing up different because we're faster, we fail fast, we solve problems faster. All of that ends up going to the bottom line. As we often say, there's no hobby AI here. We're doing everything around an ROI. Arun can go into it a little bit more on the technology part, but I wanted to just frame it on how we're going about operating the company every day.

Yeah, thanks, Dave. Bascome, Dave laid it out really well in terms of the operating model being the sort of starting point. The goals are set in a way that requires us to come up with breakthrough thinking and disruptive innovation. That's how the operating model works. It challenges us to do so. That's the first part of it. When we met at Investor Day, we talked about disruptive innovation and disrupting from within. This notion of C.H. Robinson in the past being disrupted by other companies, there was all this rhetoric around that. We've clearly been disrupting from within, which means using the operating model as the baseline, we are now adopting technology and implementing technology with a clear through line to financials. If you remember Investor Day, we said our technology and our investments are going to drive operating margin expansion through productivity, gross margin expansion, and growth.

If you look at this disruptive innovation, the way it works, when Gen AI came out and our teams have a goal, we create this big goal and the teams have to figure out how to leverage Gen AI in a disruptive way to deliver that upside. I think the benefit is that we're not working with a third party. It's our people, our engineers, who understand our domain, working in the confines and context of our operating model altogether that are driving this innovation and these results. There's space to be messy and build and learn equally. We have the guardrails of our operating model to make sure that translates into ROI and actual bottom line results. That's how it is. We did that with Gen AI 12 to 18 months ago and now are in that same curve with Agentic AI.

We expect that it will deliver the same type of upside that we've seen the past 12 to 18 months with Gen AI.

Yeah, Bascome, this one's an important one, so I'll jump in as well. It's passionate to all of us that talk about this a lot. We think about how we're approaching go to market, what we call lean AI. It is the combination of our operating model. It is a combination of our technology. We think of it, how many moats are we building between us and competition? That's the way we think about what we're doing versus others may be doing. I think it starts with our strategy. Dave mentions this a lot. Our strategy is to outgrow our markets and expand our operating margins. If you don't get that strategy right, you pick one of the two. We don't pick one of the two, we do both. I think that also builds the philosophy for how we build the tech and how we drive the operating model.

The operating model itself, we think, is a clear differentiator. Arun mentioned how did we start down the journey of Agentic AI that was born from the operating model? It was, guys, we have to figure out how do we deliver future results, how are we going to do it? The operating model facilitates that discussion. Tech team goes back, comes back and says, hey, we think the way we're going to get there, the path we'll get there is through Agentic. At the time we were exploring the possibilities of Gen AI. The operating model drives our tech to be better. Our tech drives the operating model to be better. It is really this symbiotic relationship that we call lean AI that we think is unique to anyone in the industrial space. Dave spoke about our experts, the human in the loop, getting that right.

We've talked about our tech makes our people better, our people make our tech better. We think that is a critical element that we've refined. We think we have the right mix of human and technology to deliver the right value for Robinson and our customers. The last thing I'll speak to, as you mentioned, some of the startups, we're approaching this like a startup, but with scale, but with an investment grade balance sheet, industry leading data. We can do things with technology nobody else can do because of those attributes. It is very difficult for a startup to compete with what Robinson can do when we're acting like a startup in the way we're developing our technology. Lastly, we're developing our own tech. We have 450 engineers that are Robinson employees. They know the business. They know the outcomes we need to deliver.

Because they're our engineers, the amount of lead time we can reduce, the pace in which we can create a discipline and deploy it to the operations at scale is far greater than if we were using a third-party vendor. If you add all of that up, that's the moat that we talk about. It's not just one, it's multiple moats that we talk about and why we believe what we're doing is special at C.H. Robinson versus other companies.

I'll just add two more things that Damon triggered for me. One is our data set. Everything we build depends on our algorithms learning from our vast data set, so that is a huge advantage. The other point is we own the technology, and therefore when you put the scale on our platform, once we pay for those fixed costs, the marginal costs are very, very small. It drives the scalability of the model.

Yeah, Bascome, you hit a nerve on here. We do like to talk about that. I'll finish with, I'm not saying you put this on a T-shirt or anything, but you know, Lean is really the engine and AI is the accelerator. And just. You think about it that way. Our people really do enjoy this as we continue to transform. Thanks for the question.

No, thank you. Thanks to everyone for the answer. Take care.

Thank you. Our next question comes from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.

Thank you. Good afternoon. Damon, just one quick clarification first. On this 26 updated operating income bridge, you already spoke to some of the challenges in global forwarding. I think when you introduced this, you had said global forwarding would be kind of run rating at the, I'll call it depressed levels of second half 2023. Is that reset lower given what you've seen recently? Is that the same? Let me introduce the second one too, so I can clear the decks here. This concept of retaining the optionality to deliver demonstrable outgrowth once you hit these margin targets. I assume there's an element of organic and inorganic in that. If we think to the inorganic part of it, what's the real opportunity set there for you? Just given everything that you've done internally to potentially purchase something and introduce what you've done.

Are there any risks to that? To taking something from outside the core C.H. Robinson business today?

Thanks for the question, John. I'll answer the first one. If you think about our market normalization construct, which included not only ocean rates normalizing, but also truckload rates normalizing as well, what I'd say is that incremental pressure that you see that we've built into the new construct versus the original isn't really on the back of global forwarding. Right.

What we're seeing in global forwarding we expected to see. Right. I think for the most part within rounding, global forwarding is doing what we thought it would do. We call it out because it's such a demonstrable impact to our results, and we want to make sure it's understood that it was a demonstrable impact to Q3. We think it'll be a sizable impact to Q4, but it doesn't change the overall global forwarding aspect of that ocean rate normalization as we build that 2026 construct. Really that incremental pressure is what you're seeing is truckload rates not recovering to the levels we thought they would on a slower pace. I wouldn't think of it as ocean rates deteriorating.

I think of it as truckload rates not adding benefit at the rate we thought it would add as we built that original construct, but pretty modest change overall as you look at the entire landscape of how we get to that $6 of EPS with no market growth. To answer your question specifically, I'd say immaterial impact overall on global forwarding. Again, I think the path in which we get there is important still. Normalization in Q3 as we saw further normalization in Q4, and then it gets to a more stable point as we get into 2026. On your question around market share growth and the optionality, again another favorite question of ours, because we're passionate about it, what I would say is the walk we've provided for 2026 is certainly over indexed to organic.

When we talk about the pipeline of opportunities that we have to execute, certainly outgrowth initiatives are a key part of that pipeline. That pipeline includes outgrowth initiatives and includes gross margin expansion initiatives and includes cost reduction and avoidance initiatives. When you look at our waterfall and our build to 2026, it is certainly over indexed to organic opportunities. Now with that said, as we mentioned often, we're looking at inorganic opportunities all the time. Now our bar is extremely high on inorganic opportunities. Kind of your part B to that question was is there any risk of you making a mistake potentially on the inorganic side of that equation? That's why I said you think about 2026. Certainly well over indexed to organic. We are kicking the tires on inorganic.

When we do make an inorganic move and we will at some point in time, it'll be obvious to our investors why we made that move. It'll be a high quality decision. The price we pay will be obvious to the value we get. The synergy case will be obvious. You know, our commitment, Dave's commitment, we won't make a mistake on M&A. Hopefully that answers your two questions.

John and Jonathan, just to put a period on that. Yes, Damon said it's, you know, think of disciplined and measured. We're very much disciplined and measured as we look at inorganic. Thanks for that question, and it's something that we look at often.

Thank you. Our next question comes from the line of Chris Wetherbee with Wells Fargo. Please proceed with your question.

Yeah, hey, thanks. Good afternoon, guys. Maybe wanted to come back to the productivity and maybe zoom out a bit.You talked, I think, about 2026, double-digit productivity continuing, and then beyond that, I think there's a baseline of single digits. As you think about the opportunity in front of you, are there limitations on productivity, obviously within reason, that require a deceleration as we get past 2026? It seems like there's a lot of new and exciting innovations that you have, and the sort of third inning, first inning comment would maybe suggest that there could be more. I just want to maybe expand a little bit on the productivity opportunity, particularly beyond 2026.

Hey Chris, this is Dave. Hey, thanks for the question. I hope you're doing well. We'll jump in here. Let's just start with a bit of context on our productivity first. We're pretty proud about the productivity since 2022, over 40%. You know, we often say on our productivity that, you know, double digit productivity, ultimately we're not going to keep that up. We're going to go to single digit productivity. There will be times when we enter into certain events, certain technologies that can pivot us back into double digit productivity. The thing I want you to really understand is whether we're on a hot market, on the high, our culture and the way we're going forward, we expect with our lean operating model that we're always doing productivity at Robinson. It's not just in a slow market, it's not in a mid cycle.

We expect productivity to happen because it's the way we run the company. So Damian, you can jump in and double on that.

Chris, I'll just kind of round out what Dave said. Think about our productivity in kind of two different stacking constructs, right? We've committed to year in and year out, call it mid single digit productivity just on the back of our operating model, right. All companies that are practitioners of lean are driving continuous improvement. Robinson is one of those companies. Think of that mid single digit productivity as on the back of our operating model every single year that we're confident we will deliver. As Dave talked about, there are times we call them waves of productivity. Certainly we saw a wave of productivity around gen AI. We're going to see a wave of productivity around Agentic AI. When we see those waves, those waves push us into double digit productivity, right? You can't expect those waves to be every year.

There's no specific occurrence when you would expect those waves. I think certainly when you have kind of that fundamental innovation that drives a completely different way in how you look at processes and cost, you can expect double digit productivity. As part of our 2026 guide, we've committed to that double digit productivity on the back of the second wave of Agentic AI. Your question around the early innings concept, I'll break that into two answers, right? As it relates to lean deployment in the operating model, we're still in the early innings across the enterprise, right? We say this a lot of times, if you talk to companies like Danaher, I'm pretty sure they would tell you after 30 years of lean deployment, they're still in the middle innings, right? We feel like there's tremendous opportunity in further deploying lean deep within the organization.

We are certainly in the early innings of reaping the benefits of the operating model. When we talk about the innings construct around technology and the productivity it brings, we've provided a little bit of clarity. We think NAST is probably in the, call it, third inning of tech deployment productivity. We think Global Forwarding is probably in the first inning of tech deployment productivity. I think you got to look at it as all kind of a backdrop between lean, AI, our operating model, our technology deployment. We're certainly in, if you had to weighted average it, we're in the early innings across the board. Certainly as it relates to technology, I'd say NAST is in the third inning, Global Forwarding is in the first inning.

Okay, very helpful. I look forward to continuing these early innings for quite some time. Thank you.

Thank you. Our next question comes from the line of Ken Hoexter with Bank of America. Please proceed with your question.

Hey, good evening. Thanks for the time. Great job on the efficiency gains. The workforce reduction versus the volume growth. Damon, maybe delve into the $6 potential for 2026 that you talked about. It sounds like maybe a little pressure in the fourth quarter, but then $6 potential into 2026, the potential to accelerate volume gains, maybe using more price if margins remain good enough. What triggers you to get there? Thinking about that $6, are you including the $2.6 billion buyback over the next three years? Maybe the better question is your thoughts on incrementals as things turn.

C.H. Robinson Worldwide (CHRW) Q3 2025 Earnings Call Transcript

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