C.H. Robinson Reports 2023 Second Quarter Results

C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (Nasdaq: CHRW) today reported financial results for the quarter ended June 30, 2023.

Second Quarter Key Metrics:

• Gross profits decreased 35.9% to $656.7 million

• Income from operations decreased 71.8% to $132.6 million

• Adjusted operating margin⁽¹⁾ decreased 2,560 basis points to 19.9%

• Diluted earnings per share (EPS) decreased 69.7% to $0.81

• Adjusted EPS⁽¹⁾ decreased 64.3% to $0.90

• Cash generated by operations decreased by $40.4 million to $224.8 million

⁽¹⁾ Adjusted operating margin and adjusted EPS are non-GAAP financial measures. The same factors described in this release that impacted these non-GAAP measures also impacted the comparable GAAP measures. Refer to pages 11 through 13 for further discussion and GAAP to Non-GAAP Reconciliations.

C.H. Robinson's recently appointed President and Chief Executive Officer, Dave Bozeman, said, "It is an absolute privilege to be leading C.H. Robinson, a market leader with enormous scale, a strong base of loyal customers, and a resilient business model that generates profits and free cash flow through the entirety of the freight cycle."

The company noted that global freight markets in the second quarter continued to be impacted by weak demand, high inventories and excess capacity, which resulted in a more competitive marketplace with suppressed transportation rates. North American surface transportation volumes and load-to-truck ratios remain near the low levels of 2019. In the freight forwarding market, ocean vessel and air freight capacity continues to exceed demand, which has kept ocean and air freight rates low during this period of significant decline that has continued since the second half of 2022.

"We are staying focused on what we can control, providing superior service to our customers and carriers and streamlining our processes by removing waste and manual touches," added Bozeman.

"I know from my time in the transportation market that other freight providers and new entrants look to Robinson as an example of a commercial engine with the breadth, scale, expertise and financial strength that they aspire to achieve. However, there is always room for improvement, and I recognize the tremendous opportunity in front of us to accelerate growth in a very fragmented market. Our goal is to provide such a compelling offering that customers feel like C.H. Robinson is essential to the success of their supply chain. As I aim to reinvigorate the winning culture, my focus will be on people, products, processes, technology, collaboration and excellence. To enable greater agility and flexibility and to accelerate our clock speed, I’m empowering our people to uncover new ways to challenge the status quo, move faster and act boldly to better anticipate our customers’ needs, exceed their expectations and make us indispensable. As a Lean practitioner, I'm passionate about continuously improving how organizations operate. Lean principles work and are applicable at Robinson to further improve efficiency."

"Shippers are looking for stable and innovative logistics partners," continued Bozeman. "Robinson has shown the strength of its model through cycles, our balance sheet continues to be strong, and we plan to invest in initiatives that we expect to amplify the expertise of our people and generate high returns on investment. We have some of the best people in the logistics industry, with the grit, grind and hustle needed to solve challenges for our customers and carriers, and I'm confident that together we will win for our customers, carriers and shareholders. While the near-term freight environment presents some challenges, the strength of our people, scaled network, financial model and investments in improving efficiency position us well for the eventual rebound."

"I'm excited about our opportunities and our future. I look forward to leading this great company to new heights and sharing our progress with all of you along our journey," Bozeman concluded.

Summary of Second Quarter Results Compared to the Second Quarter of 2022

• Total revenues decreased 35.0% to $4.4 billion, primarily driven by lower pricing in our ocean and truckload services.

• Gross profits decreased 35.9% to $656.7 million. Adjusted gross profits decreased 35.5% to $665.5 million, primarily driven by lower adjusted gross profit per transaction in truckload and ocean.

• Operating expenses decreased 5.2% to $532.9 million. Personnel expenses decreased 15.2% to $377.3 million, primarily due to cost optimization efforts and lower variable compensation. Average headcount declined 10.1%. Selling, general and administrative (“SG&A”) expenses of $155.6 million increased 32.8%, primarily due to the $25.3 million gain on the sale-leaseback of our Kansas City regional center recorded in the prior year and increased claims and warehouse expenses in the current year.

• Income from operations totaled $132.6 million, down 71.8% due to the decrease in adjusted gross profits, partially offset by the decline in operating expenses. Adjusted operating margin of 19.9% declined 2,560 basis points.

• Interest and other income/expense, net totaled $18.3 million of expense, consisting primarily of $23.2 million of interest expense, which increased $6.3 million versus last year due to higher variable interest rates. This was partially offset by a $3.5 million gain of foreign currency revaluation and realized foreign currency gains and losses, compared to a $10.3 million loss last year, driven by foreign currency impacts on intercompany assets and liabilities.

• The effective tax rate in the quarter was 14.9% compared to 21.3% in the second quarter last year. The lower rate in the second quarter of this year was driven by lower income before taxes, increased U.S. tax credits and incentives, fewer non-deductible expenses, and incremental benefits from foreign tax credit utilization.

• Net income totaled $97.3 million, down 72.1% from a year ago. Diluted EPS of $0.81 decreased 69.7%. Adjusted EPS of $0.90 decreased 64.3%.

Summary of Year-to-Date Results Compared to 2022

• Total revenues decreased 33.6% to $9.0 billion, primarily driven by lower pricing in our ocean and truckload services.

• Gross profits decreased 30.7% to $1.3 billion. Adjusted gross profits decreased 30.3% to $1.4 billion, primarily driven by lower adjusted gross profit per transaction in truckload and ocean.

• Operating expenses decreased 5.8% to $1.1 billion. Personnel expenses decreased 11.4% to $760.4 million, primarily due to cost optimization efforts and lower variable compensation. Average headcount declined 5.9%. SG&A expenses increased 12.3% to $297.1 million, primarily due to the $25.3 million gain on the sale-leaseback of our Kansas City regional center recorded in the prior year and increased depreciation and amortization in the current year.

• Income from operations totaled $293.7 million, down 64.0% from last year, due to the decrease in adjusted gross profits, partially offset by the decline in operating expense. Adjusted operating margin of 21.7% decreased 2,040 basis points.

• Interest and other income/expense, net totaled $46.5 million of expense, which primarily consisted of $46.8 million of interest expense, which increased $15.3 million versus last year due to higher variable interest rates. The year-to-date results also included a $6.0 million loss from foreign currency revaluation and realized foreign currency gains and losses, compared to an $11.8 million loss last year, driven by foreign currency impacts on intercompany assets and liabilities.

• The effective tax rate for the six months ended June 30, 2023 was 14.1% compared to 20.0% in the year-ago period. The lower rate in the current period was driven by lower income before taxes, increased U.S. tax credits and incentives, and fewer non-deductible expenses in the current year.

• Net income totaled $212.2 million, down 65.7% from a year ago. Diluted EPS of $1.77 decreased 62.4%. Adjusted EPS of $1.88 decreased 58.8%.

North American Surface Transportation (“NAST”) Results

Summarized financial results of our NAST segment are as follows (dollars in thousands):

Second quarter total revenues for the NAST segment totaled $3.1 billion, a decrease of 25.7% over the prior year, primarily driven by lower truckload pricing, reflecting an oversupply of truckload capacity compared to soft freight demand. NAST adjusted gross profits decreased 35.9% in the quarter to $400.5 million. Adjusted gross profits in truckload decreased 45.4% due to a 41.5% decrease in adjusted gross profit per shipment and a 6.5% decline in truckload shipments. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 23.0% in the quarter compared to the prior year, while truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 19.0%, resulting in a 41.5% decrease in truckload adjusted gross profit per mile. LTL adjusted gross profits decreased 18.8% versus the year-ago period, as adjusted gross profit per order decreased 19.0% and LTL shipments were flat. NAST overall volume growth was down 2.5% for the quarter. Operating expenses decreased 18.8% primarily due to lower variable compensation and lower average employee headcount. NAST average employee headcount was down 14.0% in the quarter. Income from operations decreased 57.4% to $117.9 million, and adjusted operating margin declined 1,490 basis points to 29.4%.

Global Forwarding Results

Summarized financial results of our Global Forwarding segment are as follows (dollars in thousands):

Second quarter total revenues for the Global Forwarding segment decreased 62.7% to $779.9 million, primarily driven by lower pricing in our ocean service, reflecting an oversupply of vessel capacity compared to soft freight demand. Adjusted gross profits decreased 44.8% in the quarter to $179.2 million. Ocean adjusted gross profits decreased 52.9%, driven by a 49.5% decrease in adjusted gross profit per shipment and a 7.0% decline in shipments. Air adjusted gross profits decreased 40.3%, driven by a 39.5% decrease in adjusted gross profit per metric ton shipped and a 2.0% decline in metric tons shipped. Customs adjusted gross profits decreased 9.7%, driven by a 14.5% reduction in transaction volume. Operating expenses decreased 4.7%, primarily driven by lower variable compensation and lower average employee headcount, which was partially offset by an increase in credit losses. Second quarter average employee headcount decreased 9.3%. Income from operations decreased 82.3% to $29.6 million, and adjusted operating margin declined 3,510 basis points to 16.5% in the quarter.

All Other and Corporate Results

Total revenues and adjusted gross profits for Robinson Fresh, Managed Services and Other Surface Transportation are summarized as follows (dollars in thousands):

Second quarter Robinson Fresh adjusted gross profits increased 8.3% to $37.9 million, primarily driven by a 10.0% increase in case volume and integrated supply chain solutions for foodservice and wholesale customers. Managed Services adjusted gross profits increased 4.8% in the quarter, due to growth with existing and new customers. Other Surface Transportation adjusted gross profits decreased 5.7% to $18.9 million, primarily due to a 7.3% decrease in Europe truckload adjusted gross profits.

Other Income Statement Items

The second quarter effective tax rate was 14.9%, down from 21.3% last year. The lower rate in the second quarter of this year was driven by lower income before taxes, increased U.S. tax credits and incentives, fewer non-deductible expenses, and incremental benefits from foreign tax credit utilization. We now expect our 2023 full-year effective tax rate to be 16% to 18%.

Interest and other income/expense, net totaled $18.3 million of expense, consisting primarily of $23.2 million of interest expense, which increased $6.3 million versus the second quarter of 2022 due to higher variable interest rates, and a $3.5 million gain of foreign currency revaluation and realized foreign currency gains and losses on intercompany assets and liabilities.

Diluted weighted average shares outstanding in the quarter were down 8.1% due to share repurchases over the past twelve months.

Cash Flow Generation and Capital Distribution

Cash generated from operations totaled $224.8 million in the second quarter, compared to $265.3 million of cash generated from operations in the second quarter of 2022. The $40.4 million decrease was primarily due to a $250.9 million decrease in net income, partially offset by a $143.7 million sequential decrease in net operating working capital in the second quarter of 2023 compared to a $45.3 million sequential increase in the second quarter of 2022. The decrease in net operating working capital in the second quarter of 2023 resulted primarily from a $180.0 million sequential decrease in accounts receivable and contract assets, partially offset by a $36.3 million sequential decrease in total accounts payable and accrued transportation expense.

In the second quarter of 2023, cash returned to shareholders totaled $106.1 million, with $72.8 million in cash dividends and $33.4 million in repurchases of common stock.

Capital expenditures totaled $24.4 million in the quarter. Capital expenditures for 2023 are expected to be $90 million to $100 million.

About C.H. Robinson

C.H. Robinson solves logistics problems for companies across the globe and across industries, from the simple to the most complex. With $30 billion in freight under management and 20 million shipments annually, we are one of the world’s largest logistics platforms. Our global suite of services accelerates trade to seamlessly deliver the products and goods that drive the world’s economy. With the combination of our multimodal transportation management system and expertise, we use our information advantage to deliver smarter solutions for our 100,000 customers and 96,000 contract carriers. Our technology is built by and for supply chain experts to bring faster, more meaningful improvements to our customers’ businesses. As a responsible global citizen, we are also proud to contribute millions of dollars to support causes that matter to our company, our Foundation and our employees. For more information, visit us at www.chrobinson.com (Nasdaq: CHRW).

Except for the historical information contained herein, the matters set forth in this release are forward-looking statements that represent our expectations, beliefs, intentions or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to, factors such as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; fuel price increases or decreases, or fuel shortages; competition and growth rates within the global logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; risks associated with significant disruptions in the transportation industry; changes in relationships with existing contracted truck, rail, ocean, and air carriers; changes in our customer base due to possible consolidation among our customers; risks with reliance on technology to operate our business; cyber-security related risks; risks associated with operations outside of the United States; our ability to successfully integrate the operations of acquired companies with our historic operations; climate change related risks; risks associated with our indebtedness; interest rates related risks; risks associated with litigation, including contingent auto liability and insurance coverage; risks associated with the potential impact of changes in government regulations; risks associated with the changes to income tax regulations; risks associated with the produce industry, including food safety and contamination issues; the impact of war on the economy; changes to our capital structure; changes due to catastrophic events including pandemics such as COVID-19; and other risks and uncertainties detailed in our Annual and Quarterly Reports.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date. All remarks made during our financial results conference call will be current at the time of the call, and we undertake no obligation to update the replay.

Conference Call Information:

C.H. Robinson Worldwide Second Quarter 2023 Earnings Conference Call

Wednesday, August 2, 2023; 5:00 p.m. Eastern Time

Presentation slides and a simultaneous live audio webcast of the conference call may be accessed through the Investor Relations link on C.H. Robinson’s website at www.chrobinson.com.

To participate in the conference call by telephone, please call ten minutes early by dialing: 877-269-7756

International callers dial +1-201-689-7817

Adjusted Gross Profit by Service Line

(in thousands)

This table of summary results presents our service line adjusted gross profits on an enterprise basis. The service line adjusted gross profits in the table differ from the service line adjusted gross profits discussed within the segments as our segments may have revenues from multiple service lines.

GAAP to Non-GAAP Reconciliation

(unaudited, in thousands)

Our adjusted gross profit is a non-GAAP financial measure. Adjusted gross profit is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers. We believe adjusted gross profit is a useful measure of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profit to be a primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profit. The reconciliation of gross profit to adjusted gross profit is presented below (in thousands):

Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profit. We believe adjusted operating margin is a useful measure of our profitability in comparison to our adjusted gross profit which we consider a primary performance metric as discussed above. The comparison of operating margin to adjusted operating margin is presented below:

GAAP to Non-GAAP Reconciliation

(unaudited, in thousands)

Our adjusted income (loss) from operations and adjusted net income per share (diluted) are non-GAAP financial measures. Adjusted income (loss) from operations and adjusted net income per share (diluted) is calculated as income (loss) from operations and net income per share (diluted) excluding the impact of restructuring and related costs. We believe that these measures provide useful information to investors and include them within our internal reporting to our chief operating decision maker. Accordingly, the discussion of our results of operations includes discussion on the changes in our adjusted income (loss) from operations and adjusted net income per share (diluted). The reconciliation of income (loss) from operations and net income per share (diluted) to adjusted income (loss) from operations and adjusted net income per share (diluted) is presented below (in thousands except per share data):

GAAP to Non-GAAP Reconciliation

(unaudited, in thousands)

Our adjusted income from operations and adjusted net income per share (diluted) are non-GAAP financial measures. Adjusted income from operations and adjusted net income per share (diluted) is calculated as income from operations and net income per share (diluted) excluding the impact of the gain on sale-leaseback of our Kansas City regional center. We believe that these measures provide useful information to investors and include them within our internal reporting to our chief operating decision maker. Accordingly, the discussion of our results of operations includes discussion on the changes in our adjusted income from operations and adjusted net income per share (diluted). The reconciliation of income from operations and net income per share (diluted) to adjusted income from operations and adjusted net income per share (diluted) is presented below (in thousands except per share data):

Condensed Consolidated Statements of Income

(unaudited, in thousands, except per share data)

Business Segment Information

(unaudited, in thousands, except average employee headcount)

Business Segment Information

(unaudited, in thousands, except average employee headcount)

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

Condensed Consolidated Statements of Cash Flow

(unaudited, in thousands, except operational data)

CHRW-IR

View source version on businesswire.com: https://www.businesswire.com/news/home/20230802120809/en/