CH Robinson Worldwide Inc at Stifel Transportation & Logistics Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: J. Bruce Chan - Stifel - Analyst : Just to back it up a little bit, when we talk about generative AI, for the late people in the room, myself included in that group, what specifically are you talking about? And if it's maybe easier to address it this way, when you think about the specific functions and tasks that you're automating that's allowing you to bring this quote-to-cash to bear a lot faster and be more competitive in the market, what kinds of things are we talking about here?

Question: J. Bruce Chan - Stifel - Analyst : So that's really helpful. And I think that covers a lot of the sort of shipper-facing side. When you think about the other side of the house, if that's the right way to think about it on the procurement end of things, it strikes me that AI and a lot of these data tools and data science is having a pretty meaningful impact there as well. Can you talk about some of those?

Question: J. Bruce Chan - Stifel - Analyst : So during our lunch presentation, I mentioned that my sell-side monkey brain likes to think about these things in easy kind of margin numbers that I could just plug in my model as an input, right? And [Ashwin Rao] mentioned that he thinks that there's a 300 to 500 basis point opportunity maybe over the next couple of years, next few years from a lot of the leverage on this GenAI stuff. Would you agree with that assessment? Is it maybe a little bit smaller than that? Or how do you think about the long-term opportunity in terms of the operating margin at Robinson?

Question: J. Bruce Chan - Stifel - Analyst : And Dave, you brought it up a little bit, right? But part of the fundamental change in the operating model is also driving accountability and the idea of Lean into the model. What were the opportunities that you identified when you came into Robinson in terms of the fat, so to speak? And maybe you can talk a little bit more about that philosophy? And in terms of I don't know, to use the baseball analogy, right? What inning are we in terms of how much optimization is left? What's your thought there?

Question: J. Bruce Chan - Stifel - Analyst : Yes. No, that's great. I appreciate it. And maybe just a two-parter for you here. Technology, obviously, is not just available to the carrier, the service provider. It's also available to the shipper or the customer. And one of the thoughts out there is that with better technology comes better price discovery, which potentially put some long-term pressure on gross margin. So the two-parter is, number one, would you agree with that assessment? And number two, if you do, presumably, there is enough of a operating margin offset to kind of counterbalance that pressure.

Question: J. Bruce Chan - Stifel - Analyst : So maybe just on that point, and Dave, you and I talked about this a little bit upstairs is that you managed to accomplish a lot of these changes during one of the most prolonged or protracted freight troughs that we've seen for a very long time, potentially since deregulation. And I'd be remiss if I didn't talk a little bit about the cycle here. So in terms of the outlook, when you talk to your very big pool of customers, what's the consensus in terms of where we are in the cycle and what, call it, the next 11, 12 months looks like, when are we expecting to turn in the cycle? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 9:40PM, CHRW.OQ - CH Robinson Worldwide Inc at Stifel Transportation & Logistics Conference

Question: J. Bruce Chan - Stifel - Analyst : And let's just flush that out a little bit because at this point in the cycle, you are at a pretty significant sort of bias towards contract versus spot right now. That's not, I'd say, unique to Robinson. I think most people are in that situation. So it seems like the positioning is for that slower recovery. How do you position if things move faster? Or is there even a need to because maybe with some of these GenAI changes, there is a lot more virtual capacity to absorb some of that spot if you do see the V-shape recovery. But I guess the question is, if we see a sharper recovery, how does that change the tactical positioning at Robinson?

Question: J. Bruce Chan - Stifel - Analyst : Let's take it down to brass tacks a little bit because I know investors always love that. You all have given some targets and projections in terms of how you see contract pricing and spot pricing shaping up this year. Maybe you want to remind the audience what those look like and what the assumptions are that underpin them. And maybe given that we're not very far away from your Investor Day, but we've had some time, where you're seeing those expectations come through the way you thought they would?

Question: J. Bruce Chan - Stifel - Analyst : Dave, you talked about portfolio being one of the components of the four Ps here. We spent a lot of time on NAST. But obviously, there are other pieces of the puzzle here. One of the panelists on the logistics panel talked about freight forwarding is being a little bit behind the curve in terms of technology and optimization and maybe lean in trimming the fat. You find that to be true in your case, what's the opportunity ahead for Global Forwarding?

Question: J. Bruce Chan - Stifel - Analyst : And, Damon, the opportunity has long been to sort of close the margin gap between the Global Forwarding business and what you see from some of the best-in-class peers in that industry, which, to be quite frank, are very impressive. What do you see as the timeline in closing that gap? Or are you more confident in that today, less confident? Maybe some color there.

Question: J. Bruce Chan - Stifel - Analyst : All right. Great. Well, we've got about a minute left, if there are any questions in the audience. Sure, we'd be happy to field them. Otherwise, I've got like 30 other questions. Well, as promised here, so I want to kind of focus in on your Global Forwarding concentration, which is obviously that Asia to US trade land. I believe you're the largest LCL consolidator, if not in North America, maybe in the industry, but certainly in North America. A lot of conversation about tariffs, particularly around China, maybe some pressure on yields. I would imagine there's some increase in competition on that trade lane. So thinking through the competitive dynamic, some of what we're hearing in the geopolitical sphere, do you think that's going to be a headwind for the business?

Question: J. Bruce Chan - Stifel - Analyst : Great. Well, unfortunately, that is all the time we have. I don't want to keep you from cocktail hour, which starts at about 20 minutes.