CH Robinson Worldwide Inc Q3 2024 Earnings Call Transcript

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

Question: Tom Wadewitz - UBS - Analyst : Let's see, and nice to see the strong results. I wanted to see if you could give a little more comment on maybe how we might think about the NAST operating margin and gross margin in 4Q. I think there were -- you said maybe stable headcount sequentially and talked about cash freight shipments index, the normal sequential decline. But I just wanted to see if you could give any thoughts on kind of improvement or deterioration sequentially. And then another, I guess, related to those, how do we think about key drivers in '25 for those two metrics for NAST gross margin and operating margin? Does it become more market-driven? Or is there still a lot left for CH Robinson to do that's truly company-specific?

Question: Jonathan Chappell - Jonathan Chappell - Analyst : Dave, you said before, the processes are never ending. But you've also mentioned a couple of times that they're non-linear, either a point as we get we're looking at SG&A at the low end of your range with the personnel expenses at the low end of the range you set out earlier this year. Is there a point where it just becomes more difficult to garner any more productivity and margin expansion without getting some help from a broader market volume tailwind?

Question: Brian Ossenbeck - JPMorgan - Analyst : Maybe this one is for Michael. When you look at the market, obviously, it was a bit tight in July and then has come back in to really be sub seasonal and still kind of soft when you look at the broader truckload market. So what are you looking at in terms of conditions and what do we need here to see the market turn? We saw price above cost per mile on a year-over-year basis. I mean in the past, that's meant different things. But as we look forward to an improvement in inflection, what are you looking for? And what's sort of your best guess when we might start to see that?

Question: Jeff Kauffman - Vertical Research Partners - Analyst : Congratulations. I know you talked a little bit about the pull forward, but I'd just like to dig a little deeper into that in that of the revenue growth a pretty extreme revenue growth in 3Q. What's your best guess at how much of that improvement would have represented pull forward? And if we were to try to think about is the market normalizing in the fourth quarter or through the first quarter of the year, what kind of pullback do you think we could see outside the normal season now?

Question: Jeff Kauffman - Vertical Research Partners - Analyst : So I guess where I'm going is there was a $300 million sequential revenue pickup on a gross revenue basis, give or take, could we be looking at the fourth quarter, it looks a lot more like the second quarter. I was just looking for a little guidance in terms of how material of that $300 million jump. What do you think is normalization?

Question: Ken Hoexter - BofA Global Research - Analyst : Hey, good afternoon and great job in benefiting from the ocean and forwarding rate inflection. I guess my question would be on if we get inflection in spot -- not when we get, but when I guess, when it approaches, how do you think that impacts the business in the new operating model? Does it make you more fluid? Should we expect your ability to fluctuate with spot rates to be a bit quicker? And then I guess to follow on that, are you seeing any of those signs in the firming between the rates and costs at this point or not yet?

Question: Scott Group - Wolfe Research - Analyst : So when I look at your chart with truckload pricing and cost, pricing has turned a little positive year over year, cost still a little negative. And if I think back on prior cycles, I feel like it's usually where the cost goes positive first and you get squeezed a little bit and then eventually catch up. So I guess I'm wondering, why do you think it's a little different this time? And does this mean in your mind, when we get that eventual inflection, we won't get squeezed? And so if you're right, that costs are up, spot costs up 9% next year, do you think you would outpace that with price?

Question: Daniel Imbro - Stephens Inc. - Analyst : Maybe one on the personnel cost side. I think on the quarter, head count was down 1% sequentially, but adjusted personnel costs were still up about 2% sequentially and then back to growing year over year. I guess the question, is this a new model where it's fewer heads, but it's higher comp per head. And so we're past the period of personnel cost declining, and should we expect total personnel exit to continue increasing in the coming quarters, especially if we do any market tightness and you have to add back people? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, CHRW.OQ - Q3 2024 CH Robinson Worldwide Inc Earnings Call

Question: Daniel Imbro - Stephens Inc. - Analyst : Is variable compensation per broker out there, though, going to continue? So if we have periods of strong profitability, there will always be a higher incentive compensation. So total comp overhead still goes up?

Question: Chris Wetherbee - Wells Fargo Securities, LLC - Analyst : I wanted to ask on [back heads] specifically. So I think we've seen kind of eight or nine quarters in a row of sequential declines there, and maybe the guidance is kind of flattening out for the fourth quarter. I guess as we think about it, conceptually, are we getting to the point where you now feel like with the technology you've enabled the productivity initiatives, we're at the right kind of equilibrium between the freight market and where you sit from a resource perspective? I don't know if that's too presumptions, but want to get a sense of kind of how you think about it. Or can there be incremental legs lower in terms of maybe broadly resources if the freight market doesn't respond positively as we move into 2025?

Question: Ariel Rosa - Citi - Analyst : I was hoping you guys could address some of the changing competitive dynamics in your industry. We've seen, obviously, this quarter brought a merger or an acquisition, if you will, between two top 10 brokers. I wanted to get your thoughts on how that might impact the industry. And then also, we've heard some of the truckload carriers talk about a shift in business away from brokers and towards asset-based carriers. I'm curious if you're seeing that. If you could corroborate that and just your thoughts on if that continues and what that looks like if the freight cycle tightens.

Question: Jason Seidl - TD Cowen - Analyst : Dave, Michael, team, congrats on the good quarter. Wanted to go back to your comments about algorithmic pricing, and it sounds like you guys are using it selectively. I wanted to get a sense of what we should expect going forward. And how does the freight through that algorithmic pricing look from AGP margin perspective compared to your legacy business?

Question: Stephanie Wissink - Jefferies - Analyst : I wanted to -- I actually think you brought up a good point earlier, your color around needing to see a demand inflection for the freight market to truly repair and maybe just a lack of underlying momentum in the market is actually a really fair assessment. So if this is what continues and we don't, in fact, see this demand inflection next year or for a lot of next year, what is your playbook? What are the next steps or levers that can be pulled to continue the current momentum and then drive growth?