C.H.Robinson Worldwide Stock

All right. Good afternoon, everybody. Welcome. For those of you who do not know me at this point, my name is Stephanie Moore. I'm Jefferies Transportation and Business Services analyst. Thank you for coming to Jefferies 2026 Industrial Conference. We are very pleased to have the team from C.H. Robinson with us today. We have CEO, Dave Bozeman; CFO, Damon Lee. Welcome.

Thank you.

Thank you.

Format, fireside chat. I will kick it off with probably what has been the most topical area of question that you've received over the last couple of months or so, but that would be post the Supreme Court ruling on the Montgomery case, there's been a lot of, I think, just uncertainty that investors feel about just what this can mean for the overall brokerage space and C.H. Robinson as a whole. So maybe just to start things off, since the SCOTUS ruling, what processes have changed at C.H. Robinson?

Why don't you start off?

Yes. So I'd say post Montgomery, first of all, I'll just start with, look, we're a lean company. We have a lean operating model. All of our major processes are always going through some level of continuous improvement. carrier vetting is no different. But I would say, post Montgomery, we did not have material changes to our carrier vetting process. So roughly about I'd say less than 3% of our active carriers were expelled from our network post Montgomery. What does that tell you? That tells you is that we had an industry-leading carrier vetting process, pre-Montgomery. And we still have an industry-leading carrier vetting process post Montgomery.

And then I would even add the life case, which has got the most recent attention. Post line, we've made no material changes to our carrier vetting process. So we've always felt really good that our carrier vetting process was of the utmost integrity and quality was industry-leading. We felt that way after Montgomery, we fill that way after life. We're going to continue to do what we do.

And just to add on to what Damian said, and we've been talking to investors, analysts about this and just putting some framing on this. We're a data company. We like to talk in facts and data not kind of in a motion in a sense. So if you think about it, we've been public for 28 years or so, we've had a docket. Everyone has a docket that's in this industry. in doing that. And we manage our docket pretty well. And our current docket, it consists of, say, like tens of cases, that's on the lower end of tens of cases. But you got to put that over an overlay of what's our annual shipments, 37 million annual shipments.

Over time, we manage hundreds of millions of shipments over a current document dotted of, say, tens of cases. Our point there is that we're very good at managing a docket defending ourselves about those things. And also, if you're going to have a lawsuit or think you got to have an accident. We don't have many in doing that. And so we do very good. We feel good about our carrier network. We feel good about our bedding processes. And again, we talk about numerator denominator, the actual math of what's happening, and that's the scale, tens of cases, hundreds of millions of shipments and you just have to like keep that in perspective when you're going through this.

Yes. And just a round out what Dave said, look, 98% of are docket, right? So these are -- so of our current docket, 90% historically in current of those cases get dismissed or settled and the settlement amount of that 98% is somewhere between the range of $1 million to $3 million, right? So historically speaking, legal liability has not been a material issue for C.H. Robinson. We do not believe it's going to be a material issue going forward. We believe the live case is an anomaly. Certainly, the industry standard is to settle cases, not to let them go to jury trial that ultimately, we believe, will be turned on appeal.

So we feel that the historical precedent that we've set with having a very successful path of managing our legal docket successfully. That's going to continue going forward. I'll just add one element because it's probably on top of mind is related to insurance. Just to provide some baseline insurance stats and then talk about what we think the future holds. So automobile liability insurance today is only 25 bps of gross revenue for C.H. Robinson and so it's a relatively a material number to our cost structure. Even if you have inflation on that number going forward, we don't see that number being a material impact to our earnings potential going forward.

So we certainly don't believe the earnings trajectory that we've been on, the outperformance that we've been on in any way is going to be derailed by insurance. We're in early discussions with our insurance carriers. I would call those discussions reasonable and fair. I don't believe some of the more bear-case scenarios that you've heard of insurance going up 100% is going to apply to C.H. Robinson. I think we'll ultimately end up in a situation that that everybody gets a sense of com once we're able to share some of those details.

And Stephanie, as you know, we always say, who has -- who's the best proxy for our current docket it's our insurance carriers, right? They have an intimate knowledge of our current legal document. They are -- they could be on the hook for that. And so at the end of the day, how we progress with any type of increase of insurance or the rate of that, it's our insurance carriers will be a good proxy for people listening to this on how you judge Robinson on going forward, and we feel pretty good about ourselves.

Yes. And one last comment, Stephanie, if you allow me. We're in a bit of fog of war right now with the legal environment. We believe once we get on the other side of providing clarity around the legal docket, clarity around the insurance, we actually think this is quite bullish for C.H. Robinson, right? We believe the average small and medium-sized broker is going to have a very difficult time surviving in the post Montgomery Post Life world.

Certainly, that market share will accrete to companies like C.H. Robinson a consolidation event. So again, once we get through some of the unknowns and the clarity that's needed on the current legal environment, the insurance environment, right? We believe this is actually a bullish economic position for Robinson going forward.

I do want to touch on maybe the longer-term implications for the industry and the potential for further consolidation. Before we get to that, though, Dave, and I think you addressed we talked about this earlier today, and I did. But do you think that there needs to be as the leader in the industry as yourself, to go into Washington or kind of create some maybe oversight or some changes from a federal standpoint post these rulings that will ultimately help the industry?

Yes, I do. And actually, I'll be in Washington all week next week. I'm sure you guys have a lot of sympathy for me in doing that. But it's on 2 vectors here. Let me just explain. Our team, along with some of my industry colleagues as well who agree with us on this I'll be talking to FMCSA, administrative bar really kind of driving the conversations around a standard. And we have to really get back to what is that duty of care standard that needs to be established from the federal government.

And we certainly, as Robinson and others, are talking to the FMCSA to establish that standard. And I think we're going to do that because we have to get that going and that won't solve all of this. Having the standard, you have to have a second vector and that's the legislative part. And we'll also be talking -- I'm going to talk to a number of different senators, congressmen and women in which we're now talking about with the legislative solution on this. And that has to be a bipartisan approach to this.

We think that this is bipartisan when you look at both sides of it, and we'll be having that healthy dialogue all next week to make sure we're applying what is reasonable liability when it comes to the legislative part of this. And so it's a 2-vector approach because what Scott has did on Montgomery was essentially -- it wasn't really an indictment on Robinson is essentially saying, hey, the federal government really is not capable of kind of driving this right now. And so they put it out to the various states in the various jurisdictions.

Obviously, that creates ambiguity, and we just want to help Congress act and drive some clarity in this space. And ultimately, I think that will bring everyone in the industry should welcome some of that, and we'll be having some of those conversations next week.

So maybe moving to some of the longer-term implications for the industry. Are you already seeing some of your enterprise shippers actively consolidate their broker list post this rolling?

We certainly are. I mean, that behavior, Stephanie, has started. Part of it, you have to just do the framing on here. You have shippers who are looking at their own liability when they see what's happening. And part of it is they're looking at us saying, hey, yesterday, we may have had 12 different dispersion of our freight going out and they say, hey, maybe we don't need that. We'll roll that up into 2. And we're seeing those calls come to us. We're seeing some of that call quality. So the behaviors of shippers, we've seen that, that has changed.

And we don't -- we think that's going to continue to happen. And as Damon said, we'll have continued roll up within the industry. And you know what, listen, at the end of the day, over the last couple of years, just on the economics, 20% of brokers had really shut their doors anyway over the last couple of years. Now at Montgomery and life to it, we think that, that obviously can increase to almost 30%, 40% per se, if you're a small to medium broker, and there'll just ultimately be some consolidation within the industry.

Yes. And Stephanie, we believe that consolidation happens a couple of different ways. One is certainly shipper selection, right? So shippers want a higher-quality broker, one that can provide some liability, stability between them and the freight movement. But then I think there's also just going to be the lack of insurability with small and medium-sized brokers, right? So we believe the insurance industry will also dictate kind of who wins at loses in the go-forward environment as well. So I think shippers will have an impact.

I think the insurance company is on who all actually ensure going forward. And then I think you're back to the economics again, right? I mean you're in an industry where many of the small and medium-sized brokers still do not turn a consistent profit. For them, a higher insurance cost is going to be a lot more demonstrable to profitability than it would be to a company like C.H. Robinson. So we just think you've got multiple angles of influence on why we believe the small- and medium-sized brokers will consolidate. And then ultimately, we'll be a beneficiary of that market share.

I guess maybe just given this quite recently could be maybe the biggest change to this industry that we've seen since deregulation are certainly in many, many years, how is C.H. positioned to capitalize on this change in this environment? So the consolidation, the potential pricing mechanisms that come from this? What's the strategy going forward?

Well, our strategy is -- you've seen us, Stephanie, over the last 2 years and starting this transformation. And what we said is that we were going to build the best model in the industry. And I think we're on our way to doing that. And we don't just say that ingest. We invite everyone to just look at our results and what we have built. We've introduced Lean AI into an industry that's kind of count as it's countercyclical in this industry to bring in lean manufacturing within an industry.

And we've done that along with technology. We feel that, that has generated the best model within the industry on a couple of different fronts. Our strategy was simple. It was one, outgrow our end markets; and two, expand our operating margins. in which you're really told in this industry, you can't do both. You have to do one or the other. And we just don't believe that at Robinson. And I think looking back, it's been over a little bit over 3 years, believe it or not, being in the chair here. But we've had 13 quarters in a row of truckload outgrowth. We had 10 quarters in a row of beating EPS consensus. And that's not going to stop.

I mean we're going to continue, why, because our model of our lean operating model is one that has unleashed our technology. It's unleashed our people. It allows this company to be a disruptor, move at a pace that the industry is not used to and really go to from an output-based company to an input-based company. So we, in a sense, are we act like a technology company in an industry that's been around a long time. And that's where you're seeing some of that disruption.

And so we are well positioned in pole position to not only have -- when the market takes off, I think we will have an exponential curve, not a linear curve, and you'll see more of a demonstrable spread between ourselves and the industry. And I think we feel really good about the results we've had, but it's a lot more coming because we're in early innings on a lot of that transformation.

Yes. I would just add that we've had the question yesterday and today of, okay, if you're going to take the demonstrable share, you're going to have to add more cost and to support that demonstrable share? And the answer is no, right? I mean we've built processes. We've built sustainable processes at C.H. Robinson that can absorb substantial amounts of volume without adding incremental cost, right? We have decoupled headcount growth from volume growth at C.H. Robinson, right? So the share that we're talking about accumulating to Robinson as the industry consolidates, right, we will be able to absorb that volume with very little incremental cost to the business.

Therefore, the operating leverage will be great. right? So as Dave mentioned, I don't know that we could be in a better position to take advantage of what's getting ready to occur with the industry.

A 2-part follow-up on -- about what is the level of incremental volume you can take on within NAST before adding incremental cost or head count?

Yes, it's substantial, right? So just to give you one example, one of our agents out of the hundreds that we have in operations. We have one agent today that we've said this publicly that today, if it's doing 600,000 requests for transactional freight quote and tomorrow, the market in flex, and that goes to 6 million request for transactional freight quotes, we don't have to add any incremental personnel to support a tenfold increase in volume. And that's one example.

We have numerous examples of mature agents that are operating, many, if not most, of our back-office operations at C.H. Robinson that can absorb multiples of volume increase without adding incremental head count. So we're very confident, right? We get a question a lot, how does your model work when the market rebounds, when more volume comes into the system, and we answer that with, look, nobody is more excited than us to prove what this model can do when you get substantial volume into the system. We've said this publicly many times, we think our operating margins and our operating leverage were surpassed out of the assets when volume returns to the system, just Q2 alone in a very tepid quarter where the market was down 4.5%.

Our operating leverage as a broker was 96%, right? I don't think anybody 2 years ago would have thought a broker would have had operating leverage in a market that was down 4.5%. So we're very compelled about what our capability is on absorbing tremendous levels of volume without incremental cost.

I think it's important for me and the team at Robinson is that this audience listening to this, that this is not a temporary change. This is a structural change. And so this is very sticky. I mean we've been purposeful about where we apply these changes. And for us, we looked at that order to cash process. We have attacked that order to cash process. We've augmented our people and upskilled our people as we've gone after the small and medium business segment. We've been very successful with that, enhancing our people on the verticals that we participate in.

But that particular order to cash process, as Damon said, that's a structural change. And so it doesn't matter. The market stays where it is for longer we win in that scenario. If the market does an inflection, we certainly win in that environment because it's a structural change. And that's the important thing to know about Robinson today versus Robinson yesterday. This is just a different model.

Maybe on the incremental volumes and consolidation piece, you've also been public in talking about taking on incremental volumes via M&A. That might be a change in tone from what we heard a year or so ago, maybe that's wrong. But how would you view your return or as you look to evaluate going after that share organically and via M&A?

Yes. So it won't be an either/or strategy, right? I mean we'll continue down our path of organic growth, organic margin expansion, organic outgrowth and earnings growth. None of that would change if we introduced inorganic to the mix, right? I think certainly, we had to earn our right to do M&A. I think certainly 2 years ago, we didn't have an organization that was mature enough from an operating model perspective to successfully integrate a company.

Our technology hadn't matured to the point where we feel comfortable putting another company on that platform. certainly, I'd say, the last 6 months, we've gotten very comfortable that now we're stable, both from a technology and an operating model perspective. And therefore, we think there's some very attractive opportunities that can drive real value for ourselves and investors from an inorganic perspective. I think it will show up in 2 different forms. One we've already demonstrated. So in Q2, we acquired a company called DeSpir Logistics, roughly a $75 million acquisition.

DeSpir is an industry leader in high-value, high-risk goods, right? So think advanced safety, advanced track and trace, advanced security protocols. That's an area that Robinson, I would say, is underrepresented in today. DeSpir brings that industry-leading capability. We put the Robinson scale behind it. we think the ROI is going to be fantastic on that acquisition. So the strategic tuck-ins that gives us capability that we can immediately scale is an attractive area of M&A for us going forward.

And then we've also said we're not going to roll out scaled acquisitions either, right? I mean certainly, if you think about what we've done with the lean operating model, the Lean AI approach, we have the best cost to serve model in the industry. we do feel that at the right price, with the right mix of business, that there's competitors that are at scale that have relatively healthy books of business, so think relatively healthy gross margin. It's just their cost to serve model is suboptimized, right? We believe we can take that book of business, put that on the Robinson operating model.

And ultimately, in a couple of years' time, bring that book of business up to 40% operating margins like our NAS businesses today. So we believe that type of acquisition can drive tremendous value for investors as well. Now we won't make a mistake. We're going to be very disciplined. As Dave said before, we're not going to be a statistic as it relates to M&A, right? When we do an M&A deal you will know why we did it, it will be compelling. But I believe you'll see us demonstrate our muscles in both of those vectors over time.

And Stephanie, you may recall, I mean, we first started this journey. So none of this is hazard, right? This was -- I talked about a diagnosis talked about -- you've been in some of those meetings, right? And coming out and doing that under like the 4 Ps, right? It was people, product, process and portfolio. And so we've systematically built out this strategy and this transformation around that people, product, process and portfolio. So assembling a leadership team that is really made for this moment, that was part of the plan.

And Damon coming over from GE Aerospace, with his pedigree, having a CFO that understands Lean, understands transformation at scale that was really purposeful. It's just having Jim Ruttlinger come in from Danaher, helping me to scale out our Lean operating model, put together our playbooks for potential M&A. I mean, all of that was putting together the team that we have today that I think is exceptional that puts the company in a position of optionality and or something that we purposely built over the last 3 years.

And do you want to maybe transition to talking a little bit about your operating model and maybe some of your more specific results as it relates to 2Q. So within -- for the second quarter, look at my figures here, but it was a 30% year-over-year increase in truckload linehaul costs, but AGB per load was flat. So clearly, your ability to dynamically manage cost and pricing was very much evident there. What does this mean when the cycle -- as the cycle continues to turn?

Yes. So I'd say our Lean AI approach, what gets most of the headlines is the productivity, which rightfully so, we've generated 60% productivity since the end of '22. And that's a real productivity number, no footnotes, no asteric. You can find it in our earnings. You can find it in our operating margins. But I'd say what hasn't got as much attention is what Lean AI is unlocked from a revenue growth perspective and from a revenue management perspective.

So specifically to your question, Stephanie, on how did we kind of break the norm and break the physics of a broker in Q2, it is through that revenue management capability. Historically, and we would argue most of the industry still operates like this today. When you had a rise in spot rate cost, typically, the approach was to give everybody every lane, the same cost increase. So spot rates are up 30%. You give a shot approach. Everybody gets a 30% increase, chaos and sues across the industry, about 50% of the price and accepted, 50% rejected, and it takes you months, if not quarters, to reprice your book of business.

With our approach, what we call New Robinson under Lean AI we can actually utilize our $100 trillion data set model that we have that has almost unlimited characteristics for loads and lanes and carriers and customers and pricing dynamics. And so we can be very surgical in how we reprice our book. We are surgical by customer by lane, by region, by different freight dynamics. And so therefore, if a customer has 20 different lanes, we may only have to reprice 4 of those lanes versus all 20. And so therefore, the ability for us to get the customer over the line and get them to accept our price increase happens in a much faster time line than what have happened 3 or 4 years ago.

So I mentioned the roughly 50% to 60% acceptance in that shotgun approach. Right now, our acceptance rate on our price -- repricing of our book is 93%, right? And our average time to reprice our book through this call it, 4-quarter cycle of reprice and has been 3 weeks. So we've gone from a cycle time of repricing our contractual books from months, if not quarters, in some cases, to an average time of 3 weeks. So that cycle time is what allowed us with that revenue management capability to essentially reprice that book almost in real time to mitigate the rising spot costs.

And that shows the strength of our people. So in this industry, we always talk about this is a people industry. We agree because we think we have some of the best logisticians in the world. Our customers to have that have to have trust and the people who do the work at Robinson, they have built that trust over many years and to show them that data, trust has ensue when you have that much of a stickiness when it comes to repricing of a book. And so we feel really good about the team and where we are.

Yes. And just the data behind that trust that Dave talked about was that 93% acceptance rate, right? So how do you get to 93%. You give a price increase to a customer they go shop it around pretty quick, realize they're not going to get a better price with the same coverage, they come back to Robinson accept the pricing, right? Now we were right, 93% of the time because the customers came back and accepted our pricing. That's the trust that Dave is talking about. You can only develop that trust if you also have the tools and the discipline and the capability to price that increase right the first time, right?

You got to have the right level of sophistication to be able to stand in front customer and say, this is the best price you're going to get. And if you want to cover your loads, I would recommend you accept that price, that resulted in 93% acceptance, which we think is a phenomenal result.

Damon, you mentioned your contractual exposure, which I think as of the second quarter stood at about 70% of your mix. How would you kind of characterize your contractual mix exposure for where we are in the cycle?

Yes. I mean we like the mix we have, right? I mean certainly, I know there's been some headlines on on kind of chasing spot because that's where the margins are. And that's not the case for Robinson, right? We can make very healthy margins in the contractual side of our book, and we can make very healthy margins in the spot side of our book. And so we believe that result of having a 70-30 mix, which has lasted through this last inflection of cost, has what's allowed us to optimize market share at the same time of optimizing earnings.

And just a reminder to the crowd, right? 75% to 80% of all freight is contractual, right? So you cannot live in the spot world forever, right? I mean you can get a temporary sugar high from the spot market, but it is fleeting, right? It will go away. And if you haven't put your efforts into building contractual book and reprice that contractual look like Robinson has, ultimately, you're going to give back a lot of market share on the other side of this cost curve. So we feel really good about what we've done. I mean, to us, that 70-30 mix is just math, right?

We've won aggressively in spot, but we've also won aggressively in contractual. So you haven't seen us really alter our mix because we've been winning aggressively in both sides of that equation. We've actually set our own internal records, even including COVID, on the file averages we've generated on the spot side of the business. So I'd say we're eating well on the spot side. We're eating incredibly well on the contractual side. And I think the competitive advantage we have contractually is we can take business and make good margins on it that most brokers can't break even. That's why we've been able to win substantial share in this inflection.

We've had good conversations today on that where some investors have said, well, Dave, why don't you just go change that mix and go really, really heavy spot. And our response to that is exactly what Damon just laid out. It's like you really don't want me to do that. That would not be the best move -- for investors, you want a balanced mix on how we're doing it. And ultimately, that pays off in the longer run. So we've been measured, we've been disciplined in how we've approached. And again, I think that shows up on the bottom line.

So maybe as we think about some of your long-term targets as you balance volume and margin, how should we think about the medium-term margin opportunity for CH as you kind of balance as you said, making profitable -- having profitable contractual growth, but also taking advantage of the small market, too?

Yes, I would start with Q2. So as you led with, right, Q2 was, I think, a unique quarter, where spot rates were up 30%. Our AGP per load was flat, but our operating margins actually achieved -- actually exceeded our mid-cycle margins in a market that was down 4% to 5%. We think an outstanding result that the team demonstrated in the capabilities. That's just so different from Robinson versus everybody else in the quarter. And it's important that we've achieved those mid-cycle margins now, right?

Those are self-imposed quality of earnings targets that we set out there for ourselves to show our revenue management capability and how we were going to keep a floor on quality of earnings. Now that we've achieved those targets. Now we can take some of that incremental margin, that incremental price, invest at back and even more demonstrable outgrowth versus what we've demonstrated for the last 13 consecutive quarters. So we view getting to those mid-cycle margins in Q2.

Now we have another tool in our toolkit that can even supercharge our outgrowth even more. Now with that said, we've committed to, on an annualized basis, we're going to continue to expand operating margins because we've committed to evergreen productivity that will facilitate that operating margin expansion. But on a month-to-month basis, quarter-to-quarter basis, I think you can see some oscillation between margin and market share gains as we optimize the best mix for earnings growth.

That negotiation happens every day. And we built our way up. This was, again, something we said we would do. We have to build our way up to hitting mid-cycle margins and having that optionality and we happen to reach that point in Q2.

But arguably, I don't know if we would say 2Q was in a mid-cycle environment.

Absolutely not.

Absolutely not.

No market was down 4.5%. So we've certainly exceeded our own expectations.

So I think about the hint to the question might be -- so what do you have Dave and Damon, is that going to go higher? I mean I think the answer to that is, yes, it could go higher. But as Damon said, we have that optionality. And that's why we haven't put out new targets or anything like that because this is what we said we would do. Get to that optionality allow us to get that more growth at our option to do that because as Damon properly says, freight changes on a Monday to a Thursday. It could be all different dynamics within freight.

And you have to have that negotiation every day. But we are at a point where -- I think we're in pole position because we've built the system to be able to give us that optionality and the team can execute to that.

Yes. And Stephanie, to that point, we don't see a scenario where operating margins don't continue to expand, right? It's just really do they go to 45% or do they go to 43%, and we invest that 200 basis points back into demonstrable growth, right? I think it's really that optionality that we've kind of reserved to optimize earnings growth is really what we've been focused on, right? But there's certainly going to be quarters where margin will expand more than the average and then there'll be quarters where the market share gains are more than the average.

And it's exactly what Dave said, right? Is the freight that shows up every day is not the same freight that showed up the previous day, and we're very disciplined and selective on what freight we take at C.H. Robinson. So when there's good freight to be had, we'll increase market share. When there's not good freight to be had, we'll expand our operating margins even more. Really, that's the math going forward.

Stephanie, can I just put a point on 1 thing, though. We're seeing all of this. We love our results, where we're going, this is not easy, right? I mean changing this over, changing the culture over, you go Eaton Prairie in Minnesota or any of our hubs around, that's an awesome team. I mean everyone loves showing up at Robinson, they love winning. They love improving. This has been -- but make no mistake, driving a lean operating model every day takes dedication. And you have to do gimbal walks, you have to have operating reviews.

And I take that very serious in leading that, along with Damon, some of the senior team. So this is not something that you can just replicate. I mean this is really difficult and then add our technology in there. It's just, we think, several moats of advantage that we've built over the last 3 years, and we're going to continue to build, but it's not something is easy. It's easy to sit here and talk with you, you make it easy to do that, but the execution of it is something that the teams do every day, and they do it well.

Just one final question for me. We didn't touch on it, but I do think it's important, especially as you talk about investing for growth. So can you maybe give us an update on some of your lean AI opportunities that you have on the global forwarding side?

Yes. I mean the simplicity about talking about Global Forwarding is it's a broker business just like NAST, right? And so the playbook between NAST and Global Forwarding has a very high correlation, right? So it's -- we're optimizing that quote-to-cash cycle. Now albeit the processes in global forwarding tend to be more complicated and a higher level of complexity. But we have the playbook to execute that play. So I'd say very similar set of process capabilities that we've generated in NAST is what is applicable to Global Forwarding.

And I would say we may even be more excited about the opportunity in Global Forwarding because the cycle times are more elongated, the complexity is higher. So therefore, the opportunity to drive efficiency and opportunity is higher. But for us, it is really running the same playbook that we ran in our NAST business.

Using at a genetic technology has me really excited. If you asked me, Dave, what are you excited about excited about what we will do with our genetic technology, applying it first in Global Forwarding and then bringing it actually back into NAST. And so there are certain things that were below the line that we can bring above the line now with that enhanced technology. So generative AI was very, very important to us and gave us results. Agentic is going to give us even more. We think we're going to do some special things in the industry.

Great. Well, thank you both for your time.

Thank you.

Thank you. All right.

[Audio Gap] at Citi, he's going to be asking the smart tech questions. And then we're thrilled to welcome C.H. Robinson to our conference. We have Dave Bozeman, CEO; Damon Lee, CFO; and Arun Rajan, Chief Strategy and Innovation Officer, informally CTO, I suppose, is fair.

It's interesting. So just before we started, Dave and I were talking about the idea of a transportation and logistics company at a tech conference might be a bit strange to some folks. And yet those who are familiar with the C.H. Robinson story certainly would not be surprised by it. Just looking back to the last couple of years, if we think about your North American Surface Transportation segment, we've seen gross profit per employee up more than 60%, headcount down -- is down roughly 30%, shipment per employee have increased to -- at a double-digit rate. There's really been some remarkable things that you guys have been able to do with technology and leveraging AI and specifically, you referred to Lean AI.

Maybe you could discuss that, just kind of, as an introduction, what are the changes that you've introduced that have been able to drive those gains? And specifically, it would help, I think, if you gave some specific examples around what have been the challenges that have kind of -- you've had to overcome to get to that?

No. Yes. Thanks, Ari. And happy to be here at your conference. Thanks for having us. For us, as we talked before, it's not strange to us being here because we know the story and the transformation we've done at Robinson over the last 3 years. I'll just, kind of, frame it and then have Damon and Arun kind of get into it because it is a story. You talked about Lean AI. What we've done is introduced a transformation of a 120-year company to essentially make it a disruptor within this industry. And we've done it in 2, kind of, vectors. One, a very different lean operating model based on Lean principles. This is about continuous improvement, problem solving, pace, speed, all things that have been around, but we've introduced into this company and I think also have been pivoting this industry.

That has really opened up and allowed our technology, which we're builders, not buyers and always have been. It allowed our technology and our data set, which is pretty proprietary and the largest in the industry, to really, kind of, come alive to make that data intelligent. And then between our Lean AI, the best technology, we think, in the industry and then our people, of course, which are some of the best logisticians in the world.

Those 3 have been symbiotic in the system we run at Robinson and has really allowed some of those gains that you just talked about that's what's, kind of, driven that. But let's get into the technology in particular and also our operating culture, which drives bottom line results. But we can do that, Damon, Arun?

Yes, Arun, why don't you talk about the tech, and I'll wrap it all up.

Yes. So from a technology perspective, like you noted, we've improved our productivity by 60% over the past 4 years. And sort of this journey of -- we work backwards from what would a tech company do to disrupt this industry, right? So I mean when you work backwards from that and you say, well, a typical tech company would say, well, how do we decouple headcount growth from volume growth, right, which is, like, to make this a very scalable business, right? So some of us came from Amazon, like, that's the model you would do. So the first thing you do then is, like, okay, well, how do you engineer the system to ensure that it's scalable effectively decoupling headcount growth and volume growth. We've been on that journey for multiple years now. And you see the 60% number.

One thing that's changed materially over the last couple of years is we use traditional software engineering approaches for the -- I've been in the company for 5 years, but the first 2 or 3 years are more traditional software engineering approaches. But over the last couple of years, in the past, a lot of projects wouldn't sort of, like, make the ROI bar because there's a lot of software engineering effort. This industry is, kind of, plagued by nuances that are specific to customers that are specific to carriers because we sit in the marketplace, right? We sit in the middle between capacity and customers. And unlike a peer-to-peer marketplace, this is B2B marketplace, which has lots of nuances. And we sit in the middle of that. And a lot of these projects didn't make the bar 2 or 3 years ago.

But with AI, now all of a sudden, engineering is massively better. We have 500 engineers, but those engineers punch like there are 2,000 or 3,000 engineers as they start to use coding tools. That's on one side. The other side of it is we've engineered a platform and Agentic AI platform that basically allows us to capture the collective knowledge of the company, the context of the company into our agentic AI platforms. Now all of a sudden, you're not building software the old way, right? We're not engineering every single rule or every single SOP into software. It's in a context layer, right? So in a way, we're the company is being programmed in English, right? I mean it's probably the simplest way to think about it with the advent of LLMs. So this agentic harness that we built on top of the LLMs has created this massive acceleration in our productivity in the last couple of years, combined with a lean operating model. So that's one side of it. So that's the productivity side of it.

And the other side of it is as a marketplace, what do you do, right? There's pricing on one side, how you price to customers. And then on the costing and the capacity side, it's how you procure capacity efficiently. So in the marketplace, it's, kind of, like you make the spread. So this notion of personalized pricing that drives our pricing algorithm. So we have machine learning-based algorithmic pricing, which we had for 10 years. But as the data compounds and grows, this is traditional AI, right? I'll call it classical AI machine learning that effectively drives our gross margins by driving the right pricing for the right customer for the right amounts of value we deliver. And likewise, on the capacity side, it's about cost discovery and how we procure the capacity at the lowest price, the lowest cost to us to put on a particular load, right?

So again, if I was to step back and, sort of, summarize what I said, which is, well, if we were trying to disrupt C.H. Robinson as a tech company, what would you do? You would create this scalable model to drive down the unit economics and then you would drive this intelligent pricing and costing discovery to drive the best sort of gross margin number. And that then compounds ultimately, what do you do with the lower cost to serve like we've accomplished, you parlay that into growth by driving prices lower, right? So that's sort of the formula for driving our business. Lower cost to serve, higher gross margins, but you parlay some of it back into growth by lowering prices to customers.

And just to put a bow on what Dave and Arun said. So since the end of '22, we've not only benefited with 60% productivity since the end of that year, but we've also seen demonstrable revenue growth. We've seen demonstrable gross margin expansion. And then certainly, the operating margin expansion we've realized has been on the back of the productivity. But for us, AI, Lean AI specifically, it's more than just productivity, right? We see revenue growth. We see revenue management capabilities. So think better price, better procurement of freight, all this productivity. So we see the benefits of our Lean AI strategy up and down the entire P&L. We know what we're doing is very defensible, right? So we have 450 engineers that builds our own tech. This is custom tech for our company-specific problems, right? Very difficult to be able to go off the shelf and try to replicate what we've done.

We've estimated that you would have to partner with maybe 15 to 20 individual AI platform companies to replicate what we've done. And even once you did that, you're getting a generic solution set for a company-specific set of problems and opportunities versus our customized solutions. And I think the most -- maybe the most important thing outside of that is the cost, our marginal cost of ownership once we build an agent is close to 0. Whereas if you're using somebody else's third-party tech, you're going to pay by the drink every single time you use their technology. So we've generated hundreds of millions of dollars of operating income value since the end of '22.

And on an annualized basis, we spent less than $1.2 million on tokens. So just soak that in, in an ecosystem of AI where you cannot find a company that's generated a positive ROI from their investment in AI. We've generated hundreds of millions of dollars of value since the end of '22 with a very immaterial amount of token investment on an annual basis.

And I think for this audience, from an investment perspective, this has been a structural change. Everything that Arun and Damon just said, we are very, very purposeful about where we put the technology, and that's embedded it into workflows. And for us, it was the order-to-cash workflow. That lends itself very much coming from machine learning into generative AI, and now we're actually doing agentic within our other business that will come all around. That has allowed us to automate essentially our back-end or operational type of roles that it doesn't matter if the market takes off or if the market stays lower for longer, this system is now going to be structural and that change. We won't add in a number of humans in this kind of order to cash type of process.

And so we always talk about transactional quotes. We have a mature agent that is doing our transactional quotes that come in with e-mail used to only get to 60%. Now we do 100% quoting. We do it in 31 seconds. It used to take 17 to 20 minutes. We do it back in a conversational manner. And the point on all of that, that's allowed us to win more freight see more freight. But it also says that if we're doing 600,000 of those quotes, you can add a 0, we'll do 6 million, and we won't be adding humans to that because that's a mature agent that is placed within that realm and that workflow. So I know that was a long answer, but it covered a lot to show why this is symbiotic and why this is structural from an investment perspective, and we feel good about that story.

Yes. No, that's a great overview and really impressive productivity growth over a short period of time. Maybe diving in a little bit more on the technology stack. I mean it sounds like a lot of this is homegrown, right, purpose-built for Robinson. But how do you kind of see the who's -- as investors here are looking at technology companies, like who's gaining wallet share? Is it mostly the infrastructure providers? Who's losing wallet share if there are technology vendors from that perspective? And then one of the interesting things you said was just $1.2 million of annualized token costs. I'm sure some other companies in the Valley would like to be that low in terms of token costs, what we hear. What are you using? Is it the frontier? Do you go more of the open source route? Would love for you to hit on that as well.

Yes. Yes. No, great question. So I would say like strategic partnerships, we're a builder culture, right, which means we build our software, which means we will evolve to be an AI-native logistics company, right? So then the question is, like, what are the underlying infrastructure providers we use? We've long had a partnership with Microsoft. And they're a cloud platform, and they also have the access to multiple models, right, through Azure. We can access multiple LLMs. We have a partnership with Snowflake. Now again, I think of these as infrastructure players. The real sort of value that's coming from AI is from our custom-built harness that sits on top of the LLMs, right? So think of it as we have the ability to route a given workload to any LLM, right? We can use a frontier model, if it's a complex reasoning problem. But if it's a simple transactional thing, we can use open source or we can use an older version of the model. We have a router that will route the work based on the sort of complexity of the work to the appropriate LLM. And in some cases, we host our own open source LLMs.

So the bottom line is, in the end, because we're a custom-built shop and we have our own harness and we built these agentic workflows, the way we architect our platform kind of accrues most of the value to us, right? Certainly, the -- there's some token costs that OpenAI probably gets a giant share of that $1.2 million token spend that Damon described, but there's a bunch of volume going to open source. And over time, we will continue to route the simpler workloads to open source models, which is why the costs are so low.

So then the question is like, well, how do you do it? Just like I think of this as you kind of roll back 15, 20 years to the cloud. And when the cloud first came out, I think you had this tendency of people to sort of like say, "oh, the cloud is here, like I don't have to provision hardware in my data center. So I can just spin up this instance in the cloud and like spending went crazy, right? I think the same thing is happening with LLMs, where it's like, well, I can easily access this intelligence.

So let me point my application at it and just, hey, look, it's great, but it costs a lot. Because of the way we built our harness, the way and the way we've engineered our agents, each agent has a very specific purpose and it has a very specific context, which means it has a limited context so it doesn't hallucinate. But equally, its token consumption is very limited. And also, we can use an older version of the model or an open source model to do the work.

So I think this all goes back to sort of -- to me, this looks -- this era looks like you have to get your platform engineering and your infrastructure engineering right to be able to get the true value of LLMs. And if you don't harness -- we don't create this harness, I think you end up in a lot of labs rich, right? So...

Yes. I think, again, for this room, why is Damon used the word earlier and why is this defensible? It's defensible because one thing running on the back of all of that, and we've said this a lot, Ari, in the past, is our data set. And we have the largest data set in the industry. It's 100 trillion data points that have been accumulated over time. And that data set is proprietary to Robinson. And when you build a bespoke platform like we're doing with that data set, that makes that very powerful and very hard to replicate even if you're an AI native company starting to do that because you don't have access to that data. You have access to some data, which can be averages of averages, but not the level of data that we have and what Arun just laid out is super, super important on why this is a deeper, wider moat.

And there is no hobby spend on AI at C.H. Robinson, right? So every dollar we spend on tokens, every dollar we spend on engineering capacity has a ready-made high probability ROI assigned to it, right? So we don't just give 900 employees or 10,000 employees Copilot license and say, go try to do something creative, right? The only dollars we spend are based on a very high probability outcome from an ROI perspective, which is why we've had the success we've had.

Yes. And I guess as you think about -- you talked about the productivity gains, which is one side of it, but then those incremental revenue opportunities, right, like building a more sophisticated pricing engine, like how much would you sort of attribute these AI investments to driving productivity versus driving revenue? And then maybe just give a sense for the audience, like what are your biggest areas ahead as we look forward in the next few years that AI will tap?

I'll start and then hand it to Arun. I would say because we let the highest ROI project dictate investment, difficult to say what percentages of our benefits come from revenue management versus productivity versus growth because they're all in the same funnel competing for the same investment dollars. I would tell you, though, the revenue management unlock has been substantial, right? I would say as little as 4 years ago in this industry, just the way in which the industry priced was very unsophisticated, very low frequency, meaning you'd set a pricing strategy at the beginning of a month and maybe determine at the end of the month that you win or not from that pricing strategy, whereas today, with our technology, with our disciplined approach from Lean, with that data set that Dave referenced, we're setting pricing strategies on a seconds and minutes basis.

So we'll -- the example we use a lot is we come in Monday morning, set a pricing strategy at 8:00. If that's not yielding the volume margin expectations that we anticipated, we could change that strategy tens of times an hour, hundreds of times a day, thousands of times over a quarter, whereas as little as 4 years ago, you may have only changed that pricing strategy once or twice in a 30-, 90-day period of time. But just the frequency in which we're interrogating the market from a revenue management perspective and just the ability now to access that data set that Dave mentioned is over 100 trillion data points.

Before the advent of AI, the ability to analyze that data was extremely limited. Now with our advanced machine learning, with our predictive analytics, with generative and agentic AI, now we can use a significant portion of that data to drive arbitrage opportunities in our marketplace. And we believe, as I mentioned before, what we're doing on revenue management in the logistics industry, we believe is unmatched.

Maybe I'll add. I think the way I would say it is that an Agentic AI platform or a harness, you kind of combine that with sort of first principles. And I think you get the same approach we've taken to productivity or the approach we've taken to revenue management and gross margins. The same applies to pretty much everything. So if you convert that into, say, go-to-market and our sales and account management motions, right? So think about a typical sales situation, there's a bunch of prospects that we have to call out to be top of mind, right? A lot of that's handled by AI, right?

So all those -- because those prospecting or reactivating customers who -- especially small and medium customers, we reach out to them purely via AI, right? Because now the humans can focus on something else, right? They can focus on actually serving the customer. This notion of how do you take customers from the top of the funnel and drive them down lower into the funnel. An example might be we're not just connecting supply and demand. We're solutioning for customers. Customers are asking us, well, because truckload -- the logistics sector is like a monolithic single-dimensional market, right? There's flatbed and there's like temperature controlled and there's bulk movement. There are all kinds of different types of freight, I'll call it, modes and services.

And so when customers ask us -- ask our account manager for that expertise, often they have to call an expert, a subject matter expert to come in and join the call, right? So now we have AI agents that are trained to be that subject model expert or trained to be a supply chain engineer because we only have so many subject matter experts and so many supply chain engineers. Now you apply the same principle of scalability. Now you can take these roles, encode them into an AI agent that participates in the call to help us close deals, right? So again, it's the same principle that we applied to productivity because this is a different type of productivity, but it's in the sales motion.

I think just to put a bow on all of that to your question, I'm super excited in the next chapter of Robinson. We always say last 2 years have been awesome. The next 2 years are going to be very much more exciting than the last 2 or 3. And I'm super excited about what the teams are building on our agentic platforms when it comes to, say, our Global Forwarding business that will ultimately go to our NAST business as well. Very, very complicated business that if you do a quote, it can take upwards of 10, 12 days in a sense to put together a really complicated quote to move things from, say, China to North Carolina.

And now we're building a platform that could potentially have agents do that quoting in a matter of hours versus days. And that's pretty significant in doing that. And so super excited about that technology. And then that also comes back into our NAST business as well, where that attack time is immediate. And now we're able to take technology of agentic from generative and reapply that, bringing some things that we couldn't do below the line, above the line. That's why it's going to be super exciting for Robinson going forward.

Dave, I think you guys have done a great job of describing what Robinson is doing that's different from competitors and difficult to replicate. I know we don't have a ton of time, so I want to make sure we hit on kind of broader transport type of questions. One of the concerns that a lot of people have had recently is potential slowdown in the macro. Obviously, rising interest rates put some pressure on -- potentially on the consumer, on industrial activity. Speak to what you're seeing out there from kind of a supply-demand standpoint because a lot of people think that we've kind of experienced this freight cycle inflection and that there's room to run. Do you agree with that? Do you still see that as the case? And then what does the earnings growth look like? Let's assume freight demand remains somewhat tepid. How important are these tech initiatives in kind of still being able to drive earnings growth regardless of what the macro environment looks like?

Good question, and we like that because it gets down to the receipts in our business, as you know, Ari. And we -- Damon and I, we always talk about the receipts. First of all, on the macros, I mean you guys see it out there. You are correct that this has been somewhat of a supply side correction, meaning supply has tightened up, spot prices have gone up. We see that, of course, and we're participating and doing really well when it comes to the spot side of it. But we're also doing very well when it comes to the contract side of the business of what we're doing. From a demand perspective, you called out industrials. We see some industrial technology out there, be like data centers and things like that. But we're cautiously optimistic on that because you really have to continue to watch retail housing and manufacturing. Those are the things that are going to really drive freight for the most part.

And I think some of those are a bit muted right now. And some here and there, green shoots, but we are monitoring all that. But the thing with Robinson is higher highs, higher lows, as you know. And we are certainly winning at a very 4.5-year type of freight recession and think we will not only linearly but exponentially have a curve that when the market inflects with the thing we've built, it is only going to -- it's going to generate even more. But we'll get into some of the actual numbers and why we feel that as well.

Yes. So just on the earnings potential, just a couple of double clicks there. So I'd say in an almost 4-year freight recession, right? Certainly, in '24 and '25, we had over 20% earnings growth in both of those years. Certainly, the market didn't help drive any of those earnings performance. And then certainly, consensus holds this year to be another 20% earnings growth year in '26 with, again, another flat to down market. And Q2 was, I think, a real important quarter for us. You had the market down again 4.5%. That was with spot cost up over 30% and yet our AGP per load, which is a key KPI for us, was flat. So if you ask somebody 2 years ago, could a broker have flat AGP per load, when spot rates were up over 30% in a market that was down 4.5%, they would have told you it's physically impossible. We demonstrated that in Q2.

I think the other exciting point in Q2 that just shows the potential for our earnings growth is our operating leverage. So in Q2, we had substantial operating leverage. So AGP dollar flow to operating income flow over 90%. In fact, Richa at Deutsche Bank reminded us, that was the best operating leverage performance of any company in logistics, including the assets, right? So here, you get a broker demonstrating operating leverage. That's a concept nobody thought was even possible. It's supposed to be a variable cost model. We've transformed Robinson now into a semi-fixed cost. So what you get with Robinson is you get the best of both worlds. You get the operating leverage of an asset in an asset-light model, right?

So we believe we've created something quite unique at C.H. Robinson, which is why we believe we will continue to outperform the market both from an outgrowth perspective and both from an earnings perspective as we go into the future.

That's important, Ari, and you see it, and that's in a really tough backdrop. So as this inflects, this system only goes wider and deeper.

We're excited to see where it goes, certainly. I know we're close to time here, but last question because it's probably the question I get most often. And obviously, the stock has sold off a bit on concerns around broker liability and Supreme Court ruling that opened up brokers to liability in the case of accidents. Speak to that for the investors in the room or the investors listening in who might say, I can't get comfortable with the C.H. Robinson story until I know how this settles out. And potentially, we're looking at years of brokers kind of fighting in courts or fighting these claims in courts. How do you think about that? What would you say to investors to kind of get more comfortable around that? And then just if we could tie it in quickly to the tech point, Talk about how you can leverage AI maybe in carrier screening or what's being done there as well?

Yes. So 3, 4 vectors you're really calling out, and we'll try to do it very quickly for you here. From a Montgomery perspective, these are just facts. We're a data company. We talk in data and facts. What the Supreme Court ruled on that was just no more of a preemption for brokers. But the facts are prior to Montgomery, that's just one defense now that's off, but we had to deal with well over 30 states that didn't have that anyway. And so for Robinson, we've always had a docket. We've been public for 28 years. We've had a docket during that time. Everyone in this industry has a docket that they're dealing with. We've had tens of cases in that docket. We ship 37 million shipments a year. And over that time, that's hundreds of millions of shipments with tens of cases. And so that just tells you that, one, we're disciplined, we're measured. We know how to defend a docket. But more importantly, we run a very, very safe and disciplined company in doing that. The lower side of tens of cases, hundreds of millions of shipments. Now you break down that -- so that's the facts of that.

The second vector then for investors is, okay, Dave, what about the impact of inflationary insurance because of this? Will you get that? Let's talk about the facts of what that is. And maybe we'll finish off with the technology and what we're doing on vetting, which we think is the best in the industry.

Just to round out Lipe, which is the last case, right? So we feel really good about the facts of that case. We chose not to settle that case. We feel like we will prevail on appeal. So I mean, that's the facts of Lipe. 98% of all of our cases either get dismissed or settled. We don't think that trend is going to be disrupted post Montgomery post Lipe. So we still believe the vast majority of our cases will be settled. average settlement amount has been somewhere between $1 million and $3 million. We think that trend probably holds into the future as well. As it relates to insurance costs, I honestly believe you don't have to wait until Lipe gets through the appeal process to get comfort in C.H. Robinson. We're going through insurance renewal right now.

So I believe once the insurance companies essentially provide their verdict on C.H. Robinson for 2027, I think that will give you a great insight to what they view as the risk profile of our docket and what they view as the risk profile of Robinson. Some of the more bearish sentiment on the Street that insurance costs are going to go up hundreds of percent. We do not view, that's going to be the case for C.H. Robinson. We think inflation will be a very manageable number that the majority of it will get passed through freight rates anyway, right? And so ultimately, the consumer will bear the majority of that cost, any legacy costs borne by Robinson, we get paid to offset that anyway.

Just a baseline fact to show you how immaterial insurance has been to us historically. Insurance plus claims is less than 50 bps of gross revenue for Robinson. Automobile liability insurance on its own is less than 25 bps of gross revenue. So even if we did see a material increase in inflation on insurance, it's not going to have a material increase on our earnings. So look, we feel really good about where we're at. We ultimately believe the current legal landscape will drive a pretty accelerated consolidation of our industry, which will be -- once we get through the fog of war on Montgomery and Lipe, we feel like this will be a very strong bull case for C.H. Robinson on the other end. So we've been active buyers of our stock. We continue to be active buyers of our stock. We're putting our capital where our words are.

And finally, we're driving a legislative and rules-making vector as well as we're working with FMCSA to get a standard through the Department of Transportation and have a lot of our transportation industry peers that are following with us on responsible freight. I'll be in D.C. next week and also working on a legislative solution to this as well with certain bills that are going through that we think that will apply the right accountability responsibility. So we're going to continue to lead the industry on that.

And so thanks for having us. And hopefully, your investors understand our story. More exciting to come in the next few years.

It's a great story, and you guys tell it well. Dave, Damon, Arun, thank you all.

Thank you.

Thank you. Appreciate it.

Hello, everyone. Welcome to Deutsche Bank Industrial Conference. I'm Richa Harnain, the transportation equity research franchise here. Thanks to everyone for -- special thanks to our speakers this morning. Dave Bozeman, CEO of C.H. Robinson and Damon Lee here, CFO. And we have Chuck Ives in the audience as well.

So lots to talk about here, and we really appreciate your time. Maybe you can go ahead and address the elephant in the room first, get that out of the way, the tragic Lupus accident and the unfortunate outcome in large nuclear verdict that was made against you. How are you thinking about next steps? What do you think is most misunderstood regarding the case that's been weighing on shares?

Yes, for sure. Richa, good to see you. Happy to be here. Thanks for having us. So let's jump into that. We obviously gave some color on our recent quarterly earnings call, but I'll just double-click and Damon can jump in as well. First and foremost, as we stated before, we totally feel like this was a case in a local jurisdiction within Dallas that was certainly made more on emotion than fact. We strongly believe the facts in this case are one that are on our side. And obviously, our insurance carriers thought the same thing as they had a appellate attorneys in there -- in the proceedings.

Plaintiffs' bar requests were unreasonable to settle in a case like this, particularly when the facts were so strong on our side. And we just feel on appeal within Texas, and that has a history of showing this that when the facts are presented for law that this will eventually be ruled in our favor. I have to strongly believe that nuclear verdicts are not going to be the norm. But I would say that we are making a call on here in various vectors.

From an investment perspective, I would say this doesn't change C.H. Robinson's strategy and what we're doing. We've had a docket. We've always had a docket. We've managed that docket extremely well for over 2 decades, and you can go back or look at 8-Ks and things of that nature. 98% of cases never see a court room, they get settled out in doing that. And you look at the amount of freight that we brokered, 37 million shipments, as you know, per year, and we have tens of cases that we deal with.

So do I think that the reaction to the industry, not just Robinson is a bit overdone? I do think that it's certainly a bit overdone on here. This case, advisory verdict will go in. Ultimately, the judge will put a final verdict in the next 30 to 90 days. When that happens, our appeal process will immediately appeal. And then the post -- the pre-trial motions and things like that will happen before the judge has to make a final determination.

When that determination is made and filed, we'll file an appeal and then that process starts, and that can be a series of 18 months, 2 years, and then it can go to the Texas Supreme Court as well. And so you're talking about this could be 5 to 7 years in doing that. But it doesn't stop the fact of who we are, how we've managed it, how we manage inflationary costs. We do it, we do it all the time when it comes to insurance costs, we feel really good about that.

And I'll make this last point that this is not about Robinson. This is a bigger issue. This is really about commerce as well. Multiple vectors happening, but you have to look at commerce. And if nuclear verdicts are going to be the norm, then there are a number of the industry that will really have an issue and will have an issue moving commerce within a country because 30% of commerce is moved by brokers. 500,000 truckers have 1 to 10 trucks and are small owner operators, they get their movement through brokers. And that's 500,000 out of the 600,000 that are around.

So this is a bigger issue. We are pushing for a standard through Department of Transportation and FMCSA, that standard of reasonable care. We're also driving the legislation. We want Congress to act when it comes to accountability and the legislation around this issue as well, where else we will have a commerce issue. That's how we kind of look at this.

So a bit overdone on stock reactions within that. Robinson is solid. You see that from our last results, and hopefully, we'll get into that. We've built a moat and we've built a system that we think wins at the low and certainly wins at the high. And we don't think that a case like this when it comes to any type of insurance, inflationary cost is an issue for us. We've proven that we absorb all of that.

I'll just put up on what Dave said. So two things. We think the stock reaction is, one, it's kind of hinting that nuclear verdicts will become the norm. We don't believe that, that's likely. And then number two is, I think it's assuming that we won't prevail on appeal, which we feel highly likely we will prevail on appeal, right? So we think, as Dave mentioned, stock price reaction is overdone. We've certainly been active buyers of our stock and continue to be and certainly believe that this has become an attractive entry point for investment.

On that, why don't you believe nuclear verdicts will become a norm. Is it just based on this commerce connection that you made, but it could really paralyze the state of commerce in the U.S. and the legislators are probably not going to stand for that at the end of the day or...

Yes, for two reasons. One, plaintiffs' attorneys, you can always do -- we can't stop a lawsuit per se, right? You bring a lawsuit in a particular jurisdiction and that can happen at a local level. No one, no matter who they are, can really stop some type of lawsuits. They happen. They happen all the time in various industries in doing that. But proving that facts set all the way through the court system, I think you kind of see what happens over time. And we think in this case, that certainly will happen when the facts are presented to the appellate courts, it will clearly show some things that really show that Robinson is not at fault and certainly was not negligent in this -- in the way we went about transacting this load. Those facts are clear. And so we feel really good about that.

So we don't think that, that will be a nuclear verdict. If it is, if for some reason we see and that's the norm, then that's a bigger issue. And I would go so far as to say the company that really kind of stands up and has the wherewithal to do that, you need someone with an investment-grade balance sheet that has the scale, that has the monetary means to do that, and that company is us to be able to stand through something like this. We're just calling on a broader look at all of transportation that this is a bigger commerce issue. We will be fine either way, but this is a commerce issue. And I do not think that there will be an appetite to have commerce slow down and have increased costs, less service and that impact. I just don't think that we would stand for that.

Yes. I would just add, look, as Dave mentioned, the vast majority of cases that are litigated, they settle, right? The plaintiffs want to settle, the defendants want to settle. Very difficult to settle cases with this type of expectation, right, of a nuclear verdict. So we just don't believe that is the norm, right? And in fact, history has shown in most industries that is not the norm, right? We think -- in fact, even in this case, if you read what the plaintiffs' attorneys have published post the verdict, they've always wanted to settle this case, right? They didn't want it to go to a jury verdict, right? So we believe history will be proven right that this is a unique outcome and that ultimately, the history that shows the vast majority of cases become settled at reasonable amounts will be the norm.

As Dave mentioned, if this becomes the norm, it is certainly not a C.H. Robinson's alone issue, right? Logistics, the movement of goods, commerce, as we know it, will be severely impacted. And I've said this morning, I mean, think about what we went through with COVID, right? I mean I think you could see similar type events with empty shelves, service levels dropped in substantial inflation, because, again, an industry cannot provide for its customers if the norm is nuclear verdicts, right?

So in that scenario, certainly, the government, Congress would have to do what we're asking them to do today, which is develop a national standard and to enforce reasonable liability as it relates to that standard, right? I mean that is something they could do today. Hopefully, Congress does not wait until we end up with a situation where things are much more dire to act. But again, that's not the case we're saying is base case. We believe this verdict is unusual. This case is unusual. We believe that history will be more the norm. That's our base case.

You said you're very emphatic that this is emotion versus fact and facts are in your favor. So we just hash out and it's the fact here. You hired a carrier that had a safety -- satisfactory safety rating from the FMCSA, which is not easy to get, by the way.

Only 6% of carriers carry that satisfactory rating, and it was pre and post accident as the government came in and did an audit after that accident and upheld that satisfactory rating for that carrier. That carrier was less than 5% of Robinson's business that did that and was used by multiple entities, brokers and shippers alike.

And then what about this concept of [indiscernible] employee? How do you -- what are the facts against that?

I mean the facts are this. We did not contact that driver. The fact that when you look and say, "Hey, that driver talked to their dispatch and we actually rescheduled that load for 4 days later. That's just the facts. Now what's out there is fog. I'm giving you the facts of why this is bullish. That's just the facts of what we did. And that stands on what it is, and that's why we feel really good on appeal.

We had no communication with the driver. We did not control the actions of the driver. The driver was an employee of the carrier. I mean, it's that simple.

And Robinson did not act as a motor carrier in this particular case. That is a really important fact.

And that's why we believe on appeal, those facts will be taken into consideration, and we will prevail.

The appeal has not been filed yet. The final judgment has not been made yet. Correct. And is there some discussion with the judge to maybe think about these facts and then the actual...

That judge has a lot of way in which she can determine. We're not expecting that, but she could change everything from the liability to a number of other things within this case. We are prepared as our insurance carriers are as well to do the immediate appeal.

One question [indiscernible]. All right. So let's shift gears and talk about blocking and tackling as you are passionate about it. Before getting into this C.H. Robinson's special sauce, talk about just the market. You upped your outlook for dry van spot rates significantly throughout the year, but that was very much past year supply driven, right? How are you feeling about the prospects for stronger demand to come back? What are you hearing out there from your customers?

Yes. Good question. The -- you're absolutely right that this has been a supply-driven kind of inflection on overall cost. On demand, I would say this, it's a mixed bag. We certainly see some green shoots that are out there, but we're also cautiously optimistic because you have to break it down. Again, I will reiterate, we really look at housing, retail and kind of this industrial manufacturing when we start looking at freight, what are really the things that drive freight.

There certainly are tech industrials going on with data centers and things of that nature that is certainly active. But if I look at housing and I look at retail on consumer spending, some of those are a bit flattish, and we certainly would like those to have an inflection to go up and to the right to really start driving this kind of demand rebound.

And up to this point, we're just cautious about that. The main thing is that, as you know, we built a system that wins at the low and it's going to win demonstrably at the high. And I think we've proven that by outbeating the Cass Freight Index 13 quarters in a row. And that is our secret sauce and our system that does win. And when the market does inflect, we will win on both the contractual and spot like we've been doing, but we'll do it in a more demonstrable way.

That is very impressive with 13 straight quarters of outgrowth at that. Maybe speak to that a little bit more, right? Like what is the value proposition that customers are particularly drawn to? I guess you'll talk a little bit about your unique tech platform here, but I'd love to hear more about sort of what differentiates you from your [indiscernible].

Yes, I'll start and Dave jump in. I mean I think it's -- at the end of the day, we provide our customers a very high level of service at a very competitive market price, right? I mean that is the equation. Now what enables us to do that is what we've talked about often, which is our lean AI approach to execute on our strategy, right? And so we get the question often, how does your customer benefit from your lean AI approach, right? And one example we give often, which is we have one agent that handles transactional freight quotes. And prior to the current lean AI approach, we only touch 60% to 65% of those requests in our NAST business. Today, we touch 100%.

So if you're the customer, historically, if you're only getting a response in the time you need to get a response, 60% to 65% of the time, you're probably not happy all the time. Today, they get a response 100% of the time, and that agent responds 7 days a week, 24 hours a day, right? And so our #1 role as it relates to deploying our lean AI strategy is do no harm to the customer. That is the bare minimum, right?

If any approach we believe is going to create any deficit with the customer experience, we don't implement that technology. What we've seen over the last 2.5, 3 years is that the customer experience, our service levels, our service -- customer rating scores have gone up as we've implemented our lean AI strategy. So we always have to be market competitive. We always have to provide a differentiated service. And certainly, our lean AI approach has allowed us to do that in an exponential way with our customers.

And Richa, let me tie that up on what Damon said, which I think is right. But as CEO, I'll look at you and say, we are not just a global forwarder and a freight broker. That's the price of admission at Robinson at scale. It's much more than that. So when you start talking about the customers, we're a solutions provider -- a technology solutions provider at scale for our customers. And that separates us out from, I think, the industry and competition. We drive solutions when it comes to topology and onshoring and customs and really hard decisions that customers are making about very complex supply chains.

And we do that with things that we've recently launched, our lean AI planner, a lean AI engineer, scans, supply chains, constantly gives answers to those supply chains, saving our customers' money on inefficiency and things of that nature. So we are becoming more than a forwarder and just a broker. This is a solutions provider company, is something we've been building along with our system as we've transformed the company over the last 3 years.

I think It could also be helpful to hear a lot of your competitors talk about the importance of human touch in the cycle [indiscernible] like, okay, fine, we can address all these requests that come in. But next iteration, maybe something goes wrong with the load and they want to talk to humans, right? Talk about how your solutions are maybe making it more easier for folks to handle maybe more complex.

Let's get into that and be really, really clear about what we're doing here because I hear that sometimes. I want to make sure people understand what's going on here. No customer, and I'll speak for everyone here. No customer, no matter what your customer is, wants to pay for back office repeatable task. And if you think that back-office repeatable tasks are going to come back and you will add cost in to do those back-office repeatable tasks, that is inefficient. And I don't think that, that is supporting your overall customer.

We no longer are going to do that. We have very much put our technology into our order-to-cash process to automate some of those repeatable tasks that really are set themselves up to be automated, such as tracking and quoting and a number of other things. So when the market comes back, we are not adding humans back into those particular repeatable tasks.

What we have done is taken our people and allow them to do the things that I just talked about, solutions providing customer touch. We have the best logisticians in the world. And so when we start talking about solution setting and touching base with the customer, that's where we're focusing our people on small, medium business, investing in people going out and doing that work. But order tracking and quoting, that's not coming back at Robinson. That has contributed to a 60% productivity since 2022, but it's on a solid ground of what we've built. And I want to be really, really clear about that.

And just to add to that, I mean, every process that we've automated at Robinson has a human in the loop, right? And so if a customer or a shipper wants to talk to a human, they can, absolutely right? But our technology is enabled in such a way that they don't need to, right? And I think if you use your own life, for example, in most cases, if you can go online and solve your problem in a satisfactory way, you probably don't want to talk to somebody, right? Well, most of our shippers are that exact same way. But if they want to talk to somebody..

We'll meet them where they are.

We'll meet them where they want to be. The way we think about our technology, it's not about replacing the human touch. It's about augmenting the human touch. We've taken the employees that our shippers love to deal with, and we've given that account manager to be available to that customer 24 hours a day, 7 days a week, right? And that human in the loop can intercede into that automated touch point anytime they choose to.

So for us, it's not about either/or. It's not about human touch or technology. It is both. And we feel like we've got the right recipe to give the shipper that optimal combination of human touch and automation. And as Dave mentioned, if you were to ask a customer, what are you willing to pay for? Those tasks that they're not willing to pay for, we've automated those almost 100%. And the feedback from the customer has been extremely favorable on that journey that we've been on.

Let's talk about first mover advantage theory out there that it's only a matter of time for competitors to catch up...

We've been hearing that for 2 years.

Yes. So talk about what's different here. I feel like it's 2 years ago, the management team, right, you guys came in and were willing to break things, make things and maybe that's it. But like can you talk about that in a different philosophy.

Yes, I think a good framing on it. The first-mover advantage, I actually disagree with that premise. And the reason I do that is because we just have to go back into a little bit of history. You can go back to 2015 or so and the digital entrants came in, remember that. And when the digital entrants came in, it was like, "Hey, Robinson is done because this is going to like take away all of like brokerage and automated and things like that. That ultimately didn't work out.

I mean the thesis was a pretty good thesis, but the issue is that now you look at a 120-year company at scale that has 100 trillion data points and proprietary data, largest data set in the industry. And now it's the disruptor because that thesis has some flaws in it because moving freight is really hard, and it didn't account for that variability. Well, we actually do account for that variability and the proprietary technology that we've used along with our operating model, it has driven us to be a disruptor in the industry.

So we didn't create lean and we didn't create AI. It's all been out there and anyone can get that. How you orchestrate that and how you implement that is different. That's where we have an advantage. And therefore, it can't be a first-mover advantage. It's just an advantage. And it's not going to be one that we give up because you assume when that question is posed that if someone even tries to catch up that we would be in the same spot. We will not.

By the way, the example of some pretty big names in fact coming in [indiscernible]. All right. Low single-digit growth in volumes that you guys have been seeing. Of course, in a down market, [indiscernible] 13 quarters of outperformance to the industry. But could we see more meaningful growth, especially as you recently hit your margin target you promised to the Street impressively before we reach mid-cycle conditions. You talked about leaning more into growth once you achieve that target we're there now. Curious if that could look like a step function change [indiscernible].

Yes. I mean we certainly believe having optionality is one of the tools and levers to drive performance is going to be critical for us going forward. Now we've said this many times before, and we always like to clarify this, which is the freight market on Monday is completely different on Tuesday. It's completely different on Wednesday, meaning there's going to be some days where we can take demonstrable share and it's at the economics we want, and we do that. There's other days where the freight quality is just not there. And we'd much rather the competition take that share because it doesn't meet our standards, right?

And so what I would say is we now have one more tool. Now that we've established that baseline quality of earnings, the mid-cycle margins you referenced, 40% for NAST and 30% for Global Forwarding. Now that we've established that baseline quality of earnings, now we have one more tool to drive out growth. And so we do believe that will be a meaningful contributor to our outgrowth in future quarters.

I would think of it more as situational versus linear, right? I don't think you can say every single quarter, that optionality is going to yield, I'll make up a number, 100 basis points of outgrowth, right? As I mentioned, the freight market is quite different every quarter, every month, every day. But we do believe on a situational basis, it will add meaningful outgrowth to our performance.

And then just like the supply attrition we're seeing across our industry, obviously, you kept AGP a little flat [indiscernible]. But it is creating a bit of a near-term sort of friction, right, like [indiscernible].

Yes. I would say -- I mean I think we're in an elevated spot rate market for longer, right? I think if you just look at the fundamentals of the market, I would say we're in the early innings, and I'll get to the next tranche of why I think we're in the early innings. One is just -- I mean, a lot of capacity has left the market. The current regulatory environment is going to keep that capacity out of the market.

And so I think the elevated rates that we've seen, even though the rate of incline may slow down, I still think they're going to stay at an elevated level. And we believe our revenue management capabilities allow us to win incrementally in that type of scenario. You mentioned purchase transportation. We believe through that revenue management capability that I just spoke of that we procure freight better than anyone else in the marketplace.

So even though the cost is going up, our relative performance to the market on that purchase transportation, we believe, is industry-leading, which allows us to deliver flat AGP per load like we did in Q2. Now the other tranche of why I believe spot rates will stay higher for longer is what we've talked about around the legal environment, which is we mentioned post-Montgomery that there would be a consolidation of small- and medium-sized brokers and carriers in the industry. We think now the combination of Montgomery, plus Lipe, Lupus Superior is going to even exacerbate that even more, right?

And as the industry consolidates, certainly, Robinson will be a winner in that consolidation. And certainly, that consolidation will keep spot rates higher as well. So we think the fundamentals, as I just laid out, are a pretty solid recipe to keep spot rates higher for longer.

Well it's a very fragmented market. We don't get to see what's happening in the private side as much as you do. Are you seeing that already in terms of these consolidation opportunities?

We are. Yes, we are. Yes. It's on a couple of different fronts. We see small, medium brokers. First of all, as a fact, over 20% of brokers had kind of burned down in the last couple of years just on the macros of the environment. That's -- we've talked about that. We've seen a bit more of a spike on now some of the other issues that are hitting, be it headwinds on costs that they have to deal with. So we do see a bit of a spike on that. Ultimately, as Damon said, I think we'll see, potentially, small carriers could have some of those headwinds as well as there's some consolidation that could happen as we all continue to navigate this current environment.

Yes. And certainly, we're getting the signal from shippers, right? So shippers are certainly sending us a signal where they would have had many brokers before, they're certainly consolidating the number of brokers that they're willing to deal with, and there's certainly a flight to quality in that number of brokers that they're willing to move freight with.

So as we've said many times, we think shippers are certainly going to be part of this kind of reshaping of the brokerage universe because as the economics change, as the legal environment change, shippers are only going to want to do business with brokers that they feel like are going to be here to provide those services going forward and protect them from a legal perspective from some of these verdicts as well.

That kind of goes back to that earlier question you had on customers. That's the other thing. We provide is that cartilage, is that partnership, and it's that trust at scale for shippers. And I think that's as what Damon said, that's what shippers -- that's what we're seeing in that flight to quality right now.

In terms of asset base versus not, you're also hearing this from your peers that assets matter and shippers want to work directly with folks they know. But there's another line of thinking that maybe shippers are more inclined to work with brokers because they get that extra layer of protection before the carrier gets into the asset [indiscernible] in that shop. So are you seeing any sort of...

Yes, that question, this is how I would -- I'm afraid I'm not in the rooms of what the other folks are saying. We just -- I think we're pretty wise at Robinson on how we kind of look at things with data and everything. So assets do matter and brokers matter because commerce matters. And 30% of commerce is moved by brokers. And assets cannot move this alone, right, on doing things. And shippers go to brokers for a reason. We have, in our case, 75,000 customers or shippers that we deal with. We connect them with this 350,000 to 400,000 carriers that we have access to. That allows a lot of choice as well as topology and reach when you do that. And if you're an asset, you have advantages and you have disadvantages. And for a broker, we -- our reach is pretty extensive in doing that. And that's why both work in concert, really, to kind of move commerce. So I think both are needed. It's not just one.

Modern logistics does not work without brokerage, right? So if you think about the flexibility, the economies of scale, the economics that brokerage brings to the logistics marketplace, that was demanded by commerce, right? So if you think about it, you had a world of assets, right? Shippers and assets. So shippers' requirements and the requirements that assets couldn't meet created brokerage, right? And at the beginning, brokerage was 5%, 6% of the for-hire market. Today, it's 30% of the for-hire market. And if you look at the curve, we've been gaining share almost every single year for the last 20 years, and we believe that trend will continue. Just to reiterate what I said at the beginning, we don't believe modern commerce can operate without brokerage, right? We don't see a model where that assets absorb that capacity, right? We just don't believe that model works for modern logistics.

Can you say why you think that should be competing systems? And what do you think? Do you think there's a natural like it should be 50-50 or...

I think it is the superior model to move goods, right? So you're thinking you have the most access to capacity of any model out there and you have the most access to freight of any model out there. So your ability to move goods at the most efficient price exists. Now in early days, brokerage had challenges with service levels. Today, we don't, right? We can provide -- Robinson can provide service levels that equal the assets. So if you're a shipper and you can get the flexibility and the economics and the service level, right, and you have all the flexibility and optionality that brokerage brings you, why wouldn't you use that mode to move goods? That's what the curve tells you. And that's why brokerage continues to take market share in the for-hire market.

And I think when you say, "Hey, should it be 50-50 or where will it go?" I think the market will bear that, right? And so I mean it comes down to assets on their -- how much will they invest. And a number of assets are -- have stood up brokerages, right? Onto the -- so it's a reason that they stand up those brokerages because it is a model that works. But the market will bear what that percentage will be. And again, it's just been going kind of on this up and to the right curve from '06 to now. We just think that, that trend will not bend and go down and to the right for all the things that we've been talking about.

Yes, to Dave's comment, I think the best compliment that the assets can provide the brokerage is the fact that all your main assets have brokerages.

Yes. I think it's a great point because I often hear I love brokerage. The main benefit they bring is access to low-cost capacity. In fact, actually cost is driving the brokerages. Like you said, the service, the flexibility, and there's a lot more to brokerage...

And for us, we're a safe network. We're at scale. We have access to a lot of carriers, a lot of capacity. And I don't know if I'm buying into just this low-cost thing that, the data just doesn't prove out on that, right?

And make no mistake, small carriers is not equal unsafe carrier. That's not correlated, right? They're -- the vast majority of small carriers are very, very safe carriers.

Okay. Let's go back a little bit. You talked about some of the cost increases that your smaller peers are facing, insurance is one of them, very topical. I know you talked about your insurance renegotiations here. You seems pretty relaxed around prospects of that. And I think it's because of some of the results, you faced a lot of cost headwinds that you've done really good in terms of operating profit and all that. But yes, maybe you can discuss that a little bit more. Are you -- are some of these narratives we're hearing around like the multiples of insurance costs increasing true for some of your peers? And why do you feel like yours are not going to go up as much as the industry?

Yes. So I would say the extreme bear cases you're hearing around the high multiples of insurance going up. That is certainly not the discussions we're having preliminarily with our carriers. Do we think inflation is going to impact insurance going forward? Yes. But fun fact, it's been impacting insurance for the last 7 years, right? I mean, insurance has been inflating at pretty high clips for a very long time now. And so we don't believe the bear case on insurance inflation is going to affect C.H. Robinson, right?

Now to your point -- look, our confidence on how will we manage higher operating costs going forward, I mean, it rests in our operating model, right? I mean we are tasked with solving problems and offsetting headwinds every day of every week. That's just what we do, right? And if you think about 2025, we offset a $100 million headwind at the operating income level that the market generated, and we still exceeded consensus EPS that year, right? So absorbed $100 million headwind, still exceeded expectations, right? That's our mindset every single year, and we view inflation on insurance as no different, right?

As we've said before, insurance on a gross revenue basis is a very immaterial number for us. We do not believe this inflation is going to drive it to a material number for us going forward. And whatever that inflation is, we'll offset that and continue to deliver the results that we've been delivering. The other comment I would make is I believe that burden will only reside with brokers, specifically C.H. Robinson, for a brief period of time. Ultimately, that cost will become part of the freight rate environment. It will become part of every load we quote, and it will become part of the shippers' cost, and it will be passed on to consumers, right?

So we do not see a scenario where higher insurance cost is just a burden that ourselves will absorb 100%. Ultimately, like every other inflation, the consumer will ultimately pay the cost.

Shifting gears a little bit, moving our [ Q2 ], impressive contract versus spot [ and manage ] to do well your contract exposure increasing. Maybe talk about that and what you think of the spot market trends and the fact that more freight is settling in contracts, is it going to be a lot tougher, less telling basically just what's happening in the spot market.

Yes. Do you want to start?

Yes, I'll start. So this question is really important because there's a lot out there on doing that. I'll just tell you where we stand on here. Again, more of a -- we'd like to take a wise approach on this. And contract feeds transportation, 75% to 80% of contract is going to feed the loads that happen in there. Spot is necessary as costs go up as we know that.

In fact, we are winning at both. We have historical spot rates that we are winning, and we will continue to do that. But we also have, as we go into this repricing mode with our contractual book, we have a 93% acceptance rate within our contractual book. That means 93% of our customers that we work very closely with are accepting some price changes. Some go out to spot. And again, we compete there as well.

This is super important to understand because as spot rates begin to, say, level off or grow at a smaller slope, that contractual book is super important that you have to have because that's what's going to drive that. And then you'll see kind of that impact or if you're just counting on spot rates. We have a balanced approach in doing that, and it sets us up well for the future as well as today.

So we don't look at things in just a short-term valuation perspective. You have to look at this from a cycle perspective. And I think we're set up very, very well in winning in both contract and spot.

Yes. I would just add that it's like a balloon. If you squeeze it, air is going to go to one end, go to -- It's the same way with the spot and contract. So if you're winning substantially in spot, you're losing contractual loads. And more times than not, it's the same customer, right? And so there's rarely a relationship where you can forsake a customer on the contractual win in the spot and then come back to that customer and say, "Hey, like a contractual business." So when we hear, "Hey, we're killing it at spot," we hear you're losing contractual business. If you want to know why we're outgrowing the market the way we're outgrowing the market, I think it's comments like that, that fuel our outgrowth.

We're running out of time, so let's talk about your LTL exposure, another differentiated factor. Just how -- talk about your exposure to the market as changes happens at the market begins to recover. Do you have more outsized exposure to regional versus large LTL providers? Is it hard to secure LTL capacity from the marketplace or just risk of that...

Those are LTL business. It doesn't get the same attention that our truckload business does, but we think it should, right? I mean it is a well over $3 billion business and continues to perform extremely well. In fact, we've said if it was a stand-alone LTL business, be hard to say it's not maybe the top performer in the LTL space right now. It has performed that well. I think LTL has some favorable macro characteristics right now that are also beneficiary. Certainly, pricing is more elastic in LTL than it is in truckload. And so certainly, that allows us to capture more price and more margin as we win share in the marketplace.

I'd say our book of business is very diverse, right? It's enterprise customers, it's medium-sized customers. So I think we have a very diversified and healthy book of business. The other thing I would say is the fact that we have truckload and LTL allows us to optimize freight for whichever drives the best efficiency for our shippers and the best performance for C.H. Robinson, right? So we believe having LTL under the Robinson roof makes our truckload business better. We believe having our truckload business under the same roof makes the LTL business better, right? We can make trade-offs between those 2 modes of transportation that very few can, right?

So just to summarize that, we feel really good about the performance of our LTL business. We think it is really punching above its weight versus the stand-alone LTL carriers out there. And that business continues to take share and continues to drive really substantial margin performance as well.

Compared to some of the LTL providers like this TL freight that's moving back into the LTL, maybe 3PL is more involved than that's going the other way, right, like more consolidation of LTL versus in TL. Like is the weeding out going to be beneficial to you? Is it going to be more harmful to you? Like how does...

Well, the thing is for Robinson, it's always beneficial, right? Because for us, we're looking for what drives, as I mentioned before, the best value for the shipper and then what drives the optimal performance for C.H. Robinson. And for us, if that means sacrificing a truckload load for LTL or vice versa, as long as the performance is optimized for C.H. Robinson and the shipper gets what they need, we're happy, right? And again, we can make those trade-offs where the pure plays can't. And we believe that is a tremendous competitive advantage for Robinson.

Any questions on that?

Actually, I had a question. What support do you think you have in the business there, retail, how does it come back?

Substantial. So if you look at our operating leverage flow through in Q2, so 96% of our AGP dollars flow through to operating income in a quarter that I think we would most say was pretty muted from a market perspective. So, yes, we believe our operating leverage will be substantial when volume returns to this marketplace. In fact, we've said publicly many times, we think our operating leverage will rival the assets when the market returns to growth.

Okay. That was my second. That will be my last.

Thank you.

Yes. And reaching those mid-cycle margins is a big deal for what the team had to go through. With this set of conditions right here, that only gets demonstrably better. And it's not a linear curve. It's an exponential curve.

Yes. If you took a survey, would anyone believe 3 years ago that Robinson would have generated almost 41% operating margin in a quarter with a negative market and spot rates up over 30%? I think the survey would have been -- nobody would have said that would have been the outcome. So we're really proud of what the team has been able to do. We think these results are unmatched in the marketplace, and we're just getting started.

And more importantly, I think it proves the strategy that we've built, that we've been on this journey with, that you've seen since we started, is one that works. And we've always said it would work in the low, but it will definitely work in the high.

That's right.

I know we're up on time, but maybe bring it all together, talk about the strategy being really in AI strategy. We saw maybe more of a flow through on the GI side this past quarter. Just maybe what you're most excited about there and think about M&A, you're not slowing down, not kicking the tires, could be big scale, all of that, what's next in the evolution of C.H.?

For us, it's important that the community understand that we say what we're going to do, our say-do ratio in doing that. And all along, we said we were going to build a system that would perform the way that it's performing. In Global Forwarding, we said that, "Hey, we're going to drive back half of the year, you're going to start seeing an uplift in Global Forwarding as we start purposely taking what we did in NAS and applying it to Global Forwarding." That is indeed what you start to see within that business. We will continue to make that business more healthy, and it will punch above its weight. So we feel really good about Global Forwarding and setting the tone there in that industry.

So that will happen. You're right, we're going to continue to kick tires, but we're also going to be disciplined and measured. You can't have valuations that don't make sense. That's not who we are. We make sense in what we're doing. ROI is important to us in what we're doing. So we'll continue to do that. But we will also continue to invent, create, right, and innovate. And so we're going to be the disruptors in this industry, and that you can count on. Six months from now, Richa, it will be something else that we create and deliver.

And so Robinson is the play for you, and we're actually super excited about where we are right now. And we hope that you guys are, too. because we can always point to the results, no asterisks, this is it. And we've always said that, and we're going to continue to do that.

Yes. And capital allocation strategy has not changed post the light Lipe verdict. So we're still going to continue to evaluate opportunistic buybacks of our stock. We're going to continue to be inquisitive, right? So certainly, we closed on DeSpir Logistics in the quarter that we think is going to be a really nice acquisition. And as you mentioned, we're certainly not limited our inquisitiveness to just small tuck-ins. We'll certainly look at scaled options as well.

All right. Thank you.

Bye. Thank you.

Thank you.

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Second Quarter 2026 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, July 29, 2026.

I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, operator, 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 list 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 Investors 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 want to begin by thanking 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. These efforts contributed to the high-quality earnings we reported today. When I became CEO 3 years ago, we committed to delivering higher highs and higher lows across freight market cycles.

Our second quarter results are yet another example of delivering on that commitment. Despite being in the trough, of the freight market demand cycle with the cash freight shipment index declining on a year-over-year basis for the 15th consecutive quarter, we hit our mid-cycle operating margin targets in both NAST and Global Forwarding in Q2. We achieved this through disciplined execution of our lean AI strategy, which has enabled us to identify and remove waste and to automate manual processes in the quote-to-cash life cycle of an order.

The result has been evergreen productivity improvements of over 60% since the end of 2022 in both NAST and Global Forwarding. The execution of our strategy has also enabled us to build a scalable model with significant operating leverage, which contributed to the 20% year-over-year increase in our adjusted operating income. But our lean AI strategy isn't just about generating higher productivity.

First and foremost, it needs to result in better service to our customers and carriers. And our scores related to customer satisfaction are exceptionally strong. As we continue to purposely engineer our work to drive higher automation and industry-leading cost to serve and service to our customers and carriers that is better than ever.

We've consistently gained market share in our NAST business. Q2 was the 13th consecutive quarter in which our year-over-year NAST volume growth outpaced cash freight shipment index. Our team also continued to exercise our disciplined revenue management practices, while the North American trucking market reflected a period of significant supply-driven tightening.

This tightening caused our truckload linehaul cost per mile to increase 29% year-over-year, putting significant pressure on our contractual margins and we still delivered a truckload AGP per load that was approximately flat year-over-year. As we've said consistently, we're not immune to and increase the spot rates. But our revenue management disciplines and our improved price and cost discovery enable us to manage through spot rate inflections better than we ever have in the past.

In our Global Forwarding business, the team continues to help our customers navigate ongoing disruptions across global shipping networks, and they continue to implement the same revenue management disciplines that have been successfully deployed in NAST. Additionally, they are moving from manual reactive work that is dependent on manual handoffs towards automated workflows that are faster, more connected and easier to manage at scale.

While this journey is still ongoing, we're already seeing encouraging progress in several areas. And as a result, the Global Forwarding team delivered year-over-year productivity improvements of more than 15% in Q2 and achieved an adjusted operating margin, excluding restructuring, of 33.4%. Our ability to consistently deliver secular earnings growth over the last 2-plus years is a result of focusing on controlling what we can control and the strength of our lean AI strategy.

Lean AI is our unique disciplined approach to AI innovation that is transforming supply chains. It combines the principles of our Robinson operating model, rooted in lean methodology with the power of custom-built AI, and the expertise of our people to maximize value, minimize waste and drive better outcomes for our customers and carriers.

We'll continue to focus on providing differentiated service and solutions to our customers and carriers. Executing with discipline and improving our business model and our cost to serve. We're highly confident in our ability to continue executing on all of our strategic initiatives and the strategies that our team is executing are built to be effective in any market environment.

We're excited about the prospects for a possible return to a healthier demand environment. Our industry-leading cost to serve model is highly scalable and we expect it to strengthen further as we harness AI's capabilities to automate more of the quote-to-cash life cycle of a load. AI is changing the way the world works. We recognized that early on and embrace it as an important part of transforming Robinson into a different and better company. And we also recognize that it can amplify the expertise of our people and help them thrive in more strategic roles.

As the industry pay center for cutting-edge innovation, and differentiated solutions, we will continue to use our domain expertise to build technology that delivers on our customer promise and drives higher value for all of our stakeholders. And while we're pleased with our secular earnings growth over the past 2-plus years, our transformation is still in its early stages. We have significant runway remaining as we continue to strengthen the lean mindset and scale custom-built AI agents across the enterprise.

I'll turn it over to Michael now to provide more details on our NAST results.

Thanks, Dave, and good afternoon, everyone. I'm very proud of the team's execution in Q2, which again demonstrated our improved ability to offset the pressure of significantly higher spot rates on our profitability and displayed our ability to hit our mid-cycle operating margin targets despite still depressed freight demand.

Let's dig into everything that the NAST team accomplished in Q2. As Dave mentioned, for the 13th consecutive quarter, our total NAST volume outgrew the cash freight shipment index. Our focus on winning a higher percentage of contractual bids has been a primary driver of our sustained market share gains, and we expect they will continue to be going forward.

Similar to Q1, our contractual truckload volume grew year-over-year as a result of a higher win rate on contractual bids. Our mix of contractual truckload volume held sequentially at approximately 70%, but increased from 65% in Q2 of last year.

At the same time, multiple enforcement actions and events such as road check week have reduced the supply of carriers in the market and caused truckload spot market cost to increase sharply. Excluding fuel, DAT spot rates in Q2 increased approximately 34% year-over-year, up from approximately 19% in Q1. As a result, load-to-truck ratios and tender rejection rates remained elevated, which continue to create opportunities for transactional volumes at higher margins.

Equipped with stronger disciplines and tools, our freight experts effectively captured the right transactional volume at a substantially higher AGP per shipment compared to last year. Combined with an ongoing repricing of our contractual business to reflect the new market realities, we were able to offset the pressure on our contractual margins and deliver a truckload AGP per shipment that was flat year-over-year.

This is quite remarkable given the dramatic increase in spot rates and the increase in our contractual volume. It's also different than what we've been able to accomplish during historical spot rate inflections, which is a testament to our revenue management discipline and our improved price and cost discovery capabilities.

As truckload contracts continue to be repriced across the industry, we've seen improvement in contractual route guides and overall route guide depth decreased in Q2 versus Q1. Absent an inflection in freight demand, we expect this will lead to less transactional opportunities. This and the fact that 75% to 85% of truckload freight moves on contracts, is why continuing to win contractual bids is critical to sustainable market share growth, and we will continue to stay focused on the long game rather than chase short-term volume bumps.

While we did maintain our truckload AGP per shipment, our NAST gross margin percent did experience some compression in Q2. This was due to the sharp increase in spot rates and due to the higher cost of fuel, which is a pass-through cost in our truckload brokerage model. While higher fuel costs have a very minimal impact on our gross profit dollars in our truckload business, it does reduce our gross margin percentage due to the pass-through nature.

Similarly, while we were able to hold our truckload profit per shipment flat year-over-year, that profit level was on a higher revenue per load, resulting in the reduced gross margin percentage. Our contractual repricing activity is continuing into Q3 as spot rates are expected to remain at elevated levels and spike again during the Q4 holidays.

As I mentioned earlier, the NAST team outgrew the cash freight shipment index for the 13th consecutive quarter. Our total NAST volume grew 1.5% year-over-year compared to a 3.3% decline in the index. Our LTL volume increased approximately 2% year-over-year, while our truckload volume grew approximately 0.5% year-over-year, reflecting market share gains in both modes.

As truckload rates continued to move higher through Q2, some of what we refer to as bubble shipments, those that sit on the margin between LTL and truckload and had previously migrated to truckload during softer market conditions have moved back into LTL networks. Having leading solutions in multiple modes is a competitive advantage for Robinson. We'll continue to drive the best solutions for customers and move their freight in the most optimal way that fits their supply chain.

One of the keys to our consistent market share gains has been volume growth in key verticals that we specifically targeted. During Q2, we continued to deliver year-over-year truckload volume growth in the automotive retail and technology verticals. These results reflect the strength of our expanded capabilities that directly support these segments and evolving customer needs, such as our leading drop trailer, cross-border, expedited and short-haul capabilities.

In our more than $3 billion LTL business where we move more LTL freight than any other 3PL in North America, we delivered year-over-year volume growth for the tenth consecutive quarter, underscoring our sustained outperformance versus the broader LTL market. Our deep long-standing carrier relationships and proven ability to manage service variability at scale enables us to deliver reliable, high-quality service for customers. As a result, customers continue to rely on Robinson to reduce LTL complexity, improve service outcomes and lower costs.

Across NAST, we continue to expand the use of our proprietary digital capabilities, giving our freight experts faster access to actionable data and AI-powered tools so they can make better decisions and capture the optimal freight for our business. Those digital capabilities also enabled us to continue delivering double-digit increases in NAST shipments per person per day with a 15% year-over-year increase in Q2 and a greater than 60% increase since the end of 2022 in shipments per person per day measured across the entirety of our NAST organization.

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.

Looking ahead to Q3, market volumes are typically comparable to Q2 with the 10-year average of the Cass Freight Shipment Index, excluding the pandemic impacted year of 2020, reflecting a 0.2% sequential volume decline in Q3. On a year-on-year basis, we expect to continue outperforming the market index. Truckload spot rates are expected to remain elevated and we're now forecasting a 34% year-over-year increase in dry van spot rates for the full year, up from 17% only 3 months ago.

As we look forward, we will remain focused on what we can control. and we will continue to deliver industry-leading solutions and flexibility for customers and carriers. We also continue to appropriately exercise our optionality on a monthly, weekly and daily basis to pivot toward volume or margins as market dynamics evolve, making disciplined data-driven adjustments in order to optimize for the most effective combination that drives earnings growth and long-term value creation.

Our people and their unmatched expertise enable us to deliver exceptional service, create greater value and drive sustained improvement. We remain in the early innings of our transformation journey with significant runway for improvement still ahead.

With that, I'll turn it over to Arun to provide an update on the durable advantages of our lean AI strategy.

Thanks, Michael, and good afternoon, everyone. Last quarter, I shared some of our thoughts on why we believe our approach to AI is differentiated. We call it lean AI because it impairs our AI transformation with our proven lean operating model. What further sets us apart is that we own our application layer. We have a builder culture supported by more than 450 in-house engineers and data scientists and our AI agents are powered by proprietary data, deep logistics expertise and an engineered context layer that simply cannot be purchased or built overnight.

Today, I want to focus on how those advantages enable us to continually operationalize and scale innovations across our business. This is not about automating tasks or taking people out of the process. It is about fundamentally improving how work gets done, raising the level of service we provide to our customers, and improving the quality of work and experience for our employees. All are enabling the business to scale more efficiently and drive sustainable operating performance in any market environment.

A critical element of our strategy is that we don't just treat AI as another tool. We make it part of how we run the business. The company is creating lasting value from AI are not experimenting at the edges of their business or chasing the latest technology. They own it and AI becomes part of the foundation of the business operate on. At C.H. Robinson, we own the application layer, and we embed our AI agents directly into the workflows across our [indiscernible] life cycle, pairing them with the same disciplined operating model that has driven our broader transformation and measuring their success by the outcomes they deliver. Our AI strategy has already shown up to sustain productivity gains of more than 60% since the end of 2022, margin expansion and consistent market outperformance.

But the benefits also go well beyond productivity. It's also improving decision-making, expanding revenue opportunities and enhancing the customer experience. One of the most important investments in scaling AI is autonomy lean structure, and this is where our lean operating model is a crucial role. It acts as the guardrails of our AI framework, enabling our technology to generate real results pointed at real problems.

Our agentic AI is not designed to improvise or operate without boundaries. We have hundreds of AI agents trained to perform very specific jobs across the shipment life cycle. We defined responsibilities pure guardrails and access to the operational context needed to do those jobs as well.

By design, this reduces the risk of experimentation keeps the system focused on the work that is intended to do and allows us to scale AI with confidence. Humans remain in the loop where judgment, exception management and customer nuance matter most. The result is a system that is tailored, controlled and grounded in real logistics operations.

As I've said before, AI is only as valuable as the data, context and workflows winded. So supply chains are dynamic, fragmented and highly interconnected, which makes them one of the most challenging environments for AI to operate effectively.

It is also what makes C.H. Robinson's position unique. We are not applying AI from the outside looking in. We are building it from within the daily reality of global logistics at scale. That real-world foundation enabled us to launch the world's first close loop agentic logistics system designed to operate a global supply chain autonomously while continuously improving. In our 4PL Managed Solutions business, our new technology called Lean AI engineer works in concert with our [indiscernible] planner to create one connected system that uniquely enhances our supply chain as it runs.

The lean AI engineer can assess an entire supply chain in 25 to 30 minutes and determine improvements before performance was impacted. Compared to supply chain assessments that typically take up to 4 weeks and look backward at what has happened and sort of what should happen.

While the lean AI engineer delivers intel, the lean AI planner manages shipments through hundreds of interconnected AI agents, and in turn, leads more data back to the lean AI engineer developed business model refinements. So those capabilities are embedded directly into customer workflows, the outcome is faster decisions, smarter execution and better performance even as complexity increases.

Global Forwarding is another example of our lean AI strategy in action. The first half of 2026 in Global Forwarding has been about making a deliberate shift in how work gets done across the network. We are simplifying and standardizing workflows, engineering the necessary context and developing AI-powered capabilities that we deployed at scale.

Across Global Forwarding, we are rolling out AI-powered automation designed to reduce [indiscernible] effort improve data quality and enable our teams to focus on higher-value work. These capabilities connect activities that have historically been manual and fragmented. They allow work to begin earlier information to move more accurately and potential issues to be identified sooner.

That enables our teams to operate more proactively and creates a faster, more consistent and more predictable experience for our customers. Importantly, the objective is not simply to remove work. It is to improve the work. For our employees, this means spending less time on repetitive and reactive activities and more time applying their expertise to complex problem solving, managing exceptions and strengthening customer relationships.

It also means giving them better information and workflows that make their work more efficient and rewarding as they operate in one of the most complex environments in the world, supply chains. We are delivering real tangible results that demonstrate our approach to AI is not to variable, and we are still in the early innings of our lean AI transformation with substantial runway across NAST and Global Forwarding.

As innovations move into broader deployment as we continue to combine our proprietary data, engineered context, logistics expertise and lean operating model we can continue to widen our competitive moats and deliver better outcomes for all our stakeholders.

With that, I'll turn the call over to Damon for a review of our second quarter results.

Thanks, Arun, and good afternoon, everyone. Our Q2 results demonstrate again how disciplined execution and our Lean AI strategy are driving secular earnings growth, and meaningful progress against our strategic priorities, including market share gains, gross profit optimization and improved operating leverage.

Despite continued macro environment pressure in Q2, with the cash freight shipment index down 3.3% year-over-year. Total revenues increased 19.3% and AGP increased 6.5% year-over-year. This was due to NAST continued outperformance versus the index, higher pricing in NAST and Global Forwarding and improved profitability in all of our business segments.

For the total company on a monthly basis, our AGP per business day compared to the prior year was up 9% in April, up 7% in May and up 3% in June. However, on a sequential basis, our absolute amount of AGP per business day increased each mark, primarily reflecting an improving trend in Global Forwarding throughout the quarter.

Turning to expenses. Q2 personnel expenses were $338.5 million, including $8 million of restructuring charges related to workforce reductions. Excluding restructuring charges, our Q2 personnel expenses were $330.5 million, down $1 million or 0.3%, primarily due to our continued productivity improvements and cost optimization efforts.

The benefit of those efforts was partially offset by higher incentive compensation and alignment with our strong results. Our average head count was down 10.8% year-over-year in Q2 and was down 2% sequentially, illustrating how we continue to decouple head count growth from volume growth, while growing volume. Due to an expectation that our people will be rewarded for our strong 2026 performance, we believe that higher incentive compensation will push our 2026 personnel expenses towards the higher end of our range of $1.25 billion to $1.35 billion.

This includes an expectation that incentive compensation will be higher in Q3 and lower in Q4, in line with our sequential earnings trend and seasonal demand trends. It also still includes an expectation that we will continue to generate double-digit productivity improvements in both NAST and Global Forwarding as we continue to implement agentic AI solutions across our quote-to-cash life cycle of an order.

Our Q2 SG&A expenses totaled $143.8 million, excluding a $0.5 million net gain driven by the favorable termination of an operating lease. SG&A expenses were up $2.7 million or 1.9% year-over-year, primarily due to increases across several expense categories. Based on our first half execution and greater visibility into the remainder of the year, we are narrowing our SG&A range by $10 million and now expect our 2026 SG&A expenses to be in the range of $540 million to $580 million, compared to our prior range of $540 million to $590 million.

Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact. Within the revised SG&A expense range, we now expect depreciation and amortization to be towards the lower end of previously stated range of $95 million to $105 million for the year.

As Dave mentioned, both NAST and Global Forwarding achieved their mid-cycle operating margin targets in Q2. This is the results of our Robinson operating model and lean AI strategy at work, which has created greater operating leverage in our model. In Q2, this manifested itself in a 96% incremental operating margin with 96% of our year-over-year increase in AGP falling to our adjusted operating income.

By segment, NAST expanded its operating margin, excluding restructuring costs by 280 basis points year-over-year to 40.9%. Global Forwarding expanded its operating margin, excluding restructuring costs, by 470 basis points year-over-year to 33.4%.

Moving below operating income. Our effective tax rate for the quarter was 21.5% and we are maintaining our tax rate guidance of 18% to 20% for the full year. That said, I'd like to provide some additional color on the tax rate for the next 2 quarters.

In Q3, we expect our effective tax rate to be similar to Q2 or slightly higher. And in Q4, we expect our effective tax rate to be lower due to incremental tax benefits from stock-based compensation deliveries that occur in the quarter, similar to Q1.

Turning to cash and our balance sheet. We generated $35.9 million in cash from operations in Q2. Cash flow was negatively impacted by the significant increase in freight rates, which caused our receivables balance to increase substantially, driving up our net operating working capital.

Our capital expenditures were $18.2 million during the quarter, and we are lowering our 2026 capital expenditures expectations to be in the range of $65 million to $75 million down from the previous range of $75 million to $85 million.

We ended Q2 with approximately $900 million of liquidity. Our financial strength continues to be a key differentiator in our industry, giving us the ability to invest throughout the freight cycle to further enhance our capabilities and to return capital to our shareholders.

Our net debt-to-EBITDA ratio at the end of Q2 was 1.64x, up from 1.32x at the end of Q1. As we opportunistically deployed capital for share repurchases and strategic M&A investment. While our capital allocation strategy remains grounded in maintaining an investment-grade credit rating, our balance sheet strength enabled us to return $301.3 million of cash to shareholders in Q2. This represents an increase of approximately 88% compared to Q2 of last year and includes $226 million of share repurchases and $75.3 million of dividends.

We also allocated $79 million of capital for acquisitions in Q2, including the acquisition of the DeSpir Logistics in June. DeSpir brings differentiated expertise in premium transportation solutions for high-value freight, which when combined with C.H. Robinson scale, we expect to deliver superior results for our customers, carriers and shareholders. We will continue to deploy capital in a disciplined manner, investing in high ROI organic initiatives returning capital to shareholders and pursuing strategic M&A opportunities, all aimed at maintaining a high quality of earnings for all of our stakeholders.

Based on our first half performance, we remain confident in our ability to achieve our 2026 operating income target within the range that we raised in October of 2025, which is on Slide 17 in our earnings presentation. That range was originally based on an assumption that market volume growth would be 0% to 5% in 2026, which seems increasingly unlikely, given that the Cass Freight Shipment Index was down 4.7% in the first half of 2026.

But the consistency of our disciplined execution and continued progress in growing market share, optimizing gross profit, improving productivity, and expanded operating leverage reinforces our confidence in both our operating model and our path to achieving our 2026 target. We have strong conviction in the strategy we are executing and in the intrinsic value of the business. There is tremendous runway for improvement ahead. And our operating model, our technology and our people continue to differentiate Robinson and widen our competitive moats.

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 continued to deliver higher highs and higher lows from the disciplined execution of our strategy. In an industry where disruption is constant and agility is essential, our differentiating lean AI gives us a unique ability to create new ways to solve complex challenges at scale, helping our customers build supply chains that are smarter, faster and more resilient.

In my first 3 years leading this company, I'm proud of the progress we've made to transform C.H. Robinson into the global leader in lean AI supply chains. And I want to thank our people for embracing the culture shift that has fundamentally changed this company.

With our lean operating model, our commitment to continuous improvement and our AI innovation is at the core of our transformation, I continue to be even more excited about what we believe we can deliver in the coming years.

The strength of our strategies, our technology, our people and our operating model disciplines are differentiating and sustainable in any market environment, including an inflecting spot rate environment like we've seen recently or eventually an inflecting demand environment.

Finally, I want to address the evolving legal environment regarding trucking accidents. These accidents are tragic. And every loss of life on our nation's highways is one too many. But acknowledging that a terrible tragedy occurred is not the same as having caused it. Last week, a jury in Texas issued an advisory verdict that we strongly disagree with and we'll immediately appeal if the jury's verdict is entered as final.

C.H. Robinson did not act negligently and should not be held liable in this case. The carrier safely delivered nearly 270 loads for our customers, and they held the highest rating from FMCSA when we selected it and after a federal review of the accident. The carrier is an independent motor carrier and the driver worked for them. C.H. Robinson does not employ drivers.

Safety is core to how we operate and always has been. We go beyond federal requirements and apply multiple layers of safety and risk criteria that we continuously reevaluate and strengthen. The extreme nature of this verdict means it is even more imperative that Congress and the federal government act with urgency to establish clear and proper accountabilities across the transportation industry that enhance highway safety, and support the uninterrupted flow of goods across the United States.

Events like this also reinforce why scale and financial strength matter. Customers and carriers rely on and benefit from providers like C.H. Robinson that have the resources and financial stability to manage complex legal and regulatory environments, while continuing to invest in service, technology, safety and compliance.

These verdicts also highlight the risk shippers take on when purchasing freight services and underscore the value of working with a provider that helps manage that complexity. Reducing risk in customers' transportation networks is an important benefit of the solutions we provide.

As we uphold our standards, we will continue to lead with purpose and move with urgency to disrupt ourselves and the industry, and we expect to drive sustainable outperformance, profitable growth and long-term value for all of our stakeholders.

That concludes our prepared remarks. I'll turn it back to the operator now for the Q&A portion of the call.

[Operator Instructions] And our first question comes from the line of Tom Wadewitz with UBS.

Yes. [indiscernible] see. And congratulations on the good results and progress. I wanted -- I guess I've got two. So I guess first on just the way that things are developing in NAST. Michael, I understand the comment of focus on contract and business that, that's kind of more sustainable, maybe more longer-term way to grow.

But I guess I'm surprised there isn't maybe more opportunity for you to see a participation that is stronger in spot just because the market has gotten so tight. And also, I think your investment in systems and AI and customer connections, it seemed like that would make it is fairly seamless for you to do that.

So I just wanted to see if you could offer some thoughts on maybe why that doesn't come through in terms of stronger spot and that would maybe also help your what the gross margin or GP per load looks like?

And then the second one would just be like, I know, Dave, you offered some perspective on the jury verdicts, but are there any things you can -- other things you could point to that would say hey, this would help investors to better understand the risk or what could help people to see that risk being reduced.

Just what could give us more visibility on how this plays out? Is this really a waiting game for the appeals process and for more information that unfortunately could take a while through the courts? Or you think there's like something we might get from the government from FMCSA that would be -- maybe provide some more clarity and help you as you move through that.

Tom, thanks for the question. This is Michael. Maybe I'll clarify some of the comments because I think it's important.

We certainly feel good about our position in the contractual space, and we continue to win business in that space. And I'm really proud of how the team executed that work in Q2. But we absolutely participate and feel really good about our transactional performance in the quarter. And so, our transactional performance was significantly up year-over-year. It's significantly up sequentially from Q1 to Q2. But as the Cass Freight Index shows, there's still not a lot of demand growth in the marketplace.

And so as companies like ourselves repriced contracts that was necessary in Q2, that naturally starts to raise acceptance levels and then a number of transactional loads in the marketplace does lower as repricing continues.

And so I think it's super important. We feel really good about our transactional performance in Q2 and feel like we are -- our win rates in that space are healthy and really focused on that optionality of winning the right freight with the combination of our contractual business.

Our comment was more specific to the fact that longer term, especially in a marketplace that's still supply-driven in terms of why rates are up. It's important that we continue to win share in the contractual space if we're going to see long-term market share outgrowth. But we absolutely take advantage of the T space, transactional space and did so in Q2 at levels we're very proud of.

And Tom, I'll just add to that discussion before Dave jumps on is, look, as Michael mentioned, we feel very good about our spot market wins -- we feel very good about our contractual market wins. As Michael mentioned, we're in this for the long game, right? We're repricing our book for not just 1 quarter or the next quarter, right? But for the next 6, 12, 18 months of contingent market share gains at accretive pricing.

What I would tell you is different about us, and I think a lot of companies we compete with is we're making good margins in the contractual space. With our revenue management capabilities, the way the team is managing this squeeze, I think you're going to see sustained repricing and profitability efforts at Robinson that you see nowhere else. And certainly that you haven't seen from Robinson historically.

Tom, this is Dave. Thanks for the call out on the quarter. Really proud about what the team did. Tom, I'm going to go a bit deeper, give some more color to your question is I feel there might be others that have a version of the question that you add. So I'll go a little bit deeper and give you guys some color on here.

First of all, we really believe this case was decided based on emotion rather than law. We believe the law and the facts support our position and we strongly disagree with the jury's verdict in this case, as I said previous. I mean if the jury's advisory verdict has entered as final, we will immediately appeal and we are very confident in the facts and the law on appeal.

It's important to note the carrier, in this case is an independent multicarrier. They worked with many brokers and shippers and the driver work for the carrier, not C.H. Robinson. He did not communicate with C.H. Robinson, and we did not supervise, direct or control his actions. The C.H. Robinson does not employ or control drivers. A carrier only having $1 million in insurance doesn't make our brokerage company with a strong balance sheet, liable.

Now based on the facts of this case, we and our insurance carriers were not willing to settle based on the plan of attorneys demands. We and our insurance carriers who had a pellet counsel present at the proceedings expect to be successful on appeal. Since this is an ongoing legal matter, we're not going to discuss any other details of this case or our defense, but a jury's advisory verdict to your question, is only 1 step in the legal process. The advisory verdict does not determine what C.H. Robinson will ultimately pay, if anything.

Any final outcome remains subject to post-trial motions, appeals and other legal proceedings. We're also not going to get into the details of our legal document as I'm sure there are some questions there. C.H. Robinson has been named in court cases in a normal course for many years, and we've successfully defended ourselves against many negligent hiring and vicarious liability claims, and we expect to continue doing that.

And I'm sure many of you have talked to our competitors, both brokers and asset-based carriers and shippers in the industry. One thing I want to make clear is that as much as the whole industry tries to be safe, as much as we all work to continuously improve our vetting, there will inherently be trucking accidents. Nuclear verdicts such as this, our transportation issue overall. Not just a Robinson issue, not just a brokerage issue, it's an issue for all transportation providers and shippers.

Now nuclear verdicts like this one are the new normal. And by the way, I don't think that is the case. The move -- there'll be an impact to 3 key things: the movement of goods will be substantially impacted within the country. Service levels will be significantly impacted. And of course, the cost of transportation will certainly sore.

But while risk grows from more complex industry, and you can see that, we're super confident in our scale, our technology and expertise and as stewards of the industry, in our ability to adapt and deliver solutions for our customers and all our stakeholders. And I think we've shown that today in the outstanding results that the team have done.

So I appreciate the questions, and I wanted to just add that color and I may answer some of the other questions that were on there.

And our next question comes from the line of Jeff Kauffman with Citizens.

And congratulations on a very challenging environment. David, I just wanted to kind of hop on some of your comments earlier. -- you've come in, I can't believe it's been 3 years already and just brought in a great team and just have been very successful in fixing maybe what needed to be fixed in a tough environment. what pivots do you think are necessary from where you are today to accommodate the types of growing environment that may lie ahead of us.

Yes, Jeff, thanks a lot, and I appreciate that call out. From a -- when we started this 3 years ago, and you're right, I can't believe it's been 3 years. We started off with a strategy. And that strategy was real simple. It was go and grow market share, expand margins and do that with an operating model and discipline and just drive our say-do ratio higher.

And I think we did that and we continue to do that. and we continue to get stronger. And right now, I'm really happy with where we are, but more so where we're going. As much as it's been really fun and successful, Jeff, in the past 3 years. I can tell you, we have a whole lot of grass to cut. It really is early innings. And the difference in the company right now, we continue to learn and drive our lean prowess, our technology prowess. It continues to be early days. The things we see on the docket and what's coming forward are really exciting at Robinson.

So growth is part of that strategy. And I think, hopefully, you're seeing that quarter-after-quarter and we continue to show that. And this quarter was no different in showing what we continue to do and what we continue to expect to do.

And our next question comes from the line of Ken Hoexter from Bank of America.

Dave, thanks for the rundown. I think a solid kind of feedback on the process for the courts and what we can expect. I don't know if there's any -- I think the one thing you missed was, if you can say anything, is a time frame or anything just to help people out.

But I guess, Damon, you had previously mentioned maybe some more M&A was part of your thought process. I think you had an acquisition you announced. Does this give you pause, given the ruling until appeals are done to ensure what you buy or that there's no unforeseen liabilities? Do you need any kind of standard setup before this? Or is it still full throttle from your point of view in terms of how you commercially attack the market?

Yes. Thanks for the question, Ken. I'll start here. No, I would say our capital allocation strategy has not changed, and this verdict does not influence that that strategy and certainly, a large portion of that strategy for consideration is M&A.

And so you mentioned the acquisition that we closed on in the quarter being DeSpir Logistics. As we've mentioned and that one fits perfectly in our strategy, right? We mentioned that one of our target areas for M&A is to acquire niche tuck-in companies that have incredible capabilities -- but yet we -- I would say they're underscaled, right?

So you can take that incredible capability, you put Robinson scale behind it. We think that creates a tremendous amount of ROI and benefit. And certainly, we're very excited about being able to demonstrate what we can do with the DeSpir Logistics, right? We've also said that, look, we're looking at larger acquisitions as well, and that's still part of our strategy.

Now the thought that's on everybody's mind is one I'll just address, which is certainly as part of our due diligence. We go through every legal docket of any potential acquisition target, get comfortable with that docket and certainly take any provisions in the process related to that docket. So we'll certainly execute that diligence with any deal we do. But make no mistake, right? This verdict, as Dave mentioned, we feel very good about the law in this verdict. We feel very good about the facts of the case on this verdict, and we feel very good about the appellate process.

And so to summarize, it does not at all change our capital allocation strategy nor does it change our focus on M&A?

Yes. Ken, just to put a bow on that, you asked about timing and I'm glad you said that's the only thing I missed it. But listen, these things -- there's judicial discretion on the timing of post-trial motions. And this could be years from an appeal perspective because there's various stages of appeal as well.

And so that's what I would say on that. It's -- and hopefully, that's helpful.

And our next question comes from the line of Bascome Majors with Stephens, Inc.

This quarter, you hit your target mid-cycle margins in both the segments. You've talked about what you get there or pass their sort of metaphorically turn the knobs and starting to focus more on volume as a lever to grow gross profit. Are we there yet? And if not, what metrics or performance or market conditions are we looking for to get to the point where volume becomes a vigorous part of the growth story.

And maybe related, when we get there, how do you measure success of that strategy internally? And how should we think about measuring it from some of the public data that we can see?

Yes. Thanks, Bascome. Appreciate the question. Look, I would say we are there, right. Now as we've mentioned, it is optionality, which means the market conditions, the freight conditions dictate when we apply that optionality, right? And so we've been very clear that this is not something that on a ratable basis is going to have kind of an equal up and to the right graph, right, is when we see freight conditions that justify getting aggressive on price to take share that we want and desirable freight that we want. Now that we're above that threshold, specifically on NAST, we'll execute that strategy, right?

But as we've said many, many times, and again, I think this is a different philosophy than how this industry and quite frankly, even C.H. Robinson has operated historically. Freight is different every day, right? What was -- there's a certain percentage of desirable freight on Monday, and that percentage changes on Tuesday, just based on the dynamics of the freight market.

And by putting that optionality in place is we're not going to put ourselves in a box to hit an artificial target, we don't need to define or hit, right? What we have committed to is we will use that optionality above those targets that we've now achieved to drive incremental earnings growth and incremental return for our shareholders, right? It gives us now one more weapon in our toolkit to drive earnings growth, right?

And I'd argue before we got to those margin levels, right? That was one constraint that we had. Now that, that constraint has been achieved, and we believe that is a sustainable level of margins. Right now, we have one more weapon that Michael can use in the NAST business to drive growth, right?

And so I would say, as we continue to execute the strategy, we'll certainly comment on areas where we've used that optionality and where we have it. But I don't know that there's a specific metric other than just what we've continued to demonstrate, which is earnings growth and market share outgrowth.

I think my last comment, and I'll see if Michael has any color here is I think the thing that gets missed with our outgrowth is that it's been for 13 consecutive quarters. And we've done that for 13 consecutive quarters, while growing earnings over that same period of time while expanding operating margins over that same period of time, while delivering demonstrable productivity over that same period of time, right? And we believe that recipe of the outgrowth that we're generating, the productivity we're generating, the revenue management capabilities that's driving accretive price and cost of transportation advantages.

We think the combination of all of those things is what makes Robinson special, right? The outgrowth is just 1 piece of those. But I think when you compare us versus others, it goes well beyond 1 quarter, right? Find somebody else that's outgrowing the market for 13 consecutive quarters. I think that's a pretty tall bar to climb.

Yes. Bascome, this is Michael. I'll just I think from my perspective, I'm just really proud of how the team handled what was a unique quarter in terms of a significant cost increasing marketplace almost exclusively supply-driven, right. As the Cass Freight Index showed, you still had a declining marketplace, but we showed out growth and actually positive year-over-year growth in both modes. Doing so while navigating a version of the squeeze.

And so the team repriced significant business, getting our route guides back into position of positive growth as well as taking advantage of a transactional marketplace that we took advantage of where we could. And so feel really good about being able to deliver all of those things and then deliver the mid-market or mid-cycle targets while cost was up 30%.

And so I think it's important context, I think, is something that's really important in a quarter like this and just super proud of what the team accomplished during a very difficult external environment.

And just to mention, the company has decided to extend the call by a few minutes beyond 6:30 p.m. Eastern Time. And our next question comes from the line of Scott Group with Wolfe Research.

Damon, just a couple of things for you. I didn't see the $6 number in the slide. Just any comment there. You mentioned 3% gross profit growth in June. Is that you think like a good run rate to use? Or with contract accelerating and not maybe leveling off, do we see sort of a more -- do we see a reacceleration in net revenue growth?

And then maybe just along those lines, like any like LTL up 22% truckload flat, like why such a big divergence? And I don't know, any thoughts there? I know there's a few things. Appreciate it.

Yes. I'll try to remember them all here, Scott. So let's talk about the monthly sequence because as you know that we've commented on before, which is, look, we don't -- and we don't recommend you spend a lot of time trying to do the math on the monthly sequence, right?

I mean at the end of the day, monthly sequential performance does it mean that it's going to continue into the next quarter, right? It is a data point, but it's just that it's a data point. And every month is not the same. And certainly, 1 month exiting 1 quarter doesn't mean that, that trajectory continues into the first month of the next quarter. So -- take it as a data point, but I wouldn't take it much beyond that.

Related to our 2026 operating income target. I think what -- the key takeaway from our update is that we've kept the same operating income range of $964 million to $1.04 billion. I think the key difference is, if you remember, the lower end of that range was based on market being flat, right. The high end of that range was based on 5%.

What we've updated in our revised slide is now that we're committed to the low end of that operating income range on a market at minus 3%, right? And that is on the back of generating another $40 million of self-help initiatives that did not exist when we entered this year.

So I think the key takeaway is certainly, the math will get you to an EPS number. But the key takeaway is we've committed to the same operating income range, but with a quite substantially different backdrop from a market perspective, now being able to achieve the low end of that range at minus 300 basis points of market contraction versus the requirement that being flat when we originally set the updated target.

Yes. And then thank you for the question on LTL. Great to get a question on that group, who've done just incredible work over the last several years.

Really, it's a combination of a couple of factors. We mentioned the pass-through nature of fuel in truckload where LTL, you tend to see benefit on LPL margins as fuels go up, not just ourselves, but you see that with the LTL carriers as well. So the higher cost of shipment in LTL, we certainly benefited from -- secondly, I'd say we showed market outgrowth as well as some really strong performance in key verticals of landing customer business that we're really proud of.

And then the last part is just there's a mix of kind of more standard LTL shipments and complex shipments, and we saw some growth in some of our larger complex businesses that have a bit higher margins in that business. So I feel really good about our LTL performance in the quarter. But to be honest, we feel really good about that team and what they've produced for the better part of, as we said, 10 quarters in a row of positive volume growth and feel really good about where we're heading.

Yes. Scott, I'll just put a bolt what Michael said. We've said this for a while now, right? Having both truckload and LTL capabilities is a significant competitive advantage for C.H. Robinson both external to our customers, but it also allows us to optimize performance between those 2 modes to generate the ultimate performance for C.H. Robinson, right.

So having 2 businesses of the scale and the performance nature of both our truckload and our LTL business, we think combined, there's really a synergistic benefit of having both of those modes under one roof.

And our next question comes from the line of Jonathan Chappell with Evercore ISI.

Damon, when you first laid out the operating income target bridge, you were speaking to Global Forwarding kind of going back to the cycle lows of late '23. Here you are hitting these mid-cycle margin targets already with an EBIT contribution from that business that's much stronger than what we had anticipated a couple of years ago.

So the question is basically how much of that improvement in Global Forwarding is C.H. specific, that's sticky through cycle versus had did you get a lot of help with a rising container ship market environment in ocean with stronger air. And as we think about the progression through the rest of this year and even into next year, do we kind of extrapolate what that business did in 2Q? Or is there some kind of market reversion so to speak, that maybe lower the EBIT levels going forward?

Yes. Thanks for the question, Jon. What I would say about our Global Forwarding businesses, that business is performing at an extremely high level, right? And it has been performing at a high level for a while, right? And it's performing at that level on the same basic principles of why NAST has achieved the performance it's achieved related to just unlocking the lean AI toolkit, the lean principles, the continuous improvement mindset as well as the productivity that we've generated in that business on the back of the lean principles.

I'd say what we're really excited about and what we've talked about for a while now is Global Forwarding is now starting to use that same tech stack that NAST has received so much benefit from, right? And that certainly will touch revenue growth that will certainly touch revenue management capabilities and pricing, and that will continue to aid our productivity.

So I would end my comment with saying we think the margins we've demonstrated, and I'll just say that mid-cycle margin at 30%, we think that is a very sustainable margin and profitability level for the Global Forwarding business.

And our next question comes from the line of Stephanie Moore with Jefferies.

Great. I guess maybe one follow-up questions to some of these questions in the Q&A. So as we think about maybe the post Montgomery world and -- and maybe what seems to be -- what could be increasingly higher nuclear verdicts or other is verdicts coming maybe more negative towards C.H. Can you talk a bit about what this could mean from an ongoing insurance as well as legal costs that you could face and what protection you have currently and how we should think about how that could change going forward? So just on quite a clarification there, then I do have a follow-up.

Yes. So Stephanie, I'll start and certainly jump in here if you want to. Look, first of all, I would just state by saying we don't think this nuclear verdict is unique to C.H. Robinson, right? As Dave mentioned earlier, if these are the type of verdicts that are going to be pronounced, right, they will happen to others, right? Brokers and assets alike, right? There's nothing unique in this case. That is unique to C.H. Robinson, right?

So as Dave kind of ended his opening statement. If you think about the facts of this case, there is nothing unique to C.H. Robinson. And we do believe this is a transportation industry issue that has to be dealt with, not a C.H. Robinson issue.

As it relates to go-forward operating cost related to insurance, certainly, we know insurance is going to inflate year-over-year. Now as we've mentioned, we're on a calendar year as far as insurability, we are covered through the end of 2026. We are just now starting to have preliminary discussions with the various insurance carriers that we deal with on insurance coverage.

But as we've said before, look, higher insurance cost is just another headwind, right? We get paid to solve problems and headwinds every single day, every single week, every single month. Higher insurance cost is just another problem we have to go solve, right? And we're confident as a business that higher insurance costs will not derail or impede the progress that we've had in our lean AI journey, right?

And so again, it will affect the industry. It will affect us. We'll solve that problem like we solve many other problems, right? As we've mentioned historically, our insurance stack has been, I'd call it, more like an asset carrier than a broker historically, right? And we think certainly that prudence that we've had around risk management is going to make this transition into a post Montgomery world, an easier transition than, say, a broker that has very de minimis insurance, right?

We feel like, again, our insurance coverage today is more like an asset provider than it is a broker. And again, we'll make that transition an easier transition than somebody that's coming from a much lower base.

And our next question comes from the line of Richa Harnain from Deutsche Bank.

First, I'm just going to echo someone's comments earlier, I thought the discussion around this case is pretty comprehensive and helpful. So thanks for all the information.

But just a quick follow-up. Just on the time line. You mentioned that this was an advisory verdict, and we'll see if it's entered as final. Just curious on like the time line for that when we find out if it's entered as a final judgment or not, and it has to go through the appeals process.

And then maybe just beyond that, I wanted to talk more about gross margins. They did step down sequentially to 13.1% from 14.6%. Michael, you said a lot of that was maybe fuel related. I'm just curious how much. And then taking a step back, in the early stages of a truckload recovery cycle, you do see this type of margin pressure in your model, see your credit, you've largely avoided that dynamic so far. But if we think about the positive reset from here, [indiscernible]. I hear your comments. The renewals we see at C.H. maybe won't be seen elsewhere. But is it just going to take longer given the uniqueness of the cycle being supply-led to kind of see that? Or could we see gross margin begin to move higher as we progress through the back half of the year or into early 2027?

Richa, thanks for the call out and the question. Listen, just real quick on that timing. Again, and I'll repeat this, the judicial discretion on the timing of post-trial motions, that happens. I mean there is just judicial discretion with that for post-trial motion. So we really don't know on that.

But I would say that when that happens, we feel really strong again about the facts of this case on appeal and we'll be set for that. So that timing, again, there's just discretion in that within these post-trial motions.

Yes, Richa, this is Michael. And thank you for the second question on margins. First of all, I think the team did a really good job managing what was a difficult environment to get AGP per load back to flat on a year-over-year basis. And really, fuel was a factor certainly in truckload, and we covered that.

But really, what I'd say is it was the impact of the contractual book and the squeeze that, that felt that we were really managing that repricing process during the quarter as well as then taking advantage of the transactional marketplace, as we mentioned earlier, to expand margins where we could. But it is a unique marketplace right now and that you have cost skyrocketing, while demand stayed where it did negative 3.3% according to Cass.

And so a very unique squeeze environment. And so I would tell you our expectation of our revenue management capabilities as we continue to get better and better at it is to push margins back upwards. But it's really going to be, as Damon mentioned, the uniqueness of each day, each week, each month in the marketplace on how we do that.

But again, I'd point back to -- I feel really good about how the team managed this process and was able to deliver the bottom line results that we did during the quarter. but feel very strongly that our revenue management practices as we go forward will allow us to manage through this process.

Yes. And Richa, I'll just put a [indiscernible] what Michael said. I mean I think it's critical to hear AGP per load was flat. With spot cost up over 30% in the quarter. I don't think you're going to find another company that's going to demonstrate that level of performance, while outgrowing the market. at the same time, right?

So I think you got to look at AGP per load and gross margins in concert with the outgrowth and the dynamic nature of the spot market increase within the quarter. And to your comment on the contraction of gross margins. I would say historically, Robinson's gross margins would have contracted hundreds of basis points in the environment that we just went through, right? And the cycle time in which we're getting through the squeeze, I think you'll find out when we get on the other side of it is going to be quite demonstrable as well.

So I would say, to Michael's point, I think we feel really good about what we've demonstrated versus the marketplace for the quarter. And we're going to continue to demonstrate that revenue management capability as we get another side of the squeeze.

And with that, ladies and gentlemen, this does conclude the question-and-answer session. I would like to turn the call back over to Chuck Ives for closing comments.

Yes. Thank you. That does conclude today's earnings call. Thank you for joining us today, and we look forward to speaking with you again. Have a great evening.

Thank you. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful rest of your evening.

All right. We're going to get going with our next session with C. H. Robinson. Really happy to have you guys back at the conference. We've got Dave Bozeman, President and CEO; Damon Lee, CFO.

There is so much to talk about both industry-wise, C. H. Robinson-wise. So rather than do anything, we're going to jump right into questions, if that's okay?

I want to just knock out some like the quick industry things right away. Obviously, like the big news over the last week was the Montgomery ruling. I guess, your initial -- your view of this. What does it mean from -- to your business? What does it mean to your insurance costs? What does it mean to how you change carrier vetting? What does it mean for the industry, large brokers, small broker, industry capacity, very open-ended question, but I think it's obviously like topical right now, we've got to address it. Let's get right into it.

All right. Let's just -- hey, happy to be here. So thanks for having us. So let's just jump right in, set the record straight where we are. Montgomery case, we expect it to win that case. And we went in to argue to win that case. It didn't go in our favor, but we had a playbook for both sides. We said that, be it favor or not favor. We had a playbook and we executed that playbook because it didn't go in our favor.

So that being said, what does that mean? Number one, we are -- we have one of the safest networks in the industry, this period. For every one severe incident, we have -- that could be an incident, we broker 500 million miles. That's just a fact, super safe.

Our vetting process, one of the strongest, if not the strongest, in the industry when it comes to our carrier vetting. We're going to continue to do that.

We have a strong balance sheet. We have auto liability insurance that is some of the strongest than rivals, even assets, $137 million; and auto liability, $86 million. In general liability coverage, strong when it comes to that.

What does this ruling mean? Listen, at the end of the day, we're proud about who we are. We're super safe. We're going to continue to go. We were trying to lead the industry on bringing clarity in the industry. So one way or the other, we have clarity, and now you move on. We do think that this will be somewhat of a headwind to smaller nonscale brokers from an insurance perspective, from a scale perspective, maybe some small carriers as well, that will be an impact.

If you think about the ruling, you have shippers that could be impacted as well, and you need a trusted scale broker to be -- to stand up and really drive this. We are that trusted scale broker. So we are squared away in doing this.

I don't know if you had anything to add?

Just had one follow-up to what Dave said, which is, look, we do believe this will lead to a consolidation in the industry. For all the reasons that they've mentioned, right, the economics of small and medium brokers, higher insurance costs, just the confidence in shippers to use small and medium-sized brokers because of all the liability connectivity there. So we believe this will lead to a consolidation in the industry. And we believe Robinson will be that consolidator.

So just a couple of quick follow-ups. So like maybe, Damon, like practically speaking, like when and by how much do you think insurance costs for you change?

Yes. So when would be our next renewal cycle? So for 2026, I mean, we're locked in for insurance coverage. We'll start those negotiations in the second half of '26 and certainly that will be -- that impact, that will be felt in 2027. But look, insurance costs today are less than 1.5% or 1% of gross revenue for C.H. Robinson. So it's not going to be a material impact even if we see a demonstrable increase in insurance rates.

And certainly, look, our job is to manage challenges. We do it every day, right? And so higher insurance costs would be just another challenge. I would say, though, I view insurance cost as a transitory impact on brokers. Meaning it will be an impact on brokers initially, it will ultimately get passed on to shippers and then ultimately get passed on to the consumer, right? So I don't view higher insurance cost as being a structural deficit for brokers forever. I view that as a transitory cost that will ultimately end up being borne by the consumer.

And Scott, to finish on that, keep in mind the scale here. At the end of the day, we're going to ship over 100,000 shipments today, 37 million annually. This is not our first rodeo here. We've been doing it. We'll continue to do it. We set the bar. This is a scale play. We've adjudicated things for years. And this doesn't change that. We were just trying to drive clarity and safety within the industry.

Okay. And then just maybe last thing on this for me, at least. What changes to like from a carrier procurement standpoint, like we just had a panel with Schneider, and they said, they were using 70,000 carriers at the peak during the '22 and now they're down to 14,000 carriers. And part of that is like being more rigorous with who they're using related to cargo theft and all this sort of stuff. Like do you have to make changes to your carrier, who you're using? Obviously, there was a 60-minute piece about Super Ego, chameleon carriers, nondomicile, do you have to -- do you have to make changes in terms of who you're using?

We're going to try to stay on point on some of that. You go all over the place on a lot of that. But the facts are this, we have a vetting process that we think is industry-leading. We do partner with Highway and GenLogs. We also have our proprietary technology as well. We're a data company, as you know. And if you look at it, we look at the results. I mean, our process has prevented several people from accessing our network.

We've stopped chameleon carriers, hundreds of them. Our fraud has down to a -- we have a 99.9% fraud-free type of network and what we're doing. These are things that people don't know, but that we're driving and that we're leading the industry. We lead a consortium of companies, including my Old Farm and Amazon and others. When it comes to fraud, and I would think our technology and our processes that we're doing are helping to lead the way that we'll continue to do that.

So strong, strong vetting process. Fact, if you start getting into driver level heuristics, some of that is illegal, right, that happens to the FMCSA, but our vetting on carriers is strong. It will continue to be strong and will continue to get better with the data set that we have.

And Scott, just to put on what Dave said, like, we feel like we've had an industry-leading carrier vetting process for a very, very long time, right? So are we going to make wholesale changes to that process? No. Are we going to continue to with our continuous improvement mindset like we do on everything else in our business to make it better? Absolutely.

Okay. So it sounds like not a whole lot has to change for you, and then it's a question of like, to what extent does this catalyze consolidation within the brokerage industry where large brokers...

Yes. So similar to my small and medium-sized broker comment, I think that same comment applies to small and medium-sized carriers. So I think that's the way we think about. Will there be a consolidation of carriers in the industry?

Yes.

Absolutely, there will be.

And is there -- does that change the gross margin profile for a broker if you're procuring capacity from larger carriers instead of smaller carriers?

No. We believe our cost to hire model is industry leading. We believe we have the best revenue management capabilities in the industry. We'll continue to procure transportation at industry-leading cost regardless.

I want to now turn to the market, right? One thing that was interesting just listening to Q1 reports, listening to some of the other brokers at our conference. Someone said, our spot volumes up 2% and our contract volumes down 18% or 19%. And then talk to another private broker said, our spot volume is -- our contract volume is up 2%, but our spot volume is up 20%, right? So meaning other brokers seeing sort of a big sort of shift more towards spot volume. And you guys were the opposite, right, at least in Q1, right, where your contract for spot mix actually increased 5%, right.

Why do you think your sort of seeing something different? And why do you think -- I would have thought spot lines would be growing given the tightness of the market. So it just seems a little interesting, notable to me. I don't know, some thoughts here.

Well, I think it's different because you want it to be different, this room because we're winning at both. And you have to break this down. You can't -- if you go into this industry and you just start talking about spot without talking about contract, I think you talk about the wrong things. So we're winning in both spot and we're winning in contract. But make no mistake when it comes to how freight moves, 75%, 80% of that freight is going to move on contract.

And you have to have a relationship with that. We're strong about where we are in that relationship, and we're strong about where we are with our processes when it comes to spot. It is a balance, if you want sustainable growth. That's super important that you got to have in this industry, sustainable growth. Spot alone is fleeting, as you know, and you can't just balance just one aspect. You got to have both. We've been consistent in our strategy, operate at both and we win at both.

Yes. I'll only add a few things. So we've outgrown the market in our North American Surface Transportation business for 12 consecutive quarters. You don't take that type of market share by just a singular focus on spot, right? And so as Dave mentioned, we're focused on healthy freight regardless if it's contractual, if it's spot, Robinson is going to win. With our cost to serve model, we make very attractive margins in contractual.

I can assure you in the spot market, we've set C.H. Robinson records on our file averages and spot. So I'd say we take a little bit different look at it. We're winning in both, very profitable in both. As we've said before, we think this will be a tremendous bid season for C.H. Robinson both in volume, so more share gain and in price. We feel good about what we're doing, right? And certainly, physics would say you can also perform better in spot if you're losing share in contractual. So that's another other way to look at it.

Right. And so in terms of the market you've said, hey, we're not immune from a squeeze, but we think we'll do better than the market on squeeze, better than maybe what we've done in the past on a squeeze. I think last cycle, you guys weren't there. So -- but at the time, I think at the peak, 15% of our volumes were loss making, like how is that doing now, right? We didn't hear you guys talk about loss loads, but like is that something that we're dealing with right now? And do you think we're at the point now where there was a squeeze in Q4, Q1. Are we starting to get unsqueezed because we're repricing business and all that sort of stuff.

I'll start. Dave will jump in here. Look, look, Robinson is a fundamentally different company than it would have been in the last up cycle, right? I mean the company is different. The mindset is different. The culture is different. Our processes are different. We're a much more efficient company, much more focused company. Our strategy is to outgrow the end markets and expand our operating margins. We've demonstrated that now for well over 2 years.

I would say the squeeze dynamic that we have gone through on the cost side is a great test for the squeeze dynamic you're going to go through on the demand side. And I think our team has performed exceptionally well. If you think about the very small increases in Q3 that we saw that we managed without any impact to the business, you had a more material impact in Q4 of last year. We managed that extremely well. And then you take Q1, where spot costs were up close to 20% year-over-year, and we had flat margins from an AGP perspective.

So we believe we're doing things at C.H. Robinson from a market share gain perspective, a revenue management perspective, that the industries just can't match, right? And we know those capabilities will transfer to an up cycle in the market as well.

So I made the statement before, I make it again today. We believe our operating leverage for C.H. Robinson will rival the asset players, when volume returns to this market, right? Our incremental margins are phenomenal right now because of the systemic way we've changed the company, that cost structure is not going to change when volume comes back to the market. So look, we always get questions. Are you guys a little -- we have a little anxiety about the market turning around? The answer is no. We're extremely excited about the market turning around because we believe you'll see an even more set of phenomenal results from C.H. Robinson than you've seen the last 2-plus years.

And you made a comment where we think we'll have a really successful business -- I forgot the exact term, what are you seeing from a pricing standpoint as bid season...

Yes. So -- and we've mentioned this before, Dave has talked about it a lot, right? Like we believe the industry practice, we call it hatchet versus surgical, right, where you just kind of put out these massive price increases, and it takes months, if not quarters for things to settle down in the marketplace, right? We are very surgical in how we're negotiating with our shippers.

And it's a continuous process, right? It goes on every day, every month, every week. With our revenue management capability, we can get very precise on what lanes need to be repriced, at what percentage versus other lanes versus just everything gets a 5%, 10% increase, right? And so we believe that approach will allow us to continue to gain market share, while expanding margins in an up cycle.

It's discipline is measured. It's part of our lean operating model. Our customers appreciate it. And I think we've demonstrated that. We're not -- this is not aspirational. We just point to the results on here. And when you talk about squeezes, Scott, you can argue that you've had squeezes along the way, be it road checks, storms, I mean there are a lot of things that are pressing companies out here on the squeeze over the last year, that's a prediction of how someone is going to operate, and we feel like we've shown up pretty well on that.

Damon, just a numbers question on the guide, right? So you've said $6 of earnings this year and in an assumption like sort of 0 market growth I know market feels a lot tighter, but we're hearing from everyone like it's supply driven, it's supply-driven. Cass at least to date is still negative. You said like we can -- I can't wait for volume growth, the operating leverage going to be great, but doesn't feel like we're getting a lot of market volume growth yet. If market stays negative on volume at least, can we still do $6 this year?

Yes. So look, I'll just reaffirm, we feel really good about our $6 target that we've committed to. And I will call it a target, not a guide. We don't guide. But feel good about the $6 target. Now to your point about negative market versus 0 growth, the $6 is predicated on a 0 growth market.

Now at the end of the day, Robinson does everything we can to deliver the best result every single day, right? So even if the market is a headwind, it doesn't mean we give up on $6 target, right? I mean we will absolutely fight in the trenches every single day to make up any market headwind we have. But our commitment, and I'll just reiterate that commitment is $6 market growth, but you'll get the best result that Robinson can deliver regardless of market.

Okay. And then similar, you've got a 40% sort of mid-cycle margin target for NAST, right? We just did 37% in what quarter where maybe there was some degree of a squeeze, right? And there's still no volume growth, right?

We thought that was pretty good.

Yes, yes. So I guess is there -- shouldn't there then logically be upside to 40%?

Logically, yes, and perhaps that will happen. Well, you need to break that down on the dynamics of that. And so we start talking about mid-market, we feel really good that we could exceed that. What we have told you consistently is that we're building a strategy of operating leverage and that operating leverage is once you have that built in what do we do at that gross profit level? Do we take some of that move it into growth and continue to do out growth? That is what we look at every day, and that's what we negotiate every day. We think we make the right calls with that, and we'll continue to make the right calls on that, but we feel super strong about where our margins are industry-leading, and they'll continue to be.

I'll just put a bow on that. So look, 40% is pretty good, industry-leading. We've talked about once we get north of 40% we want the optionality to go after market share that will demonstrably improve our earnings. What we don't want to do is put ourselves in a box or commit to a higher margin target when we don't see any reason to commit to higher margin target, right? I mean at some point, Robinson has not a lot left to prove on quality of earnings, right? And so your answer is, can we do more than 40%? Absolutely, we can. Is the likelihood that we will? Probably. Are we going to commit to it and put ourselves in a margin percentage target box above 40%? No.

Okay. And so this is actually a good -- If there are questions, raise your hand. We'll get you involved, come to you in a second. There's sort of 2 things I want to sort of discuss in that sort of context, right, as we maybe dive into like the company-specific things happening inside of C.H. So you guys have done 30%, maybe even more...

Correction, 45% enterprise-wide.

45% enterprise wide.

50% NAST, 45%. Global 40%.

End of '22.

Okay 50% labor productivity, right, in NAST, right? We hear about AI, we hear about lean. What is -- help us understand like what's AI, what's lean like what's like an actual example of here's what lean did, here's what AI did, right? And then -- can we -- how much sort of -- if we've already done 50%, at what point does that sort of tap out?

Let's frame it up for you. Because we get that question. I'll start with the short answer. You're asking me a series question, Lean versus AI. We don't think of it that way. We would say we don't know because there's a symbionic relationship between lean and AI. It's our system, it's our culture and what we're driving. So that 50% productivity improvement for NAST since the end of '22, 45%, for Global 40%. That's not a period, right, for us, it's a comma because it's part of our system and what we do.

We have publicly said we are going to commit to single-digit productivity, no matter the market condition. C.H. Robson will do that. It can be a hot market. We're going to do single-digit productivity. There are times where we will go to double-digit productivity like we are doing this year. When we have a technology advance or process advance we'll continue to do that. But it is a continuous improvement culture that is going to continue to advance what we're doing. So we don't break them up and look at it that way.

It is symbionic in what it's doing. And a good example would be we talked about quoting, transactional quoting. That was on a Gemba Walk. Gemba Walk is going to the work. We're looking and we found out that we were only addressing that 60% of our transactional quotes. Our technology, our agent at scale, our quoting agent launched. That quoting agent now hits 100% of those quotes. It gets it back in now. We cut off a second, was 32 seconds, and now 31 seconds. Back to the customer in a conversational manner with the details that a human just didn't provide as well.

So that has allowed us to get more winning percentage, allowed us to get more revenue and it's really allowed our people to move to the right and do a lot more customer facing. So that's one example of many that we have in our orchestrating agent, but that comes out of that symbiotic relationship of operating reviews, gemba walks really kind of driving and stressing the system of what's broken, what do we have to fix. That's why we're -- we have to put the context to it.

I'll only add, look, there is no cap on our productivity. As we've mentioned before, we're in the early innings of our journey. If you look at the catalog of our processes, I mean it's thousands of processes, tens of thousands of subprocesses. We've only automated a fraction of those processes, right? So we're early in our journey, both lean and AI. And so I would say, look, there's no cap on that productivity number.

And it is important to say, I mean, look, we've both been doing -- we have been doing lean over 30 years. It is just super early. I mean we're driving when it comes to problem solving all the way down to the desk. Scott, I mean, we've just got a lot to do and a lot more to go. So when people say early innings, why do you guys say early innings, you're doing all these things? It is early innings. It's like second inning when it comes to this stuff. We know what great looks like, there's a lot more to do, and we have a lot more grass to cut.

When it comes to -- so there's -- I think there's one -- at least for me, one important thing I just -- I want to understand better. So you guys said we're going to effectively, I think we're going to do 3 things, right? We're going to get a lot of labor -- we're going to get a lot of productivity, right? We're going to -- our model, we're going to have higher gross profit per load. We're going to have demonstrable growth, right?

Check, check and check.

Okay. So well, that's my question, right? So the labor productivity just said 50% undeniable.

Yes.

That is a double check. I'll give you 2 checks for that.

Thank you.

The gross profit per load is up meaningfully from the middle of 2023, rest of the industry is not?

One check for that one.

I'll give you a check and a half for that. All right. But here's the real question, though, right? You've said you've gone from responding to 60% of quotes to now you respond to 100% of quotes.

Transactional quotes, yes.

Quotes. Like I -- your volume is, I get the industry is down, right? But you're kind of flat on volume. If we're responding to 40% more quotes I don't conceptually understand why volume is not -- maybe it doesn't have to be up 40%. Why isn't volume up 10%, 20%, 30% if we are responding to 40%.

Well, let me do this.

And the math is probably more -- 60 to 100. More than 40%...

Yes. It's transactional quotes that we're doing that. Now don't take that as a 100% in-series view. Everything we've always told you from when we met is building a system that's optionality, right? So when we have that ability to quote 100% of quotes that are in there, we also take the view of negotiating what volume are we going to take, right? It still has to be the right economics for us. Since we've been sitting here we've probably denied a load at 30% margin, right, because it doesn't fit our economics in doing that. But we have the choice to be able to do that, and we control that.

And before, if you have things sitting in a box, you don't get back to it for 4 hours, that freight is gone. That attempt to when that freight is gone, we've eliminated that. We've inserted our technology in the order to cash process, and remove that friction. That's what a lot of that productivity comes from. But to your point, when it comes to that volume, we make that choice on what we're going to take. And I would also say, put that relative to the market, we're still taking share within that market, right? That's how you got to look at cash being down, we're still outgrowing the market. So you could argue that we are taking share and getting more volume on.

I'll just add a little bit. So 4-year freight recession, Cass hasn't had a positive reading I think the second half of '22, and we've outgrown that Cass index 12 consecutive quarters. So as Dave said, we take the freight we want. Any given quarter, any given month, we could take demonstrably more volume at margins that probably the industry would say, I take that, right? That's not the standard of C.H. Robinson, right?

Now going back to the 45% margin question, right? That's why we don't want a constraint on margin. So once we've established that baseline on profitability at 40%, to your question on why can't you take more demonstrable volume? The answer is we will, right? Because then the economics will fit the model we have going forward. Once we've demonstrated and sustained that quality of earnings that we've committed to, but make no mistake. Any given month, any given quarter, we could take a demonstrable amount more share than we do. We choose not to do it.

And so is it fair that in a world where market is down from volume and price, like even it's harder to just -- the margin profile of that incremental is harder to justify. But in a market where if the market starts growing and certainly in a market where price starts going up 10%, whatever, we should increasingly see the demonstrable share growth. Is that fair?

Yes. I think when we've talked about optionality, you can equate optionality with demonstrable outgrowth, right? And that's again why we've been very pointed about saying like, look, we won't commit to a higher margin target beyond 40% because of that exact statement. But I think it is just important for this room to hear again. Any given month, any given quarter, we could have a much different volume number, a much different share number if we chose to, right?

The instrumentation is pretty instantaneous. I mean, we know Damon's point, we can turn a knob. And it is an instantaneous reaction. I mean that is not a problem. But it's about being disciplined, measured, controlled, we own, and we know the freight that we want, it has to match our economics and the model we've built continues to mature. We're in a really, really good position to do that.

And so back to where we're starting. Montgomery could help catalyze some of this?

For sure, right? I think certainly.

The opportunity. Yes.

Make no mistake, if the industry consolidates, Robinson will be a winner in that consolidation. And that's the organic side. We haven't got to an M&A question, but we certainly expect to be very active inorganically and be a consolidator on that side as well. So when you think about the industry going forward, Robinson will be the consolidator of this industry.

We're going to come back to that in 1 second. I think there was a question in the back. Sorry.

What do you think is your best estimate of capacity exiting the industry due to the Montgomery ruling? The first question. Second question, you guys have said...

Can I clarify that? Just so we're clear. 2 things of capacity. Are you talking about broker capacity? Are you talking about carrier capacity? Or both.

Both. Both.

All right. You can go ahead.

Not in near term than, medium term, whatever. And the second question is you guys have said, you're going to have the same operating leverage as asset-based carriers when volume turns up. But what if there's no volume, and it's just price driving a cycle. So kind of what we're seeing now, would you guys still have the similar operating leverage?

Yes. So let's answer that. Well, first of all, higher highs and higher lows. For us, it doesn't matter. We lower for longer or inflection. We love an inflection because we're in a pole position, we're going to win. And if it's lower for longer, I think we've proven will be higher highs and higher lows as well. When it comes to the capacity going out, listen, I can sit up here I know just as much as you do. I'll give you an anticipation. We anticipate maybe 20% to 30% of broker capacity that could come out. But we don't know, right, for sure.

The reason we would say that is because of the facts. The facts are, you're going to have more insurance liability that is going to be on these brokers. Shippers are now going to have to start looking because this particular ruling now changes the dynamic and the space of where shippers can be liable on some things. So their vetting process of brokers is going to go up, and they're going to want a broker that has the strong economics and the strong service schedule to be able to have trust in where they move their goods. And that means a lot of those kind of smaller, less-scaled brokers will probably be hampered and come out of the system. That could be 20%, 30% of that.

Then I think you'll see some small carriers as well until there's a roll up. You'll see some impact on carrier capacity as well. That's what I would see that. I'll give you the other part of the question.

Yes, the other question, look I would say, we're highly confident in the scenario you gave. Actually, we're highly confident regardless. In the scenario you gave on the operating leverage, as we've said before, we have fundamentally changed the processes of the company, right? And so that quote example that Dave was going through in the transactional, if we're doing 600,000 transactional request for quotes today, and that goes to 6 million. The technology can absorb that without any material increase in head count, right? So that's just one example, tenfold increase, no increase in material cost of headcount.

The second question is, remember, we don't believe we just have industry-leading productivity. We also believe we have industry-leading revenue management, which means in your scenario around price, we believe we'll optimize price better than anyone else in the industry. We believe we are the gold standard on cost of higher discipline within the industry. So -- and that other example, we believe revenue management capability will allow us to exceed expectations in that environment as well.

Just a quick -- so would you think like you're already seeing gross profit per load improve, like before, like the cycle really has kicked in at all? Like do you think that means we should hit -- to use your term of higher highs, like should we exceed prior peak like gross profit per load this cycle?

Relative to the market for sure and relative to C.H. Robinson historically, yes, right? Certainly, take Q1, for example, right? Maintaining flat margins versus expanded in Q1 was, I think, quite a feat. When you consider some of the other competitors out there that demonstrated I think one competitor demonstrated 10% year-over-year volume growth, but margins contracted 300 basis points.

Gross profit dollars were actually down. Got another competitor where they maintained a relatively consistent margin, but volume was down 20%. So I think in that scenario, I pick what Robinson did, which was we outgrew the market. We maintained flat margins. We expanded gross profit dollars.

And Damon, I want to follow up on something you said because it at least listening to it, it felt like a little bit of a change, right? I think the last time we heard you guys talk about M&A, you said there is a really high bar for M&A. And I think you just said we think we're going to be very active in M&A. So maybe that's -- I don't know, that felt like a bit of a change, but...

Yes, I would say it's a different time right? Because if you've listened to us the last 2 years, what we've said, Dave has said many times is we had earned the right to do to do M&A, right? We have a very high bar for M&A. We're not going to make a mistake on M&A. But we had to get the company ready for an acquisition. And I would argue, 6 months ago, 12 months ago, we weren't ready, right? We didn't have an industry-leading cost to serve model yet. We didn't have processes to a level of maturity yet. We didn't have a progression on the operating model and our technology to a level that we wanted to have. But now we know we have the industry-leading best cost to serve model.

We know we're ready to do M&A, and we're going to do M&A. Now the bar is high. It doesn't mean we're going to do 10, 20 deals, right? But if you think about what kind of M&A would we do, it could run the gamut, right? Specialized small, medium-sized player that gives us capability that we don't have today. You put the Robinson scale behind it. The ROI is incredible. Or it could be the acquisition of a scale broker, right? So a traditional broker that has an attractive book of business, maybe a challenged cost to serve model, we can take that book of business, put it on the Robinson cost-to-serve model. Ultimately have a combined company that has Robinson like margins, right? So yes, we will be active in M&A. And look, we've certainly made the statement, we'll make it again today. We're going to be the consolidator of this industry.

Again, it's not new, Scott. I mean, it's part of with what we've always said. We said we're going to be disciplined and measured. Robinson has been around 120 years, have always done M&A. It's just one of those things as Damon said. We are -- the powder is good, ratios are good. And we feel like we've got the mousetrap that's built, and we think that will serve us well.

And so Dave, can you sort of like rank for us priority between buyback niche acquisition sort of transformational large-scale?

Capital allocation.

All ROI-based, right? Now we think we have the capital to do all of the above, right? Now certainly, based on the magnitude of M&A, right? I mean that can always influence pace of buyback for a period of time. Look, we believe we have the capital. We have the balance sheet. We have a fortress balance sheet. We have leverage ratios that are some of the best we've ever had. We think we can allocate capital to all those priorities in the future.

I've got time for one last question -- it's already over. Do you want a forwarding question or an Amazon question?

Forwarding. Yes.

Okay. We haven't touched forwarding. Okay. There's certainly volatility right now in markets. I think listening to others at our conference, I think the airfreight market feels a little bit structurally tighter, maybe ocean market, notwithstanding some volatility, maybe structurally looser. Just how you think about -- we've had tremendous success at NAST, like what's the opportunity set going forward at forwarding?

Look, we said consistently that we started with NAST. That was purposeful. We're now moving and being very purposeful in moving our technology stack into forwarding. That business alone, we already feel good on. It's improved off the back of just the operating model. And now we're going to continue to improve it by driving our technology stack. So kind of the core things we did with NAST, the order to cash process, removing that friction, increase in productivity, driving agility, driving speed, allowing that business to continue to punch above its weight. That's what we're in the process of doing. That's what we will continue to do.

The forces that are out there when it comes to ocean, we're not immune to that. Everyone has to deal with that, and we will compete and do with that. You're right about air, we're doing that, and that's a little bit different tact time on doing that, and we're competing really well in that business. So we're pretty excited. And I have always said, next 2 years at Robinson I'm telling man, they are much more exciting than the last 2, and the last 2 have been pretty damn exciting. So we feel really good about it.

All right. That's a good place for wrap. Dave, Damon, thanks so much. That was...

Absolutely. Thanks. Good job.

Good afternoon, ladies and gentlemen, and welcome to C.H. Robinson's First Quarter 2026 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, April 29, 2026.

I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, operator, 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 list factors that could cause our actual results to differ from management's expectations. Earnings presentation slides are supplemental to our earnings release and can be found in the Investors 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. As has been widely discussed in recent months, the North American trucking market has entered a period of supply driving tightening. As that has occurred, we've heard old tapes being replayed regarding which transportation providers benefit most during certain parts of the truckload cycle. But those storylines don't fully appreciate the secular earnings growth that has consistently been generated at the new C.H. Robinson regardless of market conditions.

The first quarter of 2026, was another example of this. And our adjusted earnings per share increased 15% year-over-year despite a significant increase in truckload spot market costs. We continue to outperform by opportunistically capturing transactional volumes at higher margins as the industry's tender rejection rates increased by continuing to exercise our disciplined revenue management practices. By repricing some of our contractual business in a very targeted fashion and by continuing to lighten our cost of higher advantage, all of which have improved as we implemented our new Lean operating model.

This enabled us to optimize our adjusted gross profit per truck low shipment and maintain our NAST gross margin percentage despite having to absorb the elevated cost of capacity. Additionally, we gained market share in our NAST business for the 12th consecutive quarter, and we continue to deliver evergreen productivity improvements across our business. Over the past year, we've consistently said that we're not immune to macroeconomic conditions or an inflection in spot costs, but that we are managing those conditions better than we have in the past and better than our competitors.

Our first quarter performance puts another checkmark on our [ Cadu ] scorecard. Our ability to consistently outperform over the last 2-plus years as a result of focusing on controlling what we can control and the strength of our Lean AI strategy. Lean AI is our unique disciplined approach to AI innovation that is transforming supply chains. It combines the principles of our Robinson operating model, rooted and lean methodology with the power of custom-built AI and the expertise of our people to maximize value, minimize waste and drive better outcomes for customers and carriers. As we continue to purposely engineer our work to drive higher automation, an industry-leading cost to serve and improve customer outcomes. All of this is aimed at building the best model for demonstrable outgrowth while continuing to have industry-leading operating margins.

I'm proud of our employees for navigating ever-changing market conditions with discipline and ingenuity and for embracing the culture shift that has fundamentally changed this company.

Our Global Forwarding team continues to help our customers navigate disruptions, such as conflict-driven rerouting and reduced flexibility across global shipping networks. The international freight market has been tumultuous and impacted by global trade policies, geopolitical conflicts and route restrictions.

Similar to the second half from 2025, excess vessel capacity has caused ocean rates to decline versus the elevated rates from a year ago. As the team help customers comply with changing customs regulations and continue to implement the same revenue management disciplines that have been deployed in NAST. The team expanded gross margins in Q1 by 60 basis points year-over-year. We also continue to evolve our Global Forwarding business to a more cohesive centralized model with standardized and Lean AI-enabled processes. We'll continue to focus on providing differentiated service and solutions to our customers and carriers, executing with discipline and improving our business model and our cost to serve.

We're highly confident in our ability to continue executing on all of our strategic initiatives, and the strategies that our team is executing are built to be effective in any market condition. We're excited about the prospects for a possible return to a healthier demand environment. While with our strong balance sheet and cash flow generation, we're also comfortable if the freight market ends up being lower for longer. In either scenario, we're ready to serve our 2-sided marketplace and to deliver higher highs and higher lows across the market cycle. Our model with an industry-leading cost to serve is highly scalable and we expect it will continue to improve further as we continue to harness the evolving power of AI to drive automation across the quote to cash life cycle of a load.

As the pacesetter for innovation in our industry, we will continue to fill fast and use our domain expertise to build technology that delivers on our customer promise and drives higher value for all of our stakeholders. We are a trusted provider that customers look to for cutting-edge innovation, differentiated solutions and best-in-class service. And while we're pleased with the results we've delivered in the last 2 years, we are still in the early stages of our transformation. Significant runway exists as we continue to deepen the lean mindset and scale custom-built AI agents across the enterprise.

I'll turn it over to Michael now to provide more details on our NAST results.

Thank you, Dave, and good afternoon, everyone. I'm extremely proud of the team's disciplined execution in Q1 that showcased the secular earnings growth underway in NAST and our improved ability to offset pressure on our contractual truckload margin as the cost of capacity increased significantly.

As a result of standing by our customers in Q1 with an industry-leading tender acceptance rate, our contractual truckload volume grew year-over-year. It also increased due to a win rate that has improved over the past year with a particular focus on growth in certain verticals that we've targeted with improved horizontal capabilities and solutions. As a result, our mix of contractual truckload volume increased from approximately 65% in Q1 last year to approximately 70% this year.

At the same time, Q1 truckload spot market costs, excluding fuel, increased approximately 19% year-over-year according to DAT. This was a result of several supply-driven constraints, including CDL and other enforcement actions and multiple winter storms that disrupted the typical seasonal rate softening across several impacted regions and prevented spot rates from following their normal downward trajectory in Q1.

As a result, tender rejection rates rose across the industry. Contractual route guides began to fail and route got depth increased throughout Q1. This created opportunities for transactional volumes at higher margins and armed with better disciplines and tools than in the past. Our team of freight experts did a great job of capturing the right transactional volume. Combined with targeted repricing of some of our contractual business, widening our cost of hire advantage, and strong performance within our LTL business, we were able to offset the pressure of our contractual margins and maintain our NAST gross margin at 14.6% in Q1.

This also included absorbing the higher cost of fuel. While it has very minimal impact on our gross profit dollars due to being a pass-through cost in our brokerage model, a rising fuel surcharge reduces our gross margin percentage. For example, the increase in fuel surcharges from February to March reduced our truckload gross margin in March by over 50 basis points sequentially. Again, no impact on gross profit dollars but it does impact the margin percentage, and this could continue into Q2 given the still elevated fuel costs.

While maintaining our overall NAST gross margin in Q1, the team also outgrew the Cass Freight Shipment Index for the 12th consecutive quarter. Our Q1 total mass volume was flat year-over-year compared to a 6.2% decline in the index. Our LTL volume increased approximately 2% year-over-year, while our truckload volume declined approximately 3.5% year-over-year reflecting market share gains in both modes. It's important to understand that we could have grown our truckload volume by considerably more, but our focus on optimizing our gross profit and earnings outweighed further market share gains in Q1.

As a result, our year-over-year and sequential growth in adjusted gross profit outperformed the market again in Q1. We'll continue to appropriately exercise our optionality on a monthly, weekly and daily basis to pivot toward volume or margins as market dynamics evolve. Making disciplined data-driven adjustments to optimize for the most effective combination that drives earnings growth and long-term value creation.

One of the keys to our consistent market share gains has been volume growth in some key verticals that we've specifically targeted. During Q1, we continued to deliver year-over-year truckload volume growth in both the retail and automotive verticals. These results reflect the execution of our strategic focus and our expanded capabilities that directly support these segments and evolving customer needs such as our leading drop trailer, cross-border and short-haul capabilities. In our greater than $3 billion LTL business where we move more LTL freight than any other 3PL in North America, we delivered year-over-year volume growth for the ninth consecutive quarter, reflecting consistent outperformance versus the broader LTL market. Our deep, long-standing relationships with LTL carriers and our proven ability to manage service variability across the carriers enable us to consistently deliver a 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.

Across our NAST business, 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 also enabled us to continue delivering double-digit productivity increases in NAST in Q1. Since the end of 2022, we have delivered a more than 50% increase in shipments per person per day, and this is measured across the entirety of our NAST organization. This enhanced efficiency is not only lowering our industry-leading cost to serve, but it is also elevating the customer experience by enabling faster, more reliable service.

Looking ahead to Q2, it is typically a seasonally stronger quarter compared to Q1, beginning with produce season and continuing with stronger food and beverage demand as the weather gets warmer across the country. Due to these seasonal trends, the 10-year average of the Cass Freight Shipment Index, excluding the pandemic impacted year of 2020, reflects a 4.5% sequential volume increase in Q2.

Truckload spot rates are expected to remain elevated, and we're now expecting a 17% year-over-year increase in dry van spot rates for the full year, up from 8% only 3 months ago. There is less elasticity in the supply of capacity and carriers operating costs continue to rise, and this is leading to higher spot and contract rates. None of this changes our expectation to continue outperforming in any market condition. And we're excited about our strong results from ongoing contractual bids and further opportunities to win in the spot or transactional market.

As Dave said in his opening comments, we remain focused on what we can control, regardless of market conditions, 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 they are relentlessly driving improved results. With much more runway for improvement in front of us, we're still in the early innings of our transformation journey.

With that, I'll turn it over to Arun to provide an update on the durable advantages of our technology, scale and expertise.

Thanks, Michael, and good afternoon, everyone. As David and Michael described, we continue to execute our disciplined strategy, delivering for our customers and carriers while scaling several innovations that better serve our customers and widen our competitive moat.

At the center of these efforts is our Lean AI strategy, which combines our Lean operating model with deep industry expertise and our proprietary custom-built AI agents embedded directly into the workflows within our quote-to-cash life cycle. This strategy enables us to automate scale and execute in a sustainable and repeatable way without letting external narratives blur the difference between perception and reality. We take a highly focused and disciplined approach to AI deployment, and there's no [ Harvey ] AI at Robinson. We deploy AI where it delivers real-world results and measurable outcomes that show up in our P&L. We prioritize our efforts based on ROI, leveraging extensive instrumentation to identify the most manual and high friction work and then scale our AI capabilities with our existing technology spend.

Access to AI itself is not a differentiator and anyone can say they're using AI. But what matters is how AI is engineered, operationalized and scaled. And AI is only as effective as the data and context that powers it. Part of our competitive advantage comes from the scale, scope, depth and proprietary nature of our data and context, which I'll explain shortly. We combine that with a disciplined operating model that allows our tech to be continuously operationalized and improved.

Before going deeper, it is worth grounding on how AI works at a high level. In the AI ecosystem, there are broadly 3 layers and the foundation is infrastructure, which provides compute and storage. Above that, our AI models, which are increasingly accessible to everyone. Neither of these layers provide a durable competitive moat. The real differentiation and advantage exists as a third layer, which is the application layer. At C.H. Robinson, we own our application layer. This is where the benefits of AI come to life when deployed correctly and how we deploy AI agents as another source of our competitive advantage.

C.H. Robinson's builder culture produced our proprietary transportation management system and an extensive application stack, including advanced AI and machine learning capabilities that sit on top of that. That same culture now enables us to design, build and deploy fit-for-purpose AI agents that drive value for the customer, carrier and Robinson. With more than 450 in-house engineers and data scientists who have domain expertise and deeply understand our business, we're able to deploy agents faster and with greater control than a buy and integrate model that relies on stitching together third-party solutions that are generic and lack the data set in context of that represent the scale, complexity and nuance of our business and the industry.

Our unmatched scale proprietary systems and deep logistics expertise provide the data, context and human in the loop oversight that makes our AI agents more effective, more reliable and more difficult to replicate. Our data and context advantage spans multiple modes, such as dry van, flatbed, temp control, ocean and air. They also span multiple services such as short-haul, drop trailer, cross-border, expedited and customs as well as multiple geographies, customers and lanes. This level of granular disaggregated data cannot be purchased. And this depth of data, such as data on individual warehouses enables us to understand price and cost dynamics better than anyone in the industry.

Scale, scope and depth of the context that we provide to our custom-built AI agents is also part of our moat and competitive advantage. Through our human in the loop process and extensive instrumentation, we collect institutional knowledge from workflows and [indiscernible] knowledge from our freight experts into a context layer that enables our AI agents to execute and continuously improve alongside our expert logisticians. In effect, our people teach our AI agents in the same way they would train a new operations employee. Routine work can then be executed autonomously, allowing our teams to handle nonroutine surges in volume and higher value, more strategic activities for our customers.

For example, think about deployment automation and the breadth of customers, freight dimensions and dock management systems we deal with. Every one of these customers, dimensions and locations as policies and nuances that are known to the appointment agent by way of an engineered context layer. Economically, this model scales efficiently. After the initial build and implementation, our marginal costs are very low. The ongoing costs are primarily tied to AI token usage rather than having to pay by transaction to a Software-as-a-Service provider. So owning the technology and engineering it in such a way that we have a scalable model is a critical component to widening our competitive moat.

Our build model is also important from a speed of implementation perspective. If a company is using multiple third-party providers to create and implement AI agents, they are beholden to that external provider who doesn't know the business as well. Without builder culture, we're leveraging the vast domain expertise of our in-house team. Since we're building our own AI agents, we have more control over the implementation process and the speed of integrating those AI agents. That faster speed to ideate, build, operationalize and scale our AI agents is a differentiator, and it's showing up in our outperformance. Our fleet of AI agents is growing quickly as we continue to pioneer new ways to automate manual tasks and supercharger industry-leading trade experts to solve for complexity and deliver high-quality service and outcomes to our customers and carriers.

We continue to leverage and scale the use of Lean AI to power the new capabilities that are backed by our unmatched data, scale and context, and we are continuing to disrupt from within. Agentic AI operates with a degree of autonomy and unpredictability, making its progress nonlinear and requiring ongoing human in the loop oversight as it advances through cycles of progress and retrenchment. Our Lean AI process of discovering, learning and building where missteps and resulting learnings are milestones is not only necessary but as the best path to uncover what truly works. Continued improvements of our service through cost-efficient AI task agents that listen, learn and act all day, every day, enables us to deliver fast accurate and personalized service at scale and in any market.

We have a clear view of both what has been built and what remains ahead, and we are still in the early innings of our transformation. There is significant runway across our business to continue scaling AI agents, and we've automated only the fraction of the hundreds of processes and subprocesses that exist across the [indiscernible] cash life cycle of an order. As Dave said, our strategy is focused on building the best model for demonstrable outgrowth while continuing to have industry-leading operating margins. Our technology is unmatched, and we will continue to disrupt ourselves to stay at the forefront of the AI revolution and to further widen our competitive moats.

With that, I'll turn the call over to Damon for a review of our first quarter results.

Thanks, Arun, and good afternoon, everyone. Through another quarter of disciplined execution, we delivered secular earnings growth and continued to advance our strategic priorities, aimed at market share growth, gross profit optimization and increasing our operating leverage, all supported by our Lean AI strategy.

The macro environment continued to provide pressure in Q1 with the Cass Index down 6.2% year-over-year against easier comps. While we outperformed the index, our Q1 total revenue and AGP declined approximately 1% and 2% year-over-year, respectively. The AGP decline was primarily driven by a 12% year-over-year decline in Global Forwarding due to lower adjusted gross profit per transaction and lower volume in our ocean services. For the total company on a monthly basis, our AGP per business day compared to the prior year was down 4% in January, down 2% in February and flat in March.

Turning to expenses. Q1 personnel expenses were $352.7 million, including $18.8 million of restructuring charges related to workforce reductions. Excluding restructuring charges, our Q1 personnel expenses were $334 million, down $13.4 million or 3.9%, primarily due to our continued productivity improvements and cost optimization efforts. Our average headcount was down 12.3% year-over-year in Q1 and was down 3.1% sequentially, illustrating how we continue to decouple headcount growth from volume growth and optimize our organizational structure. We continue to expect that our 2026 personnel expenses will be in the range of $1.25 billion to $1.35 billion. This includes an expectation that we will generate double-digit productivity improvements in both NAST and Global Forwarding in 2026 as we continue to implement Agentic AI solutions across our quote-to-cash life cycle of an order.

As we have stated previously, we expect these productivity improvements to be over-indexed to the second half of 2026, and the same can be said of the sequential declines that are expected in our personnel expenses.

Our Q1 SG&A expenses totaled $132.1 million, excluding $1.5 million of restructuring charges, SG&A expenses were down $9.6 million or 6.9% year-over-year due to cost optimization efforts. We still expect our 2026 SG&A expenses to be in the range of $540 million to $590 million, including depreciation and amortization of $95 million to $105 million for the year. Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact. As a result of our efforts to grow market share, improve gross margins and increase our productivity and operating leverage. We expanded our operating margin, excluding restructuring costs by 210 basis points year-over-year. And despite the significant increase to spot market cost in the truckload market, NAST expanded its operating margin, excluding restructuring costs, by 310 basis points year-over-year. This is the Lean AI strategy at work, and we reaffirm our 2026 operating income target that we raised in October of last year.

Shifting to below operating income. Our effective tax rate for the quarter was 11.7%. Historically, our tax rate has been lower in the first quarter of the year, due to incremental tax benefits from stock-based compensation deliveries that occur in Q1. For the year, we continue to expect the full year tax rate to be in the range of 18% to 20%. Our capital expenditures were $15 million for the quarter, and we still expect our 2026 capital expenditures to be $75 million to $85 million.

Turning to cash and our balance sheet. We generated $68.6 million in cash from operations in Q1, and we ended Q1 with approximately $1.24 billion of liquidity. Our financial strength continues to be a key differentiator in the industry, giving us the ability to invest throughout the freight cycle to further enhance our capabilities and to return capital to our shareholders. Our net debt-to-EBITDA ratio at the end of Q1 was 1.32x, up from 1.03x at the end of Q4 as we opportunistically deployed capital for a higher amount of share repurchases.

While our capital allocation strategy remains grounded in maintaining an investment-grade credit rating, our balance sheet strength enabled us to return approximately $360 million of cash to shareholders in Q1. This represents a more than twofold increase compared to Q1 of last year and includes $280.7 million of share repurchases and $79 million of dividends. We have strong conviction in the strategy we are executing and in the intrinsic value of the business. Our share repurchase activity reflects that conviction and our confidence in the long-term fundamentals of the company. There is tremendous runway for improvement ahead and our operating model, our technology and our people continue to differentiate Robinson and widen our competitive moats.

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 continued to deliver secular earnings growth from the disciplined execution of our strategy. I'm proud of the progress we've made collectively to transform C.H. Robinson into the global leader in Lean AI supply chains. With our Lean operating model, our commitment to continuous improvement, and our AI innovation is at the core of our transformation, I continue to be even more excited about what we believe we can deliver in the coming years. Our differentiating Lean AI gives us a unique opportunity to create new ways to solve complex challenges 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.

We will never stop with our push to discover, learn, innovate and solve problems with speed. And that is where the Lean operating model is so important to our success. As Lean disciplines continue to be deployed more 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 delivered further earnings growth in Q1 and how we've consistently delivered outperformance for the last 2-plus years. It's also why we're positioned to continue doing so regardless of market conditions or cycle. The strength of our strategies, our technology, our people and our operating model disciplines are differentiating and sustainable in any market environment, including an inflecting spot rate environment like we've seen recently or eventually an inflecting reflecting demand environment.

And as we lead our industry and stay on offense with our Lean AI strategy, 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 been a leader in this industry for more than a century, and we will continue to be. Our scale, our technology, our people and the Robinson Way enabled the operational excellence that has defined us for decades. The Robinson Way means being authentic, persistent, accountable, curious and united. And those values, along with our long-standing commitment to safety, guide how we operate every day. Anything suggesting otherwise, it's misinformed. We will continue to lead with purpose and move with urgency to disrupt our sales and the industry, and we expect to drive sustainable outperformance, profitable growth and long-term value for all our stakeholders.

That concludes our prepared remarks. I'll turn it back to the operator now for the Q&A portion of the call.

[Operator Instructions] And our first question comes from the line of Tom Wadewitz with UBS.

Yes. Great. And it continues to be good to see the strong results against kind of an evolving freight backdrop. I wanted to ask you on, I guess, how you would think about the impact to your business from the cycle improvement, right? So I generally think stronger contract rates are good, the brokers can get -- you can be squeezed for a bit. Obviously, we manage that well. But is that potentially if contract rates are up quite a bit. We're hearing kind of 10% to 15% contract increases for brokers and truckload. Is that potentially a driver of upside to your $6 number for the year? Maybe that helps you in second half?

And then I guess the other question is, just along the lines of Montgomery case. I think that's we're expecting a decision in May or June. So it seems like probably some over 50% chance, let's say, that you win. But how would you respond if you end up losing in the Montgomery case, just in terms of other things you can do on the safety side to do more? Or would you say, hey, we're fine because it hurts others more than it hurts us because we have scale and financial strength.

Tom, this is Dave. Thanks for the question. I think we're going to start -- I'll start with the back half of your question on Montgomery and then Michael will fill in on the first part of the question. Look, let me -- I want to be really clear about this. The Montgomery case is a case that we expect to win. We have argued, I think, a really good case going to the Supreme Court. It's important that you know on the context here, and I think you do is this case is really not about immunity for brokers. This is about safety, and this is why we support this case not having 50 different state rules. And when it comes down to the ruling of it, which we're anxiously awaiting, if it comes in our favor or not, we obviously have a playbook for either, but this is really about driving safety for the industry.

And we think that if it's not in the favor that certainly brings some headwinds to the industry because you'll have to start dealing with various brokers and this should be the FMCSA really being the ones driving safety of carriers. But we're expecting, because we've won in the [ 7th circuit ], we won, obviously, in the Southern District of Illinois. We expect that will win this in the Supreme Court as well. Either way, Robinson will be prepared and to go and we have a playbook for either.

Yes, Tom, this is Michael. I'll maybe tackle the first part of your question around kind of just the overall rate environment and how that will move forward. First of all, I'd say just really proud of the team and how they manage what was a difficult which was really an extension of kind of the back half of Q4 through the holiday and then into the multiple storm periods as well as the impact of regulatory changes on the overall supply of capacity in the marketplace.

One, I think the team did an incredible job of being very active in terms of our repricing efforts in the quarter, very rifled in our approach. We've talked about that, that we expected ourselves to be faster than we have in the past, but to do it with more accuracy, more specificity and to really work with our customers to reprice the places where the market requires it to keep supply chains healthy. But to do it with them, and I think they've appreciated that through Q1, and we saw that in our results and really have had some success with repricing.

Kind of from our prepared comments we're really pleased with our recent bid activity. Q4 and Q1 are large RFP periods for the industry as a whole, we feel really good about how we came out of those periods and feel good that we're going to be in a position to manage the ongoing higher cost marketplace that we're in right now. But also feel good that our process to manage repricing with our customers that we did well in Q1 would continue into Q2, if needed.

And our next question comes from the line of Ken Hoexter from Bank of America.

Dave, congrats on really impressive moves on the automation. But I'm sorry, on technology adoption. In dropping the 12% of employees or a little bit less year-over-year. Does that -- is there any -- maybe walk through that process and where we're seeing that change, where it's coming out of? Is it -- is it adjusting sales at all? Maybe kind of talk about that and how you can continue to accelerate that from this point forward?

And then Michael, is it normal for contract as a percent of the total book to go up this soon in the turn. I guess, don't you want to play the spot and take advantage of that fluctuating rate to offset the negative impact of the contract? Or do you feel like you're catching up on the book of business fast enough?

Yes, Ken, thanks a lot. Let me just start with a little bit of context on that. The -- first of all, the way we look at this, and we've said this pretty consistently, as we look at workflows at Robinson. And for us, it's been the order to cash process, which has been a very kind of frictionless manual process in its workflow. That's where we've really kind of gone at it with our technology.

But also in this industry and with us, you have low double-digit turnover that happens in the industry. And that's really allowed us to really drive efficiencies, while not in some cases, backfilling some of those roles that we've had in that kind of entry level kind of order to cash process that we've had.

We've also shifted as we've said consistently. We've shifted our focus on more customer focus, and that's where we've actually invested in some roles in our small, medium business as well as customer-facing for solution solving with customers. But there's just -- there was just a lot to go when we start looking at that order to cash process. That's kind of the context that we really have when it came to headcount. And as Damon and I have always said, we really don't have a KPI at Robinson when it comes to headcount because we've shifted to an input focus versus output focused. And so we really reengineered the work and the output is the output. That's how we really kind of look at it here at Robinson.

Yes. And Ken, this is Damon. I'll just put a bow on what Dave said. So this year, we've committed to double-digit productivity across the enterprise, right? So both NAST and our Global Forwarding businesses. We've also commented that, that will be over-indexed to the second half of the year. And the way we think about productivity going forward, just to remind the audience is. We've committed to single-digit productivity every year regardless of circumstances, right? So our operating model will generate productivity in the single digits, mid-single digits every single year.

And in years like 2025, in 2026 where we have waves of innovation. So whether that be GenAI adoption Agentic AI adoption, then we're committing to double-digit productivity when you compound those waves of innovation with baseline continuous improvement. But look, we're in the early innings of our productivity journey, both in early innings of the lean adoption early innings of our technology adoption. So there's a long runway to go as it relates to productivity to Robinson.

And Ken, from your second question kind of on the mix of business. I think you're right in kind of a longer time frame that our goal as the market shifts would be to move that percentage to more equalization. But really, in Q1, most of the activity in the marketplace were supply event-driven, either storms, regulatory impacts on capacity. And while we're optimistic that there's some life in the market, it was still dominated by supply-driven events. And so it was really important for us as we come out of our RFP business to make sure that we take care of our customers, that we select the right transactional business to win, which I think we did based on the combination of mix of business and our margin performance. And really early in the quarter, a lot of the transactional pricing wasn't matching where the market was or maybe, I guess, I would say the transactional market didn't match where maybe the pricing and capacity market was, and we saw that improve throughout the quarter.

So I feel really good about how the team balance that. It's important that we also make sure that we take care of the customers who've awarded us business through what we, as we said in our prepared comments, was a successful RFP season. But we do look for that to equalize over time, especially if demand improves throughout the rest of the year.

Yes. And Ken, just to put a bow on what Michael said, I mean, this has been a strong bid season. We expect to gain share through this bid season and price. So as Michael said, just to summarize that, really strong bid season for C.H. Robinson.

Damon just a quick follow-up, if I can, for Arun. How is Global Forwarding in terms of the AI deployment? Or is it still all brokerage? Is that balanced and catching up or still mainly brokerage?

Yes. Yes. So Ken, we're actively deploying the same playbook that we use in NAST over in Global Forwarding. You'll start to see more of that kind of kick in the second half of this year. And just like NAST, you've seen the journey over the past few years. We've got a lot of runway at Global Forwarding.

And our next question comes from the line of Chris Wetherbee with Wells Fargo.

I guess I maybe wanted to ask a little bit on sort of your view on spot activity and demand as we went through the quarter. So obviously, AGP improved as we went month-to-month. But can you talk a little bit about spot activity and maybe in the context of the contract comments that you're talking about, what level of contract rate increases we're seeing so far through the bid season so far?

Yes. Thank you for the question. I think what we saw early in January was there was still a bit of a decision process of whether the storm impacts of early January and flowing into early February were events or whether they were a continuous and ongoing cost increasing market. And I think what you saw from a lot of customers was pushing the loads off or rolling the loads beyond the storm without necessarily pushing the loads into the transactional marketplace.

As it became clear throughout the rest of the quarter that the cost side of the marketplace was going to hold, then the transactional marketplace started to pick up some steam. But in many cases, the overall demand ecosystem was loads being moved from one -- from the C-side of the business to the T-side of the business without a total increase in loads available. And so again, really pleased with how the team mixed the service to our customers, but also to take advantage of the transactional freight that delivered the margins that we required in that marketplace. But overall, I feel really good about that.

But to your second part, we look at repricing as an ongoing event in terms of how is the market performing. And so we don't have a preset goal of percentages. We just know that we are going to have to continue to manage the health of our customer supply chains. And for some customers, that might mean little to no repricing for other customers, it might be significant. It just depends on the mix. Geographic is a large component right now. There are areas that are impacted more than others by the regulatory changes. And so again, feel really good about our process, about our revenue management process and the tools we're getting into our people's hands. And so very confident that we can continue to take share from an RFP perspective and then manage that business appropriately.

Great. That's helpful. And then a quick follow-up. Just Dave, if we zoom out a little bit, we think about Montgomery, we think about potential outcomes here. If there's an adverse outcome, I guess, how do you think about market share? It strikes us that there's a whole bunch of this industry that is making essentially no money as it stands right now. And theoretically, there should be some cost pressures from insurance coverage or other factors. I guess, what's the opportunity for Robinson in that scenario from a share standpoint?

Yes, Chris, thanks. Listen, let me -- again, I'm going to address it this ways and hopefully you guys can appreciate this. it is really important that we put on a strong argument and that we win this case. It's important because the Supreme Court really has an opportunity to resolve kind of that disagreement on the lower courts. We got to ensure consistency in the application of this preemption of these claims and it will reduce this uncertainty, as you know, for brokers, shippers and carriers alike. The opposite to that is 50 different state rules and we support 1 national safety standard. That's super, super important.

When it comes to the impact of Robinson, we don't look at it that way. This is a long tail for a lot of brokers but we have to plan for both sides of it. And you're right in that you called that out. Obviously, there's going to be some insurance implications if you're going to be in this business and that's going to impact different people in different ways, depending on your health and your size. And we're prepared, I way for that, but we really put up a strong case. It's important for the industry. that we bring clarity to this and not just a positive or whatever impact just to Robinson. That's not how we're looking at it.

And our next question comes from the line of Jonathan Chappell with Evercore ISI.

Michael, you gave a good example of the very active and rifled in your words, repricing approach to the spot rate backdrop. I think what people really want to understand more is the sustainability of what you've managed to do in these first 2 quarters of the upturn. So in addition to that, just the repricing approach and the collaboration with your customers, can you give more tangible evidence of how you've managed these first 2 quarters differently than from prior up cycles. And then how that translates into 2Q or 3Q if rates kind of continue to stabilize from here and kind of stop the parabolic move higher?

Yes. Thanks, Jon. I think I'd start with we've talked about our revenue management capabilities and getting tools into our people's hands faster and faster. And so if you compare it to maybe the past I think it would have taken us most of Q1 to figure out where our problems were. And most of the quarter to understand what level of repricing we needed, where and how.

And really, with our Lean AI disciplines now, our tech being in our people's hands faster, they're able to see where the supply chains of our customers are having breaking points, where the health of that supply chain is impacted. And then we're able to have conversations with customers where we can make disciplined decisions together, and we can make those either in a onetime event, if needed based on the change or an ongoing event based on the really the volatility of that part of their supply chain.

We've talked in the past about whether we would have noticed it weeks after or months after, and now we're noticing it that day. We're recognizing the trend. And we're really able to talk to our people about how are we going to fix this and what time frames do we think this adjust to. And so I see our process continuing whether the market goes up or goes down, we're going to continue to have those conversations with our people and our customers. But I feel really good that we have the tools available to handle a continued upswing in the manner it has for the last 4 months. The market is stabilizing or it potentially going back down depending on just the overall conditions of the marketplace.

So I think -- I hope that answers your question, but I feel really confident that we're getting the team what they need to service customers regardless of market conditions.

Yes. And Jon, I would just add, this is Damon, that just with the frequency in which we're interrogating the market from a price and a volume perspective, as Michael said, we don't have to set a strategy and hope that strategy materializes within the quarter. We're changing strategies multiple times a day, hundreds of times a month, right? And so to Michael's point, we're working within the conditions the market has given us, and we're outgrowing that market and we're taking price at the same time, right, with our operating margin expansion.

So I think for us, whatever the market conditions bear, I think the frequency and the surgical nature of our revenue management gives us capability that we think you have in this marketplace.

And our next question comes from the line of Bruce Chan with Stifel.

Yes, thanks. Maybe just wanted to get your thoughts on Forwarding in terms of maybe volume development and then margin shaping. I know you don't always get into that granularity, but there's obviously a lot going on right now with the Middle East and capacity and the fact that we're lapping the trade disruption this quarter. So any color there would be really helpful for our models.

Yes. thanks for the question, Bruce. What I would say is, look, I think we say this almost every quarter. because it feels like we're always an uncertainty as it relates to our forwarding business. I think another really solid quarter in a very difficult macro environment that our Global Forwarding team performed, right? So as you mentioned, a tremendous disruption in the Middle East. And what I would say directly is our direct exposure to the Middle East is quite immaterial to our book, but the knock-on effect to global rates and global capacity has been the challenges that our team has helped our customers work through in the quarter. And I think they did an exceptional job with that challenge. You can imagine capacity being staged in one area that's being relocated to another area for demand patterns and repositioning. I think the team has done a really good job there.

And so I'd say, in a quarter where disruption could have been impactful to our business just because of the knock-on effect of the global impact of capacity and rates. The team manages that impact to a very immaterial number for Robinson Global Forwarding in the quarter. So I would say, look, your opening comment of look, there is a lot of disruption, a lot of global displacement because of the conflict in the Middle East. But I'd say as far as the impact to our business, we've been able to manage it quite well. The impact has been relatively immaterial to our results, and we continue to help our customers solve continuing global conflicts and challenges on the forwarding space.

And with that, our next question is Brandon Oglenski from Barclays.

So I think implied in your 2026 earnings outlook, you guys had embedded quite a bit of expected efficiency gains, especially in the back half of the year. I guess, especially given commentary around fundamentals with bid season may be going a little bit better. How do we think about earnings progression again into the back half of 2026?

Yes. Thanks for the question, Brandon. This is Damon. Look, I think we feel very good about our Investor Day update. So the $6 EPS with no market growth. As usual, the market starts out and the year starts out differently than you planned. So certainly, there's been, I'd call it, market headwinds in the terms of spot rates being substantially higher than certainly, we forecast or anybody forecasted for 2026, but the team has managed that exceptionally well. And we continue to perform exceptionally well on our self-help initiatives around outgrowing the markets, revenue management capability and productivity.

So I would say we have a very high degree of confidence in our $6 EPS target. I wouldn't say we're in a position to change that target or the profile of that target at this point in time as we did mention, the productivity improvements that we've referenced in those commitments are over-indexed to the second half of the year. We think that profile still aligns to our deliverables. But I would just say, high degree of confidence in delivering our $6 with no market growth assumed, and we feel very confident in delivering that in '26.

And our next question comes from the line of Richa Harnain from Deutsche Bank.

Obviously, very solid results in NAST. Just wanted to better understand the flat volumes and down 3.5% [ CL ] volume. Mike, I know you discussed this in earnest about a deliberate decision you're making about being disciplined on growth opportunities, but maybe dive deeper into that and what you're seeing market that prohibited you from maybe profitably participating in more volume opportunities. Maybe just PT, but I just want to better understand. And you're going to see if volume growth could start to be more significant as we go through the year.

Richa, thanks for the question. And I'll speak predominantly to kind of what we saw in the quarter. And I'd say really the impact on volume was, first of all, like we said, we had very deliberate choices about the volume we wanted to win in the transactional space at the margins we thought the market required as well as to make sure we service our customers in the contractual space. It's also important to realize that there were some major storm events that impacted very large shipping areas and volumes. And while many of that volume does end up getting shipped you don't get all of it back. So there was a volume impact just to the type of events that we went through the quarter.

And so I think when we look at that, look at the balance of what freight was available to us, look at how our customers were impacted, we feel really good about the volume we produced in the quarter. We've talked about, as Damon mentioned, the market did not grow in the quarter, as you saw with cash down 6.2%. So market outgrowth in both modes year-over-year growth in LTL. So we continue to believe we're taking the right share at the right time. We certainly expect ourselves to continue to do that, whether the market starts to improve or not. We're going to continue to hold ourselves to that high bar. But we're going to continue to do it based on what is the right return for all shareholders, customers, carriers, employees and shareholders.

Yes. And Richa, this is Damon. I would just add to that is and we've been pretty adamant about this for almost 2 years now, right, is we take the volume we want in a given quarter, right? And so in Q1 we took the volume that we felt met our criteria. Now make no mistake, Michael and team could have outgrown the market substantially more than what we did, right? But based on our own financial expectations, based on our own quality of earnings. We focused on the volume that mattered most to us.

And I think the best way to frame this up, and I won't name specific companies, but I think the bookings are important here, right? We have one competitor that had pretty high growth in the quarter, right? Double-digit growth, but yet negative gross margin dollars and a significant contraction in rate in the quarter. We had another competitor that had a significant volume reduction, almost 20% in the quarter but maintain rates, right? We believe our model is superior, right? We had what I consider very strong outgrowth in the quarter while maintaining our rates or while maintaining our AGP margins in a quarter where spot rates were up 18% to 20%.

So as Michael said, we feel like we've got the strategy that works. We take the share we want, we deliver the margin we need. We feel like we have the best cost to serve model in the industry, and I think Q1 was a perfect example of that.

Thank you. And with that, ladies and gentlemen, that does conclude our question-and-answer session. I would now like to turn the floor back to Chuck Ives for closing comments.

Yes. Thank you, everyone, for joining us today, and thank you for your questions. We look forward to talking to you throughout the quarter. Have a good evening.

Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful rest of your day.

Good evening. Thanks for joining us at the Morgan Stanley TMT Conference. My name is Guru Gupta. I am the Global Head of Transportation and Logistics Investment Banking Practice for Morgan Stanley. And today, we have joined here by the entire crew from C.H. Robinson. We have Dave Bozeman, who is the CEO; followed by Damon Lee, who's the CFO; and Arun Rajan, who is the Chief Strategy and Innovation Officer. So first of all, thank you for joining us. C.H. Robinson operates in the physical world, not the digital world. You're very well known in the industrial circles in transportation. But for the audience here, maybe start with just describing what C.H. Robinson does and where do you fit within the logistics and supply chain ecosystem?

Yes. Thanks, Guru, and thanks for having us. So glad to be here. So C.H. Robinson, we are one of the largest global logistics platform, and we're actually the largest in North America. We -- the best way to think about it is we sit in the center of a really complex fragmented market in which you have capacity on one side, that would be our carriers. And on the other side, you have shippers or customers. And we connect those shippers with that capacity. And our job is to make simplicity out of the complex, and it's a very complex market to do that. We do 37 million shipments annually. We have 75,000 customers, relationships with over 450,000 carriers. All of that complexity, we feel we are doing a really nice job now with our technology, with our operating model and with our logisticians. We call it lean AI. And we feel like we are the #1 driver of lean AI supply chains. So we'll get into it a lot more. But at the end of the day, a really, really complex way of we move the goods that really power the world.

That's great. So it sounds like, Dave, the easy way to think about this is like a 2-sided marketplace where you operate. Just help us -- help the audience here understand, as you think about your strategy and long-term thesis, you mentioned lean AI, how specifically you're using that in your business model? And why is it such an interesting story within the broader transportation and logistics industry?

Yes. We'll all jump in here. It's an interesting story for a couple of reasons. We're a 120-year company, and we've moved freight around for a long time. But now I would say that we're somewhat of a start-up and a disruptor in doing that. And how we do that and why we're so excited about it is when you apply a lean operating model and lean principles that have been around a long time, part of my background that I brought, some of what Damon has brought. When you connect that with industry-leading technology, and we'll get into that, generative AI technology, agentic technology and the experience of our people, those 3 things, we think, have driven a competitive moat that has delivered what we think are demonstrable results, but more importantly, very, very hard to replicate in our industry. And so I'll have you guys like jump in on it.

Yes. And I think certainly, we would give equal, but we get asked a lot how much of our performance the last 2 years is attributed to technology versus lean operating model. And the true answer is we don't know, right? I mean those 2 are so combined, so symbiotic. They both work together. What we will say is they both have been material impacts and demonstrable to our results. If you think about what does lean bring, Lean on its own brings operating discipline. It brings rigor and problem solving. It just brings a pace in which you run the organization. Just think of the structure and business model in which you run an organization, that is what we use our lean operating model for. Obviously, the technology has brought tremendous performance benefits to Robinson. I think what gets the #1 billing is always productivity. I think people wrongly assume productivity is only -- the only benefit generated from AI. And in Robinson case, that's only one benefit. Now certainly, AI has been a great benefactor -- or we've been a benefactor of AI from AI, 40% productivity since the end of '22 across the enterprise. But I think what's more exciting for us or as exciting is AI has unlocked revenue opportunities for us. It has been a key contributor to us outgrowing the end markets for over 10 quarters now. AI has helped us use our industry-leading data set to drive revenue management capabilities. So think of that as price optimization and cost of hire optimization, so how we procure freight. It's allowed us to use our data set to drive demonstrable benefits in revenue management. And you couple those 2 items with, again, 40% productivity generated across the enterprise since the end of '22, there's rarely an area of our P&L that we can't point to demonstrable benefits from AI -- and those benefits have been supercharged when you combine them with the continuous improvement mindset from a lean operating model. So we feel like the combination of lean principles, a lean operating model with cutting-edge technology backed by AI and now Agentic AI, we believe that's a recipe for success that we believe we're one of the few companies in the world that are demonstrating that combined capability today.

So maybe I can just sort of wrap that up and say, well, why does this all matter, right? So ultimately, we're building a scalable business model, right, meaning we're decoupled from every marginal piece of volume that we process through our system has to have very little human or technology cost, right? So think of sort of the Amazon-like model, right? So that's what we're building. So a mousetrap that is so efficient that ultimately customers have to ask, well, our shipper customers have to ask, well, if C.H. Robinson can run a platform more efficiently to move freight and also do it at higher service levels, then why don't I just outsource my entire logistics department to C.H. Robinson. And customers already do that, that flywheel will just start to accelerate as we continue to build what we're building.

So as you build this sustainable model, since last few days, we've been hearing about trillions of dollars of investment in AI infrastructure. How are you investing in that?

Yes. I'd start. So ultimately, we sit at the application layer, right? So LLMs are effectively a commodity to us. The way we use the LLMs is we're effectively -- we go to Azure AI Foundry, and we use whatever model makes sense for the problem we're looking to solve, right? So ultimately, with this application layer, so what we care about is token costs, and we pick the right model based on price performance ratio. But ultimately, everything we're doing with AI, I think Damon mentioned this earlier, whether it's AI or prior versions of technology, we're always working backwards from our strategy and our financials, right? So ultimately, we're saying, well, we're going to create a scalable business model. It means we have to have operating leverage. It means we have to have gross margins that are really strong, right? And so in that context, what we say is, well, any technology investment we make in AI drives one of those metrics. So an example might be on gross margins, we have to say, well, in this industry, price discovery and cost discovery is not as sophisticated as it is in other industries. However, we have the data to say, okay, on the price side of the gross margin equation, we're able to discover prices that we can charge for the services we deliver. And equally, on the procurement side of it because it's a 2-sided marketplace, we can procure and we can discover costs that are the most appropriate based on our algorithms, right? Because we have this granular data that allows us to do that on both sides of the equation. But ultimately, every AI investment kind of ladders back to our strategy.

And Gur, that's why actually we're so excited to be here because you can go from an industrial conference and really talk about at an industrial conference kind of where we are, as you know, but then come to one of the preeminent technology conferences and you say, why would an industrial 120-year industrial be here at a technology conference because of what you're hearing here. At the end of the day, we are the beneficiaries. There's a lot of conversations to say, what's happening upstream with AI, who benefits from that. We are benefiting from that period. It goes to the bottom line. And we like to point to the bottom line and say there's no asterisks -- there's no -- everything adds up, the benefits are there. We just couch that by saying it's our technology with the way we've transformed the company and our operating model and our logisticians who we think are the best in the industry. But that technology, that's why we're here because this is the example of how you can get benefits right.

I'll just put a bow on what both my colleagues have just said here, which is if you think about the AI ecosystem, right, we are in the sweet spot of that ecosystem, right? We're in the application layer. We are the company that is benefiting from the hundreds of billions or trillions of dollars that are going to be spent from the hyperscalers on driving better problem solving and capability at a lower cost, right? At the end of the day, we reap the benefit of all of that investment, right? So when the question comes, where is the ROI for all the hyperscaler benefits, the answer is it's a C.H. Robinson, right? We're benefiting our revenue growth. we're benefiting on gross margin expansion. We're benefiting on productivity benefits. And the other thing is when you talk about investment, Guru, our investment has been contained within our spending. So if you look at our spending since we've started investing in AI, our total spending has not gone up, right? We have been able to contain the entire investment in our AI infrastructure within our current levels of spending. So we're deploying AI in a very efficient way. As Arun mentioned earlier, once we've built an agent and we build our own tech, hopefully, we get to get a chance to talk about that in future questions. But we're a builder of our technology. We don't buy our technology. So once we build an agent, the marginal cost of that agent is close to 0, right? It's essentially just the cost of tokens, which are coming down every single year at an exponential rate, right, versus somebody that's trying to buy AI solutions off the shelf or use a third-party vendor where you're paying by the drink. So not only have we had demonstrable benefits from our adoption of AI, the way in which we build our technology, the which way we deploy it, we believe we have industry-leading cost advantage as well.

And on the engineering side, we're not investing more in engineering because our engineers are more productive, and they might have 500 engineers, but they punch like thousands of engineers based on what they can do.

Yes. So Damon, you made a great point. So what's your approach towards hyperscalers and LLM models? How do you pick which one to go with...

Yes. So I'll give an unsophisticated answer, and then I'll let Arun give a sophisticated answer. We're architected where we can use any LLM, right? And so -- and Arun will go into the details here. But essentially, we're not held to any given LLM, right? So whichever LLM gives us the best performance versus cost ratio, we can use that capability within Robinson. And our architecture is flexible enough to allow any LLM to utilize. But I don't know if you want to add.

Yes. So all of our applications are abstracted from the underlying LLMs, which means we can switch any application or any agent can call any LLM. We have the observability and sort of the test harnesses built in. So where a given team, if they think that their costs are getting out of control, they'll simply switch to a different LLM or they'll switch to an older version of an LLM, basically pick the best LLM for the price performance that we expect out of that investment.

Yes. And it's important to note that for the computations that we're doing for the application of AI that we're using, in most cases, we do not have to have the latest LLM model to get the optimal benefits, right? So we can get the cost advantage of using an LLM that's a generation or 2 old, still does what we need it to do, but yet we get the cost benefits of using a second or third generation.

I would joke around a room is doing way cool stuff. The compute is pretty sophisticated, but it's not like we're doing genealogy. So he's able to use some of the models that may not have to be the latest one.

Well, I think maybe like there's one other relevant point, though, right, because if you don't get your context engineering right, those costs could become runaway and you're going to be subject to hallucination. So the context engineering is set up. We engineer the context such that a given agent does it knows what task it's doing and the guardrails in the context that it's provided is pretty clear. So because of which, a, it doesn't hallucinate. -- b, you got contained token costs.

Arun, you want to explain what's been our usage increase as compared to cost?

Yes. So over the past year, obviously, when we first started out, we hadn't figured out how to tune things and optimize. But over the past year, our token usage is up 85x and our cost is up 1.5x. So we've got orders of magnitude of leverage as a result.

That's a phenomenal efficiency you've been able to generate. But help me understand, so you're using all LLMs, you definitely have phenomenal cost advantage. Why is it that your competitors are not able to do it? What are the moats around C.H. Robinson? Because you operate in a highly competitive industry.

Yes. It's a couple of things, Guru, on that. And I think this room will hear more and more about this, I think, in the coming year as well. I think Satya talks about it a little bit as well. It's about driving continuous improvement. So we call it lean AI. Having that continuous improvement element to get the benefits out of AI is going to be super important, and it's something we obviously are doing within our business. But there's other things as well. The data set that we have is the largest in the industry. That is super hard to replicate. You can't buy that data. And that is a -- that's a moat to have to deal with. How we go about being an internal builder versus buyer, that just all drives to replication. And it's really hard to replicate a number of the things that we are doing at Robinson. -- our team kind of calculated that it would take about -- for you to partner with about 15 to 20 different companies to kind of replicate what we're doing. And you have to have orchestrators on top of that. Well, what does that do? You can do it, but it's going to be a cost pressure. And the one thing that I value a lot is speed and velocity. We get to do speed and velocity experiments all the time because we build every day. And we can do those micro experiments, we can learn, we can innovate, we can drive. That's super hard to replicate when you're just going out and buying. And so we didn't invent this. We didn't invent AI. We didn't invent lean, but we certainly are executing to it.

I'll add to what Dave said on lean AI, the AI, the technology, the base technology and infrastructure, we've built that out, right? But they talk about data, but the other type of data is the context that sits in our people's heads in SOPs and everything else, right? So if you think about it, we've got a transportation management system, which is our system of record. That's our base layer. And then you've got humans interacting with our transportation management system. And those humans are doing things on the UI. They might be reading e-mails, they might be going to a third party like one of our partners' websites. And they're either -- they're off system and on system, just like in any other company, right? People interact with their system of record in some way. So then -- but their interaction is based on SOPs and other tribal knowledge. And so the data that Dave is talking about, there's some data that's captured in our transactions, there's other data that's in their heads, which we basically effectively harvest and put into what we call the context layer, right? So a context layer then has the collective intelligence of our people and the different things that they do for different reasons, which renders sort of the UI irrelevant. Now you got this context layer and you build AI agents on top of that context layer to go do the work on their behalf. So that doesn't happen. The change management around that is like nontrivial, right? So what I just described means the jobs of people who did operations now is to effectively manage context, not to run operations, right? Manage context so the AI agent can do the work. So this is where the operating model is a huge deal, right, in terms of like how we drive this change to the organization. That's when sort of moving and AI comes together.

Yes. And I'll just do one final double-click on AI because, again, it's probably a new term for you guys. It's one we've coined is it's important because I think the companies are going to be successful in getting value out of AI. And today, it's why so many surveys where you survey CEOs and CFOs and they say, look, we're investing in AI. We haven't really seen any tangible benefit from that example or that investment yet. And I would argue it's because they don't have a delivery mechanism. right? What lean does is lean allows you to categorize all of your opportunities within the company. It allows you to understand what is my cost-benefit ratio for automating those opportunities. And it gives you a delivery mechanism, which is what problem am I trying to solve with data, with redundancy, right? And so every time we look to invest $1 of AI investment at C.H. Robinson, we are running it through the discipline and the rigor of a lean operating model, right? We are always going back to what problem are we trying to solve? How are we going to solve it? And is this the biggest problem we're trying to solve for the organization, right? That allows us to make sure our investment dollars related to AI are going to the biggest opportunities within the company. Last comment on this is I think where many companies on AI investment and developing agents is they develop an agent for a task. -- right? They don't develop an agent for a workflow. Well, at the end of the day, you only get productivity if you optimize the workflow. Simple example of that would be if you've got a workflow that has 5 steps and you only point an agent to automate or optimize one step, all you've done is created a bottleneck in that workflow, right? You have to optimize the entire workflow to get productivity. When we deploy AI and invest in AI, we are optimizing workflows, which is why we can point to the P&L and say, we've generated 40% productivity since the end of '22, and it holds water, right? It shows up in our earnings, right? You can see it in the quality of our earnings, whereas many companies today that are investing in AI, they really struggle trying to find the benefit. And I think that scenario I just walked you through is one of the reasons why and why we believe companies that partner lean with AI will be the winners at the end.

And where Damon is gone is at the end of the day, we were very deliberate, not have hazard, but very deliberate about going after the order-to-cash process because in our industry and within our company, that's a process that has a lot of friction, and it's a workflow. And it boded well for our technology to really go in and automate a lot of those steps in the order-to-cash process, which benefit or drove a lot of that 40% productivity.

Great. So we have talked a lot about the efficiency and productivity gains. And freight markets have been in recession for 4 years. So as we start inflecting, which is what people are now beginning to see early signs, how has AI helped you on the top line and growing your revenue? And what excites you for the next couple of years?

Well, what excites me is when we get this question, we get super excited because one might look at -- I would argue that we've been in a 4-year freight recession. If competition was going to do something, you should be doing it now. I mean if things are going to inflect, is that when you feel like you're going to catch up? For Robinson, it's not going to be this kind of linear improvement. And I think the industry will see a linear improvement as we start to inflect. I think we're going to have an exponential curve. And we're going to have an exponential curve because the way we've engineered the company and reengineered the company with this technology, it's only going to get fed more. And so as the market takes off, we always give an example, we do 600,000 quotes and we've automated 600,000 quotes. You could add a 0 to that and make it 6 million, and it doesn't matter the system and that agent is going to process 6 million, and we don't have the human hours to have to bring back to do that because we fundamentally change that. So we're excited about an inflection. And when it happens, you're going to see more of an exponential approach for Robinson because of the way our agents are built and the way we've done our technology and the way we operate the company that gives us that visibility, and that's ultimately a competitive advantage.

Yes. I think, Guru, what this industry has been trained to do is very dependent on the cycle, right? And so when you go into a freight recession, you lay off a ton of people, right? The market improves, you hire a ton of people, right? That is not the Robinson model going forward, right? The processes that we've automated, they're fundamentally changed, right? So when you fundamentally change the process that is now over-indexed to technology, has very human light touches versus heavy touches previously, when volume returns to the system, there's no need to add headcount back, right? The process doesn't require headcount the way it required it before, right? And so for us, when that volume returns to the system, the operating leverage that we're going to see is going to be substantial, right? In fact, we've made the comment. We believe our operating leverage at Robinson will rival the asset players in our industry because we know the incremental cost we're going to have to add back related to the incremental volume will be very immaterial. So therefore, the operating margins will be great. The productivity will be great and the cost avoidance will be great based on the nature of that curve. But you ask how AI has benefited our revenue. So certainly, that's how it benefited in an up cycle. How has it benefited our revenue today? We give one example that I think is pretty impactful. We have one orchestrating agent that manages our quote cycle, right? So customers send in quotes, we respond to those quotes. Historically, when that was a human-led process, right, we only got to 60% to 65% of the transactional quotes that came in, okay? So think about that, 1/3 of the transactional quotes that came to us, we either didn't respond or we responded too late to have access to that freight. Today, with our agent, we get to 100% of those requests for freight quotes, right? In addition to that, at no fault of their own, the human before took 17 to 20 minutes to respond to those requests. When they did respond, even though we have this large data set, they only had time to grab 5, 10 pieces of data, analyze it, send a request back to the customer. And the nature of that submission back was fairly unsophisticated. Today, our agent, again, getting to 100% of those requests can reduce that cycle time from 20 minutes to 31 seconds -- and our win rate has actually gone up because the sophistication level in which we respond to the customer has gone up exponentially. So the agent grabs 1,000 data points, sends a very sophisticated response back to the customer. Our win rate goes up, our margins expand, right? And that's just revenue and gross margins. As I mentioned at the beginning, that process has been key in aiding to the 40% productivity that we've delivered since the end of '22. So that one orchestrating agent for our quote cycle benefited revenue growth, benefited margin expansion, benefited productivity. And in the eyes of the customer, customer service went up, right? Because now they're no longer frustrated that Robinson only responds to 65% of the quotes on the transactional side. They're no longer frustrated that we send an unsophisticated quote back to them versus a sophisticated quote. So that one agent benefits the customer and benefits Robinson on all 3 levels.

So Guru, I think if you want to take that one example, you asked what makes it exciting, Take that one example and kind of blow it out to the whole industry in every single process in the industry. And what's exciting is the platform that we've been building and which is now accelerating with AI is that it is the best mousetrap to operate a logistics business, right? -- meaning it's like the lowest cost to serve at the highest levels, which then what makes it exciting is, well, every company in the country or the world should be able to say -- every customer should be able to say, well, is it more cost efficient for me to run my own logistics and transportation department or should I use C.H. Robinson? It's the same way when Dave and I were at Amazon, it's the same thing, right, which is, okay, well, do I run my own data center or do I let AWS manage my data center? Do I run my own fulfillment business? Or do I run that Amazon run my fulfillment business? So this industry hasn't had a platform that has sort of changed the game in terms of cost profile and service profile.

That's how we look at it. It's a little bit different, right? We don't look at it as just being a global forwarder or a freight broker. We're a solutions provider. And as we use this technology to help us go up the value stack, you will see that and you'll see that at scale and at speed. If you go on Robinson, you talk about 6 months now, 6 months is ancient, right? I mean it's just -- in 6 months, we're going to create something that we don't know today what it is. It will be something new. It's just a different way of operating for Room. But go ahead.

So as you have automated most of your processes and these agents are making decisions -- how do you ensure that human stays in the loop and things are being done the right way because there are not many companies who actually have done this type of automation so far at this massive scale.

I'll let Arun talk on it, but I just want to clarify one thing.

One correction.

Yes. We have not automated with nearly as many processes, like we're just getting started. This is second inning stuff. So we're really happy about our performance and the bottom line benefits. But this is early. You have a lot, a lot of processes to go, and that's why we feel really excited about.

Yes. So this is a really great question, right? So we've been doing sort of traditional machine learning for a long time. where we're collecting data and we look at the outcome compared to what we predicted and the machine keeps getting better, right, machine learning. So then you say, well, okay, if you're going to roll out an AI agent, this AI agent first has to be trained on the context that the human like is executing today. So the way it works is for any given process that we apply Gentic AI to, a human is involved in training the agent on said task or workflow, right? And they remain in the loop for a period of time. So there's 2 things we do. First, we say, well, the agent -- we back test the agent against all previous transactions and workflows to give the human in the loop some confidence, right? And after that, they stay in the loop for some -- whatever duration they choose to, until they're comfortable with going hands off the wheel, right? But before they go hands off the wheel, they usually are -- they are on the hook to say, well, what kind of observability and monitoring and alarming they want, like that quote example, right? The quote example has a lot of observability around it because like it doesn't -- there's bands outside of which it can't go in terms of win rates or profitability and at a granular level, at a lane level, at a customer level. So you start to get alarms when something goes wrong. Again, it's just basic engineering and software culture combined with a lean culture, right? So ultimately, engineering the context, engineering it correctly with the human in the loop and having the observability to actually run it at scale are basic engineering and lean disciplines, which are required to get this out.

Yes. And I'll just put context around where Dave was going on early innings, which is as we mentioned earlier, right, the universe of opportunity is our quote-to-cash cycle, right? That's made up of thousands of processes, right? And in our NAST business, where our technology has been over-indexed thus far, we've only automated a fraction of those processes, right? So when we talk about early innings, it's because we have this universe of processes that have yet to be automated by our technology, and that's the NAST business. On our forwarding business, we chose to start our technology deployment on the NAST side, right? That was the biggest opportunity, right? We are just now starting to index that tech stack over to our forwarding business, and we'll start seeing those results in the second half of '26, right? But when we think about where are we at on this transformation journey, early innings from a lean perspective, early innings from a technology perspective, we say often, we think the next 2 years for Robinson will be really exciting, and the last 2 years have been quite good.

So we have 3 minutes left. Maybe we take questions from the audience here. Sure.

Yes.

So I was wondering -- sorry, I was hearing you talk about the way the agents are trained by a human. I was wondering what happens to that human after the agent is trained and how you see your headcount developing going forward?

Yes. Well, I'll start...

And then I'll jump in.

So the way we've been very transparent with our people about -- so the -- first of all, these are mostly operational jobs where turnover is really high, right? So that's one. And we've been very clear that the future job isn't actually to run the operation. The future job is to manage the SOPs and manage the context for the AI agent, right? So it's such that then people have time to solve more difficult problems for customers, right? Because ultimately, customers are navigating more and more complex supply chain problems. And they're asking our people to solve higher order problems. And they're not -- they don't want to pay us. So the whole industry has this waste to run operations. That's how we see it. So which is -- there are 2 things that our people can do. A, you can manage the context for an AI agent to do operations work; b, you can move into higher order work to solve more difficult problems for customers.

Yes. And I'm glad you asked that question, too, because as a company, this has been super important to me as far as headcount and how that goes. First, we don't even look at headcount, and we don't have a KPI on headcount. We just don't look at it that way. But being super transparent with people was really important for us as we went on this transformation. We have about an 11% to 14% turnover rate in some of these jobs. That's the industry. That's just what happens on this. So it's allowed us to be able to not backfill that, but also tell them, as Arun said, this is what the future is going to look like as we start moving to more customer-facing, more verticals and we start investing in different ways of work as we go forward. We've been very, very upfront. And I think our teammates have taken that very well.

Question.

Yes. I guess the obvious question is the extent to which you think you can keep these benefits over the longer term and whether you think that actually scale will actually increase or could increase the moat because a lot of what AI is doing is democratizing. It's making it easier for anyone to code and all the rest of it. But I wonder whether you think that the normal laws of economics and these will flow -- the benefits flow back to the customers might not apply, and it might actually be that the bigger players such as you guys get to keep those benefits over the long term or not really?

Yes. So we do believe we will continue to accrue and retain those benefits, right? So as we mentioned, what we've been -- the journey we've been on the last 2 years has allowed us to have a pretty sizable cost to serve advantage versus the industry, right? Our strategy will continue to expand that cost to serve advantage versus the industry, right? And so there is no mechanics where we see that degrading, right? And you mentioned AI being the great democratizer, -- we would argue we're already democratizing with AI within the industry already, and we're doing it in a very sophisticated way, meaning custom agents for custom solutioning versus generic agents for generic solutions, right? So if we weren't using AI, I would argue that would be a huge risk for our business. The fact that we're already disrupting and creating that cost to serve advantage with AI in a very custom manner, I think, just continues to expand that moat. As we mentioned earlier, you can buy AI, you cannot buy our data, right? So our data is the largest, most granular data set that has been built over decades, right? And so you can buy data, but it's averages of averages, right? You can't execute the agents the way we're executing them with the context we're executing them with generic off-the-shelf data, right? So we believe the moats that we have in place today will only continue to grow as we move to the right.

It's very sustainable.

Just to kind of add to what Damian was saying, I think it's worth saying we're effectively democratizing the cost and service benefits of this platform to the entire industry, right? So that's one way to look at it. We've applied AI to make this platform. The second part of it is the AI is not just technology. It only works with data and context. And so if you look at the data and context, there are 3 attributes of the data and context that's relevant. One is the sheer scale, the volume; two, the scope of that data and context, meaning we see a diversity of customers, modes, services. And then finally, I'd say the depth or the granularity of the data, right? So we understand fine-grained information about customers, about warehouses, about lanes, about commodities. either in data that we're recording or context that's in human's hands that we now put in our context.

And as I mentioned earlier, all of that discussion was on the technology, right? We mentioned earlier, I give equal billing to our success to the operating model, right? And so again, you can't buy an operating model, right? Nobody is going to sell you an operating model, right? I mean that is changing your company's culture at the core, right? And so that's hard work. Most companies, in fact, lean has been around for decades. There's a reason why most companies haven't adopted lean, right? It's not because they don't think there's a benefit. They just know it's really hard to do to drive it all the way down to the desk to sustain the benefit. So we think you take that delivery mechanism that we call our lean operating model and you combine that with the industry-leading technology and data that we just referenced, we just think that's a combination that's really difficult to compete with.

Thanks for the question.

Okay. We'll take maybe one last question.

You mentioned when you kind of run this to the end node, if you have scalable infrastructure at a low cost, high service that you would become the Altourus partner of choice for logistics. Can you kind of walk through kind of where are you in that journey? And like how -- like are we there? Are we a couple of years away? And like where are you in capability in being able to offer that scaled solution?

Yes. I think it depends on the sophistication level of the customer, right? So today, so we have the service transportation business, which is NAST 1/3 of our volume for that business already comes from customers where we manage their entire transportation department, right? So meaning we already operate up the value stack for customers who are probably less sophisticated, right? And so then you say, well, our -- with our AI supercharged managed solution, we keep getting better and better, and you can start to see -- we already have a few really large customers that are on our platform as well. But so I'd say like every year, every month, our win rates on managed solutions go up for that reason, right? Customers start to see us as more sophisticated than what they can probably do internally.

Yes. I would only add that I think we are the provider just because of our share today, right, we are the largest provider of managed service solutions, right? We are the largest broker providing solutions to the marketplace today. I think what we're saying is -- there is no cap on how large we can get with this capability, right? We have this discussion 2, 3, 4 years from now. We believe we'll still be the industry leader, just a much more demonstrable industry leader than we are today, right? We think those economies of scale, that cost to serve advantage, that stickiness of moving up the value stack and becoming that integrated supply chain partner with our customers, we really believe Robinson is going to differentiate itself versus everyone else in the industry.

Okay. Well, with that, we are out of time. Dave, Damon, Arun, thank you so much. Thank you much a fascinating story.

Thank you.

Thank you.

Okay. Let's go ahead and get started with the next presentation. For those that don't know me, I'm associate analyst of Transportation here at Raymond James, David Hicks. And today, we have the pleasure -- this afternoon, I have the pleasure of having C.H. Robinson with us, the CEO, Dave Bozeman; and then CFO, Damon Lee, with us today.

So I think a lot of people in the room know who C.H. Robinson is. But Dave, maybe just give us kind of a high-level overview of kind of the markets you play into what you guys do, just to kick us off.

Yes, sure. Thanks, David. Thanks for having us here. Just to start off, C.H. Robinson is one of the larger global logistics solution firms in the world, really driving in the 3PL space. For those of you who don't know that, it's a 2-sided marketplace space. And just to give you the numbers, first of all, we do 37 million shipments annually. We have about $23 billion of freight under management. And we play in this kind of 2-sided marketplace of carrier relationships on one side, that's capacity. On the other side would be shipper or customer, that's the demand side. And we have over 450,000 carrier relationships, 75,000 customers. We pick those 2 together, given the carriers access to a broad base of freight, and we give the shippers access to a broad network of carriers, giving them a good price advantage as well. Our goal is to play in 4 core modes: that's truckload, LTL, ocean and air. That's really where we focus ourselves as a company.

And then when you think about our strategy, it's been pretty simple. It's been about really kind of growing, outgrowing the market or growing or taking market share while also expanding our margins overall. That's been kind of our strategy as a company in doing that, and we'll get into talking about that.

We've been pretty successful at doing that and changing over the last 3 years or so in driving what we call Lean AI. It's our new lean operating model. But it's really combined with our logisticians, which are really some of the most experienced logisticians in the world. Our technology, which we'll talk about, which is AI technology as well as our operating model, those 3 kind of drive what we call Lean AI, and they work symbiotic as a relationship. And that has allowed us to really outpace, outperform the industry in the last several quarters, 8 to 11 quarters in outpacing the industry here, and we feel really good about that. It's early innings for us in this transformation. We're in the second inning or so and have a lot more to do, and we can get into that. But that's the company overall.

This is Damon Lee, anything you add to that opening?

No, well said.

Great. Great overview, Dave. Maybe just to level set before we talk into your story. You have a lot going on in your story, but maybe just talk about what you're seeing in the freight markets right now? We've been in a freight recession 3.5 years, but the last 6 months, it looks like things are starting to kind of perk up mainly on the supply side, demand is still kind of languishing. But maybe just give us some thoughts on the market kind of before we dive into your story.

Yes, I'll start and Dave jump in if you want to add any color or context. But look, I'd say, start with demand, I think it is more of the same, right? I think there's certainly been a little bit of excitement around some macro indicators, but I think it's been yet to show up in freight demand yet, right? I mean, certainly, CA index was down minus 7% again for the month of January. So I think even though there's some talks or green shoots, I think those have yet to be seen.

On the cost side, we have had disruptions from a cost perspective. If you go back to Q4, I think that's really where the cost curve started to elevate. Certainly between Thanksgiving and the end of December, that 5-week period of time, we did see a material increase in cost, right? I think certainly brought on by 3 winter storms that affected a large portion of the country. Those 3 winter storms were essentially on each other's tail, so they happened in sequence. You had your traditional capacity crunch during the holiday period. And then you had a stacking effect of the various regulatory enforcement actions. So I think all of that led to a heightened environment to drive cost higher.

And certainly, as we say often, we're not immune to the market, but we do hold ourselves to a very high standard. And we think we performed extremely well in Q4, both from a gross margin perspective, an operating margin perspective and an outgrowth perspective in a very difficult cost environment. And what I would say is that cost environment continues into Q1, right? Certainly, we mentioned during our Q4 earnings call that, that cost pressure had continued into the month of January, and it has continued into the month of February as well. So certainly, the cost pressures realized in Q4 will certainly have a meaningful impact on Q1 from the industry perspective as well.

Yes, I think that's well said. And just to add a little bit of color on the demand side for those of you who are more generalist on this, we look at demand that would drives freight, and those are really 3 or 4 things that's manufacture, retail housing. You could break that out and really say automotive. I kind of can put that under manufacturing as well. But those components are really would drive freight. And if you -- why Damon said that, if you're thinking about those, the housing side to retail, to manufacturing, that's all been somewhat muted and not up and to the right yet, and we certainly are looking for that to happen as you start to drive an inflection. But just to give a little bit of color on that.

Okay. That sets the stage really well. Let's dive into the story. But before we get into that, Dave, I want to talk about culture. I think it's a very underappreciated aspect of your story. You're the first -- I believe you're the first outsider CEO at Robinson. And you have these lean operating principles that we've never seen in brokerage before. You bring in Damon 1.5 years ago. Can you just talk about kind of how that culture shift has happened when you came into the company a little under 3 years ago?

Yes. Thanks, David. The -- I know it was a lot -- it was different for a number of you. I've met you. It's been almost 3 years, a number of you in the room, and you've gotten to know me as well. And it was -- it's different for the industry, but lean is not different. Lean is transferable to any industry. And all we did was I've been doing lean for almost 30 years and just brought that into this company, a 120-year company and into an industry that it makes a market difference in doing that. And culturally, it was something that what we do at Robinson, we're radically transparent with our employees. Two, we do diagnosis like we did. And three, you have to solve problems.

And what we found in our company is that we kind of admired problems more so than fixed problems, and that was something we were going to change. And so we no longer admire problems. We fix problems. And that's a key tenet of lean, problem identification and problem solving. And when you look at our culture now, it is one that's built on these lean principles and people who have been in industries for over 20 years have now learned tools that help drive this problem identification and problem solutioning. And that has ultimately driven our speed, our speed to development, our speed to creation.

Now with technology, that has now supercharged what we're doing. And the culture is a culture that really likes winning again. They like getting their swagger back. It's a company that has grit and hustle, but it also likes to win. And I think lean and bringing in a lean operating model has tremendously helped our culture. And again, we're baby steps in this. I've seen this for a long time, and we are early on in the journey. So a lot to go, and I'm proud of how the team has accepted this transformation.

So that's a great overview. And before you got there, CH had really over-hired during the pandemic, brought on a lot of volumes, but also brought on a lot of people. I always like to frame for investors is that you came in through lean methodology. It was kind of like the Ozempic that you guys needed to really get back on track. And now you're layering in AI, kind of packing on the muscle, if you will. Can you maybe break down kind of -- you've increased productivity double digits the last couple of years, over 40%. Can you maybe just break down kind of what's been on the lean front and what's been on the AI front that have really driven the changes?

Yes, I'll start, and I'll have Damon jump in as well. Like we get that question, and I used to kind of reframe that question. Like we -- I would normally start, Dave, I really like you, right? And it's like -- I normally would say, I don't know, right, on doing that, but I want to give some context to that because we don't look at that as separate. These are not series. Like it's not like, hey, how much for technology and how much for lean? That's not really the way it works. It's symbiotic and they all work together, right? Our people, the operating model and technology all works together in driving that.

I will say this, if you think -- I don't care what industry you're in, if you think you can just do like a technology by itself, we don't think that, that works, right? You have to have a conduit. And that conduit is an operating model that drives accountability, responsibility, visibility, speed and creation. And you're always ideating and driving velocity on doing that. That's -- we don't have enough time to kind of go into the depths of that, but it drives with our technology together.

And so that productivity, we don't break it down. We say, hey, in the next few months, we'll have more productivity and that productivity is driven off of our operating reviews and what we do. And it happens to just be part of it.

I don't know if you'd add anything?

I would just add a couple of things. I'd say, from a lean operating model perspective, I mean, the reason we are implementing agentic AI today as a step function improvement from GenAI in C.H. Robinson is based on something that was born out of the operating model, right? We were in an operating review, in a PD environment of policy deployment. This is really strategic initiatives, challenging our technology teams, challenging our business teams, how are you going to get to where we're performing today to where we need to perform tomorrow? They didn't have the answer, right? So they got a 48-hour request to go find answers and options to close the gap, right?

And Mike Neal, our CTO, came back and said, look, it's early days, but there's an evolving AI technology called agentic. Now mind you, this was 15 months ago, right? I mean, agentic hadn't even made the headlines yet, right? Nobody was talking about agentic yet, a 120-year-old logistics company was already starting to experiment with it and operationalize it for our business. That would not have happened on the time scale that had happened, maybe never, if not for the operating model, right?

The operating model, the lean principles drives you to get better every single day, every single week, every single month. And we truly believe the companies that are going to be successful in AI adoption and truly drive sustainable productivity benefits, sustainable revenue growth, sustainable margin expansion, we'll only be able to do that on the back of a conduit, like Dave said, like lean, right? We believe that's the magic sauce for doing AI right going forward is a combination of lean operating model and cutting-edge technology, which we've been deploying now for over 2 years.

So we believe, as Dave mentioned, they're symbiotic. We get the question a lot to the decimal place, how much of your productivity is from the operating model versus tech? The answer is we truly don't know because you can't separate the impact of the 2 of those items within the company.

I'll just put a bow on that, too. I mean it's pretty cool to see people who have been in the industry like 20, 25 years, like there's a lot of people in the room that knows what that looks like. And you have folks who have -- they're walking in now and they're starting on meeting like, hey, I'm about to talk to you about my primary, secondary and tertiary Pareto charts on solving this problem. Like they can't unlearn that tool. And they're excited about it. They're pumped about it. And that's the operating model and what is driving because they know is every person every day, some small improvement, which is why we committed to single-digit productivity improvements in this company evergreen, no matter what. I don't care if it's a hot market inflection, we will commit to single-digit productivity improvement every year. There's going to be times when we run across like an agentic technology, where we'll have double-digit productivities like this year. We initially committed to single digit.

Now we'll be double-digit productivity gain this year because things like that are going to happen along this journey. But that's the mentality, David, in driving that.

I'll just add one more thing. This is one of our favorite questions, so I have to opine a little bit on it. But I honestly don't know how a company would deploy AI the way we've deployed without the lean operating model, right? Because I think we call it Hobby AI spend, where you kind of spend on AI, it may be a shiny object. It may have a cool interface, but it doesn't actually drive business benefit. It doesn't drive revenue growth, doesn't drive margin expansion, doesn't drive productivity, right? That's what we call Hobby AI.

Without an operating model that drives you to value stream analysis that says, here's my opportunity to remove waste and here's my opportunity to supercharge some revenue component of my business. Without a conduit that steers that type of behavior, I think you're shooting in the dark on how you implement AI. And that's why we're so -- we think it's so impactful to combine the operating model plus AI, what we call Lean AI because without the delivery mechanism, and we believe lean is the delivery mechanism, we think most companies will suboptimize the way they implement AI within their companies.

And I think great on the lean side, but maybe let's go to the AI side. I think one of the most amazing things that you've come out on the AI side is that you were only able to handle 65% of quotes and now you can handle 100% at 30 to 40x the speed. And that speed to market from, call it, 17 minutes down to 30-some-odd seconds has been a game changer. Can you maybe -- has that played out? Or is there still more room and that's going to continue to compound in the years ahead?

Yes. No, it's played out. And it's just but one example. I mean our quoting agent, we're really proud about that. And you're right, 17, 20 minutes down to 32 seconds, 31 seconds now, every second counts. But the key thing is this, in this industry, time is money. And when you're getting things in 24/7 like quotes come in, if you don't get to them, that's a lost opportunity. And so having this agent actually respond at 100% of the quotes, that is more opportunity. It allows us to win more freight. It allows us to have that option to do it.

Now we could have gone and use examples of agents that we just launched, like the LTL, our reschedule agent, which was a pain in this industry about rescheduling. If anyone knows that pain, it's there. This agent has really now eliminated overnight 350 hours of work, manual work to go and do these kind of reschedules. I mean -- and we have appointment examples as well as a number of other agents that are working the order to cash process and taking that friction out. That's what this is about, is changing the workflow, taking the friction out of the workflow of order to cash, and that's where you drive that productivity.

Yes. And that one example that we led with, it's our agent that does our request for freight quoting. So AI typically gets lumped in with productivity. And I'd argue there's a few companies that are generating real productivity. But typically, AI gets associated with productivity. That one agent generates incremental revenue, expands our gross margin, so better pricing. So we optimize our price, optimize our cost to hire, and it drives productivity. And oh, by the way, the customer benefits on 3 levels, right? Before, 1/3 of the time they were reaching out to C.H. Robinson on the NAST side of the business, either they weren't getting a response or the response came too late. So that's not customer satisfaction. Today, they get a response 100% of the time. Okay.

Second is our win rate has gone up because the sophistication level of our quote has gone up as well. So where a shipper wanted Robinson to carry their freight. And in the past, we probably gave them an unsophisticated quote because we didn't have time to give them a sophisticated quote. They went with somebody else because we couldn't meet the criteria of the quote, right? So there, again, customer satisfied because we are able to give them a sophisticated quote that more times now we win that freight than we would have before. But to me, the astonishing figure in that example is 1/3 of the universe of freight that was coming our way from a NAST perspective, we didn't have an opportunity to win.

Today, we have an opportunity to win that 1/3 of freight, all that freight now 100% of that freight, right? To me, that's been a demonstrable impact on our business. But when you think about AI, it's just not limited to productivity. It can facilitate revenue growth, it can facilitate margin expansion, can facilitate productivity and it can drive customer satisfaction at the same time, if done correctly.

I think what makes you guys different is we have -- every company here is talking about AI. But can you maybe talk about what you're doing externally buying from a vendor, say, and versus building internally and kind of how important your data is as the largest freight broker in North America to kind of feeding those agents and feeding those models?

Yes. I think -- well, first of all, we talk about competitive moats. One of the competitive moats we have is our domain expertise. And that is we have internal engineers. We talk about 450 engineers, data scientists that actually build our technology. Now we sit on our hyperscaler is Microsoft with Azure, but our engineers build our technology, and we're able to use the various large language models that come out.

The beauty of it is there's this question in the industry right now and it says who's benefiting from AI, from all of this investment that's up the stack that's driving these models, who's benefiting from that? Well, we would raise our hand up and say we're benefiting from it because the cost of those models continue to come down, and we're able to use all of those models. I don't care if it's Claude or OpenAI or whatever. The technology team has done a wonderful job of being able to do that. And in fact, we switched between those large language models based on cost and effectivity.

And what we're doing, I just told somebody in a meeting here, I mean, we're doing some pretty cool stuff. We're not exactly doing genealogy. So the compute power that we need, I mean, we can use a 2-year-old model and be just fine. And our team monitors that all the time for the better economics. So we're doing that. We would not be able to do that if we were a buy culture, but we are a build culture. We built Navisphere, which is our internal TMS, and we built our overall bespoke solutions based on these large language models and the various agents that our engineers built and our engineers grew up in the business.

So you're talking about engineers that know freight, that know global forwarding, and they're building agents and having a blast right now at building these agents because they actually know that. And if you were going to go and try to replicate this, it would really take you 15 to 20 things that you have to stitch together, get an integrator to help, pay by a drink. That's a lot of headwind on margins. So it's really kind of tough to do a lot of replication. Not that it can't happen, but we're just saying that internal capability is an advantage, we think, in a competitive moat.

Yes. We think build versus buy is a critical differentiator for Robinson versus the marketplace. Dave just mentioned, right, our team estimates you would have to partner with 15 to 20 different vendors to try to replicate the ecosystem that we built, right? Can you imagine that, right? 15 to 20 vendors. Then you'd have to hire somebody to orchestrate all those vendors. And even if you got that right, you're still paying for generic AI solutioning for very specific company problems.

Today, we build our own agents, right? So we build agents that are custom to solve, custom solutions within Robinson, right? We're not trying to fit a generic solution set with a C.H. Robinson [indiscernible]. We build agents to solve our own problems, right? That is very difficult to get that same value if you're buying tech off the shelf.

And then the cost curve, we believe, is a huge competitive advantage. Once we build an agent, the marginal cost of ownership for that agent, very close to 0. We're just playing for tokens. If you're buying an agent off the shelf, you're going to pay for that agent forever by the drink. And if you're stacking up agents that you're buying off the shelf, we truly believe that for most companies, an off-the-shelf approach to AI solution will actually be a cost adder versus a productivity benefit for the life of that company. So we truly believe build versus buy is a critical advantage for C.H. Robinson.

And data is critically important for AI, but also is context, right? And we truly believe you'll never get the optimal context with an agent unless you build it, right? We truly believe that's a competitive advantage that we have at C.H. Robinson.

And David, you did say at the end about data. We do have the largest data set in the industry. That data set informs us, allows us to really drive fantastic pricing algorithms. And I always try to remind people that data is not just on things that you win, you get data on lows that you lose. And so over time, we have over 1 trillion data points that come in because we're able to use that to help inform and educate so.

Okay. So we've talked a lot of financial performance we've seen is in NAST on the productivity front, but you also have, call it, 20% of your business is in forwarding. How -- is there kind of a lag where you're taking those learnings from NAST into Forwarding? Kind of when are those kind of going to start to shine through the results?

Yes. I'd say, first of all, it was purposeful and very much an intent for us to focus on NAST from a technology perspective. The operating model itself goes across our entire company. So if you think about a Global Forwarding, which we love that business, it's not in the #1 position like NAST, but it punches above its weight. You think about last year, it grew each quarter while dropping expenses. That was on the back of the operating model. So it has some of the best quality that it has historically within that business.

But now that we've had NAST on our focus, we're now going to focus on Global Forwarding with our technology stack to do some of the same things that we were doing for NAST. We're more excited, as Damon said earlier, that we're actually going to be bringing in agentic technology into Global Forwarding. Why? Because Global Forwarding is super complicated for most in the room, a lot of handoffs, a lot of things to really drive a quote within Global Forwarding.

Because of time, I'll just kind of go to this. At the end of the day, you have agentic technology will allow us to get data off system, which is what you need in Global Forwarding. And we're really excited that building those agents that help us do that that's going to really drive some of the similar results that you saw in NAST, and we're super excited about it from quoting to a number of other things that we talked about.

Yes. And I would say we're still in the early innings of our tech realization in NAST, right? So I mean there's -- the entire universe of what we're looking to drive efficiency to is quote to cash. And we've only automated a fraction of thousands of processes that make up that universal business model, right? And so we're just getting started on NAST. We are starting to index that tech stack over to Global Forwarding, but both sides of C.H. Robinson, both of our large businesses have tremendous runway to go on tech optimization.

Okay. Great. And then we only have a few more minutes left. So let's maybe talk about capital allocation, Damon. You guys have a stellar balance sheet, net leverage below target. Haven't been that acquisitive on M&A. So highly generative free cash flow model, asset-light business. So where are you going to position that cash?

Yes. Good question. I'll clarify one thing. We may not have bought anyone at scale, but we're very inquisitive. I'd say we're more inquisitive today than we've probably been in the last 15 years, right? So we're kicking the tires on opportunities all the time, right? We're just not going to make a mistake, right? Our approach to M&A is going to be extremely disciplined. It will be the right company we buy. And it could be a traditional broker like ourselves or it could be a tuck-in that brings technology or capability that we think enhances our enterprise capabilities today. But we're very inquisitive today.

Now from a capital allocation perspective, certainly, we have an investment-grade balance sheet, maintaining that balance sheet is critical importance to us. We're a dividend aristocrat, maintaining that status is critically important to us. And look, we have the benefit of having an extremely deep funnel of organic opportunities within the 4 walls of C.H. Robinson. So everything we've demonstrated the last 2 years is just getting started, right? We have a very robust funnel of organic opportunities that certainly get a priority from a capital allocation perspective from a funding perspective.

And we don't turn away any good idea, right? We're almost in a 4-year freight recession. We've continued to fund all of our organic ideas throughout this challenging time for the industry. We've been an active buyer of our own stock, right? We think at current valuation levels, we think buying Robinson's stock at current levels is a great decision for capital allocation. We say often that we believe the next 2 years will be more exciting than the last 2 years have been for C.H. Robinson, and we're putting our capital where our words are.

And then lastly, what I led with, which is when the right acquisition comes along, we won't pull the trigger. It's just -- we will be disciplined, we will be measured in our approach to M&A.

Okay. Okay. Great. I think that's a great point to end on. Thank you, Dave and Damon.

All right. Thank you.

Thank you.

Appreciate it, guys.

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2025 Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded Wednesday, January 28, 2026.

I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, operator, 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 Investors section of our website at investor.chrobinson.com. Today's remarks also contain 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. Over the past year, we've consistently said that we're not immune to macroeconomic conditions, but that we are managing them better than we have in the past. The fourth quarter certainly provided a challenging macro environment. With weak global freight demand, rising spot costs in trucking and falling ocean rates all providing headwinds to our business. The cash freight shipment index declined year-over-year for the 13th consecutive quarter and was the lowest Q4 reading since the financial crisis of 2009.

Spot market costs for truckload capacity spiked during the last 5 weeks of the quarter due to a seasonal decline in capacity, 3 winter storms and incremental pressure from the cumulative enforcement of various commercial driver regulations. International freight continues to be impacted by global trade policies, which caused previous front-loading a dislocation of shipments and a more pronounced decline in demand after the Q3 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 of 2024. So the macro conditions for global transportation companies were difficult in Q4, and we are not impervious to these volume and rate dynamics. However, we've consistently focused on controlling what we can control, which is providing differentiated service and solutions to our customers and carriers, executing with discipline and continuously improving our business model and our cost to serve. This focus and the strength of our lean AI, which is the combination of our lean operating model, industry-leading technology and the best logisticians has enabled us to consistently outperform over the last 2 years, and we did it again in Q4.

In NAST, we grew our total volume by 1% and our truck load volume by approximately 3% on a year-over-year basis compared to a 7.6% year-over-year decline in the cash freight shipment index. This reflects another quarter of demonstrable market share growth. This was accomplished while mitigating some of the market pressure on gross profits through strong revenue management practices and by improving our cost of hire advantage. These disciplines enabled us to improve our NAS AGP margin by 20 basis points on a year-over-year basis, despite the pressure on the spot market cost from a decline in available capacity.

In Global Forwarding, we expanded gross margins by 120 basis points year-over-year through improved revenue management discipline. We also continue to evolve our Global Forwarding business to a more cohesive, centralized model with standardized and lean AI-enabled processes. We continue to improve our productivity and cost to serve across the enterprise, resulting in a double-digit productivity increase in NAST for the full year a high single-digit productivity increase in Global Forwarding. As we continue to purposely engineer our work to drive higher automation, a lower cost to serve and improve customer outcomes, all of this is aimed at building the best model for demonstrable outgrowth while continuing to have industry-leading operating margins.

I'm proud of our employees for navigating difficult market conditions with discipline and ingenuity and for embracing the culture shift that has fundamentally changed this company. Changing the culture of a company is hard work. We shifted to a culture of solving problems with speed and the implementation of a lean operating model has contributed greatly to this change. We certainly encounter challenges along the way. But how we solve them now is different, and it's not easy for others to replicate.

With the discipline and tools that we've armed our people with, we solve challenges with a lean mindset with experimentation and with urgency. As we've said consistently over the past year, 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. We're also highly confident in our ability to continue executing on all of our strategic initiatives, including further increasing our operating leverage, when freight demand eventually inflects. Our model with an industry-leading cost to serve is highly scalable and we expect it will improve further as we continue to harness the evolving power of AI to drive automation across the quote-to-cash life cycle of a loan. While we made considerable progress, we're still in the early innings of our Lean AI journey.

Lean AI is our unique, disciplined approach to AI innovation that is transforming supply chains. It combines the principles of our Robinson operating model, rooted in Lean methodology with the power of custom-built AI and the expertise of our people to maximize value, minimize waste and drive better outcomes for customers and carriers. As a result, we are building an ever-expanding fleet of AI agents, that continues to not only improve our productivity and operational performance by automating manual tasks that free up our industry-leading talent to focus on more strategic, higher-value work but they're also directly enhancing the service and value we deliver to our customers and contributing to our market share gains.

In other words, we are using our trusted domain expertise, to build technology that delivers on our customer promise and drives higher value for all of our stakeholders. We are the trusted provider that customers look to for cutting-edge innovation differentiated solutions and best-in-class service. And while we're pleased with the results we've delivered in the last 2 years, we are still in the early stages of our transformation. Significant runway exists as we continue to deepen the lean mindset and scale custom-built AI agents across the enterprise.

I'll turn it over to Michael now to provide more details on our NAST results.

Thanks, Dave, and good afternoon, everyone. In Q4, the macro conditions that Dave mentioned provided another opportunity for us to test our lean disciplines. Our revenue management practices and our ability to widen our cost of capacity advantage versus the market. While we continue to identify opportunities for further improvement, the expertise and discipline of our team and the resilience of the Robinson operating model once again demonstrated what we can do in a difficult freight environment. For the 11th consecutive quarter, the team delivered market share growth in Q4, with the freight recession exceeding 3 years, the cash freight shipment index declined on a year-over-year basis for the 13th consecutive quarter in Q4 and was down 7.6%.

In contrast, our combined truckload and LTL volume delivered positive growth of approximately 1% year-over-year. Truckload volume rose approximately 3% year-over-year and LTL volume increased approximately 0.5% year-over-year, reflecting market share gains in both modes. One of the keys to our consistent market share gains has been volume growth in some key verticals that we've specifically targeted.

During Q4, we delivered double-digit year-over-year volume growth in both the retail and automotive verticals. These results reflect the execution of our strategic focus and our expanded capabilities that directly support these segments and evolving customer needs, such as our leading drop trailer and cross-border capabilities. Over the course of 2025, we augmented our value-added solutions in these areas, including introduction of our drop trailer asset management system and cross-border freight consolidation while expanding our warehousing and cross-docking space at the U.S.-Mexico border. These solutions are designed to address real customer pain points while simplifying complexity is reducing costs and delivering consistent, high-quality service across the supply chain.

In our greater than $3 billion LTL business, where we move more LTL freight than any other 3PL in North America, we delivered year-over-year volume growth for the eighth consecutive quarter, reflecting consistent outperformance versus 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.

One example of how we're applying our Lean AI to simplify complexity is with AI agents that we launched in 2025, is a widespread shipper pain point of missed LTL pickups. These new AI agents are tracking down miss pickups and using advanced reasoning to determine how to keep freight moving. They're also collecting and analyzing previously unavailable data that LTL carriers are now using to improve their technology scheduling and operations. As a result, shippers freight moves up to a day faster and return trips to pick up miss freight have been reduced by 42%.

Additionally, 95% of our checks on missed LTL pickups are now automated, saving over 350 hours of outsourced manual work a day. This is another example of Robinson only deploying AI agents where they can deliver tangible business results. As Arun and Damon like to say, there's no hobby AI at Robinson. As I mentioned earlier, Q4 also provided another opportunity to test our revenue management practices and our ability to widen our cost of capacity advantage versus the market. That opportunity arose due to a 5-week stretch of capacity disruptions caused by a seasonal decline in capacity, 3 consecutive winter storms and incremental pressure from the cumulative enforcement of various commercial driver regulations.

As a result, dry van load-to-truck ratios increased to approximately 10:1 versus 6:1 during the comparable period in 2024 and spot market costs for truckload capacity spiked. Our team of freight experts once again responded to the spot rate inflection supported by our lean operating model disciplines and our cost and price discovery tools to widen our cost of higher advantage during the quarter and to capture higher-margin loads in the spot market to somewhat offset the margin pressure on our contractual portfolio. Despite the tougher conditions and the higher mix of contractual volume, these efforts enabled us to hold our truckload AGP per mile flat year-over-year and to deliver improvement in our NAST gross margin.

Our ability to deliver these results continue to give us confidence in our ability to handle a sustained spot rate inflection better than we have in the past, resulting in a gross margin squeeze that we expect to be shorter in duration and shallower an impact than historically. 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 also 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. This enhanced efficiency is not only lowering our industry-leading cost to serve but it is also elevating the customer experience by enabling faster, more reliable service.

And 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 Q1, it is typically a seasonally weaker quarter compared to Q4. And then the market usually shows seasonal growth in Q2 and Q3. For Q1, the 10-year average of the cash freight shipment index reflects a 2.3% sequential volume decline from Q4. The spot rate trend in Q1 is historically a near mirror image of Q4, with rates ramping up in Q4 and then trending back down to preholiday levels by the end of Q1 or early Q2 as capacity returns after the holidays, and demand enters a softer period. The timing, frequency and severity of winter storms during Q1 usually impacts the pace and magnitude of those trends. There is less elasticity in the supply of capacity and market events now cause more dramatic changes in spot rates and the cost pressures that we experienced in December have carried into January.

As Dave said in his opening comments, we'll remain focused on what we can control, regardless of market conditions, 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 they are relentlessly driving improved results. I'm proud of our 2025 results and proud of our team that continues to learn and improve. With much more runway for improvement in front of us, we're still in the early innings of our transformation journey.

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 and Michael mentioned, we continue to scale several innovations to better serve our customers and widen our competitive moat, including our fleet of secured proprietary customs of both AI agents across the extensive processes within our quote to cash life cycle of an order. One component of C.H. Robinson's culture that enables us to widen our moat is our builder culture, which has existed at Robinson for many years and resulted in the company's proprietary transportation management system and extensive application stack that sits on top of it.

This builder culture has home the company skills around the fundamentals of engineering, data science, infrastructure, security and privacy, and we have an in-house team of more than 450 engineers and data scientists that effectively and efficiently build fit-for-purpose AI agents. Filter culture is in contrast to a buy and integrate culture where companies end up cabling software and systems together. Companies with a strong builder culture, such as the tech companies that I came from, Travelocity, Zappos and Amazon, had a strategy of owning the technology and building it, and this is our strategy as well. Once we've invested a fixed cost to build software or an AI agent, the marginal cost per transaction is very low. And now a highly scalable model has been created.

As we scale our AI solutions, the primary incremental cost is just the cost of AI tokens versus paying by the transaction to a software-as-a-service provider, and the cost per token has declined significantly due to the tremendous competition in this space. So owning the technology, and engineering is in such a way that we have a scalable model is a critical component to widening our moat. Our build model is also important from a speed of implementation perspective. If a company is using multiple third-party providers to create and implement AI agents, they are beholden to that external provider who doesn't know the business as well.

Without builder culture, we're leveraging the vast domain expertise of our in-house team that has engineered our technology landscape and has a deep understanding of our industry. We own and control the code and we own the application layer because we are building our own AI agents. We, therefore, have more control over the implementation process and the speed of integrating those agents with our proprietary technology landscape. That faster speed to IDA, build, operationalize and scale our AI agents as a differentiator and is showing up in our outperformance.

The difference at Robinson is our industry-leading technology is combined with our lean AI operating model, and we expect that our in-house team with deep domain expertise will enable us to sustainably build and implement our proprietary AI innovations in a disciplined, cost-effective way that maximizes the return on our tech investments. Our fleet of AI agents is growing quickly as we continue to pioneer new ways to automate manual tasks and supercharge our industry-leading freight experts to solve for complexity and deliver high-quality service to our customers and carriers.

We continue to leverage and scale the use of agenetic AI to power new capabilities that are backed by our unmatched data and scale, and we are continuing to disrupt from within. Agentic AI's advanced reasoning capabilities are allowing us to unlock previously trapped value in unstructured data such as phone calls, e-mails and fiber knowledge through its ability to understand context and make real-time decisions. However, unlike linear rules-based automation, Agentic AI operates with a degree of autonomy and unpredictability making its progress nonlinear and requiring ongoing human-in-the-loop oversight as it advances through cycles of progress and retrenchment.

Our lean AI process of discovering, learning and building where missteps and resulting learnings are milestones is not only necessary but is the best path to uncover what truly works. Continued improvements of our service, the cost-efficient AI task agents that listen, learn and act all day, every day, enables us to deliver fast, accurate and personalized service at scale and in any market. All of these innovations are delivering on 3 items that are key to our strategy. The first is providing a superior customer and carrier experience to elevate our service offering and drive market share growth. The second is responding more surgically and faster than ever to dynamic market conditions by performing more frequent algorithmic pricing cost discovery, which, along with our operating model rigor, at our revenue management practices is contributing to the gross margin improvement that we're delivering.

And finally, the growing automation across our quote-to-cash life cycle enables us to de-cover head count growth from volume growth and to create greater operating leverage and operating margin expansion.

As Dave said, all of our strategies are aimed at building the best model for demonstrable outgrowth while continuing to have industry-leading operating margins. As technology continues to evolve, we will continue to disrupt from within to stay at the forefront of the evolution and to further widen our competitive moat.

With that, I'll turn the call over to Damon for a review of our fourth quarter results.

Thanks, Arun, and good afternoon, everyone. As you have heard, we delivered another quarter of disciplined execution as we further advanced our focused strategic initiatives aimed at market share growth, continued optimization of adjusted gross profit or AGP, disciplined cost management, and further productivity gains, all supported by our lean AI operating model. The macro environment continued to provide significant headwinds in Q4, and our Q4 total revenue in AGP declined approximately 7% and 4% year-over-year, respectively.

The AGP decline was driven by a 13% year-over-year decline in Global Forwarding AGP, which was primarily due to a significant drop in ocean rates driven by a market imbalance from declining demand and growing vessel capacity. The February 2025 sale of our Europe Surface Transportation business also contributed to the decrease in AGP and was partially offset by a 2% increase in NAST AGP.

On a monthly basis, compared to Q4 of last year, our total company AGP per business day was down 5% in October, up 6% in November and down 12% in December. This was primarily driven by lower ocean rates, which caused Q4 ocean AGP per shipment to decline 15.2% year-over-year, and this was most pronounced in December. In the face of those headwinds, we continued our track record of outperformance.

Turning to expenses. Q4 personnel expenses were $337 million, including $15.2 million of restructuring charges related to workforce reductions. Excluding restructuring charges in 2025 and 2024, our Q4 personnel expenses were $321.8 million, down $28.8 million or 8.2% due to our continued productivity and cost optimization efforts and the divestiture of our Europe Surface Transportation business. Our average head count was down 12.9% year-over-year in Q4 and was down 3.8% sequentially, illustrating how we continue to decouple head count growth from volume growth and optimize our organizational structure.

Our Q4 SG&A expenses totaled $138.7 million, excluding $0.9 million of other restructuring charges in 2025 and a $3.1 million net benefit in 2024, primarily related to the divestiture of our Europe Surface Transportation business. SG&A expenses were down $11.8 million or 7.9% year-over-year due to cost optimization efforts. As a result of our efforts to grow market share, improve gross margins and increase our productivity and operating leverage. We expanded our operating margin, excluding restructuring costs, by 320 basis points year-over-year. And despite the considerably tougher macro conditions for truck brokerage, NAST expanded their operating margin, excluding restructuring costs, by 310 basis points year-over-year. This is the Lean AI strategy at work, and we remain confident in the 2026 operating income target that we updated last quarter.

Turning to our 2026 annual operating expense guidance. We expect 2026 personnel expenses to be in the guidance range of $1.25 billion to $1.35 billion. This includes an expectation that we will generate double-digit productivity improvements in both NAST and Global Forwarding in 2026 as we continue to implement agenetic AI across our quote-to-cash life cycle of an order. As we shared last quarter, along with our updated 2026 operating income target, these productivity improvements are expected to be over-indexed to the second half of 2026.

On a quarterly basis, it's important to note that our Q1 personnel expenses are expected to increase sequentially due to the employer portion of FICA taxes resetting to a higher level until employees' annual FICA wage limits are met. This impact is estimated to be approximately $15 million in Q1 versus Q4, after which, the quarterly FICA taxes and personnel expenses are expected to decline. We expect 2026 SG&A expenses to be $540 million to $590 million, including depreciation and amortization of $95 million to $105 million for the year. Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact.

Shifting back to Q4. Our effective tax rate for the quarter was 18.1%, resulting in a full year tax rate of 18.7%. For 2026, we expect the full year tax rate to be in the range of 18% to 20%. As a reminder, our tax rate historically is lower in Q1 due to the incremental tax benefits from stock-based compensation deliveries that occur in the quarter. As a result, we expect our Q1 tax rate to be below 15%. Our capital expenditures were $15.7 million during the quarter, bringing our 2025 total to $70.5 million. For 2026, we expect our full year capital expenditures to be $75 million to $85 million.

Turning to cash and our balance sheet. We generated $305.4 million in cash from operations in Q4 and we ended Q4 with approximately $1.49 billion of liquidity. This included $1.33 billion of committed funding under our credit facilities and a cash balance of $161 million. Our net debt-to-EBITDA leverage at the end of Q4 was 1.03x, down from 1.17x at the end of Q3. This financial strength is a key differentiator in our industry, giving us the ability to continue investing through the bottom of the freight cycle to further enhance our capabilities and to return capital to our shareholders. While our capital allocation strategy remains grounded and maintaining an investment-grade credit rating, our financial strength and improved leverage ratio enabled us to return approximately $207.7 million of cash to shareholders in Q4 through $133.3 million of share repurchases and $74.3 million of dividends.

Through the disciplined execution of our strategy with our Lean operating model and AI innovation at its core, Q4 results further validate the Lean AI transformation underway at C.H. Robinson. I have been part of significant transformations in my career, most recently at General Electric. What we're doing at Robinson is carving a similar path, and I'm extremely proud of the progress we have made. And as we've said, we are still in the early innings of our transformation. We are excited about the significant runway that remains in executing our lean AI strategy and in our ability to deliver sustainable, profitable growth and long-term value for all of our stakeholders.

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 in 2025 on the transformation of C.H. Robinson into the global leader in lean AI supply chain. Our differentiating Lean AI gives us a unique opportunity to create new ways to solve complex challenges 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. With today's geopolitical landscape, there are a lot of unknowns and potential volatility that will be out of our control. But what is in our control is our ability to discover, learn, innovate and solve problems. And that is where the Lean operating model is so important to our success.

As Lean disciplines continue to be deployed more 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 our outperformance for the last 2 years and how we're positioned to continue doing so regardless of market conditions or cycle. And 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 of our people's place, 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 to provide better outcomes and more value for our customers and carriers.

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 officially see a turn in overall freight demand. And 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 throughout 2025, to provide exceptional service to our customers and carriers for breaking the Robinson operating model and continuing to execute with discipline. We've reinvigorated a winning culture and we're getting our swagger back, but we're nowhere near done. We are the new disruptor. We will continue to lead with purpose and move with urgency and we expect to drive sustainable outperformance across market cycles. You've heard us say that we expect the next 2 years to be more exciting than the last 2 years. In the last 2 years, I've been pretty damn exciting.

That concludes our prepared remarks. I'll turn it back to the operator now for the Q&A portion of the call.

[Operator Instructions]

The first question comes from Tom Wadewitz with UBS. .

Yes. Great. And congratulations on the results against that pretty tough market backdrop. I wanted to -- I think from Damon, maybe I wanted to see if you could give a little more perspective on first quarter I think the progression through by month with AGP growth, it showed more pressure in December. I guess that sounds surprising you commented on ocean and obviously, spot rates up in truck, but how should we think about the kind of net revenue growth in -- or adjusted gross profit growth in first quarter and just to shape that a little better.

And then I wanted to give you 1 other I think we're pretty optimistic on what you can do in kind of 2027. I know that's looking a lot further. But if you look out a ways to get a stronger market for truckload pricing and volume growth, do you think you can kind of overshoot meaningfully on that operating margin target in NAST? I mean if you -- can you get to like a mid-40s number against a strong backdrop? Or is that something where you really want to kind of just not allow to get too high and do a lot more on the volume side. So I guess 2 different time frames, but thank you for the time.

Yes. Thanks for the question and the comments, Tom. So look, as it relates to progression from Q4 to Q1, I mean, as you noted, I mean, December was a challenging month for the market. And certainly, we weren't immune to those pressures. What I would say as you think about December going into Q1, certainly, December was heavily impacted by global forwarding and the ocean rate normalization that we've been talking about for quite a while. If you remember back in Q3 when we gave our 2026 operating target update, and we called it out in our waterfall, we mentioned that ocean rates were continuing to normalize. Certainly, Q3 was a heavy normalization quarter that continued into Q4 and we expect that to continue into Q1 as well as we've highlighted as part of our path to $6 EPS with no market growth.

So certainly, December, as a stand-alone month heavily influenced by ocean rates. That was clearly the #1 driver for what you see in that December result there. Just specifically for Q1, and as you know, we don't give guidance. So I'll keep my comments fairly elevated here. Certainly, the spot rate cost pressure that we saw in December, certainly did carry over to January, right? So that wasn't a Thanksgiving to end-of-year event, right? Those -- that cost pressure did carry over to January. But our commitment in Q1 is to continue to demonstrate the outperformance, continue to demonstrate the execution of our strategy and continue to use the tools like revenue management that's at our disposal to continue to drive out performance, both on the top line and the bottom line in Q1.

So Q1, starting out a little challenging, but so Q4 ended a little challenging and you saw the results we delivered. So we feel confident we'll continue to over deliver and execute our strategy in Q1. As it relates to your broader question around the future, specifically 2027, we won't go quite as far as giving guidance there. I will remind the audience here that -- we've talked a lot about optionality as it relates to our margins going forward, right? And we're going to make the right decisions for Robinson and the right decisions for our investors. And in many cases, converting that margin to demonstrable market share. In many cases, could be the right decision for the company and for our shareholders.

So what I would say is we're still on a really good trajectory to get to those mid-cycle margins that we laid out for NAST and Global Forwarding with 40% being the margin target for NAST at mid-cycle, still on a very good trajectory to get to that target. But once we get beyond that target, we'll make an earnings growth and a quality of earnings growth decision on whether we continue to expand margins at that point or whether we reinvest that into demonstrable growth. Thanks for the question, Tom.

The next question comes from Bascome Majors with Susquehanna.

Just to follow up on that last point about 2027. You talked a little bit longer term strategically about the balance of volume and margin expansion. And you talked a little bit in the prepared remarks tactically about tweaking price intraday and making the right decision, minute by minute. How do you think somewhere between that -- how does it feel in 2026 right now, the balance of margin expansion and you're potentially seeking more share growth on that bridge to a world where you might consistently have margins above your mid-cycle level?

Yes. Thanks for the question, Bascome. What I would say is I'll just start again with the optionality, right? We want to make the right decision for what I consider quality earnings growth, right? And so we're experimenting with that every day, every week, every month today in 2025 and now coming into 2026, right? I mean, certainly, we're making revenue management decisions multiple times an hour, hundreds of times a day on that right balance between volume and margins, right? And it really does come down to the trade-off. Once we get to what we consider is our threshold for quality of earnings, which we've set at already, right? 40% for NAST at mid-cycle and 30% for Global Forwarding. We feel like that is a fair -- and it's typically been acknowledged by the market that look, those are the thresholds we'd expect you guys to be able to get to. And we've agreed with that, right? We've set our targets in a similar range.

But we believe beyond that point, we really don't have anything left to prove on a quality of earnings perspective, right? So we'll make the decision beyond that point on what is the right decision for earnings growth. And in many cases, that will be supercharging the outgrowth of the market that you've seen us do today. So if you take Q4, where truckload outgrowth over the cash index was over 1,000 basis points. We think we can certainly beat that mark when we get to a point of investing margin, into profitable growth for our businesses, right? So it's all about optionality. It's all about quality earnings growth as we go through '26 and '27 and beyond. And we do believe it's important to establish those quality of earnings thresholds that I mentioned. But beyond that, we'll make the right decisions for the company and our shareholders on a high quality of earnings growth that we think will be difficult to compete with in the industry.

Bascome, I think that was well said by Damon. The other thing is that we often say is that we're just going to be disciplined and measured and how we're going about this with the right economics. And we're not stopping that. That's just how we've done it, and that's how we're going to continue to do it.

The next question comes from Brandon Oglenski with Barclays.

We get this response a lot like, okay, what is C.H. Robinson doing and why can't other competitors just not yet? And I think especially for transportation focus investors, we don't maybe fully understand what a lean operating model means and the way you guys are like very targeted in deploying AI. So I don't know maybe if you or Arun could dig into that, I appreciate it.

Yes, we can do that. First of all, good to thanks for the question, Brandon. Certainly, we don't have the real estate to go really, really deep in answering that question. So I'll kind of give you the highlights. And then when we hit the road, we talked [indiscernible] much deeper. But essentially, 3 key things that we're driving the company with. Number one, it's our people. We start there. That's why customers do business with us, really the best logisticians in the world. Two, it's our technology, which we think is industry leading. It is internally built, and it's a competitive advantage for us. And then 3 is our Lean operating model in which that is the motor that brings all of this together and what has been the change for the company as we've gone through this transformation. And essentially, it drives a rhythm and a cadence and drives accountability but also innovation and speed in a company, and quite frankly, in an industry that is not the norm.

And so when we talk about making changes at breakneck speed, like Damon talked about, that's really going to inputs versus outputs and it's allowed us to use our data and make it intelligent and really, really make a competitive advantage. We think it deepens the moat, widens the moat when we operate at that pace at scale for what we're calling lean AI. So a number of things we can go deeper on, but those are the 3 things, but I'll have Arun just touch on how then that supercharges that technology that's really been a game changer for us.

Yes. So just adding to Dave's comments on the technology side, I talked about our builder culture. And we're a company that builds software. We were an engineering culture, we build software. So there's a couple of things that are super important in that. When we -- the operating model connects our strategy and our technology. And then we build towards that. We have this massive advantage. And so by being a build a culture, we don't rely on third-party software vendors as an example, to get our work done. Obviously, we depend on Microsoft as a hyperscaler, but in terms of -- we don't have to buy software from third parties and cobble them together, which I've seen other companies do, and that is expensive and it takes a long time.

The builder culture is also driven by domain experts. Our engineers have been at this company for a long time, and they understand this industry really well. So in terms of speed that both Dave and Damon just talked about, we get incredible speed with this builder culture and this domain knowledge that sits in-house. And then that gets compounded with the accumulation of our data that we've got in terms of our pricing and costing capabilities, to put all that together and you get this advantage.

And finally, AI and agentic AI, back to our builder culture, the fact that our engineers can implement it versus having to hire Accenture to come and do the work is a big differentiator. We don't need a consultant to come in and do the work. We trained our engineers internally to go after these opportunities. And everything connects back to our strategy and our financials which, as we discussed -- we discussed at Investor Day, so that's how it plays out.

And Brandon, just putting a period on that. We do have the experience within the team now on doing lean transformations. It's -- you act with the difference. It's not easy to do this. It takes discipline. You have to be measured and you really have to leave from the top to do this. That is something that this industry has not really done, but we don't own that. We didn't create AI. We didn't create Lean. We didn't do any of that, but we do execute I think, at a high level with that, and there's a long way for us to go. So a lot more from what you've seen so far.

The next question comes from Jonathan Chappell with Evercore ISI.

Michael, Brandon covered 1 of the bigger long-term questions we get shifting to 1 of the shorter-term ones. I think there's a lot of confusion about how this cycle could be different for a broker. You mentioned in your commentary shorter and probably less painful margin squeeze at the early part of the cycle. But I guess if there's any way to give any tangible evidence or any way to kind of explain why it would be shorter and maybe less painful this time around either using some examples from what you've implemented in the last 2 years or anything else that can help us put a pin on it.

Yes, John, thanks for the question. I'd start with maybe playing off a little bit where Arun just finished, which is taking that data and technology and putting it in our people's hands. So we've talked about that for the last couple of quarters that we're getting information into our people's hands quicker, more accurately and more often. And that really showed up in Q4 in our cost of higher advantage and how we performed versus the market in what was a difficult period. As we said, we weren't immune to the squeeze, but we do think we handled it better than the market, but we also think we handled it better than we probably would have handled it ourselves, whether it was a quarter ago or a year ago, et cetera.

When you think about an actual market inflection, which we're all -- we've been trying to predict as an industry for the better part of 3.5 years now is we still even saw in Q4, and we saw this through CAS, there wasn't a material demand change during the quarter. We're still having to go take share intelligently, as Damon said, on the right freight with the right combination of service for our customers and the freight that fits us. And so the real question is in the inflection is what does the demand signal look like? And we believe with a true demand signal where we start to see additional freight enter the marketplace, our ability through cost of higher advantage and then to match the right freight to the right carrier to service our customers' needs.

We believe we'll be able to manage that squeeze. We've said multiple times. We aren't going to be immune from it. We will feel that squeeze when it happens, but we have a high expectation that we will manage it quicker. We will address it faster and more intelligently and that we'll get to the other side of that squeeze, which historically for us, is a good place to get to the other side of that squeeze and demand is starting to grow as an industry.

The next question comes from Reed Seay with Stephens.

Obviously, you've made strides here with the technology that you've been implementing and the head count reductions that you've continued to make this seems different from the old C.H. Robinson where maybe these heads would need to come back with volumes. But how do you balance this head count reduction without compromising the human touch that we know from shippers and carriers prefer from their broker and avoid maybe losing some of that volume as we make these head count reductions. But any thoughts there would be helpful.

Reed, this is Dave. Just real quick. Thanks for the question. I'm going to start, but we need to double-click on what you're asking here. So the guys are jumping. I'll just start with we -- the way we look at that is we don't start and have headcount. There's not a head count KPI at Robinson. That's just not the way that we operate the business because we engineer the business. And again, the output might be a shift in our head count because again, we are shifting to more customer focus, that order to cash process, which is -- has a lot of friction, a lot of entry-level head count on that. We're automating that.

And for some of that, we're not backfilling and that's something that we're shifting out of. But we just don't look at it in the traditional fashion of cutting at a percent for headcount. That's just not how we operate the business. So I just wanted to set that structure up first, and then we can double-click on where I think you're getting that in your questions.

Yes. Reed, I'll add a little color and then ultimately let Michael wrap this up since we've had significant benefit in our NAST business to date. I think just to pivot from what Dave was saying there. I mean if you think about how we've generated the productivity that we've generated, how we've generated the results we have, we have fundamentally changed the processes right? So this isn't asking people to work harder. This isn't hoping that we can do something when volume returns. A process, which used to be a heavy human touch process before is now a light human touch process today. The process itself has fundamentally changed. The technology allows us to scale at a very large magnitude.

And so -- it's really not even a question on if we add head count back to these processes when volume returns. The question is there's no reason to, right? The process has fundamentally changed, where that it no longer requires human scale when the process -- when the volume returns, right? So I would say think about it in terms of our process through our lean operating model and our technology that is just fundamentally different than it was kind of pre the journey that Robinson is on.

Take the example we give often around our request for freight quote operation, right? Previously, we were only getting to 60% of those requests. Today, we get to 100%. Previously, it was taken a cycle time of 17 to 20 minutes. Today, it takes less than 32 seconds, right? That process has fundamentally changed, right? So if today we're doing requests for freight quotes, and it goes to $6 million. We don't have to add anyone back to the process to manage that inflection in volume because that technology can absorb that scale, right? That process has fundamentally changed. That's just 1 example.

But think about that across the 30 agents plus that we've operationalized at scale at Robinson I think that will just give you a little bit of the color on why it's different, right? It's not about working harder or asking people to work harder. The processes themselves have fundamentally changed. And so therefore, the human input that would have been required 4, 5, 6 years ago when an inflection may happen is just no longer required today. Michael will add some color there.

Yes. So Reed, 1 thing I will agree with you though is the importance of relationships in our business and connecting with customers connecting with them where we deliver the highest value. And so our focus has been to increase and improve the customer-facing roles and experience, our carrier-facing roles and experience, we were very public about our reinvestment into SMB and adding folks in that space. But we do believe there are continue to be more opportunities for us to take away tasks that are not maybe driving the higher value or higher return for our customers as we work to provide supply chain solutions.

We had a press release just this week on our LTL miss pickup agent. And that's -- we said in the release, 350 hours a day of human work that was done just to follow up on missed pickups. Well, that's an example of -- we won't have to have humans doing that in the future, but it's not really a high-value concept in terms of do we need somebody doing that role. The relationship is now our people will get that information more accurately. They're going to get it quicker, and they're going to be able to call their customers and talk to them about a solution to a pickup that maybe was missed and what are we going to do about it? How do we fix this for the next time. So really, I think it's a great question, but I think there's a really good blend going on between meeting what you described and how we're accomplishing it.

The next question comes from Scott Group with Wolfe Research.

So when you guys talk about demonstrable market share growth, is this sort of high single-digit spread versus cash, what you have in mind? Or do you think that spread should be bigger over time? And then maybe just, Damon, just 1 numbers question. If I just take the fourth quarter personnel expense and annualize it, you sort of get like a little bit below the midpoint of your guide for personnel expense. So it doesn't feel like the guide has double-digit productivity savings in there. So I don't know. Any thoughts on that?

Yes. So Scott, thanks for the questions. I'll take the personnel expense 1 first, and then we can answer the first question second. So on personnel expenses, I think, certainly, as we define productivity as shipments per person per day, right? It's certainly different math than the dollars of personnel costs, right? If you think about personnel costs, it includes not only the salaries of our people, but it also includes benefit costs, which are typically inflationary. And then the 1 thing we're really proud of is the success that we've realized the last 18 to 24 months, our people have been a huge portion of that success, right? And so we've been rewarded our people. We did so in '25. We'll continue to do so as the performance warrants that.

And so I think part of that math between double-digit productivity gains and what you're seeing on the percentage on personnel expense is really some of those items that aren't tied directly to head count per se, right? So it is benefit cost. It is rewarding our employees for the great job they're doing. But make no mistake, we're committed to -- yes, and 1 other item there is just our $6 target is based on no market growth, right? But we do have growth built into our plan next year. So no market growth, but certainly, we do have outgrow built into our plan. And when we talk about productivity, it is a combination of, what I would call, traditional productivity and cost avoidance. And so certainly, that cost avoidance won't show up as part of that double-digit productivity math, but it will show up as operating leverage as we deliver that outgrowth above a 0 market assumption.

So if you take everything that I just kind of went through there. I mean that's the rationale why the math is going to always be different between a shipments per person per day productivity number that we've pegged at double digits for 2026 versus the dollars you would calculate on personnel expenses. But make no mistake, we're committed to our double-digit productivity. We're committed to the continuous improvement that we've talked about now for 18-plus months and we're committed with high confidence to the $6 EPS target that we updated in our Q3 earnings call, again, with a very high confidence, right? So all of that together hopefully, that gives you a little clarity and color. But all of it together, we feel really good about where we're going and a high degree of confidence, committed to our $6 EPS target with no market growth.

Yes. I think at the end, you had the question about demonstrable call out. Michael, you could jump in here. But I mean, essentially, we look at it and if you look at the Cass index and how we're performing between 800 and 1,000 basis points different. We think that, that is starting to be demonstrable differences across the board on performance and proud of the team for doing that in very, very tough conditions that we're not immune from. So that's somewhat of a color that we feel. But Michael, anything to add anything.

Yes. I'll just jump in 1 point, and I'll give it to Michael is -- I mean, Scott, the way we think about demonstrable, right is, I mean, look, certainly, our relative comparison to Cash, it's a data point for us to know how we're performing versus the overall market. But when we talk about demonstrable, it is really about taking market share within this industry, right? And if you think about where our share is today, there is no cap on where that share can go tomorrow, right? So when we talk about demonstrable, I wouldn't limit it to just a certain outperformance of cash, right? Because I think that relative performance is going to be very dependent on that market for that specific time period of that specific quarter, right?

But our commitment is to take demonstrable market share as we move into the future and that optionality that I talked about, which were not even really putting in play today. We are but it's below the 40% threshold. That optionality we talk about investing future margins into even more demonstrable outgrowth. That's what really gets us excited. Everything we're doing today on productivity, everything we're doing today on revenue management. All of that is setting the stage for taking demonstrable market share in the future. We're already doing that today. We feel like we can do that at another level in the future.

Yes. I think Damon, you covered it. The only thing I'd add is we're very cognizant of outperformance within the conditions of the current business that's the right return for our customers, our carriers and our shareholders. And so we really -- do we expect to outperform the market, absolutely. The level of that outperformance will be driven by that combination of what's the right mix for those 3 stakeholders at that time.

That's right. As supported by our strategy, right? So Scott, if you remember, our strategy is to outgrow our end markets and expand our operating margin. So what Michael just walked through is there's always going to be some level of governor on our outgrowth, right? We don't want bed freight, right? We only want good freight. And certainly, we use our margins to dictate that decision.

Our last question comes from Richa Harnain with Deutsche Bank.

This now concludes our question-and-answer session. I would like to turn the call back over to Chuck for closing comments.

All right. It looks like we're up on time. So thank you, everyone, for joining us today. That does conclude our call. And we'll talk to you again in the coming days. Thanks. Have a good evening. Thank you.

All right. Thanks for joining us on day 3 of the UBS Tech Conference. My name is Seth Gilbert. I'm one of the SMid-cap software analysts here at UBS. And today, we're joined by the entire C.H. Robinson crew. Thanks for joining us. We got Dave Bozeman, CEO. We have Damon Lee, CFO; and Arun Rajan, Chief Strategy and Information Officer -- Innovation Officer, sorry.

I'm sure everyone's heard the C.H. Robinson name, but maybe you could give us a brief overview of kind of the company, the business model for some of our tech investors, and it is the AI conference. So maybe at the end, you can touch on how you're using generative AI and maybe give us a tangible example.

Yes, very good. Well, pleasure to meet you, Seth, and happy to be here. Just real quick, an overview of Robinson. We are essentially one of the largest logistics providers. And at our core, we essentially move the products that really power the world. And we do that every day at scale. 37 million shipments annually. We have over 83,000 customers. And we also interact with over 450,000 carriers. So really big scale from a logistics platform. But we also do solutions. We think we have the best logisticians in the world. And so it's a really big scale play.

The way it works is really in a 2-sided marketplace. On one side, you have shippers that want to ship goods. On the other side, you have carriers that want to move those goods. We sit in the middle and we broker that transaction between the 2. Why is that an advantage? It's an advantage because we provide to the shippers a vast amount of carriers, giving them all types of access to various carriers with price. And for the shippers, we give them access to carriers to move their goods all around the world. And we do that every day with some of the best people in the world.

We have been undergoing a transformation, and it's been quite successful. It's based on a lean operating model, which is really a continuous improvement type of culture change that we have in Robinson. That has been and has really supercharged our people and our technology. Arun and team has done a really nice job going from using machine learning. We moved into generative AI, which has been really successful that we'll talk about and even into the advent of Agentic AI, which is where we're moving now.

But if you think about just a tangible example and we will go further in this, how have we kind of moved the needle and why is it a game changer? It's a game changer because the order to cash process in our industry and in our company is fairly manual. It's very fairly frictionless handoffs. This would be quoting and appointments and things that require human interaction to do that. This lended itself well to really the advent of generative AI and going in and automating those processes. And that's actually what the team has done is attack that process. What's been the end result of that? Well, a 40% productivity increase since the end of 2022.

And one tangible example would be on quoting. At our scale, we get thousands and thousands of quotes and those quotes are, hey, C.H. Robinson, can you please move these goods from point A to point B. We would like a quotation on what it would take to do that. As that came in, that was humans processing that quotation yesterday. Today, we have an agent that is built, that is very mature, that is at scale. And that agent goes in, and it takes what used to take about 15 to 17 minutes on a quote, and now it does that in about 30 seconds. And it sends back in a very conversational manner to the customer, the heuristics of that load.

What's been a benefit of that? Obviously, productivity, but it's also allowed us to get 100% of those opportunities, whereas before, we can only get to about 65% of those quotes. So that's been a game changer, and that's but one example. And at the end of the day, we have a lot more grass to cut. We feel really good about where we are. Happy to be here. We are an industrial company that are getting AI benefits. And I think we've been under the radar. And today, we're no longer under the radar.

The marketplace model is actually one of my favorite business models as a tech investor. So I'm happy to have you guys on stage. You mentioned one thing I wanted to follow up on, which was productivity. You threw out a few numbers, you gave us a tangible example. And I believe you guys define productivity as shipments per person. So how are you thinking about the uplift from generative AI? And as you move to Agentic AI, I assume there's a greater uplift.

There is, and I'm going to have the team really jump in here. We define it as shipments per person per day in our Freight Brokerage business, files per person per month in our Global Forwarding business as well. So we're a bit unique in that we have both, right? We move goods from China to North Carolina every day when it comes to our Global Forwarding business, and then we move domestically in North America, a scale amount of Freight Brokerage that happens.

Generative AI obviously has played extremely strong within our North American Surface Transportation business and has benefited in that productivity. As we start to move to Agentic AI, we're super excited because it starts to really have the effect of getting at data that's off system and applying reasoning to that, that can have extremely strong benefits for us. But I'll ask Arun and Damon to weigh in on that.

Yes, Arun, why don't you talk about kind of the differences between Gen and Agentic in our company?

That's a great point. So on the back of -- Dave talked about 40% productivity improvements, that's been on the back of traditional software engineering, traditional classic machine learning, Gen AI and Agentic AI. So let me kind of walk through a little bit how Gen AI has worked. So that quoting example that Dave gave is a really good one. So the first half of it was Gen AI, which is a customer called me, let's say, I'm your account manager, a customer calls me and says like, hey, Arun, can you quote me for Chicago to Dallas like you did last week?

Now imagine there's a lot of context that's missing, which a human can make sense of because I worked with you before, I'd be like, okay, I know sets from Coca-Cola. He wants this thing move from Dallas to Chicago. It's from this warehouse to that warehouse. Here's a commodity, here's my pricing strategy for Coca-Cola. This is how I respond, right? So now the way Gen AI was working was -- the way we set it up was, okay, well, you got to parse that e-mail, interpret it.

And then now with Agentic AI, and we were just returning quotes in the past, but now with Gen AI -- with Agentic AI, what we're saying is where effectively, if you build the entire context that a human knows for the agent and give it access to all the tools that the human uses, right, which is, oh, I go look up order history to see what happened last week from what -- which warehouse to which warehouse do the goods move, what the commodity is. So you give it the context and then give it access to the tools that the human would. And now you start to see sort of like exponential productivity. And Dave talked about our NAST business and our Global Forwarding business, right?

Our NAST business is a one-shot response, right? So e-mail comes in, you interpret it, call a dynamic pricing engine and you respond. Our Global Forwarding business is a little more complicated because imagine like a China to an L.A. routing option, right? You might get 50 responses kind of like you get a response on Travelocity or Booking.com. Now you got to reason which one to pick, right? So think about all these scenarios where a human is able to reason because they have context. And what we've built is the appropriate context for the agent to take what Gen AI is interpreted and then give it the reasoning and the context and the tools to go actually respond.

Yes. And I'll just put a bow on what both Dave and Arun said is in the world of AI, I mean, it's hard to find anybody, person or company that doesn't say today they're using AI, right? I mean it's almost synonymous with their mission statement. What I would say is different than us. You mentioned the productivity statistics, greater than 40% productivity across the enterprise since the end of '22. That's without any footnotes, that's without any exclusions, right? That's an enterprise number point blank, right? So that's pure productivity.

And what we like to say at C.H. Robinson is, look, the ultimate scorecard on are you getting value for your AI investment is your P&L. It is your earnings. And for us, productivity gets probably the most attention, but we're getting revenue growth benefits from AI use. We're getting gross margin expansion from AI use, and we're getting operating margin expansion from AI use. And as Dave mentioned earlier, AI has been a big piece of our transformation, but our lean culture and our operating model is equally as important, right?

And so when we get asked, how are you differentiating yourselves versus others in your industry versus others in the industrial space, the combination of the lean principles, the operating model and our cutting-edge technology, what we call lean AI, we think the power of those 2 together is exponential versus them being separate.

Got it. In the software world, we have a metric called RPO, remaining performance obligations. And most all software companies report it, and it's a measure of backlog. So we can see as some of these larger AI deals come in, it might not be hitting revenue quite yet, but we can see the backlog growth and that anticipates future revenue growth. I'm wondering if for you guys, it makes sense to define some sort of AI KPI? Or is the business changing too much? Would investors just kind of see it in the revenue growth and the OpEx savings?

Yes. What I would say is externally, I think we just talked about it, right? The real key metrics on our usage of AI and is it benefiting the company, it really is in the productivity metrics we share. It really is in the P&L metrics that we report every quarter. And I always joke the easy job for Dave and I is, I don't have to convince you if AI is driving benefit in C.H. Robinson. All you have to do is look at our results for the last 2 years, right? And you can see bright line results and revenue growth and margin expansion and earnings growth in what's almost a 4-year freight recession.

So I think the true metrics for us are productivity, outgrowth of our end markets and then ultimately, our earnings performance as dictated by the P&L performance. What I would say is internally, certainly, we have a catalog of every process that exists between quote and receiving cash from our customers, right? So that's thousands of processes. And Arun's team knows working with the businesses, what's the human intensity, what's the human touch for each one of those processes, right? And then what's the cost to convert that manual process today to an automated process tomorrow. So that's an internal tracking mechanism we do to understand the funnel of opportunities that still exist for C.H. Robinson.

And look, we're pleased to say we talk about our transformation as being in the early innings, right? Call that the third inning of a 9-inning baseball game. And certainly, on the operating model, we call that third innings on the tech deployment side, we call that probably third inning for NAST because that was the first application of our tech stack. Global Forwarding is now starting to be indexed with that tech stack. But when you think about what I said earlier, there's thousands of processes that are available for automation. We've only automated a fraction of those processes today for NAST and even less for Global Forwarding. So even though we've had great results, the last 2 years, we truly believe the next 2 years and beyond are going to be more exciting for C.H. Robinson than the last 2 years.

And I think, Seth, for this room, for investors, it's really important coming off of what Damon said. We're building -- I've been doing lean for 30 years from working at Harley to Caterpillar to Ford and Amazon. But we're also building sustainability. We're builders by heart, and we're going to continue to do that. We're going to build things that last. And we go into that with a high P level, P90, P95 confidence on when we build these solutions that they're going to be sustainable.

And at our scale, when markets shift, we win at the bottom and we win at the top. So it's important for investors to know just how sustainable these solutions are, and we're bucking the trend in an industry that said, hey, you guys shouldn't be able to grow and expand margins. Well, we're doing that, and we will continue to do that because of the systems and our logic with our operating model and our technology and our people.

Got it. Just a reminder, if you have questions, we'll take questions at the end, but there should be instructions at your seat, so type it in and I'll read it up on stage.

Maybe a question for you, Arun. We'd love to dive in. This is a tech conference, a little bit about your tech stack. Do you own data centers, you purchase compute from the major hyperscalers, Amazon, Microsoft, Google, Oracle.

And then as a follow-up, NVIDIA chips are all the rage right now, and a lot of customers are having trouble getting NVIDIA chips. So I'd be curious, if you enter in data centers, do you -- or even if you don't, do you need to run on the latest NVIDIA chips? Or is that not necessary for your workflow?

Great question. So first, I'll start about Microsoft is our partner. And so we use Azure as our sort of cloud partner. And the enterprise-grade LLM, which is essentially that Microsoft offers, which is a version of ChatGPT. That's sort of our core primary provider. But that said, we have optionality, and we do use Gemini in some cases and cloud in other cases, right? So the way we think about it is that we are abstracted from the LLMs. So we can choose whichever LLM is fit for purpose, gives us the best price performance ratio, right? So that's step one. But largely, a lot of our workloads do move to Azure as our primary LLM.

So then in terms of like the question around chips, ultimately, what we look at is token usage for any given problem that we're trying to solve or trying to automate. And so in that context, what the LLM provider does for us, in this case, if it's Azure or AWS that's hosting Quad, it doesn't matter to us. The price performance ratio that we look at is token costs to get a certain workload done. So we're abstracted from the chips because the LLMs, we don't really care what the LLMs use underneath so long as we get the price performance ratio from the LLM. And we'll switch to one of different LLM providers or different versions of LLMs to get the price performance ratio that we seek.

Got it. There was a follow-up I had was it's tough to keep track, I think, for me and probably for investors of all the new models coming out. We had Anthropic up on stage yesterday. It's really tough to keep track. I've probably got a few updates in my e-mail that I need to get through after this week. So how easy is it for you to switch between model providers when a new model comes out? Is it cost prohibitive? Is it easy? Is it -- does it cause workflow disruption? Maybe comment a little bit on that.

Yes, it's a great question. So right from the beginning, we designed and architected our system. So we have an abstraction layer or a gateway that then makes it very simple to switch between different LLM providers. So we have an R&D and an innovation team that all they do is look at performance of different LLMs. And because our core technology stack is abstracted from the LLMs and we have a testing and regression testing framework, when we switch to a model or switch to a different model, we can back test and make sure we're getting the repeatability and the predictability out of the model that we need for the things that we need.

Because you can imagine that we can't have it hallucinate like we need a certain amount of predictability based on the context that we provided the LLM. So therefore, we need that repeatability. So a, we're abstracted from the LLMs and b, we have a test harness that allows us to back test when we switch models without disrupting any of the upstream kind of workflows.

And the great thing about where we sit in the AI ecosystem is, as Arun just walked through, we can be agnostic to the LLM, right? We can actually pick the LLM that best fits the problem we're trying to solve, right? And we don't have to have the latest generation of the LLM to get the required benefit that we need. So we can be using a generation [indiscernible] LLM, therefore, getting optimal cost while getting the same level of business performance that we desire.

We often say, look, we're in the sweet spot of the AI ecosystem, right? If you think about the hundreds of billions of dollars, the soon to be trillions of dollars that's being spent to build capacity and processing capability, we're the beneficiary of that. We don't have to spend any of that money to get the ultimate benefit and cost curve of that set of scale. Arun shares a statistic a lot that our token usage is up 10x year-over-year. Our cost is down 25% right? So when the question is always posed to the broader market, who is benefiting from the hundreds of billions of dollars that's being spent in the AI universe, we raise our hand and say the answer [indiscernible].

And that's been just in the last year, that 10x increase in the cost going down. So we're essentially at the end of the bullwhip. And that's why this competition war that happens, we are the beneficiary of that at the end of the day. So...

It's worth adding some color to that. There are 2 vectors to driving that price performance, right? So 10x usage and cost going down. Obviously, there's -- by picking the right LLM for the right job, right, we get benefit. And the LLM is kind of competing amongst themselves gives us benefit. So that's great. But equally, you've got to engineer things right and architect and design things right, just like you remember like when the cloud happened and engineers were deploying things to the cloud because like elastic compute, you can start to, hey, compute is free, and you have runaway costs when you don't have a disciplined way of using a new technology like what happened with the cloud.

The same thing happens here, too, which is you need a disciplined architecture and design to say, well, you can't like create this monolithic agent that has so much -- such heavy prompting that it's like it's super expensive to run, and it will probably hallucinate, right? So this notion of engineering the agents correctly to kind of manage our costs is equally important as a sort of competitive environment...

Right. Let's actually shift to the competitive environment. I would assume that you're not the only company in your space that's using AI. What sets you apart? Do you have a bigger engineering team, more data, more historical data, a differentiated approach? Maybe you could talk a little bit about the competitive...

Go ahead, Dave.

Yes. I think just to kind of start, and it is all of the above. But to put it in context, what separates us is, number one, it's that domain expertise, which Arun has been talking about. These are engineers that grew up in the business that actually know freight. So that -- I can't tell you just how important that is. Building our own internal systems that Arun talked about, that is huge when it comes to ideation, discovery, experimentation and velocity and speed. Super, super huge in doing that.

Our operating model, how we operate really drives a cadence and it allows us to discover and go fast, I think, faster than competition and discover a number of different things that separates us apart. And then just our logisticians, we think, are the best logisticians in the world. So we're not just a freight broker, we're a solutions provider for customers. And we think that separates us out. And that scale and that speed, there are a number of different moats that Damon always talks about. We have deeper, wider moats. And it's not just one, competition really has to cross 3 to 5 moats to really try to keep up with Robinson.

And I can tell you, as we sit here today, 12 months from now, we'll create something that's not been created today because we're always trying to build and ideate. And so you really have to keep up with us on where we're going there.

I was going to say clicking into sort of the build part of what Dave said, I think the industry is kind of dominated by people who buy and cobble together things. And so if you kind of look at our approach, C.H. Robinson has always built its own software. And so it's seen generations of, hey, I built this monolithic thing 2 decades ago, I've evolved it. It's evolved to a services-oriented architecture and a microservices architecture. So all the stuff has been built.

So you've got like the fundamentals of infrastructure, security, privacy, and we've got an engineering team that build fit-for-purpose things. So right? So those engineering teams are effectively -- so we've got this builder culture versus a buy and integrate culture, which is, in my mind, I grew up in tech companies like Amazon and Travelocity and Zappos and companies like that. So we're -- that's a distinctly different culture than a traditional IT culture where you buy and integrate software, right? And I think there's a lot of competition that does it that way.

So you can imagine you build the software. And once it's built, once our fixed costs are covered, the marginal cost for serving any additional volume is near 0, right? So to Dave's point around scalability of our model is super important. So owning the technology and building it such that we have a scalable model is super important versus a buy where you have to, a, cobble together multiple solutions; b, paid by the drink because you've got multiple SaaS providers that are charging you, which is not a scalable model.

And the last thing I'll just double-click on is the speed, right? So if you're using third-party providers, you're using multiple third-party providers. Your ERP is a third-party provided ERP. Ours is custom-built, right? The ability to adopt a customized, very fit-for-purpose solution at pace very difficult, even if you leave the cost aside for a second. So because we control -- our book of record is Navisphere, our system of record is Navisphere, we built that. We control the code. As Arun mentioned, we own our application layer. We build all of our own agents. We integrate those agents into Navisphere. We control the speed, right?

And I think that speed is a clear differentiator because once we ideate an opportunity, we operationalize it, we scale it, we control that entire time line, and we do it really quick. If you're depending on third-party providers, you're not going to get near the time line and the pace that C.H. Robinson is able to deliver to these solutions that are driving revenue growth and productivity. And then on top of that, as Arun mentioned, the fact that we develop our own tech, our marginal cost of ownership once that agent is built is very close to 0. It's just token cost, right, versus having to pay by the drink perpetually for a lot of our competitors that use an outsourced model.

So as Dave mentioned earlier, when we talk about the competitive landscape, it's not just crossing one moat. We feel like the competition has to cross 4, 5, 6, 7 moats just to get to where we're at today. And then 2 years from now, Robinson will be in a completely different position than we are today, right? And so our operating model drives continuous improvement, right? Arun doesn't get the plateau on his technology evolution, right? The expectation is every day, every week, every month, the tech is getting better, the company is getting better. We think that mindset really differentiates us from the competition.

Got it. Arun, you're in the hot seat. We got a few questions. First question, I think we answered it a little bit, but maybe you can touch on a little bit more. I'd love to hear about what foundational models they are using? Do they switch between models? Do they use any open source models? You touched on it a little bit, but maybe you could expand a little bit.

Yes. We're not using open source models. We use enterprise-grade models from ChatGPT from Microsoft, Google and Anthropic. Those are the 3 that we use. What was the other question?

Do you switch between models? You touched on it a little bit, but maybe you can give maybe a tangible example.

Yes, we switch between models all the time. So let's take that quoting example that Dave gave, right? So let's say, a new model comes out. And like our R&D team might say, well, hey, we think you might be able to get a better price performance ratio out of this new model, right? So they go to the engineering team and say, okay, quoting team use this model, right? So it's pretty easy because of the way we're abstracted. There's a gateway pattern, it's a well-known pattern in software engineering, right, where you say, I talk -- I always go to a single layer to talk to any different LLM provider, right? So let's say, I'm talking to ChatGPT today and Quad came out with a new model and the R&D team says like, hey, you ought to take check out Quad to see if you get better price performance. They go to the engineering team.

The engineering team can pretty quickly do a test by saying, okay, I'm going to switch over I'm going to back test like the last 6 months' worth of requests that I processed through the old LLM, I'll run it through Quad and see if I get a better price performance ratio, right? And so that whole -- because of this gateway pattern and because of all the testing harnesses that are built into here, we can switch models and back test them pretty seamlessly and see if it's worth switching to a different model. So we switch all the time.

And I think Dave or Damon might have said this, frequently, we might actually go back to a different version of the model because we're finding that it's costing us way more than we need, and we don't actually need the latest model, we might even fall back to an older version because we get a better price performance ratio. So absolutely, we do that all the time, and we're intentionally architected and designed to enable the optionality to switch between models.

Got it. Maybe next one we have. I think end of the genesis of this one, but a question about which database vendors do you use. And the question is probably someone trying to figure out if you're increasing your usage, maybe what players to be more bullish on. So maybe you could spend a minute on that.

Yes. I mean, like we use Microsoft SQL Server. We use Snowflake as our sort of like underlying data platform, data warehouse. But aside from -- but again, like the way we work is a lot of the heavy lifting is built. So for like -- take those 2 vendors, right? If we're serving high-volume traffic, it's mostly cached. So right, we're not going to like increase our licenses on SQL Server. Equally, we might use Snowflake, but a lot of the compute and a lot of the number crunching is happening in a machine learning model or somewhere outside of Snowflake, right? So the way we engineer and architect ourselves is like we're not going to spend -- there's not going to be runaway costs with like underlying database vendors and underlying data platforms.

Got it. We're just about out of time, but I want to give you the chance to close it out. You have an asset-light model, the marketplace model. You're using AI, you're showing tangible benefits. It's probably not a name that was on a lot of tech-focused radars, but maybe you could just give a few parting words as to why it should be.

Yes. A few parting words would be this. Number one, Damon and I and Arun would say the next 2 years in Robinson are going to be more exciting than the last 2 years. And why do we feel that? Because we know we are in super early innings in this journey. We love the results. They've been demonstrable results that's only going to continue because of the things we talked about today. Our operating model is a differentiation. Our technology is a differentiation.

Our people are a differentiation. And so we have solved for the operational layer, and we continue to solve. There's more to do. But when we look at the customer-facing side of it, there's just so much more ideation and discovery that this company is going to do that brings even more bottom line results. So to me, this is an exciting play, and that's why I call it an undervalued AI industrial play from where we are.

I think we'll end it there. Thanks for joining us.

Seth, thanks for having us.

Thank you.

All right. Good morning, everybody. My name is Tom Wadewitz. I cover the freight transports at UBS. Welcome to the first full day of the conference. I appreciate everybody joining us. We've got a great lineup. We're going to kick things off with C.H. Robinson. I think C.H. Robinson has had a great story. We've got Dave Bozeman, the CEO; and Damon Lee, the CFO. Chuck is in the audience as well. So thank you for joining us. Maybe I'll offer you a few intro comments, if you will, and then we just dive into the fireside chat session.

Yes. No, I appreciate it. I think we've just dived in, Tom. We're happy to be here. I feel really good about where we're going in Robinson, where we've been in the last 2 years. As Damon and I say, hey, the next 2 years are going to be just as more exciting than the last 2 years because we've got a lot going on, and we feel really good about it. So happy to talk about it and happy to have us here man.

Yes. Great. Great. Well, thanks so much for joining us. So I think you're -- against a tough cyclical backdrop, you've really shown a lot of impressive improvement in the last 2 years. And I think that investors have gained more confidence and more understanding, let's say, of some of the things you're doing on the technology side. That having been said, how do you think about where you are in the kind of journey with lean and tech and kind of how much has been driven by the lean initiatives so far? And how much has been driven by tech and then maybe how that mix kind of looks going forward?

Yes, interesting question. I'll start and Damon can weigh in as well. Well, first of all, we look at that a bit different, that question at Robinson. Lean and tech for us, it's really symbionic. It's a system. Our lean methodology is the pulse for how the company is running. And our technology is really kind of energized from our lean methodology. So they go hand-in-hand. Lean really allows our tech to flourish, and we talked about that publicly in doing that. We put in that lean operating model to really drive not only our pace, our decision-making, but it's also driven our innovation within the company that we're really proud about.

It's allowed our tech now to open up and not only give us what we think are demonstrable results, but it's also allowed us to create what the next generation is, and that's agentic AI, and that's really driven off of our lean operating model. So it's an important point. We just don't go about this in a serious fashion within Robinson. This is a parallel fashion. It's symbionic. It's all one thing. So when I get that question, I always pause and give a little context to it. That's how we operate every day in Robinson. It's about creation and development from a technology perspective in a strong operating model.

Yes. I would just add, I think -- well said, Dave, I would say our technology makes the operating model better, and the operating model makes the technology better. So as Dave mentioned, they -- it's very difficult to bifurcate the 2, right? I think if you ask us how much productivity is related to each one, the answer is we don't know, right? Because they're so intertwined, they work so well together. There's really no value in trying to separate which one is driving what value because they work together to drive an exponential result. You ask what kind of level or what progress are we in our journey here. And I'd say we're in the early innings. If you think about the operating model, I would say we're in, call it, the third inning, using a baseball analogy across the entire enterprise, right? So that would include our NAST business, Global Forwarding business and the smaller businesses. So call it third inning on the operating model.

And I would say that's going to be a many, many years, if not decades, journey. If you think about some of the best companies in the world that have lean operating models, I think most of them would tell you they've been doing it for 30 or 40 years, and they're still probably in the fifth or sixth inning, right? And so we're just getting started from a lean culture and an operating model perspective. From a technology perspective, I think the answer is a bit different between the 2 businesses, right? I'd say our NAST business is probably in the third inning of its technology deployment. And I'd say our Global Forwarding business is probably in the first inning of its technology deployment. But if you summarize everything together, certainly, as Dave mentioned, as we started, we truly do believe the next 2 years will be more exciting than the last 2 years because we're just getting started on our lean journey, and we're just getting started on our technology journey as well.

Yes. And Tom, just to put a period on that, what Damon just said. I think we've personally been doing this. I know I've been doing lean for over 30 years. And the reason he says that is that there's just a lot that has to happen. I'm super happy about where Robinson is, but there is so much grass to cut on where we are from a lean understanding, and you guys will continue to see that as we go forward.

Great. So if I think about the -- some of the productivity metrics you've talked about, I think you were aiming for over a 2-year period of time, like a 15% growth in loads per person per day. And then the go forward is more like, what, single digits plus agentic on top of that. That's a -- it's a pretty rapid pace of change for the organization. So how do you manage that change internally to maintain employee morale, to keep people excited about things, to keep people away from just being concerned about the jobs? And also from a customer perspective, is that something that you consider that you say, okay, well, how do we manage potential loss of customer connections as we have a reduction in our workforce?

Well, interesting question. Number one, is just radical transparency for us. I mean in starting this journey, one of the first things we did in the transformation is we actually sent out -- and I talked to a number of you back then, we actually sent out a what's impacting your work type of request, sent it out to every employee. And it was really me asking for feedback from our employees, what can make your job better? I intended to write back 340 responses, handwritten notes thanking everyone for their feedback, and it got back over 3,100 ideas. That told me a lot. But when you look at what those -- thematically, what those ideas were, it's really what we're doing in our transformation. So we've been very clear with our organization and saying, number one, we're going to get our swagger back.

Two, we're going to start winning again. And everyone loves that. Now that being said, there's hard work to be done, and you have to be very transparent with everyone on what that means. And we have been in the journey. Are there some people who are no longer with the organization? There are, right? There are some people who've come into the organization. But our employees feel really good and they're very clear about where we are, and we measure that as well. So to sum it up, being super transparent with everyone, taking their feedback, executing on that, allowing Robinson -- and when people start to see that change and start to feel that win, it only starts to compound, and I think they feel really good about that.

Tom, I would only add a couple of simple concepts. One is I think transparency is critical when you're going through a transformation like we're going through at Robinson, right? So we've been very transparent with our team to say, look, 2 years from now, there are going to be roles that don't exist anymore or there are going to be roles that are dramatically different in scope and scale than they are today. But you can upskill to what the future holds, right? And so we've encouraged our entire employee base to get comfortable with AI tools, to get comfortable with the transformation we're going through, to get comfortable with lean techniques and the operating model so that they're prepared for the journey that we're going on. And I think that's been received quite well. I think, look, at the end of the day, employees want honesty, they want transparency.

That's what Dave has certainly brought to this discussion. And then I think what Dave said is also critically important, right? Look, people want to win. People want to be on a winning team. And Robinson was a winning team for decades, right? And then they -- we hit a spot where that we weren't winning, right? And so now we're back to winning again. I can assure you that team that tasted defeat and now is tasting winning again. They never want to taste defeat again, right? And that is a huge motivating factor for our team. So to me, it summarizes, look, teams want to win. We're winning. I think that's a great tool from a motivation perspective. And then at the end of the day, I think transparency is key when you're going through a transformation like we're going through at Robinson.

Yes. And finally, for this audience and anyone watching here, I can't tell you the importance of leading by example as well. And when we say go to Gemba, that is a lean term where you go to the work. I personally, Damon and I leading the transformation from a lean perspective, that means going out, I've sat at the desk, for hours with employees. I've booked freight. Don't hold me to the quality of booking that freight, but I did it, right? But it was really about understanding the work that's happening because if you're going to make and when you make high judgment decisions, you really need to understand what's happening at the base grain of the work that's happening within your company. And going out and leading by example in doing that, leaders at this organization have to be educators and you have to go in and use the 5 whys and have to have a Socratic method. We're going through all of that. And I can't ask people to do something that I'm not leading myself. And that makes a huge difference when it comes to the transformation.

Great. Okay. Getting into the -- kind of talk a little bit about generative AI and then Agentic. Can you provide some examples of how have you used generative AI? And then maybe what were some of the challenges to deploying that? And then I'll ask about Agentic after that.

Yes. Let me frame it. I'll have Damon jump in because I want to frame that question is that we looked at this, none of it was haphazard, right? It was really about defining a problem. That's super important of how we operate this company. And defining that problem, we wanted to put together a comprehensive strategy. And we did that and shared that with our Board of Directors. They were very supportive. And in tacking this strategy of our 'order-to-cash process', we looked at that and said, "Hey, we could be much more efficient with the technology we have." And there are some benefits within Robinson that we'll get into but looking at that order-to-cash process in this industry, it's a very manual physical process. It's handoffs that happen within that process. And at our scale, that is a lot of handoffs or what I would call waste within the system that, quite frankly, customers really are not interested in paying for.

And so that's where we focused our efforts of our technology first is to really reduce those mundane tasks, automate that kind of order-to-cash process. We've talked about our automatic quoting as an example. But I just want to frame that on what we're doing. Now there is a lot of different examples we can use. One of the ones we use that I think is super, super important is time is money in this industry, and you really have to be on it. And from a quoting perspective, we just were not bringing our best self when it came to respond to quoting. And in fact, we were probably responding to about 65% of the quotes that came in.

And that's leaving a lot of potential loads on the table after we've launched our large language models and our generative AI, which this lends itself to be the perfect application because this is on-system data that you can really go after in generative AI. That now has moved us to 100% quoting 24/7 in about 30 seconds. And we respond back in a conversational manner to the customer, and that's very beneficial as well. That has changed the game for us because it's allowed us to really get more wins just in quoting. And there's a number of other examples. But I'll have Damon weigh in on some of the other things. I just want you to understand how we went about starting and attacking this quote-to-cash process.

Yes. I would just add, I mean, Tom, I think it starts -- it's hard to have a discussion on the progress you've made without starting with our strategy, and it's actually a quite simple strategy, right, which is we're going to outgrow our end markets, and we're going to expand our operating margins. Now it seems simple, but that and between the 2 defines everything we do at C.H. Robinson, right? So we're not just looking to grow or we're not just looking to improve quality of earnings. We have to do both. And that principle of and drives completely different problem solving within the company. And we've been able to do things that others in this industry said couldn't be done, like outgrowing the market and expanding margins at the same time. That's been a kind of an urban legend for decades that couldn't be done. We've been doing that now for several quarters. But it starts with that and strategy, right? We have to grow, and we have to expand margins at the same time. And as Dave mentioned, I'll just give you a couple of examples.

The benefit we have realized from the operating model and our technology, what we call lean AI, you can see it throughout our P&L at C.H. Robinson, right? So it's not just benefiting cost. Now we have generated over 40% productivity since the end of 2022 across the enterprise, and we're proud of that number. And I'd like to say that's a number with no footnotes, right? There's no exclusions. There's no mystery. That's 40% productivity defined by shipments per person per day across C.H. Robinson since the end of '22, right, with no exclusions. So we're proud about that number, but it's more than just productivity, right? We've also aided our growth through that example Dave just gave. So you think about we have 30 -- over 30 agents that are operationalized and scaled at Robinson today. One of those agents manages our freight process, right? So we get a request for freight quote. Historically, we would only touch maybe 65% of those requests. So we're leaving 35% of freight opportunity to the wind that we never touched before.

Today, in our NAST business, we get to 100% of the request for freight quote, right? So from 65% to 100%. So you can just imagine how that's aided our ability to grow and outgrow the market in our North American Surface Transportation business. In addition to just having a bigger ocean deficient from a freight opportunity perspective, our win rate has gone up as well. And you may ask, well, how did your win rate go up? I understand you get more access to freight. But the quality and the sophistication and how we're responding to those requests now has gone up exponentially, right? So before, if you had a human that was just trying to get to every request for quote, they were only getting to 65%. So the one they did get to, they would grab a handful of data, 5 or 6 pieces, put a quote together, send it back, right, in a fairly unsophisticated way.

Today, our agents and our human in the loop, again, getting to 100% of the freight that's available to us from a quote perspective, they send back a much more sophisticated quote, right, gathering hundreds of data points. And so therefore, we're able to target that freight differently, and our win rate has gone up as a result of that. So that's one example, one agent that's not only driving revenue growth, but it's also driving productivity at the same time. Another agent we're very proud of is our revenue management agent, right? And so again, another kind of urban legend in this industry has been, look, you can't expand gross margins. They're commoditized, right? So you can't differentiate yourself at the gross margin level. We would say that's not correct, right? I'd say we've been doing that now for almost 2 years.

And so we're able to use our technology. We're able to use the discipline of our operating model to drive price arbitrage and cost of hire arbitrage at the gross margin level and see sustainable benefits there as well. So that agent, again, not only driving productivity because we have less human touches managing that process than we did historically, but it's also driving gross margin expansion at the same time, right? So if you look at where AI is benefiting C.H. Robinson, right, it's not just a productivity play, although that's been a demonstrable benefit. It's revenue growth, it's gross margin expansion, it's operating margin expansion. And I always joke the easy thing for Dave and I is, I don't really have to convince you if it's working or not. You can just look at our earnings. You can look at the quality of the results that the organization is generating, and you can see the benefit firsthand. Go ahead, Dave.

Yes. And I was going to say, and for this room, this is super important. What Damon just said is we literally don't wake up every day and just say work for the day. That's a -- we expect that. That's a price of admission. What we just said is that you have to think about velocity and sustainability and scale. And all of those things are going to happen. This is why I make the statement that the next 2 years, I'm more excited about the next 2 years than the last 2 years because we've built and we are building constantly a sustainable process that will benefit in either market because you notice we don't talk about the macros because it doesn't matter when you build a system like this. If it's lower for longer, fine, we'll win in lower for longer. If it inflects, well, we have systems that will scale and will drive velocity, and we're actually anxious to see when that happens because you'll see even a more demonstrable benefit. So that's really, really the important takeaway off of what Damon said as well, is you have the today, but think about the tomorrow, this is a scalable system that we're building here.

So you touched on the macro piece that you'll regardless of the macro backdrop, you'll prosper and you'll execute on your strategy. How do you think about what is kind of assumed in your $6 or more for 2026 framework? Is that kind of a flat market? Are you assuming that there's a little bit of cycle lift in second half? Or how do you think about what's the assumption is macro-wise underneath that '26 view?

Yes, go ahead. Yes.

Yes, I'll take it and you can jump in, Dave. So I would say, certainly, in the approximate $6 EPS update to our Investor Day that we disclosed as part of Q3 earnings. So that $6 assumes no market growth, right? So that's a 0 market contribution scenario. So it's primarily $6 on the back of all the self-help initiatives that we've been generating at the company. From a productivity perspective -- and we talk about our productivity and kind of a stacking set of functions, right? So originally, our '26 commitment as part of Investor Day included what we consider our continuous improvement commitment of single-digit productivity essentially forever, right? Every single year, we're committed to single-digit productivity regardless of any circumstance. We improved that productivity target from single digits to double digits in our update.

And we did that on the back of our discovery of Agentic AI, right? So we've had great benefits from GenAI over the last 2 years. We challenged the team in an operating review -- it's been a while now, on, okay, we're performing here today. We need to get to here. How can we do that? The tech team came back and said, we don't know. We need to do some problem solving to figure it out. They came back in pretty quick order and said, look, there's something new, the next evolution of AI called Agentic. We think that's what we need to get to the next level of performance at C.H. Robinson. And from that discussion to already starting to operationalize those agents was about 30 to 45 days. So it was a pretty quick discussion to, okay, we don't need to analyze this for 2 years, right? We know the answer here, and we were off to the races.

But that pivot into Agentic AI is what allowed us to get confidence to move our productivity assumption in 2026 from single digits to double digits. And I think that's the way you can kind of think about C.H. Robinson's productivity journey going forward, which is we're going to have waves of productivity, difficult to predict because they are, call it, ideation and innovation. GenAI was certainly, I would consider a wave of innovation. I would say the implementation of the operating model was a wave of innovation for Robinson. And then I'd say Agentic is another wave of innovation. And so you've got that stacking effect that's happened in '24 and '25. And now we're confident it will happen again in '26. And then we say beyond '26, again, we're committed to single-digit productivity, yet to be determined if there's another wave of innovation that comes along.

But that's the way I would frame it, Tom. I would say, certainly, no market contribution is in the $6 of EPS update. Productivity is assumed at double digits for '26. And then the Agentic benefit, we did comment does have more of an indexing to the second half of the year. And that's just purely the lead time, right? I mean it takes 12 to 18 months from the time you have a concept to the time you have it operationalized and scaled. And that -- and scaled is important, right? If you don't scale the tech, you don't get the optimal benefit. And so 12 to 18 months is what we've experienced as the lead time for those type of innovations, and that fits well to the second half of '26.

Yes. That just -- Tom, and that just reminds me of something -- again, I look at this room and those watching and what would I want people to take away from what Damon just said, one, the explanation of '26 and EPS for your question. But also, there are some people here that have been covering this company for a long time or they're aware of Robinson. We are just fundamentally a different company. I mean this is structurally a different company from yesterday to today. So going forward, when we talk about how we operate, it's experimentation, it's ideation, it's failing fast. It's small experiments that break and then we scale from there.

That is -- I can't tell you, not only is that different for Robinson from yesterday to today, that's different than how the industry goes about operating. So if there's something we want to start looking at and saying, what's different? If you went into Eden Prairie or around all of our offices and facilities, the way we operate is different. And that is really a technology type of driven of operating culture that we have within Robinson with -- I can tell you right now, 12 months from now, Damon and I, as we sit up here, there's going to be something created at Robinson that we don't even know of yet because that's how we go about doing that. That's super important for you guys to hear that.

You hit a nerve with that one, Tom, because I'll add another comment, which is if you think about what we call policy deployment, which is really our multiyear strategy initiatives, right, roughly half of those initiatives that we're working on today didn't exist 12 months ago. When we talk about the sustainability of what we're doing, and as Dave mentioned, the ideation and the experimentation, right, this is going on every day, every week, every month, right? I mean there's new ideas that's surfacing literally every day, and then they go through our gauntlet of testing because again, we don't do any hobby spend at C.H. Robinson, right?

If there's not a bright line ROI to where we're going to spend that money and get the return, we don't spend the money. So there is no hobby spend at C.H. Robinson, right? But to Dave's point, I mean, we've got this almost a technology culture now of just constant innovation, constant experimentation, which allows us to keep our funnel of organic opportunities extremely full, right? We feel really good about organic opportunities. And certainly, they've boded well for us over the last 2 years, and we feel like we have a very healthy pipeline going forward as well.

So I want to take a kind of a step back from that and say, okay, from an industry perspective, there is an opportunity for others to use AI and to become more efficient. There are a lot of good competitors out there in domestic truck brokerage. There's some good global forwarders out there competing against you in forwarding. How do you think about what others may do with this? So I think it's probably pretty fair to say you guys are ahead. You've been very successful. You've done the culture and the lean as well. So that -- and I know Damon, we've talked about like the moat, right, that those would be in place. But it seems to me like, well, others will still try to do some things. So do you think this is like the big players, everyone benefits. So you could see operating margins that are maybe stronger at other players as well and maybe the midsized or smaller players get hurt and can't participate? Or how do you think the overall impact to the industry is? And maybe there's a piece that you compete either away with some of the benefit too?

Yes. It's a good question, but let me put it in context. First and foremost, we wake up every day. Our focus is C.H. Robins. It is -- that's what we do. I don't -- there are some good shops out there, but we didn't invent generative AI, and we didn't invent agentic AI. What I do know is that we're all going on about a 4-year freight recession in dealing with that. Everyone has had to deal with those cards. And the technology is out there to use it. And so I can't tell you what the competition is going to do. I can tell you that we're not looking back. I think while people are really thinking about how they operationalize generative AI, I can tell you this company is already on to agentic AI which there are some fundamental differences on where that is. Now I'll just put a really important point on this. And I do think that we have an advantage, and it really comes down to domain expertise. We often talk about our 450 internal engineers and not only just internal engineers.

These are individuals that have grown up in the industry and within Robinson. So they actually know freight. Why is that an important part? Well, because at some point, if you're going to go all in on using this technology, you're going to have to have some level of assistance. Either that's going to be your own internal assistance on what you're going to do to build your technology for your particular business and how you execute or you're going to have a partner, an integrator, someone's going to have to come in and do it for you. When that happens, they really have to -- they have to know your business and they have to know the industry. We don't have to do that. And what's the advantage of that? We get speed. And I can't tell you how critical speed is. We get to experiment fast and break things. That's super important. Our engineers actually know how to book freight from China to North Carolina.

They've grown up in that, and they're building the agents that allow us to do that. We have Navisphere now that is our own TMS with our applications now running on top. That is an extreme advantage when it comes to what we can do from a speed perspective within Robinson. And then there's the data. As you know, we have the largest data set within the industry. Data is super important. And what you might not know is, yes, we have 37 million shipments annually each day -- each year, lots of data that comes with that. But there's also data in every load we don't win. And so that's even the more powerful data. So we deal with a lot of data and learning that happens. That makes this moat, Tom, deeper and wider. But again, we didn't invent this technology. Everyone has access to it. But I think it is showing up, as Damon says, in our P&L the last several quarters, and that's because we're executing.

Yes. Tom, I would add, as we've said before, do we think our peers and competition are going to experiment with AI and do things with AI. And I think the answer is, of course, they would, right? I think it would be probably reckless for them not to, right? But what I would say is when we talk about what makes C.H. Robinson different than our competitors, I would say it's not one moat. It's many moats that our competitors have to cross to do what we've been able to do. right? And so take the first moat is our operating model, right? And so I don't think you get anywhere near the benefit that we've gotten from our technology without the lean operating model, right? I don't think you would -- I think it would be a demonstrable difference in where we've succeeded on tech versus not without the operating model, right? And doing an operating model is not easy, right? It is changing the culture of your company all the way down to the desk, right?

So there's very few things harder in a company than changing the culture and certainly putting in a lean operating model, a real one, right? There's lots of examples of fake lean out there. And a lot of people talk about lean because it can become the buzzword of the day. But to truly implement a lean operating model all the way down to the desk, it's hard, right? And we think that's a clear moat that competition would have to cross. As Dave mentioned, we build over 95% of our tech, right? So we have over 450 engineers, if that's what they do, right? They build the application layer on top of the LLMs. And as Dave mentioned, most of those 450 engineers have grown up in C.H. Robinson, right? They know the business. They know the industry, they know logistics and freight. So therefore, their ability to make a custom agent to do what we needed to do versus us paying a third party to kind of guess at what we needed to do. You can't compare the 2, right? The results are demonstrably different.

Also, the speed of developing our own technology, right? So where it could take quarters, if not years, for companies that are outsourcing their AI adoption to third parties. We can do it in days and weeks, and we're doing it in days and weeks. We've always had the industry-leading best data set. I would argue, historically, we couldn't utilize it. We had it. It was an asset, but what were we doing with it, right? We didn't have the technology. We didn't have the discipline from the operating model to use it effectively. Now we do. And we think our data set is a key differentiator for us as well. Investment-grade balance sheet, right? We have not stopped investing in our technology through, as Dave mentioned, almost a 4-year freight recession. So our financial wherewithal allows us to do things that other competitors can't do.

So if you add all those up, not just one moat that we think competition has to cross to do what we're doing. But it's 4, 5, 6 moats that they would have to cross. And oh, by the way, we're not stopping and we're not standing still, right? What we're doing today versus what we're going to be doing 2 years from now will be quite different, right? And so we're going to continue to advance. We're going to continue to run hard. We're going to continue to innovate, continue to drive the operating model. And so even if somebody did catch us to where C.H. Robinson is today in 2025, we're going to be on to a much different state 2 years from now. So I think all of that added together is why we feel pretty confident about what we're doing is special versus others in the industry.

So how do you think about M&A when the timing for that might be right? What might be a way to do it because your operating model, your use of tech, your execution is very strong. You've seen improvement in growth versus the market. So it's -- I'm sure it's attractive to drive that organic growth for a period of time. But it seems like you could also apply that method to other companies.

Sure.

So yes, any thoughts on is that part of the growth strategy in the future? Maybe when would be the time you'd start to look at that? And what might you want to do?

I'll have Damon jump in on the capital allocation. It's super important that we set this up and say, what's driven success, I think, so far with Robinson and will continue to do so is being disciplined and measured. And I've spoken to a number of you about that. That is our approach to be disciplined and measured. It's -- we've been around. We've worked at a number of organizations, and you know that. This is not our first rodeo, if you want to say that. We also know the statistics on how much is accretive. 30% of these acquisitions can be financially accretive. You get 84% of them failing. At Robinson, that won't happen. We always say our internal opportunities are robust.

We have several internal opportunities that are very attractive. But jumping out and just chasing a shiny penny just to chase it and lose your discipline and focus, that's where things can break. And that's what we won't do. It doesn't mean that we're not kicking the tires. We're doing that all the time. And if it's the right fit, when it's the right fit, that's something that can fit into our system. I agree with you, we'll make a number of things better, but we have a certain bar that we're going for, and that's something that we're going to continue to do. But disciplined and measured, that is what we're going to do at Robinson.

Yes. And Tom, I'd say the simple answer is, will inorganic opportunities be part of our future growth story? The answer is absolutely yes. Now to Dave's point, we won't make a mistake there, right? So we're going to be disciplined. We're not going to chase. We're not going to create synergy cases that we know are low probability to make the valuation work, like when we acquire somebody, it will make sense, right? I think it will make sense to everyone in this room. It will make sense to us. It will be something that creates value for our shareholders. And I think the way to think about inorganic is it doesn't always have to be an extremely large acquisition, right? There's a lot of value to be had in small tuck-ins that have a niche technology that we think is attractive or could be a tuck-in that has a specialization capability that we think is attractive.

It could be a small acquisition that helps us further our vertical and horizontal strategies that we have. But as Dave mentioned, like we've never stopped looking for inorganic opportunities. But I would tell you in the last 2 years, the bar has been extremely high for inorganic because of the return that we've generated on the dollars we've invested in our organic opportunities, right? It's very difficult for an acquisition to compete with those dollars because we've had such success and such high returns for those organic opportunities. So simple answer is yes. Inorganic will be part of our growth strategy, but it will be disciplined and thoughtful when we do it.

Okay. We're approaching the end of time here, but I want to get maybe a couple of thoughts from you on the freight trends, economy. Do you have -- do you see some reasons for optimism? I think data points in 4Q and we're getting some LTL updates and a lot of different sources of data, it seemed like it continued to be on the soft side. And I think that was true for October. It seems like that's the case for November. Are you seeing anything different than that? Or do you kind of see what were maybe something consistent with what we see from other transports? And then as you look to '26, I mean, do you have reasons for optimism? Or are you just like, hey, flat is the best view?

Yes. I would start, Tom, I'd say -- as you know, we don't spend a lot of time talking about the macros, right? We spend most of our time talking about how we execute our strategy at C.H. Robinson. And so the great thing about our strategy is it works in all market cycles. We're convinced of that, right? Because it's -- we fundamentally changed the process and the processes within the company, right? So we know they're scalable. We know they'll work because we get micro examples of being able to test that thesis all the time. So we're highly confident that whether we're in another year that looks like '25 or if we see a year that's got modest growth or if we see a year that inflects, we're highly confident that the strategy we're executing on outgrowing our markets and expanding our operating margins will continue, right?

So we don't have a doubt there. I would say to that question, Tom, I'd say, look, there's -- I think there's theories on what can make '26 a better environment for freight. But I'd say at this point in time, they're just theories. I don't think there's any hard data that's really showing anything that would say the markets are going to improve in any type of material way. And certainly, on the cost side, there were certainly a lot of headlines in Q3 that costs were becoming an issue. And I would say we didn't see them as an issue in Q3. I think we did see a modest increase in cost in Q3, but we managed it, and we delivered our results, and we continue to outperform and we continue to expand margins. So on the cost side, I would say that's a modest curve as well.

And so I think just in total there, Tom, I'd say it feels like lower for longer, which, again, from our perspective, we don't get disappointed with that because we know we have a recipe that wins if the markets are lower for longer. And then if volume returns to the system, we're extremely excited to be able to show the operating leverage that we're going to create with our new model, right? In fact, I've made this statement a couple of times is I think our operating leverage when the market starts to see volume return, will rival that of the asset players. I think we've developed a very attractive cost structure that I think will scale very well when volume returns.

Yes. It's well said. And just to put it on there, just one of the things why we're excited about it, we talked earlier when you asked the question around automation, and we talked about quoting. If we're doing 600,000 quotes today automatically through our technology, we always say you can add a 0 to that. And the system will just eat it up and churn it out. And that is scale. And so lower for longer, we're good, but we'll take the volume and our systems are ready for it. So glad to be here.

Okay. Dave, Damon, thanks so much for joining us.

Thanks, Tom.

Yes. Thank you.

Good afternoon. My name is Dan Moore. I'm the Senior Transportation Analyst here at Baird. Fortunate to have good chunk of the executive leadership of C.H. Robinson with us today. A pleasure to have both of you here, Chuck, you as well. Appreciate your time. Appreciate the opportunity to ask your questions.

Happy to be here.

Yes. Happy to be here. Thanks for having us.

How is everything going?

Everything is going well. We're pretty happy with the team and what they're doing. I think before we get started, I do want to acknowledge because we certainly have veterans in Robinson. I want to really pay respect to our veterans and what's going on, on Veterans Day. So to all the veterans out there, we just want to pass that on.

I don't think we have any slides that we were going through. We're just going to launch into questions.

I'd like to maybe start off with a state of freight type question. The market has been a very dynamic one, really for the better part of the year, kind of absence of seasonality earlier in the year, front-loading of inventories, tariff policy, government shutdown, not to be lost on anyone. Certainly, there's a very powerful idiosyncratic story taking place at C.H. But if you could frame just the state of freight and how you see things today might be a good place to start.

Yes. Thanks, Dan. Well, as you know, we don't spend a lot of time on the macros, but per the question, just, first of all, truckload lower for longer. That's what we kind of see there. From an ocean perspective, you kind of called it out. There's dislocation happening, peaks where it's not supposed to be. And we kind of see that happen, and there's some uncertainty, of course. But that's about kind of what we see on that. We try to design our system and say, listen, I can't control the macros. Let's do what we can control and build that system, which I'm sure we're going to talk about today. But I don't know if you would add anything else.

No. Well said. I don't think there's been much of a marked change in the macro environment for either truckload or forwarding. So I think Dave summarized it well.

I know this may sound a little repetitive, but there's still a lot of investors who probably don't fully appreciate the scale of the transformation that's taking place at C.H. Robinson. AI and automation have played a very pivotal role, the cost out piece, the ability to procure capacity more effectively, identify price more effectively, the opportunity to take that model and apply it to Global Forwarding. If you could just talk a little bit about the transformation that has occurred and what remains to be done?

Yes. Well, let me start, and then, Damon, you can add in, too, because you're a big part of this as well. Listen, Dan, you and I, we've talked before on this going back. It's been a little bit over -- almost 2.5 years since taking the seat here at Robinson. As we came in, we said back then, I needed to do a diagnosis of the company, and we did that. We did do it along the lines of what we call the 4 Ps like People, Product, Process and Portfolio and just went deep in this company along that grain of those 4 Ps. Came out of that diagnosis, and I've use that terminology because it's kind of a lean terminology, being somewhat of a lean practitioner, that's a big part of our transformation.

And you have to diagnose a problem before you can treat it. And we wanted to do that scan of the organization to figure out what was going on. So what do we find? A number of different things that as we started the treatment, we said, hey, this company, which has really good bones overall. I mean it's a company that started the 3PL market was used to winning way back in the day in driving that. It kind of started a lot of other companies in the industry. So Robinson has a history of success. It certainly ran across some headwinds when it came to digital insurance, price transparency and a number of other things that what the industry would have had to deal with.

And certainly, Robinson as well. And it kind of lost its swagger. It lost its winning attitude. And as I came in, what I saw were a headwind on margins, a number of other things, activist investor that was in the company and just a number of other things, unhealthy type of business environment. But as we decided from a treatment perspective, this company was in need of an operating model, and that operating model was based on lean principles. We started it in January of 2024. What was the intent? The intent was to shift this company to get back on rhythm and get into a cadence, drive innovation, drive speed and drive problem solving throughout the organization.

Some of the things that we saw is that we were a culture that admired problems. And now we don't admire problems, we solve problems. And so -- and part of this, I could talk very frank because that's part of who we are. We're pretty vulnerable at Robinson. We put on the table what's broken so that we can fix it. And this particular model was one that said we're no longer going to prosecute the person. We're going to prosecute the business and the problem. And that kind of led us really on a scale since then, along with our technology, which was really good, but this operating model allowed our technology to bloom and to open up.

And we went from kind of machine learning to generative AI and then to the advent of Agentic, which we could talk about. But those 3 things that technology, that operating model and then our logisticians who are really, really good, the best in the world. That allowed us to kind of shift this company. And since then, it's been 7 quarters, I think, of really good performance within the company. Company has gotten its swagger back. It has gotten this winning nature back. And anyone right now, if you walk in there, they're not high-fiving or anything, they're still going to work because we've got a lot more work to do at Robinson. And we feel really good about what we're building. So I don't know if you want to add on that.

I'll just add a couple of comments. I think to your point about what's been underappreciated, I think the operating model, I think, has been underappreciated, right? I think certainly, people have gravitated to the technology. And certainly, the technology has been a critical element of our success. But the discipline, the rigor, the problem-solving capability that the operating model brings, I think, is underestimated for the folks that follow Robinson. I think there's some that get it, some that don't, right?

Because the operating model makes the technology better, the technology makes the operating model better. It really drives the enterprise results. The other area I'd say, I think is underappreciated is the sustainability of what we're doing, right? So I think a lot of people question, can you guys continue to do what you're doing? And our answer is absolutely, right? The fundamental changes we've made to the company, these aren't hatchet changes. These are very surgical, very purposeful. They have fundamentally changed the way we operate the business. And so when we get the question of, well, will this sustain when volume comes back to the system, the answer is it will absolutely sustain because the processes themselves are fundamentally different, right?

And so to me, those are the 2 items I'd highlight, Dan. One is just I think the operating model is underappreciated, and it's absolutely a critical element of what we're doing. And I think the sustainability of what we're doing is probably also underappreciated, and we feel very confident that we were having this conversation 2 years from now. It'd be the same conversation on overperformance at Robinson versus our peers in the market.

Dan, the people appreciate it. They love it. They're having fun, right? And they're inventing because we fill fast, we break things and we stand up and keep going. One thing that's for sure, in 12 months, we will create something that we don't know about yet, and that will happen in Robinson. And that's just how the company moves at a speed that's different. That's different for this industry as well. And that's why we always say, hey, we were a company that was being disrupted, but then turned that into the disruptor.

And we feel good about that. And we've got a lot more in store. And so Damon and I always say the next 2 years are going to be more exciting than the last 2 years, and we fundamentally believe that what we got going on.

It occurred to me, Damon, you just mentioned that you would expect the benefits to be sustained going forward. In a stronger volume environment, a stronger longer-term price environment, you could make the argument that they should be expressed in a more substantive fashion because you get the leverage effect of volume and price over what you've done. So you should be able to benefit to scale. I want to make sure that we address that and then maybe pivot into Agentic and what the opportunity set is to go deeper in the organization, address more complicated opportunities.

No, you hit it, right? I think it's the operating leverage that we expect to demonstrate when volume returns to the system, right? So you think about the processes we fundamentally changed, many of them on the back of AI, right, where the process used to be human heavy, now it's human light, right? It is a technology-based process. So rather, let's just take request for quotes. Rather we're getting 600,000 quotes or 6 million quotes, I don't need any more people, right? The technology is all that needs to scale. And to scale the technology, it's tokens, right? And so that's why we feel so confident in our ability to roll this model out, regardless of market cycle, right? The strategy we have in place, the fundamental changes we've made to the company, we believe they will be successful in every phase of the market.

We've really looked at this at a quote-to-cash process, as we talked about before. That quote-to-cash process for anyone that's in this industry knows that, that's somewhat of a physical process. I mean it's handoffs. It's manual. And we've really attacked that with this technology. And so for that, certainly, as Damon said, those manual tasks we're eliminating, but we're shifting as well, right? We're investing in small, medium business. We're going to customer-facing. So a lot of our hiring we're investing in, is kind of shifting to the right.

Some of the operational things, as you know, that's where our productivity came 40% since the end of 2022. And that's something being asset-light that we'll continue to drive. We committed to single-digit productivity no matter the market. right? And double digit at times where we have a wave of technology. We had double digits committed to or single digits next year, and we switched that to double-digit productivity improvements with the things we expect to come out of Global Forwarding as well. So this is just how the company works and how we create.

And maybe that's an opportunity to touch on Agentic. You talked about Global Forwarding. Global Forwarding is not as standardized as truck brokerage.

No.

You're dealing with different currencies, you're dealing with duties, tariffs, different countries, different policies, different procedures, a lot to process. Can you talk about the ability to leverage automation into Global Forwarding?

Yes, we can, and we both will. But first start off by saying that business has done a really nice job. And going back to the importance of the operating model, you're talking about a business last year that grew every quarter, but also dropped its expenses. That was just on the backs of the physical operating model. That business goes through the same process that NAST goes through on our review set. And so it's just fundamentally gotten better from a discipline perspective.

But now we've leaned in heavy with our technology stack on NAST, typically on generative AI. And as you said, the difference between the 2, you're talking about on-system data. And in truckload, it moves really, really quickly, right, especially at our scale. And so this was a perfect application for generative AI, and that's why you're seeing a lot of the rewards that we're seeing within NAST. Global Forwarding, as you say, you go from China to North Carolina, there are a lot of -- there's a lot of sausage making that has to happen, right, behind the scenes to do that.

And what's included in that is data that's off system versus on system. And this is where the advent of Agentic technology works, a lot more reasoning. It works with data off system and it learns. And so if you think about it, it takes several days for you to put together a quote potentially to go from a load from China to, say, North Carolina. It takes several days, and there's a reason for that.

You start doing this technology, and you can get down into hours to do that, which is why we feel really good about where we're going with this technology. And by the way, it's not just for Global Forwarding, that Agentic technology will also come back and help NAST as well as it comes back.

Yes. Great clarification because we get the question a lot, is your NAST business in the later innings of technology deployment? The answer is absolutely not. We're in the early innings of our technology deployment in NAST. As Dave mentioned, the entire universe of opportunity is that quote-to-cash cycle, right? I mean if you can think about that, that's hundreds of subprocesses that are target-rich for automation, right? And we've only touched a fraction of those for our NAST business today.

So we're still in the very early innings for NAST. On Global Forwarding, we call it inning one because up until this point, most of our technology has been over-indexed to NAST, right? That was done intentionally. That's where we could prove out proof-of-concept. We could get scale, we could get benefit quicker. Now we're to the point where we're going to move that indexing over to Global Forwarding. And as Dave mentioned, we think Agentic is perfect for Global Forwarding because just kind of the quick assessment of Gen versus Agentic.

For Gen AI, it works really well when you're dealing with simple processes. Now the volume can be extreme. So as Dave mentioned, it can be hundreds of thousands of processes or hundreds of thousands of transactions, millions of transactions, but they're simple, 1-to-1 simple processes, high volume. Gen works perfect for that. And it also works perfect for that if your data is on system. So for us, our book of record is Navisphere. The majority of our data in the NAST business is on Navisphere. So therefore, target perfect environment for Gen AI. You move over to Global Forwarding, where that not all of our data is on system. A lot of our data is in, call it, SharePoint sites, spreadsheets and maybe in customer websites, less structured than NAST.

So a portion of our data is off system. Gen AI can struggle with that, right? Agentic AI has higher levels of reasoning. So we can look at multiple data sources, whether it be on system or off system and produce a much more efficient product than Gen AI can, right? And as Dave mentioned, the physical attributes of Global Forwarding, where you may have a many-to-many relationship or a many-to-one or one-to-many, just more complicated on the Global Forwarding side than the NAST side.

Again, Agentic works really well because that requires a higher degree of reasoning that Gen AI doesn't have the great capability of doing. So we're really excited about it. because you think about all the benefits we've realized on the NAST side of the business due to the technology, and now we're starting to index that over to Global Forwarding. And we do believe that will be over-indexed to the second half of '26, right? There's like a 12- to 18-month cycle time when you start -- go from concept to full-scale operation on the AI technology. And so we think we'll certainly be seeing benefits of Agentic and Global Forwarding for the first half of '26, but it will be over-indexed to the second half of '26.

And Dan, just to put a point on this, on how we started this conversation, I can't emphasize more the importance of how we're running the company from that operating model. Everything Damon just said, how we got to Agentic AI that really came out of our operating model, that came out of our reviews in which we are saying, hey, we have to reach a certain point. And in our discovery, our 5 Ys, as we're going deep, our technology team said, hey, where we are, we can't get there. We think the only way to get there is this new technology in Agentic AI.

And that started a very fast process in which we all looked at that, made a high judgment call. And next you know, we're building these agents as we're moving forward. That typically would not have happened. That's not easy to do, but it shows the power of why you have that disciplined operating model because it drives discovery and innovation, and that's super important for where we're going.

There's another theme here that I don't think it's talked about enough, and it's this notion that there's a consolidation story, both in terms of domestic freight brokerage as well as Global Forwarding. Brokerage is a highly fragmented business. Most brokers don't have -- no broker has your data set. Very few, if any, have your tech stack or anything remotely close to it.

The ability to leverage those things into a market that can't respond the way you can to develop the tools that cost out the efficiencies. It presents the opportunity to consolidate in a way that these tools, this technology, I mean, it affords you that opportunity in a way that never has been present in the past. I think that's in front of us. I think what's been occurring in your business is you've been -- what you've delivered is very much a C.H. story. What's in front of you also, though, is very much, I think, a consolidation story. Can you speak to your views around that, whether or not you think that's a present theme, whether or not there's substance to that?

Yes. I think certainly, any marketplace where you've got the fragmentation and the long tail, like we have in brokerage, right? I think the thesis is always consolidation makes sense, right? And I would argue that consolidation is happening now, right? You have brokers leaving the system every day, right? Now they may not be the brokers that make the headlines, right? But there's tens of thousands of brokers and they're actually into that system every day. So some of that consolidation, on, say, the tail of the industry is already happening.

Now to your point, and again, we try to articulate this as best we can. The way we're using AI and the way we're deploying AI, we believe, is quite different than most companies, right? So we're not buying our solutions off the shelf. We're not using third-party vendors. We're not using consulting companies to help us integrate it. We have 450 engineers that are C.H. Robinson engineers. They've grown up in the company. They built Navisphere, and now they're building our AI agents for very bespoke customized solutions for C.H. Robinson.

So why is that a benefit? Benefit number one is it's a custom solution for C.H. Robinson. It's not a generic solution that we have to make fit our business model. It's a solution that we come up with an idea to solve a problem and generate a return, and we build an agent custom fit to that solution set, right? So that's benefit number one. Benefit number two is we built Navisphere, right? So our transportation ERP system is already custom to Robinson, right? We control the code. We don't have to rely on a third-party vendor to let us augment that ERP.

So therefore, our ability to deploy this technology, I would say, is substantially faster than anybody that's using third-party capability, where they're having to negotiate timelines. We don't have to do that, right? We own the code. We can put AI agents on top of Navisphere. We control that timeline. And then lastly, I would say is our cost advantage because we create our own tech. We create our own agents.

So therefore, once we've created an agent, the marginal cost of managing that agent is close to 0. It's just tokens. We're not paying by the drink. We're not paying a third-party vendor for fees, right? I mean it is a very attractive cost curve. And so to your point, I think AI for smaller brokers could actually become cost prohibitive, right? They're not going to be able to develop their own stack. They're going to have to feel like they're going to buy it off the shelf to be competitive. And I actually think in most cases, in that scenario, it's not going to drive efficiency. It's just going to add cost to their already thin margins, right?

And so I think there is an opportunity as we go through this journey where AI may drive a further consolidation in the industry just because those that have command of the tech that can drive that leverage and that competitive advantage. Those that don't have it, I don't think that will become part of that consolidation. That's right.

And Dan, I think you and this audience would also appreciate, it's also speed. And it's also these engineers know freight. So they grew up with it. And knowing freight and growing up with it is a big difference than I'm going to learn freight and do it. That -- time is money in this industry, and that's -- we feel like that's a competitive advantage.

Right. I have one more question, then I'll turn it over to the audience to the extent that they have any. Growth versus margin improvement?

Yes. Both.

High-quality opportunities. So you've got these choices in front of you. You guys have realized a tremendous amount of margin improvement. It affords you the ability to take your -- I don't mean to say eye off that, but to hold that in a steady state and really begin to leverage what you've done to begin to take share and go after growth in a way that you maybe haven't in previous cycles, which I think for better for worse, has been a struggle for C.H. through the last cycle and maybe even the last 2 cycles. I think you're very well positioned to demonstrate a different growth trajectory this next cycle.

Talk to us for just a minute about how you plan to manage the balance between those 2, recognizing you've achieved essentially 40% margins at this point in NAST, but there's still room to go, not lost on me. Could you just frame that?

Yes. I'll start, Damon will finish, and then we'll take questions if they have. Number one, this is our strategy that we started with. We said, hey, we're going to do 2 things that are critical. One, we're going to take market share and we're going to expand margins. So this is not something new for us. We were building a process and a system to do those 2 things. And I think we're demonstrating that we can do that in a really, really tough environment. But there's handoffs that we do every day when it comes to that. And so let's hit on your margin percentage. I want to just double-click on that and...

Yes. So I think all of you are aware, right, we had our Investor Day in December of '24. We put out what was deemed pretty aggressive targets, both on margin and results. And we just came out with an update to that Investor Day target set in our Q3 earnings, right? And you'll notice it wasn't a typo of Chuck. We didn't change our margin targets. So we left NAST at 40%, and we left Global Forwarding at 30%. Those are what we call mid-cycle margin targets. And as you just referenced, we're close to those now. And the reason we didn't update those targets is the optionality, right?

I think -- historically, I think there was a misnomer in this industry where you can either grow or expand margins. You couldn't do both, right? And as Dave mentioned, we set a strategy that said we have to do both, and we're doing both, right? Our operating model, our technology, our leadership team, our people, we're doing both, and we have been doing both now for several quarters. But there comes a time where when you're already demonstrating industry-leading profitability, right, at some point in time, the best decision for earnings is to invest some of that margin back into growth. right?

And so once we establish with sustainability, those margin targets, 40% for NAST, 30% for Global Forwarding, right, we reserve the optionality in any given quarter that we may grow margin to 42% or we may not. We may take that 200 basis points and go take demonstrable, profitable share, right? Different mindset than we've had historically, right? And again, there may be quarters where the right decision is to grow margin because the quality of the incremental growth that's available just isn't there. And we're not going to chase volume. We're not going to take bad freight.

But we believe that's the right equation going forward. Now over the long haul, we'll do both, right? So if you think about over years, we'll continue to expand operating margins. We'll continue to outgrow the market. We'll continue to grow on an absolute basis. But we just want to make sure we don't put ourselves in a box on the quarter-to-quarter basis where we can make the right decision for investors, and not suboptimize that decision because we're trying to get to a new margin target.

And again, that was part of the strategy of operating leverage that we always talked about. But we'll turn it over to you for questions.

Any questions?

Just [indiscernible] a question as it relates to the [indiscernible] technology [indiscernible], but you're -- surely we're not [ giving ] [indiscernible] understanding margins for the contract structure, where they might raise the price. Just extract some of the [indiscernible] or are these kind of like [indiscernible] contract [indiscernible].

Well, it's a great question. It's actually one of the competitive advantages we love about how we're using AI, right? So if you think about the AI ecosystem, right? You got the hyperscalers and the chip guys on the left, you've got the data center guys in the middle, and then you've got companies that are using AI to drive business results, right? And we think we're one of few that are on that far right that's actually delivered revenue growth and margin expansion by using AI. So to your point, we're using LLM models, and we use them all, okay?

And so therefore, for our perspective, we're in the perfect spot from a cost curve perspective because what is one of the themes you hear is, well, the LLMs are already becoming commoditized, right? Well, that's great for us because we use them all. So the more they become commoditized, the cheaper they become for Robinson, the less costly they are for me to deploy my technology, right?

So for us, we actually don't see any cost pressure at all. In fact, we see cost deflation as it relates to the use of those LLMs and the tokens, right? One stat, over the last 12 months, our use of tokens has gone up over 250%. The cost of those tokens has come down between 25% and 30%. So we feel like we are in the sweet spot as it relates to the cost of deploying our technology for the business results that we're getting.

That's why we say it's an undervalued industrial AI play because of the results we're getting and because of that question, that's an important question from a cost perspective that many don't realize.

Anybody else? We have time for one more question. Gentlemen, thank you for being here. Appreciate it.

Thank you.

Thank you, Dan. Appreciate it.

Yes. Look forward to catching up with you in the fourth quarter.

You got it.

Sounds good.

Thanks. Happy holidays.

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Third Quarter 2025 Conference Call. [Operator Instructions] 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 list 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 Investors section of our website at investor.chrobinson.com. To 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 Robinson. 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 cash freight shipment index declining year-over-year for the 12th consecutive quarter. The cash 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 3 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, 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, and causing our adjusted gross profit per ocean shipment to decline 27% from June to September. So 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. But this is a new C.H. Robinson and we don't use the macro environment as an excuse. We are fundamentally different company than we were 2 years ago, illustrated by the company's consistent outperformance versus the market. But 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, selling 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 solved those challenges with a lean mindset with the 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 a significant runway exists as we continue to deepen the lean mindset and methods across the organization.

Shifting to our Q3 results that provide another proof point of the disciplined execution of our strategy. In NAST, we grew our combined truckload and LTL volume by approximately 3% year-over-year and demonstrably grew market share versus a 7.2% decline in the cash 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 towards 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 continue 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 7 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 and 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 and 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 genetic 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 2 years for C.H. Robinson and our stakeholders will be more exciting than the last 2 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 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 margins. 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 Shipping 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 and that we highlighted as growth areas at our Investor Day, which include retail, energy, automotive and health care.

During the quarter, we delivered year-over-year volume growth in each of these verticals. We 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 higher 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. And 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 life cycle 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 agentic supply chain solutions, automaker team tasks, surface strategic insights and enables seamless global coordination across every mode and region. This launch is the first step in a broader expansion of a genetic 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 genetic AI to power new capabilities that are backed by our unmatched data and scale, we are continuing to disrupt from within. The advanced reasoning capabilities of genetic AI enable us to unlock the value trapped and unstructured data, such as phone calls, e-mails and tribal knowledge due to genetic AI's ability to understand context and make decisions in real time. But it's also important to understand that most transformative technologies and innovations rarely emerge fully formed. They evolved through cycles of experimentation, feedback and iteration. Along these lines, innovation and pioneering in a genic 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, AgenticAI operates with a degree of autonomy and unpredictability, making his 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 of scale AI as 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, Agent AI has the ability to ignite the 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 tendered 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 win more business, thereby accelerating our market share growth. The continued advancement of our AI is also powering our dynamic pricing and costing and responding more surgically and faster than ever to dynamic market conditions by performing more frequent price discovery. Along with our operating model rider 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 life cycle whether it be in quoting, order entry, low 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 3 items that are key to our strategy, transforming the customer interior 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 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 in AGP declined approximately 11% and 4%, respectively. An 18% decline in Global Forwarding 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 to $1.4 billion, but above the midpoint of the range.

Our Q3 SG&A expenses totaled $135.9 million, excluding 2024 charges primarily related to the divestiture of our Europe Surface Transportation business SG&A expenses were up $0.9 million or 0.7% year-over-year. Based on year-to-date SG&A expenses of $417.7 million, excluding restructuring charges and current expectations for Q4, we still expect our 2025 SG&A expenses to be in the range of $550 million to $600 million, but above the midpoint of the range. This guidance includes depreciation and amortization that is expected to be $100 million to $105 million versus our previous guidance of $95 million to $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% to 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 to $75 million.

From a balance sheet perspective, we ended Q3 with approximately $1.37 billion of liquidity and 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. 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 to $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 to $1.04 billion. The bottom end of this range, which assumes 0 market volume growth equates to approximately $6 of earnings per share. The full range of market volume growth assumptions include an expectation that if the market does return to year-over-year growth, it likely won't occur into the second half of 2026, in line with the market predictions of external sources such as ACT research.

So 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 increased 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. Then as we incorporate certain innovations into our operations, such as Agentic-AI, 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 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 Robinson 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 3 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 heard in our prepared remarks today, we've made significant progress on the transformation of C.H. Robinson 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 agenetic supply chains. It's the next chapter in how we solve complex challenges 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. But 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, but 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. And 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 7 consecutive quarters and how we're positioned to continue to doing so regardless of market conditions or cycle. And 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 while 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. And as you just heard, Damon talked 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. But we have no hubris and we're not resting on our laurels. We are the new disruptor, and we will continue to disrupt our sales 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&A portion of the call.

[Operator Instructions] And our first question comes from the line of Richa Harnain from Deutsche Bank.

So lots of questions. I guess, maybe we can start with the obvious one. There's been a lot of talk around how very low-end capacity is exiting the market. Curious if you saw 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. So again, 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 a maybe stabilizing a better market?

Richa, this is Dave. Thanks for the shout-out. We appreciate it, and it's good to be at your conference as well. The -- I'll start and then have Michael go a little bit deeper. What we are seeing is there's been some -- obviously, some policy changes recently. The U.S. pause on truck driver visas is creating what we see as some localized uncertainty especially in some key markets. So we're watching that key markets like Southern California. But 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. And we think we understand that stack. But I want Michael to double-click into that a little bit more to give you some more context.

Yes. Thanks, Richa. To kind of keep going where Dave was heading. We've seen kind of several regulatory changes or policy changes and individually or [indiscernible], each one of them hasn't had a material impact, but -- but as they have started to stack on top of each other, whether it was the English requirement of what Dave mentioned in terms of the pause on visas, nondomiciled CDLs, that stacking effect does have an impact. And I'd say the way we're seeing it is similar to what we've said on past calls of when there are events or when there's pressure in very localized markets, geographic areas for short periods of time, we are seeing more volatile spikes in costing. And 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.

And Richa, I would only add that. So 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, right? So what Michael is describing is a 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 the -- versus our own historical capability and versus the industry.

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

And our next question comes from the line of Tom Wadewitz with UBS.

Yes. And congratulations on the strong results. It's, again, such a tough freight backdrop. It's especially impressive. -- wanted to get your thoughts on just volume growth in truckload. I think that skeptics have maybe said, well, hey, they're cutting a lot of costs at [indiscernible], but what are they going to do when how are they going to show volume growth and that's kind of really another proof point. It does seem that you're showing that. So 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 you're having an early effect with enterprise customers, is that something which you would expect some further acceleration that truckload volume up we can go up 5%, up 7%, up 10%, if you look out a couple of quarters. So really some thoughts on the volume growth and just kind of what's driving that and how we can look for that going forward.

Tom, this is Michael. Thank you for the very nice comments. And really, 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, health care and all of them grew year-over-year in Q3. Kind of 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. And so 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 of all, 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. And 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. And so 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, but we also want to make sure that we were very smart about it. The volume year-over-year growth is something we're really proud of, but the market outperformance is pretty demonstrable. And we want to make sure that we're smart in how we do that each quarter.

Is that occurring with SMB too or in the volume growth and where some of your quick pricing tools are having an effect? Or is that really driven more by enterprise?

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

And our next question comes from the line of Scott Group with Wolfe Research.

So 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 a $20 million increase from Q3 to Q4. So I just want to make sure I heard that right. And then 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 help or color there.

Yes. So 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, many times, right, is 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? And so 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, right, whether that be in personnel costs, whether that be in SG&A cost. And so certainly, 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, right?

So if you think about the impact we had in Q3, where the AGP related to our ocean rates was down over 27%. And we don't feel like Q3 is the bottom of that normalization, right? That normalization of ocean rates will continue through Q4. So that's certainly having an impact on the month-over-month comps that you referenced. And so yes, I think as you look at our results as we head into Q4, it's a very challenging market for Global Forwarding, right? As we've talked about many, many times before, certainly, 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. And so that level of uncertainty, reduced volume overcapacity that we spoke to. And it's all created a very challenging market in Global Forwarding that you saw in our results for Q3, and 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 in pressing and keep generating substantial results. Our revenue management within Global Forwarding is ensuring a really high quality of when on the business that we're capturing. So the team is doing a great job on what we can control. But the market is very challenging for Global Forwarding. And I believe that's what you're seeing showing up in the September comps you referenced.

And our next question comes from the line of Bascome Majors with Susquehanna International Group.

Arun, if it was easy to do what you're doing, we'd see other people doing it and generating similar results. But 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 specialist 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.

Bascome, this is Dave. Thanks for the question. Good to hear you. I'll start with this. There's 3 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 certainly is augmenting and superpower and allowing them to do their jobs even better. And the third one is our operating model and those 3 together, we certainly feel is 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're doing here is something different, and 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. And as we often say, there is no hobby AI here. We're doing everything around an ROI. And 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.

Yes. Thanks, David. And Bascome, that's -- Dave laid out really well in terms of like the operating model being the sort of starting point, right? The goals are set in a way that it requires us to come up with breakthrough thinking and disruptive innovation. That's how the operating model works. It challenges us to do so. So that's the first part of it. And 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 from by other companies. There was all this rhetoric around that, but we've clearly been disrupting from within, which means using the operating model as sort of the baseline, we are now adopting technology and implementing technology with a clear true line to financials, right? Again, if you remember at Investor Day, we said our technology and our investments are going to drive operating margin expansion through productivity, gross margin expansion and growth.

And so if you look at sort of this disruptive innovation, the way it works, when Gen AI came out and our teams say, "Well, we have a goal, we create this big goal and the teams have to come up with feeling out how to leverage Gen AI in a disruptive way to deliver that upside, right? And 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, all together that are driving this innovation and these results. So 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. So that's how it is. And we have that with Gen AI 12 to 18 months ago and now in that same curve with Agent and we expect that it will deliver the same type of upside that we've seen in the past 12 to 18 months with Gen AI.

Yes, bascome. This one is 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, right, what we call an AI, right? It is the combination of our operating model. It is a combination of our technology. And we think of 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. Look, I think it starts with our strategy, right? Dave mentioned this a lot, right? Our strategy is to outgrow our markets and expand our operating margins. If you don't get that strategy right, you pick 1 of the 2, right? We don't pick 1 of the 2, we do both, right? And 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 -- how do we start down the journey of AgenticAI? 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 to agentic, right? At the time, we were exploring the possibilities of Gen AI, right? So the operating model drives our tech to be better. Our tech drives the operating model to be better. It is really the symbiotic relationship that we call lean AI that we think is unique to anyone in the industrial space. Dave spoke about our experts, right? The human in the loop, getting that right. We've talked about our tech makes our people better. Our people make our tech butter. We think that is a critical element that we've refined, right? We think we have the right mix of human and technology to deliver the right value for Robinson and our customers.

And the last thing I'll speak to is as you mentioned some of the start-ups, we're approaching this LICA start-up, but with scale, but with an investment-grade balance sheet, industry-leading data, right? We can do things with technology nobody else can do because of those attributes, right? So very difficult for a startup to compete with what Robinson can do when we're acting like a start-up in the way we're developing our technology. And then lastly is we're developing our own tech, right? So we have 450 engineers that are Robinson employees. They know the business, right? They know the outcomes we need to deliver. And because there are 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. So 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 talked about and why we believe what we're doing is special. At C.H. Robinson versus other companies.

I'll just add 2 more things that Damon triggered for me. One is our data set and everything we build depends on our algorithms learning from our vast data set, so that is a huge advantage. And 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. So it drives the scalability of the model.

Yes, as 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 lean is really the engine and AI is the accelerator. And just -- and you think about it that way. And our people really do enjoy this as we continue to transform. So thanks for the question.

And our next question comes from the line of Jonathan Chappell with Evercore.

Damon, just 1 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 '23. Is that reset lower given what you've seen recently? Or is that the same. And then let me just introduce the second one, too, so I can clear the deck 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? And are there any risks to that to taking something from outside the core Robinson business today?

Yes. Thanks for the question, John. So I'll answer the first one. So if you think about our market normalization construct, which included not only ocean rates normalizing, but also truck load rates normalizing as well. What I'd say is that, 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. What we're seeing in Global Forwarding, we expected to see, right? So 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 will 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.

So I wouldn't think of it as ocean rates deteriorate. 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. But to answer your question specifically, I'd say immaterial impact overall on global forwarding. But again, I think the path in which we get there is important, right? Still normalization in Q3 as we saw further normalization in Q4 and 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 or because we're passionate about it. What I would say is that the walk we've provided for '26 is certainly over-indexed to organic, right? So when we talk about the pipeline of opportunities that we have to execute, certainly, outgrowth initiatives are a key part of that pipeline.

So that pipeline includes outgrowth initiatives. It includes gross margin expansion initiatives and it includes cost reduction and avoidance initiatives. So -- so when you look at our waterfall and our build to 26, it is certainly over-indexed to organic opportunities. Now with that said, as we mentioned often, right, we're looking at inorganic opportunities all the time. Now our bar is extremely high on inorganic opportunities. So 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 if you think about '26, 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 will be obvious to our investors why we made that move. It will be a high-quality decision. The price we pay will be obvious to the value we get, the synergy case will be obvious. Our commitment, Dave's commitment, we won't make a mistake on M&A. So hopefully, that answers your 2 questions, John.

And John just to put a period on that. yes, as Damon said, it's a big of disciplined and measured we're very much disciplined and measured as we look at inorganic. So thanks for that question, and it's something that we look at often.

Our next question comes from the line of Chris Wetherbee with Wells Fargo.

Maybe I wanted to come back to the productivity and maybe zoom out a bit. So you talked to think about 2026 double-digit productivity continuing. And then beyond that, I think there's a baseline of single digits. So I guess as you think about the opportunity in front of you, I guess, 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. So I just want to maybe expand a little bit on the productivity opportunity, particularly beyond 2026.

Chris, this is Dave. Thanks for the question. I hope you're doing well. The -- 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%. And we often say on our productivity that double-digit productivity. Ultimately, we're not going to keep that up. We're going to go to single-digit productivity. But there will be times when we enter into certain events, certain technologies that can pivot us back into double-digit productivity. But 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 Damon, you can jump in and level on that.

Chris, I'll just kind of round out what Dave said, I mean, think about our productivity in kind of 2 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? So all companies that are practitioners at lean are driving continuous improvements. Robinson is one of those companies. And so think of that mid-single-digit productivity is 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. So certainly, we saw a wave of productivity around Gen AI. We're going to see a wave of productivity around agentic AI. And when we see those waves, those waves push us into double-digit productivity, right? So you can't expect those waves to be every year. There's no specific occurrence when you would expect those ways. But I think certainly, when you have kind of that fundamental innovation that drives a completely different way in how you look at processes and costs, you can expect double-digit productivity.

So 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. So I'll break that into 2 answers, right? As it relates to lean deployment in the operating model, we're still in the early innings across the enterprise, right? So -- and we say this a lot of time. If you talk to companies like a [indiscernible], I'm pretty sure they would tell you after 30 years of lean deployment, they're still in the middle innings, right? So we feel like there's tremendous opportunity and further deploying lean deep within the organization. So 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.

But 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 -- had a weighted average it. We're in the early innings across the board. But certainly, as it relates to technology, I'd say NAST is in the third inning, Global Forwarding in the first inning.

And our next question comes from the line of Ken Hoexter with Bank of America.

So great job on the efficiency gains, the workforce reduction versus the volume growth. Damon, maybe delve into the $6 potential for that you talked about, it sounds like maybe a little pressure in the fourth quarter, but then $6 potential into '26. The potential to accelerate volume gains may be using more price if margins remain good enough, what triggers you to get there? And then thinking about that $6, are you including the $2.6 billion buyback over the next 3 years? Or maybe the better question is your thoughts on incrementals as things turn.

Yes. So let me -- I'll start with the last just to provide that framework, Ken, is. So we still have authorization on our current board authorization on share repurchase, right? So we still have 4.5 million shares of authorization that we'll continue to use as part of our capital allocation philosophy, right. The incremental $2 billion will kick in, certainly after we deploy that additional 4.5 million shares. Now what I will tell you as far as just kind of modeling out the 120 million shares, right? That number includes I would consider a reasonable assumption that we will continue our level of buybacks into the future and pace that with incremental free cash flow. But then there's also new issuance that go into that number. So I think you can get to the $120 million by looking at certainly a netting of continuing fairly ratable rate of share buyback, slightly increased based on free cash flow opportunities, again, within our capital allocation construct.

And then there would be some offset with new equity issuance as part of that as part of that math. Your question on the outgrowth versus margin construct for '26. Again, another area we love to talk about is look, the reason we didn't change our 40% NAS target and a 30% Global Forwarding target is, look, we feel like those represent really healthy results, right? So when we're consistently generating 40% and 30% we feel like that's the right level of health on our margin capability. Above and beyond that, we think there are scenarios, and I would call it likely scenarios where we can deploy margin above those healthy levels to AGP accretive market share gains and demonstrable growth, right? And so we certainly feel like that's an opportunity. And that's why we've been out probably for the last 6 months really talking about that optionality because we think that more than likely will be the right decision to increase shareholder value.

Now with that said, we're not going to chase bad volume, right? So if there's quarters where volume doesn't warrant share gains, then we'll have margin increases above those target ranges. But what we see that as a great opportunity to take demonstrable share going forward when the opportunity presents itself. Now what I will tell you is, as you mentioned, certainly, we feel very good about the $6 by the end of 2026, it's a journey to get there. As I mentioned earlier, certainly, we want to make sure that we effectively communicate the markets that we're in as we go into Q4 and Q1. We effectively communicate the challenging environment we have for Global Forwarding as we go into Q4, and I would say even into Q1 of next year, both volume and rates. And I would also highlight what we called out in the prepared statements, which is as a room is laying out, our innovation cycle, it is a cycle, right? And so to reap the technology benefits that NAST is reaping today, it was roughly a 12- to 18-month cycle until we were fully operationalized, fully scaled on those benefits. We think that same cycle applies to the agentic benefits we'll get on NAST and the agentic benefits we'll get on global forwarding, which is why in our prepared comments.

We said, look, we'll get some benefits from that further technology deployment in the first half of '26, but it's certainly over-indexed to the second half of '26. So I think the way you laid it out in your opening comments is right. Look, we've got some challenging sledding on Global Forwarding for Q4 and probably into Q1, but we are extremely confident with a high degree of confidence that the $6 EPS with no market growth that we laid out for 2016 on the back of our self-help initiatives, we feel really good about that commitment.

And Ken, just 1 clarifier on the share buyback, too. And we -- this is Chuck. When we talk about the $2 billion intent over 3 years, that really is specific to the $2 billion, not the $2 billion plus the 4.5 million shares that are remaining. Just wanted to clarify that.

And to my comment, Ken, I mean, I think as we said, we certainly hold the discretion to move capital allocation around based on the best returns for the company, but barring some material inorganic opportunity that could change that thinking. I think the continuation of our share buyback, as I said, with a potential increase based on free cash flow opportunities is the right way to think about it.

Great. Just to clarify though, is that $2 billion plus the 4.5 million shares, is that in the $6 or is that above and beyond?

Well, the an assumption around the 4.5 million shares is assumed in the $6, right? The $2 billion would be beyond the would be mostly beyond the 2026 landscape.

Ken, we specifically called out that it would be $120 million of diluted shares outstanding for the year that gets you to the $6.

And our final question comes from the line of Bruce Chan with Stifel.

This is Andrew Cox on for Bruce. Just wanted to first off, echo Tom's comments. Congrats on another impressive quarter. in a pretty nary market. Just to finish up here, I guess I want to talk a little bit about the upcycle shaping. Apologies if you guys have discussed it. I've had a battle with the Q and getting take from the call. But you guys talked about it earlier, how comfortable you guys have been operating in a lower for longer environment. You've proven highly adept here in this market. I just kind of want to discuss also the real opportunity that you guys have said before is that it's not so much in this cost savings at this point in the cycle, but it's the operating leverage that you will eventually see in an up cycle. So I just kind of want to discuss how the model responds in maybe a shallow spot recovery and demand recovery next year versus potentially a steeper 1 should these regulatory changes progress quicker.

Thanks for the question, Andrew. No, the question has been asked, so it's a good one. Look, we feel like our strategy traverses all market cycles, right? So our strategy to outgrow the markets and expand operating margins, the way in which we're rolling out that strategy and doctoring that strategy, right? It works in all market cycles, right? So let's just take the current cycle we're in, right? We think, look, longer for -- or lower for longer, we went right? We keep doing what we're doing. We think we have the right recipe on both outgrowth gross profit expansion or gross margin expansion, operating margin expansion. We believe that's the right recipe to keep winning in a continued freight recession, right? So I don't see any change in our direction or our performance in that cycle.

And what we also love to talk about is the bear case that does this translate to an up market, we know it does internally, right? And the reason we know it does is because we fundamentally changed the processes in which we're driving productivity, right? And so when we talk about the automation, when we talk about the operating model changes, these aren't brute force. These aren't hatchet changes to how we operate. These aren't temporary cost reductions to get through a trough in the market. We have fundamentally changed the processes. A process that used to be human touch heavy before is now technology-heavy today, right? And so when we talk about up-cycle scenarios, there's fundamentally no reason to change our cost structure in those environments, right? And so we talk about this a lot there would be fundamentally no reason to add back that level of human capacity because the work no longer exists in that nature.

Really, the incremental cost of managing our technology in an upmarket cycle would be the token cost, right? It's very scalable, and we feel like that beneficial marginal cost of of maintaining our tech in an up cycle will generate substantial operating leverage. So to kind of put a bow on it, look, we feel like our strategy, our tech deployment, our operating model discipline works in all market cycles. It will continue to work and lower for longer, and we feel like it will scale really well when volume returns to this market in some future period.

Yes, Andrew. And just to kind of put a bow around that as well said by Damon, it's also our balance sheet and just our financial health, allowing this company to invest at the bottom of the market goes a long way because that's really tough out there for a lot of people in dealing with a market like this. And we will continue to do that because it sets us up as the market inflects. So we feel like we're in a strong position. Our people, our technology and our operating model puts us in pole position, and we feel really good about it. So thank you.

And at this time, there are no further questions. I'd like to turn the call back to Chuck des for closing remarks.

Thank you, everyone, for joining the call today. We look forward to talking to you throughout the quarter and on our next earnings call. Have a great evening.

Thank you. And with that, this does conclude today's conference call. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful day.