C.H.Robinson Worldwide Aktie

Dan Moore, I'm the senior transportation analyst here at Baird. I'd like to welcome everyone to the panel discussion with C.H. Robinson. I have the pleasure of introducing David Bozeman and Damon Lee. Chuck is in the audience as well. I've got a lot of history with this company. I -- my first introduction was in 1996. And so I've lived a few lives but had a lot of -- had the pleasure of watching a lot of development at C.H. over the years. And this past year, it has been a busy one, guys, right?

A little bit.

It has been a busy one. And so with that in mind, maybe to just unpack some of the last year and there's plenty -- it's a target-rich environment. There's plenty of stuff to talk about. But we started the year, a weak freight market, some evidence that the spot market was improving. I think as the year progressed, we saw a Supreme Court decision that I think radically shaped the market in a lot of different ways. Can you maybe just talk for a minute about how this year has progressed, what this -- really, how you view the cycle relative to whatever a normal cycle is, if it's even fair to say that?

Well, happy to be here, Dan. Thanks. And you do have a history with Robinson and good to see everyone here. A lot of familiar faces in the audience. The -- you're right, it has been a year and it continues to be. But for us, it's been positive and it's an opportunity as well. You talked about spot cost. Let's just go there first. And you're right, we've seen a steady increase in spot, 38% increase in spot costs throughout the year and that's for a number of different reasons with capacity coming out. And we actually expect spot to be plus 30% year-over-year in fourth quarter as well. And even going into next year, probably a plus 10% in spot costs. So just kind of continued increase in spot costs.

Where I get really excited about Team Robinson is even with those spot costs, when we always talk, I always tell you, you have kind of Robinson today, Robinson yesterday, the team and really driving AGP at an increase of 38% spot cost and keeping AGP kind of flat. That just would have never happened in kind of Robinson before. So the team is really, really executing on our strong strategy to do that. You also talked about Montgomery. A number of things happened, obviously, with that case in which we obviously try to bring some clarity within the industry. That didn't break the way we wanted it nor the way the industry wanted it. But at the end of the day, Dan, as you know, that was just one defensive claim, that preemption. Most of the states didn't have that anyway coming out of the Montgomery case, that federal preemption. And so we've had to defend ourselves before that and we do it very well.

We defend ourselves very well in our docket and we'll continue to do that. Super happy about our vetting process, especially the last 3.5, 4 years, that continues to be very strong, a lot of confidence in how we're bringing carriers on and how we're kind of driving this market. We have a number of companies that have latched on to see what we're doing when it comes to fraud and a number of other things. So just a lot of positive things going on with Robinson and I'm sure we'll talk about some of the other things that we've recently announced later on in this conversation because it opens up extreme opportunity for shareholders, our employees and others. So we feel really good about it.

I'd just add one thing. I think Dave covered it well, is -- been a lot of moving parts this year. The one thing that has not changed is our strategy. So we've continued to outgrow our end markets in our NAST business. We've continued to drive demonstrable productivity. We've continued to expand operating margins. We've now reached and stabilized mid-cycle margins. All of that in a year with a lot of moving pieces, right? And as Dave mentioned, I think the market gets a little numb to the spot rate increases now. But just to remind the audience, right, a traditional broker, historically, this type of spot rate environment would have been disastrous, right?

And for us, we've actually grown earnings over 20% each one of the quarters that we've had over 30% spot rate increases with an average cycle time of repricing our contractual book by close to 3 weeks, right? So we are a different company. We are a different broker. We're a completely different company than we were historically. And regardless of what the market yields, we're going to continue to outperform, 14 consecutive quarters of market outgrowth for NAST, 12 consecutive quarters of exceeding consensus expectations. So again, a year with a lot of moving pieces but we continue to outperform.

We may have to extend this 20 minutes to get to the questions I have. But one area I wanted to start out of the gate is automation. I think whether you're an investor or whether you're an analyst, I think one prescient question that everyone would like context around is, where are you in your evolution around automation? It's not a light switch, right? It's a journey. You guys have picked a lot of low-hanging fruit over the last 2-plus years. There's still opportunity to be had and I don't think that's lost on anyone. But I'd much rather have you frame it and add context around that so that people can walk away with some expectation and understanding of where you are.

No, I'm glad you said that because we do need to frame it. I actually think on this question, there's a number of people when you think about what we've done in our story that really don't understand or get it right. I was looking at Chuck because [Technical Difficulty] and the entire team in Robinson know that's a hot button with me.

That's a trigger word for Dave.

It's a trigger word for me because it's not been just low-hanging fruit. This has been a succinct, purposeful and very intentional strategy within our company to execute a system that we call that is symbiotic. And it is 3 major points. This is our operating model that we have introduced that I think not only has transformed Robinson but it really is impacting the industry if you look at it. It is -- and it's going to continue to transform this industry. And we can -- I'm happy to have that debate with anyone but that is the conduit of having that operating model. That operating model has now unlocked our technology in a way that when someone asks Damon and I about head count, we always answer the same way, like we don't know. We don't have a KPI on head count because that's backwards thinking. We are input-based company now.

And so we engineer our workflows that we are going to automate. And when we do that, head count is but an output of resource that you need once you engineer the workflow. So where are we on that? We're like super early. And so you can -- we put up 65% productivity since the end of 2022. That's true. But we sit up here and we'll tell you, it is still early days because there are hundreds of processes that still have to be, if you want to put it in air quotes "automated" but it's more than just automated. It's really engineered. We do value stream maps. We go and we look and we say, "Hey, from the order-to-cash process in Robinson." And again, I think this affects the industry as well. I know where we're going on this, Damon's point in a moment.

That order-to-cash process, we optimize that entire flow. Not a portion of it, you have to optimize that entire flow. And that has really helped us. That makes it a symbiotic relationship with our people who are really good that really drive this, our technology that is now unlocked and there's a lot more to go after that, especially with agentic and a number of other things that we're doing and then the operating model that drives pace and responsibility, visibility and accountability. All of that tells you that this is why Damon and I can sit up here and we can say, we're not going to stop and we don't ever stop with macros because it doesn't matter what the macros are doing, what the environment is doing. We're going to win on higher highs, higher lows. Now when it actually shifts and everyone here knows this, this is housing, retail and industrial. When that starts to go up and to the right, it is more of a demonstrable gap that we will put up because of the system we have put in.

It's bringing it to scale, right?

It's bringing it to scale. And that's going to be a scale that I think far surpasses the competition even more when you have an upmarket, which makes the acquisition of RXO even more exciting. That's how you have to put all of these pieces together, not just low-hanging fruit. Low-hanging fruit is in the first 60 days, the way I operate. This has been 3.5 years.

Right. No, great context and appreciate that. I'm going to pivot and talk a little bit about, if we could, the operating environment because I think the operating environment has changed. Shippers are thinking more critically about counterparty risk today. I think you're in a unique position to take advantage of that. I'll define it in my own terms, and you're welcome to correct where you see appropriate. If you're a large shipper today, whether it's Amazon or Target or Costco or Kohl's or Walmart, whoever it might be, the need to assess counterparty is maybe more critical than at any point in the past.

And I had a conversation with a really -- a very, very large retailer that everyone would know, their Director of Transportation. He said, "Dan, I've had more conversations with legal in the last 6 months than I have the last 10 years." And so I think there's a top-down narrative for retail, particularly those that have internal brokerage arms. There's an argument to be made that those arms should no longer be held internally, that you shouldn't have an internal brokerage arm that needs to get outside the corporate veil. Some people would agree with that, some people wouldn't. The -- I think it depends on how you want to operate your business. But I think there are clear advantages to taking it outside the veil and you're in a position to pick that business up.

Small to midsized brokers historically, I would argue, offered a really low rate in many cases but didn't offer insurance. They may have allowed retailers and wholesalers and industrial companies to do things they might not have been able to otherwise do. And I think we're in a market environment where there is consolidation now, the bottom up because they don't have the fortress balance sheets. They don't have the insurance towers. They can't apply capital to really improving process. And moreover, they can't apply automation like you can across your business. So to me, there's a very clear top-down and bottom-up consolidation theme. I'd like you to unpack that however you'd like to.

There's a lot there and a lot of vectors that you put in there. And that's good. But let's try to do it in somewhat of a brief way. I'll start and Damon can jump in. So a couple of things that are like facts because there's a lot of things being thrown around that is just not factual. And our data set is not just a data set that allows us to execute and win transactionally. It allows us to have intelligence and see a number of things that are going on. And so in that data set, I mean, it's a fact that because of the current environment, shippers are making a different choice. And some of that choice is, yesterday, I may have had a distribution strategy of 15 different brokers and things like that.

And the fact is they're shifting away from that and saying, I don't need to do that. I've got to like bring this down into brokers that are going to be able to act as that cartilage between myself right and my loads going out there, not just from a legal perspective but also from an assurance perspective of getting loads there, the fact that you have scale in order to do that. And one that I'm really proud of and Robinson, it goes really under the radar is it's problem solving, right? Like we do freight forwarding, we do brokerage as a price of admission but we really solve high-scale problems logistically and globally for shippers at scale. And that's not what a lot of small and medium brokers are in this business to do. That's what we do. And so we are seeing and we are getting the calls from shippers who say, "Hey, I'm doing some consolidation." In one case, we had going from 12 down to 2. We're 1 of the 2. And we see that.

But I'd also tell you that we're also the one leading the conversation in D.C. to put this kind of genie in a bottle that says this industry doesn't want immunity. We want accountability. And you have to have a standard and you have to have a legislative solution to really apply some reasonable accountabilities within this industry. We're leading that fight for all -- for the industry in driving that and we'll continue to do that. And so that's just a fact in driving that. So that's super important. The last point I'll tell you is another fact. Modern commerce does not work without a brokerage model.

I mean that's just -- everyone just needs to understand that. It was -- this was developed to move commerce. You have to have that. That's why you have -- you've gone from 6% to 30% penetration, 6% in 2005 and now 30% and that's going to continue to go up and to the right. And this is why you see assets have brokerage arms. Now to your point, that's being assessed. But you still have to have this model for us to have modern logistics and move commerce. And we will be the company that does that and we'll continue to do that but we'll also try to drive that fight in D.C. to bring some reasonable standards and legislative solutions to what's going on. That's some unpack of a number of different things you had.

I'll just add one thing, which is we've been very consistent since the Montgomery ruling, which as we said, look, we wanted to win. We felt like that was the right thing to do for the industry, the right thing to do for Robinson, would bring stability in the standard. We always knew if we lost, there was probably positive economics to follow. That's exactly what we're seeing today, right? We knew the economics of being a small- and medium-sized broker post-Montgomery were going to be less than advantageous, in most cases, prohibitive. And certainly, there was going to be a flight to quality as well just due to the liability related to post-Montgomery, right? And we're seeing that every day as far as shippers choosing larger brokers versus small and medium-sized brokers.

The comment that was made earlier around the procurement arms of shippers now talking more to legal than they probably have ever in their career. I would argue that risk management within most of these enterprise shippers are making the procurement choices now, right? They're the ones saying, these are the brokers you can do business with versus what you did yesterday or 2 years ago, right? And so as you can imagine, that flight to quality is going to benefit brokers like C.H. Robinson. It's going to benefit brokers like RXO, right? And between the 2 of us, we had the best insurance stacks in the brokerage industry, right, bar none, right? And so as we said before, wanted to win Montgomery. We always knew there would be positive economics and a consolidation of this industry if we didn't. Certainly, life accelerated that and we're seeing the windfalls of a flight to quality within brokerage.

I'm glad you brought this up because it's an important question and thank you for all that context. Wayfair and Amazon both filed an amicus brief on your behalf when you were in the midst of the Montgomery case. It strikes me that there's alignment of interest on the part of some very, very large players in the market. It would behoove the industry to try and get legislation sponsored that would clearly define negligent hiring so that all states could move up and under that definition. It would also behoove the industry to encourage legislation that created a standard for scoring carriers in terms of safety. What's the likelihood that we see legislation at some point in the next year with this new Congress that's bipartisan, that simply defines what negligent hiring is in a way that's clear and allows everyone to operate under the same premise?

Well, listen, it's -- a lot of people here have gone to D.C. I mean it's our legislative system that we have, not the fastest. But I will tell you, I feel pretty positive about it on -- I personally have met with both sides, both Dems, both Republicans and in solving this, this has to be bipartisan in doing that. I will also tell you that we don't get absolute noes because it's the way you shape the issue. This issue is a combined both side issue. This is a Main Street issue. And the way we're putting that to them is you have 1.2 million truck drivers. So we have, call it, 500,000 small carriers that have 1 to 5 trucks driving around on the highways. And that represents about 1.2 million different truck drivers that are in there. This is an employment issue. Those carriers are being impacted. They're being impacted by Montgomery, not to mention the number of small, medium brokers that are now going to go out that are already starting to go out. We know this. We see that.

So this is an employment issue, number one. Two, this is an affordability issue. Ultimately, increased insurance rates, a number of different things with less than on time in full and a lot of things that go on the shelf, that all gets passed down to cost and shelves of -- products on the shelves. That's going to hit Main Street. This is an affordability issue. And so we lay that down. But then three, you cannot have business going around and adjudicating this in 50 states with multiple jurisdictions and just think that, that is scalable and sustainable for most people. It is not. You have Robinson up here who, we obviously have the scale and we'll continue to do that. But for most in the industry, that is really, really tough.

And then the last one, why you see an Amazon and a Wayfair is, when you start looking at plaintiff's attorneys or trial attorneys and looking at this and you know this, Dan, it is who's next up on the ring. And you can potentially have shippers now that have liability that comes their way. And that is -- that's something that, again, do we want to see all of this happening in courtrooms constantly around the country? And I think that's what's made this very interesting on both sides of the aisle. We're going to keep driving that fight. I feel pretty positive about it because ultimately, this is just one thing that kind of brings sensible accountability within the industry.

Right, right. Maybe to shift to RXO. So I think on paper, the RXO -- at least RXO deal to us is very -- the benefits of it are very clear. The opportunity to cost out and really leverage that platform across your own is very -- it's very clear. I think some investors rightly or wrongly have questioned in a world where there should be tremendous organic growth opportunity, the way I've defined it at least from the top down and from the bottom up, could you accomplish a lot of the same things organically without having to take on leverage? Or when you saw that -- and maybe to pivot -- when you were pursuing the deal, when you had -- when you were considering the deal and the opportunities that it offered, clearly, you made the decision that those opportunities, those benefits far exceeded anything you could do organically. I think that's something investors want to better understand. And the thing we've said is just look at the SG&A for RXO. It's a pretty big bucket. There's a lot of opportunity there for you. And so in your own words, how would you maybe add context around those issues?

I'm going to have Damon dive into that and bring in the context to it. I just want to start by saying, Dan, we can -- we will sit here 12 months, 24 months from now and you'll be asking me a different question on just the unlocked impact of this deal in a very different question, which will be a very positive thing. I can tell you that today. That's how strong I feel about this deal and what's going to happen because it's right in front of our face. And I think that makes Robinson almost the ideal investment, not to pitch anyone here but I'm just telling you. But go ahead.

Yes. Look, I think it's very simple. We're going to do both, right? So at no point in time have we said that we're going to redivert investment from organic to inorganic. No. The same investment we've been making in the organic to drive the demonstrable outgrowth and margin expansion and productivity that we've been driving, that's going to continue, right? There is no pause. There is no change to our strategy organically. We're going to continue to do what we've been doing for the last 2.5, 3 years. RXO gives us an opportunity to supercharge that strategy, right? I mean we lay out this example all the time. Forget M&A for a second. If I was to say, I can add almost $7 billion of profitable revenue to the Robinson books. I can do it in 2 years. I have to lever up a little bit but I'm going to completely delever that in 2 years. And by the way, I'm going to generate $300 million in net synergies along the way. I think it's a good project. I think most -- every hand would go and say, yes, it's a really good project, right?

I think the fact that it's done through acquisition is what gives everybody pause, right? And so we feel really good about it. Why do we feel really good about it? What we've been through the last 3 years with C.H. Robinson has been one big integration, right? We have reintegrated C.H. Robinson, right? The same processes, same mindset, same strategy, same tools, same operating model, same technology that we've transformed C.H. Robinson with applies to RXO with an extremely high R-squared, right? In fact, I don't know that you could find a better R-squared. We know exactly how they execute their business model, right? We know exactly how they go to market, right? They're a broker. We're a broker. They look a lot like Robinson did 5 to 10 years ago, right?

So we know the playbook. We know what generates success. We know what generates productivity. We feel very comfortable with their book of business, our book of business and having de minimis overlap between the 2. We've done a lot of diligence there. To me, this is a once in, kind of, a generational opportunity to put 2 of the best franchises together and generate demonstrable returns from doing that. And as Dave said, now is the time to take the benefit of that, right? If you wait 18 to 24 months, it's going to be too late, right? And so Dave and I have had these conversations before. We remember having conversations with investors in 2024 and early 2025, saying, this is what we're going to do and this is the path we're going to go on.

And we had those same conversations a year later with investors saying, "Man, I wish I had listened to you guys 12 months ago." Well, now is the time to listen to us now, right? We know what the playbook is. We know how to execute that playbook. Sure, it's going to be a lot of hard work. But we know how to drive the synergy benefits of the RXO integration because, again, look at what we've done with C.H. Robinson, right, 65% productivity since the end of '22, right, with the combination of our technology and our operating model. So we're very confident in what we've laid out to the Street on the benefits of this deal and very confident in how we're going to execute that at a very high level.

And I would just add on here, Dan. And RXO, both companies are really good at customers. I know Drew, I know that team, driving customers, driving customers retention, attraction. That's what we both do. And so I couldn't feel better about an acquisition, as Damon just laid out, when you just look at the math and for everyone listening to this and watching, we also feel super good about when it comes to the type of customers that we have. We said that it's been limited on the overlap. We stand on that. There is no worry for us about the customer overlap and we feel really high when it comes to the execution. And I think we've had some of the receipts to prove that we will run that play again.

Well, let's close with one last thing. Milestones, as we think about '27, if you were to set some milestones for yourself that investors could hold you accountable to and you do it all the time, to be clear. But what 2 milestones, be it in the core business, be it with RXO, what would you qualify as being important milestones?

Yes. I'll give you 3 real quick here. So one is -- we're going to continue to outgrow our end markets, right? Our NAST business is going to continue to do what it's been doing. Global Forwarding business is going to continue to drive profitable growth there as well. Second is we're going to continue to drive productivity, expand our operating margins, right? Nothing changes there. So the same strategy we've had the last 3 years applies to 2027. And then certainly put up a meaningful synergy number in 2027 for the RXO acquisition, right? I mean this isn't a deal where all the benefit is going to come in the last month of the 2 years we committed to, right? There'll be meaningful savings in 2027 and we can't wait to share those with you guys.

Well, I want to thank you both for being here. Really enjoyed the time together here on stage. Welcome everybody to ask questions in your breakouts and one-on-ones. I hope you have good meetings. Thank you for being here.

Yes. Thank you.

Great.

Greetings, ladies and gentlemen, and welcome to the C.H. Robinson Third Quarter 2026 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, October 28, 2026. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, Donna, and good morning, everyone. On the call with me today are 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 Events and Presentations 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 morning, everyone, and thank you for joining us today. Before we talk about another quarter of strong results delivered by the Robinson team, I want to take a moment to review what the team has over the past 3 years to revolutionize our business and why we can replicate that transformation with the acquisition of RXO. Three years ago, many doubted that a lean operating model was applicable or could be adequately implemented to drive significant benefit in the logistics business. So it will be impossible to outgrow the market and expand margins at the same time.

As it turns out, we've consistently outgrown the market. We've expanded our gross margins and optimized our portfolio, and we significantly increased the productivity and operating leverage of our business. We've achieved all of the things we said we would do, building a strong say-do ratio. Let's talk about how we delivered all of this and how this put us in a position to have a business model that can now be applied to inorganic solutions. As always, it starts with the customer. We strengthened our value proposition by improving the horizontal capabilities that support the verticals our customers operate in.

We've invested in our customer-facing roles, and we've improved our go-to-market approach in order to emphasize the full breadth of our domestic and global services. As a result of providing better service and solutions to our customers, our NAST business has outgrown the market every quarter over the past 3 years, and we expect this consistent organic market share growth to continue for many years to come. We've implemented disciplined revenue management practices that dictate the responsible nature in which we obtain market share at an appropriate gross margin.

These practices have enabled us to be more selective in the volume that we seek and accept and they've improved the speed and success of repricing our contractual portfolio when the market conditions require it. At the same time, we've improved our ability to capture spot market volume with enhanced price and cost discovery and with an AI agent that responds significantly faster to transactional quotes received via e-mail. All of these initiatives have enabled us to expand our gross margins.

Last, but certainly not least, we've lowered our cost to serve and improved our operating leverage by removing waste and automating manual processes through lean disciplines and custom-built AI agents. This has enabled us to decouple head count growth from volume growth. As a result, since the end of 2023, we've expanded our NAST operating margin by over 1,500 basis points and achieved our mid-cycle target of a 40% operating margin, and we've done it despite facing headwinds from the overall market.

Similarly, we've expanded the operating margin in our Global Forwarding business by over 2,500 basis points and exceeded our mid-cycle target of a 30% operating margin by applying the same Lean AI strategy. Three weeks ago, we announced our agreement to acquire RXO and we continue to be very excited about the benefits of the planned acquisition for our customers and carriers, our employees and our shareholders. The same lean operating model and AI technology that have been vitally important in the transformations of our NAST and Global 40 businesses are what will enable us to successfully integrate and transform the RXO business.

These disciplines don't disappear as we integrate a strong team and book of business with additional capabilities. Rather, we believe these disciplines are what will enable us to deliver different results in this industry's past acquisitions. Those disciplines will be emphasized by our skilled integration team that has proven integration experience and our transformation pedigree. That team is being led by our Vice President of the Robinson Operating Model, Jim Rutlinger, who was instrumental in several successful integrations at Danaher and in helping me stand up the lean operating model at Robinson in January of 2024.

There are also a few other things that I want to reemphasize related to our planned acquisition of RXO. It is not a substitute for our organic growth or an indicator that our organic growth is slowing. As I said earlier, we expect our organic outgrowth to continue, supported by the same initiatives that we've been executing on. We believe the inorganic growth from the RXO addition will accelerate our growth and profitability. For example, in addition to our own knowledge of where we do and don't compete with RXO, our team of external advisers did a thorough analysis of potential customer overlap, focusing on the top 100-truckload brokerage customers of RXO.

Even though this seems hard for some to believe that data shows that the overlap is limited. We are a data-driven company, and we rely on data to drive our decisions. And finally, a thorough analysis of RXO's legal docket was an important piece of the diligence that was completed. That analysis revealed that RXO's legal docket is a neutral factor when compared to our own docket. And like us, RXO has a significant assurance tower for contingent auto liability claims.

Our Assurance Tower is a differentiator versus many other brokers. And is 1 reason that we believe an inflation in our 2027 auto liability premium will be less than what other brokers will have to absorb and much less than the extreme scenarios that some have suggested. We continue to manage our legal docket as we have for years, with most cases being either dismissed or settled for amounts below our deductible. We're also progressing nicely through our '27 insurance renewal process -- and we believe this renewal will result in insurance inflation that is reasonable and manageable. As a reference, we've been absorbing approximately $30 million of annual wage inflation. And we still delivered double-digit earnings growth in 2024 through 2026.

Our insurance renewal process will be finalized by the end of December, and we will share an update on our 2027 insurance costs as soon as we can. Lastly, we continue to see examples of our customers deciding to alter their sourcing strategy to shift volume to larger brokers with significant insurance coverage and strong carrier betting processes. Everything that I just discussed is why we strongly believe that we can deliver the $300 million of net synergies from the acquisition of RXO while continuing to drive organic outgrowth that we'll be able to manage the expected insurance inflation and that we'll continue to deliver significant value for our shareholders.

Now turning briefly to our third quarter results that Michael and Damon will discuss in more detail. I want to thank our people for continuing to provide exceptional service to our customers and carriers, embracing the Robinson operating model and executing with discipline, resulting in another quarter of double-digit year-over-year earnings growth. Q3 was the 14th consecutive quarter in which the NAST team delivered year-over-year volume growth that outpaced the cash freight shipment index. They also continue to deploy our disciplined revenue management practices, while the North American trucking market continued to reflect a period of significant supply-driven tightening.

By successfully repricing a large portion of our contractual truckload portfolio and by capturing spot volumes at higher margins, the team achieved a 17% year-over-year increase in truckload AGP per load. In NAST and Global Forwarding, the team continues to turn manual processes into a genetic workflows that are increasingly automated, more connected and easier to manage at scale. As a result, both businesses delivered a higher level of year-over-year productivity improvements that they achieved in the first half of 2026 and both businesses achieved their mid-cycle operating margin targets again.

Our ability to consistently deliver secular earnings growth over the last 3 years is a result of the disciplined execution of our Lean AI strategy. Lean AI is our unique approach that 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. We're highly confident in our ability to continue to execute on all of our strategic initiatives in any market 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. As the industry pacesetter for cutting-edge innovation and differentiated solutions, -- we will continue to use our domain expertise and lean mindset to build technology that delivers on our customers' promise and drives higher value for all of our stakeholders.

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

Thanks, Dave, and good morning, everyone. In Q3, the NAST team continued to demonstrate our ability to consistently gain market share to optimize our profit per load despite significant higher spot rates and to deliver higher levels of productivity as we incorporate agentic AI into our workflows. As Dave mentioned, our total volume outgrew the cash freight shipment Index for the 14th consecutive quarter. Our total NAST volume grew 3.5% year-over-year compared to a 0.3% decline in the index. Our growth was balanced with both truckload and LTL volume growing 3.5%, reflecting market share gains in both modes.

Having industry-leading solutions in both truckload and LTL is a competitive advantage for Robinson. In our LTL business, where we moved more LTL freight than any other 3PL in North America, we delivered year-over-year volume growth for the 11th consecutive quarter, underscoring our sustained outperformance versus the broader LTL market. We'll continue to drive the best solutions for our 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 Q3, we continued to deliver truckload volume growth in the retail, health care and technology verticals, supported by our horizontal solutions such as drop trailer, cross-border and short-haul capabilities. We continue to win volume in both the contractual and transactional markets. As a result, the mix of our truckload volume remained at 70% contractual and 30% transactional, which was unchanged year-over-year and sequentially. At the same time, stricter driver requirements, federal enforcement actions and other carrier challenges continue to remove capacity from the market, created an environment that is increasingly sensitive to disruptions and sudden changes in freight demand has also caused truckload spot market cost to increase significantly in 2026.

Excluding fuel, DAT spot rates in the U.S. increased approximately 37% year-over-year in Q3. As a result, load-to-truck ratios and tender rejection rates remained elevated, which continue to create opportunities for transactional volumes at higher margins. In Q3, our team continued to effectively capture the right transactional volume at a substantially higher AGP per shipment compared to last year. Combined with ongoing repricing of our contractual business to reflect the new market realities, we were able to give a 17% year-over-year increase in our truckload AGP per shipment.

Our revenue management disciplines, our improved price and cost discovery and our strong customer relationships have enabled us to reprice our contractual portfolio much faster than we have historically. Our customers know they can trust the market and rate information we're bringing to them, which has resulted in historically high level of acceptance in our repricing campaigns. Across NAST, we also continued to integrate Agentic AI into our workflows, lowering our industry-leading cost to serve and elevating the customer experience by enabling faster, more reliable service.

The increased automation of our workflows enabled us to continue delivering double-digit increases in NAST shipments per person per day with a greater than 15% year-over-year increase in Q3 and a greater than 65% increase since the end of 2022, measured across the entirety of our NAST organization. Looking ahead to Q4, market volumes are typically softer compared to seasonal peak in Q3 with the 10-year average of the cash phrase shipment index, excluding the pandemic impacted year of 2020, reflecting a 3.4% sequential volume decline in Q4. On a year-over-year basis, we expect our consistent outperformance versus the market index to continue.

Truckload spot rates are expected to inflect higher during Q4 as capacity seasonally tightens during the holiday time frame between Thanksgiving and New Year's Day. As we look forward, we will continue to deliver industry-leading solutions and flexibility to our customers and carriers. We'll 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, combined with our operating model, enable us to deliver exceptional service and drive sustained improvement.

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

Thanks, Michael, and good morning, everyone. Today at CS Robinson, we are faster and more disciplined in how we design, build and scale technology across the company. We adapt faster to changing market conditions, put actionable data into the hands of our people faster and respond faster to our customers and carriers, all while solving increasingly complex logistics challenges at scale. Speed alone is not the only objective, what matters is creating sustainable value by reengineering how work gets done. That includes raising the level of service we provide to customers, improving the quality of work and experience for our employees, and delivering measurable and scalable outcomes in any market cycle.

Our approach of pairing AI with our proven lean operating model continues to differentiate us. A key part of that differentiation is our builder culture and more than 450 in-house engineers and data scientists. They enable us to design fit-for-purpose technology and embed our agents directly into our proprietary systems and workflows. They understand logistics, our business and how work gets done at Robinson, enabling us to build for real-world complexity rather than rely on generic solutions. That same expertise also enables us to engineer workflows for efficiency, optimizing token usage and selecting the right large language model for each task based on effectiveness and cost.

We don't need the newest or the most expensive model for every use case, and we are not dependent on any single provider. Our focus is on achieving the best business outcome at the best economics. As a result, while our token usage has increased over 40x versus 2 years ago, our annual token cost on a run rate basis is still less than $2 million. As we continue to integrate our custom-built AI agents into more workflows within the quote-to-cash life cycle, the value of our lean AI is showing up across the enterprise. This includes improved service and responsiveness to the customer and productivity gains of more than 65% in both NAST and Google Forwarding since the end of 2022. These outcomes reflect the combination of our custom-built technology and our proprietary data and context.

More than ever before, we're now putting these advantages to work in our Global Forwarding business and leveraging the learnings from the same journey in NAST. One example is ocean floating where we are enabling faster responses for customers and less manual work for our teams. Our lean operating model turns those advantages into repeatable execution. We simplify and standardize workflows, identify high friction work and prioritize opportunities based on measurable outcomes. Our people are central to that continuous improvement. Their understanding of the work helps us identify the processes need to change and where technology can make a meaningful difference.

We are not simply automating existing processes. We are applying logistics expertise and lean problem solving to improve the processes themselves. That discipline also provides a structure AI needs. Our agents have specific responsibilities, defined guardrails and human oversight. We measure what works, learn from what does not work and continuously improve. This is not technology operating separately for the business. It is embedded in how we run the business.

As we said before, we remain in the early innings of our Lean AI transformation. We have automated on a fraction of the hundreds of processes across the quote-to-cash life cycle with substantial runway remaining across NAST and Global Forwarding. Our logistics expertise, proprietary data and context, custom-built technology and lean operating model work together to deliver measurable outcomes and create advantages that are difficult to replicate.

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

Thanks, Arun, and good morning, everyone. Our Q3 results provide further evidence that our Lean AI strategy and our disciplined execution are driving secular earnings growth. We continue to make meaningful progress against our strategic priorities, including market share gains, gross profit optimization and improved operating leverage. Our Q3 total revenues and adjusted gross profit or AGP, grew year-over-year by 29.5% and 14.5%, respectively.

This was due to NAST continued outperformance versus the cash index, higher pricing in mass and Global Forwarding and further progress on optimizing our truckload gross profit. On a monthly basis, our total company AGP per business day compared to the prior year was up 6% in July, up 14% in August and up 24% in September. On a sequential basis, AP per business day declined in July before increasing in August and September, reflecting improving truckload profitability and stronger ocean rates.

Turning to expenses. Q3 personnel expenses were $360.3 million, including $3.6 million of restructuring charges related to workforce reductions. Excluding restructuring charges, our Q3 personnel expenses were $356.7 million, up $17 million or 5%, primarily due to higher incentive compensation that is aligned with our strong financial performance. This increase was partially offset by our cost optimization efforts and productivity improvements. Our average head count was down 10.4% year-over-year in Q3 and was down 2% sequentially, illustrating how we continue to decouple head count growth from volume growth, while growing volume.

Due to our continued volume outgrowth in NAST, our strong 2026 earnings growth and our pay-for-performance compensation plan, we now expect personnel expenses to be in the range of $1.36 billion to $1.37 billion. Sequentially, we continue to expect incentive compensation to be lower in Q4 than in Q3, in line with our sequential earnings profile. Our Q3 SG&A expenses totaled $176.3 million, including $15.4 million of other charges that consisted primarily of $12.5 million of impairment charges associated with continuing to optimize our real estate footprint. Excluding these charges, SG&A expenses of $161 million increased $25.1 million year-over-year, primarily due to higher claims expenses.

While our claims expenses are typically linear throughout our year, periodically, some quarters are higher than others as demonstrated in Q3. However, even with the higher than usual claims expenses in Q3, our year-to-date insurance and claims expense remains at less than 50 basis points of our total revenues. Based on our expenses to date and our expectations for Q4, we now expect our total SG&A expenses to be in the range of $585 million to $590 million compared to our prior range of $540 million to $580 million.

This includes an expectation that depreciation and amortization expense will still be toward the lower end of our previously stated range of $95 million to $105 million for the year. As Dave mentioned, we hit our mid-cycle operating margin targets again in Q3. By segment, NAST delivered operating margin, excluding restructuring costs, of 40.3%, an increase of 110 basis points year-over-year. Global Forwarding delivered an operating margin of 36%, an increase of 660 basis points year-over-year. This reflects the continued impact of our Robinson operating model and Lean AI strategy, which creates greater operating leverage across the enterprise.

Based on our performance through the first 9 months of the year, we remain confident in our ability to deliver full year operating income within our target range that is shown on Slide 17 of our earnings presentation. The bottom end of our target range remains equivalent to at least $6 of diluted EPS, but we are not guiding towards any part of the target range. The range itself is unchanged from the target we raised in October of 2025 despite year-to-date market volume growth that has been negative on a year-over-year basis. We have been able to offset that headwind and absorb other cost increases by consistently overdelivering on our strategic initiatives, aimed at growing market share, optimizing gross profit improving productivity and expanding operating leverage.

Moving below operating income. Our effective tax rate for the quarter was 20.6%, and we are maintaining our tax rate guidance of 18% to 20% for the full year. Turning to cash flow on our balance sheet. We generated $124.1 million of cash from operations in Q3. However, net operating working capital remains elevated as higher freight rates continued to drive an increase in receivables and negatively impacted cash flow. Our capital expenditures were $17.5 million in Q3, and we continue to expect full year capital expenditures to be in the range of $65 million to $75 million. We ended Q3 with approximately $747 million of liquidity.

While our capital allocation strategy remains grounded and maintaining an investment-grade credit profile, our balance sheet enabled us to return $289.1 million of cash to shareholders in Q3, including $214.3 million of share repurchases and $74.8 million of dividends. This represents an increase of approximately 52% compared to the third quarter of last year. Our net debt-to-EBITDA ratio at the end of Q3 was 1.71x, up slightly from 1.64x at the end of Q2.

As a reminder, following the announcement of the RXO acquisition, we expect our leverage ratio to increase upon closing. Consistent with our commitment to maintain investment-grade credit ratings, we have now paused share repurchases and remain committed to deleveraging and returning to our target leverage range by the end of 2028. Our strong conviction in the strategic and financial merits of the RXO acquisition has not wavered. RXO's portfolio of customers and capabilities will add to our growth strategy, and we remain confident in our ability to execute the integration and achieve our synergy targets.

We have strong conviction in the strategy we are executing and in the intrinsic value of the business. Significant traditional runway remains across the enterprise, and we believe our lean operating model, our technology and our expertise position us well to create value through both organic initiatives and future inorganic additions.

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, and we continue to strengthen our say-do ratio. 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 innovations at the core of our transformation, I continue to be even more excited about what we have the opportunity to deliver in the coming years through both our organic growth and through the addition of RXO.

When I joined this company a little over 3 years ago, I told the C.H. Robinson employees that we needed to provide such exceptional service and value to our customers and carriers that they would view us as the trusted partner that they choose to do business with. We've made significant strides in delivering on that mantra. And we believe the addition of RX will only magnify our value proposition. The strength of our strategies, our technology, our people and our operating model disciplines are differentiating and sustainable.

We will continue to lead with purpose and move with urgency to disrupt ourselves and the industry and to deliver customer success through our unmatched expertise, our unrivaled scale and our tailored solutions, 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]

Today's first question is coming from Jeff Kauffman of Citizens Bank.

And congratulations for maintaining momentum in such a tough market. I just want to dig down a little bit into other SG&A. Obviously, expenses can be lumpy -- and that's what happened with claims. And you also had the real estate impairment that came through the quarter. So I guess my question is, I know you've raised the SG&A range in your view is let's just run these through operations. But in theory, was this kind of an odd lumpiness of expenses this quarter? And do we go back to more of a run rate like we were seeing in the quarters prior? Or is there a quarter where you probably have lower than expected versus the run rate because claims should average this, and we were very, very lumpy in 3Q. .

Thanks, Jeff, for the question. Look, first of all, before I get into SG&A expenses, let me just say, I'm very proud about the performance the team delivered in Q3. As you mentioned, consecutive quarters of outperformance versus the market for our NAS business. 3 years ago, I don't think anybody would have thought that was possible for the team. Another quarter of exceeding expectations. And another quarter of exceeding mid-cycle margin targets for both businesses. So we feel really good about the performance of the team in the quarter.

Specific to SG&A, I think you're on some right themes there, Jeff, which is SG&A by quarter is nonlinear, right? I mean I think we certainly focus on the full year. And to your point, there's quarters that are below run rate, and there's quarters that are above run rate. And we certainly view Q3 is a quarter that was above run rate. But if you look at our revised SG&A guidance, you will see that we've got Q4 SG&A coming down versus Q3 levels, right? So we certainly don't view Q3 as a new run rate for SG&A expenses.

And I'd also say I don't view anything unusual I think as all of you know, we have multiple types of claims that go into claim expenses. You have cargo claims. You have various types of customer settlements, you have auto liability claims, you have auto liability settlements and all those things just by their nature are nonlinear and you just saw a higher accumulation of those in Q3. But as I said before, we certainly have the expense level for SG&A coming down in Q4. And we don't see Q3 setting any type of new run rate for the company.

Jeff, I want to put a period on what David said, and I like the way you framed the question. Again, I couldn't be more proud of this team in a really, really tough kind of macro backdrop and they continue to be consistent and deliver. And that is our say-do ratio. That is the system and the model that we've built, and we continue to drive through at Robinson. So I like that framing, I love Damon's answer, but I appreciate the question.

Yes. Jeff, I'll just put a final bow on my answer as it relates to SG&A. And then we speak about this a lot. We typically refer to total insurance and total claims expenses being targeted at 50 bps of total gross revenue. And certainly, year-to-date, we are below that 50 bps of total gross revenue, even with the higher Q3 level, right? And so we typically look at these type of expenses, as I mentioned, on a longer trajectory than certainly 1 quarter, and we're still well within that guidance that we've given on where total claims and total insurance expense lies.

The next question is coming from Tom Wadewitz of UBS.

Yes. And nice to see the good results, and I think in truckload volume picking up a bit, that's a good thing too, the 3.5% growth. So I guess, Dave, I wanted to ask you about, I don't know if this is like for you or for Jim Rutlinger or Michael Castagnetto, but if you could appreciate your comments on RXO and kind of the 100 customer overlap analysis. I just wonder if you could give a little more thoughts on how you planned the integration with RXO to avoid maybe not an overlap issue, but what is your approach, what if you reject more loads because they're not as profitable as the RXO and the customer doesn't like that or they really like the customer rep or just things like that, that could be friction it could cause some attrition, not necessarily because of overlap. So what would your approach be on the integration really to avoid some of the more negative experiences that have happened with prior brokerage deals.

Yes, Tom, thanks for the question. First of all, I couldn't be more excited about this deal. I think you know that look, we've assembled a team that is experienced and ready for this deal. We have playbooks that are detailed ready to execute and all of what you're talking about are things that you have to execute on integration, and we feel really good about setting up for execution. This is a really good company, incredible top line that's going to come into a company that has built the best lowest cost-to-serve model in the industry. And we have the details to do that. But Michael can go in further on the customer overlap that you talk about because this is front and center for us. .

Yes, Tom, first of all, thanks for the question. And we did cover in some of our previous remarks, how we feel strong about the overlap number being very manageable for us in terms of the process. In terms of some of the more direct engagement post close, first of all, I'd say we're going to operate from a work backwards from the customer mentality and make sure that they get the best experience possible of the 2 companies coming together. And that means we'll be incredibly no ego about this and make sure that the right people are talking to the customer to maximize growth for the customer, maximize the service we bring to them. .

Your second part is actually something I'm really excited about in terms of profitability, maybe something they have that's different that we have at different levels of profitability. Dave really covered it, which is we've got this incredible top line growth company we are acquiring. We feel really good about that. But combining them with our industry-leading cost-to-serve, our industry-leading pricing and costing engines, our ability to put our data combined with their data in front of our people our combined teams really makes me excited about what that profitability can be not a business that others would struggle to execute.

We're going to be really in prime position to go grow and execute at a highly profitable level.

Tom, I would only add one last thing, which is when you mentioned, would we be inclined to decline volume because it's less profitability than than currently Robinson's levels. Remember, one of the things we're excited about, about this acquisition is RXO's book of business is very healthy, right? Their gross margins are actually what we consider very healthy. And so therefore, from a quoting perspective, I don't think you have much of a falloff between RXO and C.H. Robinson in the marketplace, right, where they're challenged on profitability is cost to serve. Or certainly, we have industry-leading capabilities.

So to your point, I don't see I don't see a possibility of us walking away from new business because of profitability because as I just mentioned, their AGP margins are quite healthy.

And keep in mind, Tom, and great question. You can see we're pretty passionate about it. You have 2 of the companies that are the strongest when it comes to customer interaction, customer retention, customer execution, these 2 are the strongest in the industry, and now they're going to be coming together. So I couldn't be more excited about that, and I hope you will be as well.

Yes, that's a great answer. I appreciate it. I just wondered if there's a room for like a clarification on 1 comment you made, Dave, you said that $30 million kind of inflation on comp and benefits you absorb each year. Are you trying to imply like should we assume that the increase in insurance would be less than that $30 million or of that magnitude it seems like you might be implying that with the way you presented that comment, but I just -- I don't want to read it the wrong way.

Yes. I mean, look, we provide that as an example of a magnitude just so you guys can get your head around the headwinds that we absorb every day and never talk about, right? And so when we talk about the $30 million on labor inflation, right? We've never referenced that number before. That's a number we absorbed year in and year out, it compounds year in and year out, and we still deliver demonstrable earnings growth even with that inflation.

So we've given that example just to show the community, the external community here, how we're built, right, how we're built to offset headwinds and how we're built to absorb inflation and still deliver demonstrable results. So we thought that was a permanent example to give just to give you some context around how insurance -- our inflation on insurance is not going to be some of that derails are our earnings trajectory going forward.

I mean, yes, yes, it's good stuff. Thanks.

The next question is coming from Stephanie Moore of Jefferies.

Great. Actually, I think I'll jump off of Tom's last question here and maybe try to dig in for a little bit of a finer point here. So 2-part question, but same topic. So first, maybe just remind us when we should expect to hear any update on incremental in insurance costs for 2027. So when we should kind of see that come through, you'll be able to speak to the headwind there?

And then second part of the question, I think maybe just talk a little bit about how you think you could manage these inflationary pressures. So I appreciate that you just gave that $30 million example, you're very confident that you've been able to, but you've already done a lot of work behind the scenes, and you've made a lot of headway to obviously reduce your cost to serve. So what's the next leg to the story here that gives you the confidence that in probably an accelerating inflationary environment, you can still be that successful in offsetting those costs.

Thank you for the question, Stephanie. So on the timing of insurance updated information or clarity, certainly, the definitive date is sometime in mid- to late December. I mean, that is typically when we get finality on what next insurance policies will look like. Now as you know, we are trying very hard this year to finalize those negotiations sooner, right? And we won't wait to provide guidance once we have it, right? And so once we have insight on to insurance inflation going into '27, we will not wait for the next earnings call to provide that information, right? That's information that would more likely file a K and provide that information as soon as it's available.

But as we said last call, and is the reality of what we're going through today is those negotiations are still pending, they're still in progress. And what I would say, though, is we still feel very good about those proceedings, right? We said multiple times that we feel like the outcome of our insurance negotiations will be close to industry leading, if not industry-leading, and we certainly don't feel like the inflation on those costs will be anything that will derail earnings going forward. And again, just to remind everybody, automobile liability insurance is only 25 bps of total gross revenue for us.

And so therefore, it's a de minimis cost today. With inflation tomorrow, it will be a de minimis cost tomorrow. So that's what I'd say. Now how do we offset inflation? It's a great question. This is at core of our lean operating model and our Lean AI strategy. Certainly, our whole organization is working on a pipeline of initiatives every single day. And that pipeline of initiatives far exceeds what we need to deliver any given month, any given quarter, any given year, right? And so we have the ability to pull initiatives to the left when we need to or when we're capable of doing so, right?

And so therefore, I think that's what differentiates us versus so many companies is our ability to react to the conditions that we're seeing today. And be able to improve our performance based on those funnels of initiatives that we're working on. And so I would just say that is really our full management and just the forward thinking, the forward planning that we do as a company allows us to plan past things like inflation on labor and inflation on insurance .

And Stephanie, I'll just add that road map of opportunities to Damon's point of lean AI and sort of what the tools deliver or the new tools that they roll out and the way we're able to leverage it, both on Global Forwarding, you've seen us make some announcements. We still have a lot of room to scale up opportunities that we've already got. We started to roll out. And then we've rolled out. We've talked about this before, there's still plenty of opportunity in the cash life cycle across all of our businesses as we go deeper.

We deployed a lot of agents to automate various tasks. But the ability to stitch together those agents and automate entire workflows, there's still plenty of opportunity to [indiscernible] to cut.

Yes. And I would just end that Stephanie was saying, look, it wouldn't be a Robinson call if we didn't talk about the early innings of our transformation. Very early innings of the lean transformation. I think we've gone at length on what that means and why we feel that way. And then as Arun just walked through, I mean, certainly, early innings in our tech deployment as well. And I think we've only touched a fraction of the processes that we can touch within Robinson.

But I'd also say that even processes that we've already touched, we're going back and touching it multiple times. We're making them better as the technology evolves, as our understanding of processes evolves, right? And so when we say we're in the early innings of this transformation, that is why we have such a robust pipeline of opportunities going forward. Thank you for the question.

The next question is coming from Jonathan Chappell of Evercore ISI.

Thank you. I kind of wanted to reframe the opportunity for Global Forwarding now that you've run out some of your initiatives there. Let's go back to the Investor Day and the anticipation for Global Forwarding that underwrote your '26 estimates, you weren't expecting much at all. You're saying go back to kind of late '23. And clearly, that business has done well on its own without you implementing a lot of the lean AI principles that you've done at NAST.

So now that you're kicking that off, but understanding you're coming from a much higher starting point on Global Forwarding than what you were underwriting to begin with, what's the potential there, whether that's mid-cycle margins, whether it's outsized market growth, how do we measure the medium term for Global Forwarding today versus 2 years ago at Investor Day?

Yes. Thanks a lot, John. A couple of things I want to clarify on Global Forwarding. When we started our journey in our transformation, I would say this, as we kicked off our operating model, we put that business under that operating model here for the last 2.5, 3 years. And we like the progression that we've seen on the self-help of that business and the health of that business. And I agree with you on the acknowledgment of how it's kind of gone up and to the right, but as David said, we're just getting started on that. And as we signaled earlier or later last year in the beginning of this year that we will continue to now roll out in a purposeful manner, our technology stack into Global Forwarding similar as we did to NAST. So kind of a 2 part approach.

And we're starting to see the benefits of that as well. But make no mistake, the lean operating model really has begun -- has transformed that business, and there's more to come on that, that Arun just alluded to, but we can go a little bit further and deeper on that.

Yes. John, I'll just add to what Dave said. I mean, certainly, we're in a different position in Global Forwarding than we are in our NAST business, right? I mean, certainly, the NAST business is starting at the top. And of course, we've improved that gap between us and everyone else. But Global Forwarding isn't, right? I mean, Global Forwarding is a much smaller competitor in the forwarding space. And so therefore, there's tremendous opportunity on all levels, right, on margin enhancement, on revenue growth. And I would say the same playbook we've gone on NAST is the exact same playbook we're running on Global Forwarding. So to your specific to your question.

We believe there's demonstrable revenue growth opportunities in Global Forwarding. We think there's demonstrable revenue management opportunities in Global Forwarding to improve their price and cost of purchased transportation. And then we think there's always continued opportunities on driving productivity to improve their cost-to-serve model.

And if you look at our press release, right, and things I've said and Dave said historically is we do believe we will have the best tech stack in for, right? And that will be the best tech stack and not being the #1 player in the industry. So I think to your point, I think there's a lot of opportunity to continue to expand the performance of Global Forwarding just because of everything we said, they're getting the same playbook that MAST has been so successful on. But where we're starting in the industry is a much different starting point than where NAST is.

Yes, to just sort of like amplify what Damon just said, our agent AI platform that powers all the NAST productivity that you've seen us deliver and all of our machine-learning models that power our price discovery and cost discovery basically our algorithm pricing and costing and NAST. We're deploying all of that to Global Forwarding, right? And just to David's point around our confidence in building and deploying the best technology stack in the industry, we feel very confident about that. We've got the playbook. We deployed it in NAST.

We see the results, and we're in the early innings of deploying the same capabilities, both on productivity and gross margin, i.e., revenue management and going forward.

Yes. And one final comment, John, on mid-cycle margin targets, right? We don't envision changing that target for the NAST or Global Forwarding, right? We believe those targets are solid targets. We believe they're anchored in our strategy, and we want to use that optionality around those targets to drive even more demonstrable benefits for the enterprise. So I don't necessarily see a future where we give revised mid-cycle targets. We believe those are appropriate targets for both businesses as they said. But what we have committed to is making sure that the optionality above those targets drives optimal earnings for the company. Thanks for the question.

The next question is coming from Chris Wetherbee of Wells Fargo. .

Maybe I wanted to come back to the Arco acquisition. I think the market is looking at this and is expressing some concern about revenue attrition as you put these 2 companies together. And Dave, I thought it was helpful, some of the comments early in the call about the 100 customer analysis that you guys have done. And comfort with that overlap. I don't know if there's any way you can unpack or expand on that to give us a little bit more comfort, give investors a little bit of an idea of like how you see whether it be by service or by vertical, where there is that overlap? And just maybe put a little bit of a finer point around it if possible. I think that would be very helpful. .

Chris, this is Michael. I'll try and expand on this a little bit. So versus, I think Dave did cover it really well around the top 100. And we've said even in our external statements post the announcement, right? There's a couple of places where we are really strong in the industry. LTL is an example, a couple of places. They're super strong in the industry last mile, expedite where we don't cross over really at all. And so there's a lot of opportunities, we think, from a synergy perspective there. When you take some areas, but there's large parts of the for-hire market where we don't -- we have 0 crossover.

In places where we do have some crossover, we've heard from customers that they're excited about this because there's opportunities that even within customers, we don't do the same. And so we feel really good that while we're not naive that there will be some attrition, but we've built that into the synergies number that we've shared externally. We feel really good about the future growth opportunities of the 2 entities coming together. And when you start to combine our capabilities that's the part where we feel really good about our opportunities.

When we think about how we go to market, one of the maybe unknowns is that when we go to market and compete for business, we're not competing just with other brokers, we are competing with assets. We're competing in supply chain solution modeling. We're really going after how do we provide the best solutions to customers. And in that case, when you combine our 2 capabilities of what we offer, I think it's going to be a very, very strong value proposition for customers. And so from that aspect, I'd say we feel really good about the net end game of where this plays out.

Chris, listen, I felt really good when customers have reached out, as Mike said, and felt good about doing business with us going forward. I mean, again, remember, last mile, expedite , these are not things that Robinson was exactly strong in or even did. And so that's why we feel really good. We always said now you have 2 companies that you take the steam ship and go to the front door. And so it's a lot of different customers for us, and that's why we're so excited about this. And you'll see that, and we just can't wait to really get started on doing this.

The next question is coming from Brandon Oglenski of Barclays.

Maybe I'll continue with the third question on RXO here. if we look at the recent acquisition of Coyote, it was kind of hard to see the synergies you maybe drop into the bottom line for them. And I know David talked about maybe the cost headwinds at RXO today or excess cost in the business. So when we think about key relationships with key employees and customers, how do you really address the potential for attrition in the employee side, so especially the key folks there.

Well, I think a couple of us to jump on this question, Brandon. I want to start and be really, really clear to everyone in hearing this. And hopefully, you guys, a number of you have been with us here during this transformation in the last 3.5 years. The operating model that Robinson has developed and have executed. We have basically transformed this company through a disciplined measured approach. It's a safe due ratio that we always put up with our receipts on being consistent, super, super important. But it's something that we operate this company with discipline. That will be no different then we go in and do the integration within RXO, which is why it's so exciting.

Damon hinted to it, really good healthy book of business on the gross profit line. where our strength is, is operating, and I don't know that there's a debate with that. And our operating model will allow us to bring this company in with confidence and drive that. That's a bit different. We can't speak to every deal out there in the industry. What we can speak to is how we execute. And I think we execute pretty consistently. And that's what we will do with this deal as well. But Mike, why don't you double in on some of the attrition .

Well, I think what I'd start with is looking back on what we accomplished inside our NAST business and our ability to get our cost to serve where it's been has been driven through process improvement, our Lean AI capability, combined with our operating model. It has also been focused on how do we get the best information and data into our relationship and revenue-driving job families so that we can go grow our business. .

And so when I think of potential attrition, what I would say to the folks on that team is I would be super excited about the opportunity to have the combined data stack, the information and capabilities that we have and put those into the revenue and relationship management job families that RXO has. We have not prioritized cost cuts in those job families here at Robinson. We have improved our operating processes -- and I think -- and we said this and it showed in our Q3 results in terms of our repricing, we were able to put better information into our people's hands, and we were able to reprice our contractual book faster than any time in our history.

And that comes from the operating model and putting our capabilities into our revenue and relationship managing job families as fast as possible. And so if I was on -- in those job families at RXO, I would be super excited about the combined capabilities of our entities and how quickly we're going to get information and opportunities for growth into their hands in the future.

Yes, Brandon, I would only add is just remember, on our productivity journey here where we've generated over 65% productivity since the end of '22, that has been significantly over-indexed operational roles, right, not customer-facing roles, right? We have retained, we've promoted. We've enhanced our customer-facing talent. In many areas, we've added, not reduced resourcing and head count in those areas. And as Michael said, we've used our technology to enhance those relationships between our customer-facing teams and their relative customer, right? And so as we said overall, again, you guys will get tired of hearing this right, we are going to run the same playbook with RXO, right?

And so if you run the same playbook on RXO, right, you're going to keep a lot of those relationships. You're going to keep a lot of that talent, right? You've got to keep those customer relationships, right? And the productivity is going to be driven in the back office and the operations. right? And so again, any time I think you guys think about what's going to be different versus what's not, just look at the playbook we've run on Robinson, we're going to run the same playbook on RXO.

And just to kind of underscore that all the technology we've invested in to Michael and David's point, this ability to send targeted signals to the desk such that they can action changes in the market is we've invested in this for many years, and the platform is there to be applied to RXO as well. .

We're showing time for 1 final question. Today's final question is coming from Bruce Chan of Stifel.

I appreciate all the great color so far. Maybe 1 on freight forwarding. You gave a lot of good on the internal opportunities. It's obviously been a big beneficiary on the rate side from global disruption. But as you think about demand, maybe you can give us a sense for what you're seeing in terms of strength by end market? And then maybe as part of that, how much of a benefit are you seeing from a data center build-out to airfreight right now? And how are you thinking about that as an opportunity?

Yes. Thanks for the question. Bruce, certainly, part of our vertical strategy is focused on those areas of the market that are outgrowing the overall market, right? So you mentioned certain areas of technology and data centers. And certainly, that is a focused area of growth for us. In aggregate, what I would say about 40% is very similar to what we've said about the overall freight market, which is certainly, we are seeing signs of life. There are pockets of life in the freight market.

So certainly, in technology, certain areas of manufacturing, you are seeing growth. I think you're starting to see that show up in the cash index is an overall representation of the NAST market. And I'd say there's a correlation to the Global Forwarding as well. But what I would say is consistent to what we've said, which is we're optimistic that there are signs of growth. But the contributors to the overall freight market growth are still somewhat tepid, right? I mean housing is certainly tepid market. I'd say overall manufacturing is still a tepid market and there's certainly large areas of retail that is still happening.

So until you see significant participation from those those industries, it's going to be hard to have meaningful absolute growth in the overall freight market. So we're cautiously optimistic. And now finally, [indiscernible] at least on a month-to-month sequential basis is showing some of that optimism, even though the quarter was still slightly negative. You saw some of that exit rate on August and September. I would say that theme does hold for global freight markets as well.

So optimistic, but we have not seen what I would consider demonstrable catalyst yet to say that we're going to see sustained absolute growth in the overall freight markets.

Thank you. I would like to turn the floor back over to Mr. Chuck Ives for closing comments.

Yes. Thank you, everyone, for joining us this morning for the call. We look forward to talking to many of you throughout the quarter, and have a great day.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson to Acquire RXO Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded, Monday, October 5, 2026. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations. Please go ahead.

Thank you, Donna. Hello, and thank you for joining today's conference following our announced agreement to acquire RXO. Before we begin, please note that certain information presented on this call contain forward-looking statements, including statements regarding the timing, consummation and anticipated benefits of the proposed transaction. These statements are subject to future risks and uncertainties, such as those factors described in the slide presentation available on our website as well as those described in C.H. Robinson and RXO's filings with the SEC, including each company's most recently filed annual report on Form 10-K.

Please note that the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With me on today's call are Dave Bozeman, our President and Chief Executive Officer; and Damon Lee, our Chief Financial Officer. Presentation materials, along with our recent press release can be found in the Investors section of our website. Our discussion today will be strictly limited to the transaction that we announced this morning. Any comments related to our quarterly financial results will occur as part of our Q3 earnings conference call later this month.

With that, I'll turn the call over to Dave.

Thanks, Chuck, and good morning, everyone. We're excited to be here to discuss this significant milestone for C.H. Robinson. As described in our press release, we have entered into a definitive agreement to acquire RXO in a stock and cash transaction. This transaction will bring together 2 complementary businesses to define the future of third-party logistics while driving significant value for shareholders. This is a natural step in the transformation we began just over 3 years ago.

Together, we expect to create a more resilient business, and we expect to apply our proven Lean AI operating model to unlock significant synergies and improve financial performance of the combined company through freight market cycles. Additionally, this acquisition is expected to expand our capabilities to better support customers as they navigate a dynamic supply chain environment, increase penetration across verticals and win new business. We are confident that this will allow us to enter a new chapter of profitable growth that will translate to significant value creation for C.H. Robinson and RXO shareholders.

This morning, I'll walk through the transaction and provide some context about why this is such a compelling opportunity for both businesses. Then I'll pass the call to Damon to discuss some of the financial benefits. Before we begin, I want to thank the C.H. Robinson employees for their hard work and dedication to our transformation that made this transaction possible. I also want to welcome RXO employees to C.H. Robinson.

Our people are our greatest asset, and they have to have been key to the success of our company and our customers. I am confident this transaction will create new and exciting opportunities for our team as we bring C.H. Robinson and RXO together and unlock incredible potential of our combined platform. With that, let's get going.

I'll start with a summary of the transaction terms. We are acquiring RXO for $17.25 in cash and 0.0856 C.H. Robinson shares per RXO share, implying a value of approximately $30.25 per share. The transaction represents a premium of 27% to RXO's 90-day volume-weighted average price and 29% to RXO's closing price on Friday, October 2, 2026. This also translates to a $5.8 billion enterprise value for RXO. This transaction is an opportunity to take a massive step forward in accelerating our growth and strengthening our financial foundation and earnings profile. We are creating a combined business with pro forma revenue of $25 billion for 2026 and significant opportunities to expand operating margins and accelerate profitability through improved offerings and operating efficiencies. This transaction is expected to be accretive to adjusted EPS within 9 months of close, which we expect to occur in the first half of 2027.

By the end of fiscal 2028, we expect the transaction to be mid-teens accretive to adjusted EPS. This accretion is driven by the significant synergies we expect to unlock. By applying our proven lean AI operating model to RXO's business, we expect to realize $300 million in net annual run rate cost synergies within 2 years post close. These synergies and cash generation are expected to provide us with a clear path to rapidly delever to our target leverage range of 1.75x to 2.25x by the end of 2028.

We have a proven track record of driving productivity and cost savings and expect to realize these synergies by using the same playbook. This transaction will allow us to advance our strategy and drive significant profitability and support meaningful long-term shareholder value creation.

Turning to Slide 4 and an overview of the value drivers of the transaction. At its root, this transaction is an opportunity to accelerate our proven strategy with a combined platform to enhance our resilience and better compete. Our transformation has centered on the implementation of our lean operating model and lean AI capabilities that have allowed us to move faster, operate more efficiently and deliver industry-leading service to our customers and carriers. This transaction will enable us to implement our unique lean AI operating model across our combined business to accelerate the productivity improvements we've realized in recent years, driving the $300 million in net annual cost synergies I just mentioned. Achieving these synergies will enhance our operating leverage, expand our combined margin and drive considerable cash flow generation. This is also an opportunity to accelerate our growth strategy with expanded capabilities and improved network density.

RXO's complementary capabilities will further diversify our business, expand our reach and strengthen the value proposition of our platform. It also broadens our solution set across multimodal truck brokerage, managed transportation, last mile and expedited services creating a broader and more comprehensive offering to deepen customer relationships and cross-sell our solutions to meet our customers' end-to-end needs. With expanded capabilities, increased network density and a broader customer base, we will have an enhanced ability to drive growth through market cycles. This will allow us to build on our strong financial foundation. Given our expected productivity improvements, cash flow generation and anticipated rapid delevering, we expect to maintain our solid investment-grade ratings.

On Slide 5, you can see the scale and diversity of offerings that we will provide together. This combination materially increases our network density, bringing together approximately 93,000 shippers and 600,000 carriers. We will also have an expanded business mix with the combined company offering more solutions across the supply chain. This network density and diversity will allow us to enhance freight matching, improve service levels and better compete across transportation markets. Our wider network of partners and expanded capabilities will allow us to support customers with more precision and speed than ever before. Offering a stronger, more diversified service product will help us further penetrate across modes and segments, win new business and deepen relationships with customers.

Taking a step back, Slide 6 provides a snapshot of RXO's business. The RXO team has built a fantastic business with a technology-enabled platform, a talented team with deep industry expertise, strong customer relationships, a high-quality carrier network and a proven track record of growth. Like Robinson, their success has been driven by customer-obsessed with culture and a commitment to empowering their team to compete and win in the market.

RXO's core business is truck brokerage, but where they truly excel is their differentiated and complementary last mile and transportation solutions. Their business is well diversified across end markets, and there is limited customer overlap between our businesses. Adding RXO's capabilities and complementary customer base to Robinson will diversify our revenue mix, enhancing our resilience and better positioning us to drive more consistent growth across market cycles.

On Slide 7, you can see the expansive suite of capabilities we're creating through this transaction. Together, we'll be able to offer a comprehensive set of solutions across multimodal brokerage, managed transportation, expedited, last mile and drop trailer services, creating a more comprehensive offering to meet their evolving needs. We expect that our broader set of offerings will make us a partner of choice for customers who are increasingly looking for a comprehensive provider that can support them across the increasingly complex supply chain environment. Our lean AI capabilities will be the thread that ties all of these offerings together. We expect our AI to supercharge our capabilities, allowing us to offer more tailored solutions to help our customers become more agile and efficient.

Slide 8 provides a snapshot of how these capabilities come together to create a more seamless experience for customers and carriers. C.H. Robinson is the industry pacesetter for cutting-edge innovation and differentiated solutions. With that leadership comes a responsibility to continue delivering differentiated solutions that create better outcomes for our customers and carriers. With the addition of RXO, that's exactly what we'll continue to do. For customers, the combination will provide broader solutions, greater capacity and choice, smarter execution and access to a larger, denser network spanning truckload, expedited, last mile and global forwarding services. For carriers, it will create more freight opportunities, better lane matching, enhanced network visibility and a simpler day-to-day experience through our technology and lean AI-enabled operating model.

With our complementary networks, technology capabilities and operating expertise, we believe we can further strengthen our value proposition and increase volumes. This will allow us to accelerate compelling growth opportunities faster than we could on our own. While this transaction is expected to open up new growth opportunities, the value proposition of this combination is the productivity we can unlock with RXO. We have a clear and achievable path to realize the $300 million of expected net run rate cost synergies. This plan is rooted in the same principles and playbook that has allowed us to drive productivity across our organization in recent years.

As we discussed, applying our lean operating model to RXO will be a primary driver of our expected productivity improvements. Our leading AI capabilities will add fuel to these improvements. Leveraging AI has become part of our DNA at Robinson, and we see significant opportunities to improve RXO's operations by implementing our AI agents across a wide variety of workflows. The cost to serve efficiencies from implementing our operating model and shared services savings from centralizing processes and functions will make up the bulk of our expected cost synergies. We expect to unlock additional synergies from the elimination of duplicative third-party services and other integration benefits such as insurance procurement efficiencies.

We are confident in our ability to achieve these synergies because our plan relies on the same principles that have driven our transformation since early 2024. This transaction builds on the operational discipline, productivity initiatives and AI-enabled capabilities we've already put in place. The results of that transformation are evident in our performance, including a greater than 60% increase in enterprise productivity since the end of 2022, approximately 490 basis points of adjusted operating margin expansion in 2025 and an 8% reduction in operating expenses in 2025.

Importantly, we've demonstrated an ability to scale technology efficiently, increasing AI usage by approximately 200x while growing related costs modestly, giving us confidence in our ability to integrate RXO and capture synergies. RXO brings additional volume to a proven operating model, creating an opportunity to extend these productivity and margin improvements across a broader platform.

With that, I'll turn the call over to Damon to discuss the financial benefits of this transaction in more detail.

Thanks, Dave, and good morning, everyone. I echo Dave's excitement about this transaction and what it will allow us to accomplish. We have made significant progress to create a more efficient, agile C.H. Robinson through our transformation. This transaction allows us to accelerate this progress.

Let's start with Slide 11 and a breakdown of how we intend to apply the transformation principles that Dave just discussed to RXO's business. As shown on the left side of the slide, RXO's adjusted gross profit per employee remains below Robinson's current productivity levels, providing a clear opportunity to drive additional operating leverage over time. By integrating RXO's volumes into our network and leveraging our proven operating model, we expect to unlock meaningful efficiency gains and support our synergy objectives. The productivity opportunities, operating efficiencies and synergy initiatives supporting this transaction are largely within our control, can be executed across a range of market environments and will enable us to better serve our customers.

As Dave mentioned, capturing the expected synergies will drive significant cash flow generation that will allow us to advance our capital allocation priorities. We will remain guided by the same capital allocation approach we are taking today, which balances maintaining our strong financial profile with investing in growth and returning capital to shareholders. We will continue to pursue high ROI organic investments while opportunistically pursuing M&A opportunities that will allow us to advance our capabilities.

Given our strong balance sheet, we will maintain ample financial flexibility following the transaction. Our strong capital structure and cash flows will allow us to optimize our balance sheet and rapidly delever to our target range by the end of 2028. And as we execute against our priorities, we remain committed to returning capital to shareholders through our dividend. While we will pause share buybacks until we reach our target leverage ratio after this transaction closes, we expect to resume opportunistic share repurchases after reaching our target leverage ratio and when we believe it is the best use of capital for shareholders.

We also intend to integrate RXO into our NAST organization led by Michael Castagnetto. We have created an integration task force led by Jim Reutlinger, Vice President of Robinson Operating Model to efficiently and swiftly integrate RXO operations and deliver on the run rate synergies in 2 years after the transaction closes. I would now like to turn the call back to Dave for closing remarks.

Thanks, Damon. In closing, we cannot be more excited about this acquisition and the opportunities to unlock value for employees, customers, carriers and shareholders. Through this transaction, we will build on our transformation and apply our best-in-class operating model across the combined organization. This will allow us to drive compelling cost synergies and create a more resilient platform to drive profitable growth regardless of the freight market environment. With increased network density and an expanded suite of solutions, we will be able to increase penetration across modes and segments, win new business and deepen customer relationships. We look forward to sharing additional details over the coming months and appreciate your continued interest in and support of C.H. Robinson. With that, we will now take your questions. Operator?

[Operator Instructions]

Today's first question is coming from Tom Wadewitz of UBS.

Congratulations on the deal. This was obviously a big deal, and I think a surprise, although you have talked about being active in acquisitions, I think bigger than expected. But I wanted to see if you could give some thoughts on, I think, two primary questions. So one is customer overlap. I think that's something where customers are different, but they could say, okay, we only want to do 20%, 30% of our business with a given provider. I know if you define truck, that's a big mark, kind of big portion of a customer's book, but I don't know how customers might respond in terms of large enterprise customers that might have a constraint in concentration. So if you could talk about that.

And then I think in terms of just retention of people that you think are important or salespeople or how do you think about retaining the revenue as you go through the synergy process? It sounds like it's driven more by cost.

Tom, thanks for the question. Listen, a couple of things here. On customer overlap, we feel pretty confident about this deal, and there's actually not as much customer overlap between our two businesses, which is good. It provides us more opportunities as we go forward. I think as you're hitting about or implying about hitting kind of ceilings or maxes with customers, I think we're far away from that and have a long way to go. We'll continue to go into this deal and do some diagnosis within the company. But we feel good that there's not much overlap on the customers and that gets us even more excited.

And I think on the retention part, listen, RXO has a great team, and they are energized for this deal to be successful. Drew and I have had really good conversations, and I'm confident that between the two of us that we will do the necessary things to retain the talent that we need to in this deal. But there's a long way to go to close but I feel good about where we are.

Yes, Tom, I would just add on the first half of your question there around customer overlap. We actually view that to be a very de minimis number, not material at all. And in fact, what impact we have calculated related to customer overlap is actually reflected in that net synergy number of $300 million. So just to say again, that $300 million synergy number already includes any revenue dis-synergies related to customer overlap.

Is there any way to like help us frame the overlap, like top 10 customers overlap, anything like that? Or is it too early to say that?

Yes. I'd say we won't go that deep, Tom. What I would tell you is, as you can imagine, we went very deep and wide on that assessment. We didn't choose the word complementary lightly. We do feel like the two books of business between C.H. Robinson and RXO are very complementary and therefore, reduced the overlap between customers to a pretty immaterial number. So we feel confident that we'll deliver the $300 million of savings net that dis-synergy revenue assumption.

Our next question is coming from Bruce Chan of Stifel.

Yes. I just want to echo those congratulations on the deal, certainly very transformative. Dave, I was just hoping that you can maybe walk us through the tech stack combination at a high level. Wondering if RXO is getting onboarded to Navisphere and other C.H. systems? Are you planning to integrate models and use maybe some of the RXO kind of best-in-breed approach for the different systems?

Yes, Bruce, good hearing you. Listen, that's the beauty of deals like this. I mean, I think we have a proven model at C.H. Robinson and a proven tech stack. So certainly, that is something that we will look at and making sure we bring a book of business within Robinson's tech stack. But also, we're going into this saying, hey, listen, there are great things that RXO does. We talked about in our announcement, expedite and last mile. And so there are some things that we will certainly learn and take the best in breed to make this combination a winning combination, and we look forward to it.

Yes. Bruce, I would only add to that, that for the services that we overlap on today, truckload, LTL, those businesses will certainly -- the core system will be Navisphere, which will allow us to apply our lean AI approach to those core businesses. As Dave mentioned, they do have some very interesting technology around expedite and last mile that we think can be complementary and even additive to what we have at C.H. Robinson. But yes, for the broader business, we expect Navisphere to be the core system of record going forward which will allow us to bring RXO onto our platforms, use our agentic technology, and that will certainly be at the core of generating the $300 million in net synergies we referenced earlier.

The next question is coming from Brian Ossenbeck of JPMorgan.

Damon, maybe and Dave as well, maybe you can just walk us through how you got comfortable in this post-Montgomery world with the claims the docket, whatever the technical term is with RXO and also with Coyote and how you factor that into the valuation in terms of the deal that we see here today. Is there any contingencies? Do you have a pretty good feel for it? Do you have some stuff reserve for it later? Anything on that front would be helpful.

Yes. So Brian, I'll start. Dave can provide color. Look, I'd say we're comfortable with our docket. I'd say we went through a very thorough review case by case, both our internal experts, external experts as well as RXO's opinion on all of these cases as well. And as we put into our statement, right, we believe anything related to the legal docket from RXO is neutral risk for C.H. Robinson, right? We don't believe there's anything inherently related to their docket that's different in scope or landscape versus C.H. Robinson. So I would say, in summary, we went through a very robust, very lengthy review of the legal environment and the case log for RXO, inclusive of the Coyote business. And our assessment as well as external expert assessment as well was that the legal risk to Robinson would be neutral.

No, I just -- go ahead, Brian.

Sorry, Dave, just a quick follow-up. Would this affect your renewals for the, I guess, legacy Robinson business? I know the deal is not going to close for a while. So you probably have to deal with both of them for a little bit until you can combine both books of business from an insurance perspective?

Yes. I mean, certainly, both organizations were going through dual paths for insurance renewal pre-announcement. And certainly, I think now there's an opportunity to drive synergistic approach to our renewal for 2027. So as it relates to the insurance front, we actually think bringing the two businesses together is going to be a net positive for our insurance renewals for 2027.

The next question is coming from Stephanie Moore of Jefferies.

Look, I think this may be the first brokerage acquisition where AI is truly front and center. So should we be thinking about this $300 million synergy target as a floor? I mean, I just think the potential to deploy C.H. Robinson's, I guess, AI and automation capabilities across RXO's footprint seems pretty powerful. So maybe just talk a little bit about incremental volume opportunities and then also the limited incremental costs associated with that.

Yes. Thanks, Stephanie. Listen, the way we look at this as we've always looked at it when we've gone through the transformation at Robinson is it's really a symbiotic relationship that we have with our operating model, our people and our technology. And that's what's driven a lot of the success over the last few years here at Robinson. And we're just going to continue to execute that strategy. And that is, again, yes, it will be technology. We think our generative AI and agentic AI technology will be super beneficial as we go into RXO.

But it's also our operating model and how we go about identifying problems, innovating at scale and at speed and then combining the expertise of C.H. Robinson logisticians with RXO's expertise as well. All of that combination, I think you can look back over the last 3 years and kind of foreshadow what will happen going forward. There's a big opportunity with the book of business of RXO and as we connect that into that operating model, we're super excited about that $300 million, and that's why Damon and I feel really good about it. And we're a continuous improvement type of mentality. So we will continue to do that. So we feel really strong about those synergies and look forward to it.

And Stephanie, I would just add. I mean, certainly, we wouldn't be committing a number. We didn't think we could deliver. So we feel very confident about the net $300 million run rate synergies that we've committed to. And as Dave said, look, as always, we never leave anything on the court as it relates to Robinson. So we'll always be trying to exceed our commitments. But we feel really good about delivering the $300 million, and we feel really good that that's a very healthy synergy number. And quite frankly, we believe only C.H. Robinson can bring this type of synergy number to this industry.

In the time frame of 2 years as well?

Yes, certainly in a 2-year time frame, right? And so again, we feel like this is a high bar. But as you guys have gotten used to, we reset the bar all the time, but we feel like this is a pretty high bar to this deal.

The next question is coming from Richa Harnain of Deutsche Bank.

Can you guys hear me okay?

Yes, we can.

Okay. Great. So yes, Dave, Damon, I think you sort of prepared the Street for a big M&A talking about how when you do a deal, it will make a lot of sense for the market. Aside from the broader customer base, talk to us about what the deal really unlocks for you. I know you went through it in the presentation, but what you're most excited about that you didn't have on a stand-alone basis. Maybe that means digging into the synergies some more. And then Damon, in particular, you've talked about the pitfalls around large-scale M&A and brokerage. Maybe flag what risks you're very sensitive to and how you intend to mitigate them via this transaction.

Yes. So I think what makes us excited, and you've heard us say this before is, look, RXO has a very good book of business, right? I mean they have relatively healthy gross margins. And as we've said, applying our cost-to-serve model, which is industry-leading, can generate substantial opportunity for scale broker, right? And so now you can substitute scale broker for RXO. We think it is just tremendous opportunity in driving the same productivity that we've driven since the end of '22, 60% productivity since end of '22 for C.H. Robinson and apply that same model to RXO.

So we're very excited that this really is about the operating model. This is really about driving cost to serve synergies that we think we've demonstrated a great track record of doing for C.H. Robinson, and we believe we can apply that same playbook to RXO. So very confident in our approach. And the thing I would say is this is very similar to what we've done with C.H. Robinson. So if you think about the transformation we've been through the last 3 years, it was really a reintegration of C.H. Robinson. And I think anybody here would have told you it felt like they got acquired and integrated over the last 3 years. And I think we're going to run that same playbook over RXO with a high degree of confidence that, that playbook will yield very similar results.

Now to your comment around, look, large deals can bring risk, they can. And I'd say they can if you don't do your due diligence upfront. If you don't have confidence in your synergy case, if you don't control your synergy case, we feel like we do control our synergy case because it will be a productivity synergy case. And if you don't have an operating model, our operating model dictates how we run the company. It will provide rigor and discipline in how we drive the integration and doesn't let us fail, right? And so I think you can have confidence that the exact same commitments we made around C.H. Robinson results the last 3 years are going to underlie the same commitments we're making about this acquisition going forward.

Richa, the only thing I -- just to kind of put a bow on what Damon said is if you look back and a number of you on the call here have been with us, and it's been -- hopefully, one word you could say is it's been consistent for Robinson in this transformation. We said from the start over 3 years ago, that our strategy was going to, one, outgrow end markets; and two, expand our operating margins. And I think we've been consistently doing that and going about doing that. But we also said that it didn't matter about the market and that we would win despite the market environment or higher highs, higher lows. And we continue to drive that consistency. This is no different than the strategy we built focusing on organic first, building our way to inorganic, and that's what you're seeing this morning. And so the same confidence that Damon and I have given over the last 3 years or so with this strategy, we continue to bring that confidence today going forward with a great partner in RXO coming into Robinson.

The next question is coming from Jeff Kauffman of Citizens Bank.

Well, first of all, congratulations and best of luck with the transaction. Just a quick question on the concerns that we're hearing from shareholders on the nuclear verdict post-Montgomery environment and increasing exposure to brokerage in this kind of market. I mean this is clearly a declaration of confidence that this market will settle into something a little bit more sustainable.

But right now, it's kind of everybody suing brokers and adding to lawsuits and juries that seem to be very sympathetic towards that cause. So could you maybe discuss your view on that and allay investor concerns to some degree that we are exposing exposure or increasing exposure to the brokerage market in kind of an uncertain environment on the legal front?

Yes. Thanks for the question, Jeff. I'll just start with reiterating what I said earlier in that we do not view RXO's legal risk being additive to [indiscernible], right? We believe it's neutral. We didn't see anything in their docket that was unusual to what we're what we're dealing with on our own. And then I'll just reiterate our position on the legal environment, which is we feel very good about how we run the company. We have an industry-leading carrier vetting process. We had that pre-Montgomery. We have that post-Montgomery. We do feel like Montgomery and Lipe, we feel like these are the anomalies in the industry. We do not feel like these are the new norm.

We do not feel like every case is going to go to a jury trial. In fact, the statistics say that's absolutely not likely going to happen. And we believe the success we've had historically where 98% of our cases never see a courtroom and are settled in due course for a very immaterial amount of our earnings. We still believe that is the path forward, both for C.H. Robinson. And again, based on our due diligence of the RXO docket, we feel like that's the path forward for them as well.

And I'd just remind everybody on the call, modern logistics, modern commerce do not work without brokerage, right? There is no model where modern commerce works without brokerage, right? So this model will sustain. This model will continue to take share. It is the preferred model of the customer base, and we believe it will continue to be the preferred model as we move into the future.

So just to repeat, we feel very good about where brokerage is going. We feel that once we get through the fog of war on Montgomery and Lipe that we will return to a much more normalized legal environment. And we think that legal environment is the same for C.H. Robinson and RXO going forward. So no, we don't feel there's any change to the historical course once we get through this period of time that we're in.

The next question is coming from Bascome Majors of Stephens Inc.

Big picture, there's traditionally a lot of investor skepticism in truck brokerage acquisitions. I think if you look back to maybe the last one that's consistently consensus viewed as a big success was Robinson Backhaulers, and that's over 25 years ago. But Dave, I mean, you came into Robinson with nothing but skepticism and have clearly delivered on the strategy that you entailed and turn that around. And if we look internationally, there's proof that asset-light companies can integrate successfully at scale, if you look at what DSV has done over the last couple of decades. So a lot of words there, but big picture, what do you say to the skeptics? Why is this different? And how do you earn the trust that this is going to deliver that significant synergy number that you guys have laid out there?

Yes. Thanks, Bascome. And I appreciate your comments. And the short answer, and then I'll talk a little bit about it, is proven results. And you've been around us here for over 3 years at the beginning of us laying out from the diagnosis to the strategy and then to the execution. This is no different. This leadership team was built for this moment. There's extensive expertise around integration and doing M&A at scale. But more importantly, when you look back, and we're unapologetic for this over the last 3 years, we have a high say-do ratio. And I believe we've executed on things that we're told that we could not do, which is you cannot outgrow end markets and expand operating margins. That's not supposed to happen in freight markets like we're in.

But that is what Robinson does on a consistent basis for 13 quarters in a row, outgrow truck markets and then 10 quarters in a row, beat EPS consensus. But it's really about the consistency of our leadership team, our operating model, that transfers over into an acquisition like this. We actually look at this, Damon and I and the team look at this as just a part of our strategy going forward. This is not some separate entity. And therefore, how it clicks in, we already have mechanisms, integration plans, playbooks that I think are obviously superior, and we will execute to those as we have executed on our strategy in one of the toughest freight environments it's been in decades.

And so I think you will see that. We have a super high confidence rate on these synergies. But more importantly, we have confidence that RXO coming into Robinson with the team that they've built, the new entity is going to be even stronger than we maybe even anticipate. And I have, again, super high confidence that we'll make this happen.

Yes, Bascome, I would just add, and again, I don't want to make this sound too simple. We got a lot of work to do. But if you remember my past comments, right, RXO has a very attractive book of business, and we have an industry-leading cost-to-serve model, right? We're going to run that same playbook we ran on Robinson, right? And so I think historically, why nobody viewed broker acquisitions and integrations and M&A as attractive is there was no differentiation for the cost to serve. I think we've proven over the last 3 years that we've created a demonstrable differentiation between our cost to serve model in the industry.

And to Dave's point, we've consistently proved it, right? Not a flash in the pan. I mean for 10 consecutive quarters, we've exceeded expectations, 13 consecutive quarters, we've exceeded outgrowth. And we believe that playbook is highly applicable to other brokers, right? And so if you followed what we've been talking about the last 6 to 9 months, I think every 1, 2 years from now, we'll start to see what we saw a year ago when we said we can run this cost-to-serve model on any healthy book of business and generate Robinson industry-leading operating margins going forward, right?

To me, that's the exciting part where you can take a broker that has a healthy book of business but limited operating margins and convert them to Robinson level operating margins in a couple of years, I think that's pretty attractive.

Yes, I wish -- just to put a bow on that, I wish you could see the faces of the leadership team this morning as we talk to them about this deal, the excitement, the energy they have to do this because they know this operating model that we run with every day. It's a governor, Bascome. It governs how we execute the decisions we make, how we innovate, the pace that we go at. And it will do that doing this acquisition. And so I feel super excited about it. Thanks for the question.

The next question is coming from Chris Wetherbee of Wells Fargo.

I guess I want to zoom out a little bit and think about sort of what the market is moving towards in brokerage in the post- Montgomery world. And I noted the synergies don't include anything from like a revenue perspective. But as you put these two companies together, sort of the cost to serve certainly goes down, the efficiencies and the benefits you get of scale certainly go up. And if you think about the competitive landscape for smaller players with insurance premiums rising and some other factors, it would seem like there's a decent competitive advantage there.

So maybe unpack that a little bit and think about sort of what the landscape is going to look like in the post-Montgomery world and how a company this size potentially can benefit, particularly from a top line perspective, which might be incremental to the $300 million of synergies you guys have talked about.

Yes. Thanks for the question, Chris. So what I would say is our organic strategy doesn't change, right? So if you remember, our comments post-Montgomery have been, look, we expect a meaningful consolidation in this industry from the small- and medium-sized players. And Robinson will be an outsized benefactor of that consolidation. Nothing changes there other than the fact that RXO has said externally that they believe a significant consolidation of the industry was going to occur as well, and they believed a large broker like themselves would certainly accrete that market share. So we believe that is a compelling, what I would call, organic strategy that we've laid out in addition to the synergistic case that we're laying out today for RXO.

So yes, I mean, we're going to be running both of these plays in parallel where we're going to be getting demonstrable growth, not just from the consolidation of the industry, but by continuing to execute our growth playbook that has demonstrated outgrowth for our NAST business 13 consecutive quarters. Now we're going to get on applying that same growth playbook to RXO as well. And I think the other exciting thing is there's some really exciting complementary capabilities that RXO has that we're really excited about. I mean take expedite, for example, they have a much larger expedite business than we do and expedite has been a strategic priority for us for the last, call it, 6 to 12 months on growing that business.

Now certainly, this acquisition is going to give us a jump start to those growth initiatives. So you're exactly right, right? And this acquisition is going to give us multiple factors of improvement. What we've committed to is certainly the things we control around cost and productivity. But the organic synergy case that we've had around consolidation of the industry, we believe RXO is going to be a benefactor of that as well. And now we'll certainly reap the benefits of having both large brokers under one roof.

The next question is coming from Scott Group of Wolfe Research.

Damon, I know you already said that the $300 million is a net number net of revenue dis-synergies. But any way you can quantify what you're assuming on revenue dis-synergies? And I know like past deals, it feels like we've certainly seen a good amount of revenue dis-synergies, certainly RXO, Coyote felt like that. But maybe in the post-Montgomery world, there's less risk around the synergies. But if you can just give us sort of a number, that would be helpful.

Yes. Thanks for the question, Scott. I'll jump in and then Dave can add some color. Look, I think the books of business between C.H. Robinson and RXO are quite different than the books of businesses between Coyote and RXO, right? I think there was quite a bit of overlap between those two businesses. I do not see the same type of overlap between C.H. Robinson and RXO. So as I said before, we didn't choose the word complementary lightly. We feel very good that there's a lot of additive benefit of putting the two books together in what I would consider immaterial dis-synergies, which, again, I said we've already attributed to that net $300 million number.

So I think we won't get into the specifics on that, Scott, at least not yet. What I would tell you, though, is it's an immaterial number from an overlap perspective, and it is included in that net $300 million number. And I would tell you from a customer lens, and we have examples of this even within C.H. Robinson, customers want value, they want service, right? And they want logistics solutions, right? C.H. Robinson provides those, RXO provides those. I would argue together, we'll provide them better than anyone else with a much broader breadth of offering.

And so at the end of the day, a lot of the enterprise customers, even combined, we would make up a very small percentage of their freight spend. So as I said before, I'll just repeat and then Dave can jump in here. We view the overlap to be an immaterial number. It is included in our $300 million net cost synergies numbers already, but we do not view that to be a material impact to the M&A.

Yes, Scott, I think that's well said by Damon. I'd just add on this. In going through this process, look, you have to go through a very detailed due diligence. We've always said to you guys that we will be disciplined and measured when we go out and look at a particular deal. We have been disciplined and measured on this deal in all phases, be it legal or the synergies and things of this nature. So you can count on the fact that how we execute the business with that discipline, we're executing the business on this deal, just like we signaled that we would. So I appreciate the question and look forward to the execution on it.

Yes. And Scott, one final comment. I do think certainly in the post-Montgomery world, the flight to quality is important, right? And so I think certainly, that factors into our confidence that enterprise shippers were confident in C.H. Robinson and RXO separately. I think they're going to be even more confident in our capability as a combined entity. So I think post-Montgomery world makes this discussion a lot easier as well.

If I can just ask one quick follow-up. Dave, you're by far the biggest broker, you're buying a top 5 broker. Any antitrust concerns at all with this transaction?

No. We don't see any concerns with that. We're hoping that this deal will close in the 3 to 6 months as we've first half of 2027.

Yes. No concerns there, Scott. We wouldn't have announced the deal if we thought we couldn't get regulatory approval. So we feel confident there.

Our final question today is coming from Ken Hoexter of Bank of America.

Congrats on the deal, a tremendous move. So I believe that RXO was more focused on kind of enterprise mix versus C.H. Robinson base, which I think is why you keep coming back to the not too much overlap. But is there any inherent margin differential we should think about based on the business or impacts that we should think about as you combine them?

And then on the same thought, you talked about Navisphere before and RXO Connect their systems. Any thoughts on scalability of Navisphere given the size of this transaction? I mean you had talked, I think, about going from tens of thousands of orders per day to hundreds of thousands of orders that you could review or respond to every day. Does this just fit that bill in the system? Anything we should think about in terms of systems and integration there?

Yes. So good question, Ken. Thanks for the question. Look, I would say on the portfolio, again, we like the mix of business, right? I mean, certainly, we bring small and medium business to the fold that is less represented by RXO. Yes, they are more of an enterprise provider to customers. But as I said earlier, it's a very complementary overlap between our enterprise customers and theirs, right? So we're very excited that we're able to make a scaled acquisition with what we consider de minimis overlap between the two customer bases. So very excited there.

On your margin question, what I would say is there's an opportunity to improve certainly margin for RXO. I think we've said multiple times, we have industry-leading revenue management capabilities. And certainly, those will be applied to RXO as we go through the transition. But I would argue they're starting from a very healthy base already. And then your last question on no. Navisphere is very scalable. We don't have any concerns of limitations there. In fact, as you heard us say before, Navisphere is our core system, our tech, our AI tech that sits on top of Navisphere, we have multiples of capacity that can be absorbed there. So no concerns on the technology front.

And to our earlier comments, this isn't just a -- we're only going to take Robinson Tech. I mean, certainly, we will use predominantly Robinson Tech, but we do believe RXO has some technology that is accepted very well by customers and carriers could be very additive to our technology stack, and we'll certainly go through that evaluation.

Yes. And Ken, listen, their tech is scalable as well as ours. I think the excitement coming off of this call is between the two of us. I think we're poised to do great things and redefine this industry. So really looking forward to it, and thanks for the question.

At this time, it brings us to the end of our question-and-answer session. I would like to turn the floor back over to Mr. Ives for closing comments.

Thank you all for joining us today. As you can tell, we're very excited about this transaction, and we look forward to talking to you in the future. Have a good day.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of day.

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.