EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (Nasdaq: CHRW) today reported financial results for the quarter ended September 30, 2023.
Third Quarter Key Metrics:
- Gross profits decreased 28.9% to $626.6 million
- Income from operations decreased 60.5% to $113.5 million
- Adjusted operating margin(1) decreased 1,450 basis points to 17.9%
- Adjusted operating margin - excluding restructuring,(1) decreased 1,070 basis points to 21.7%
- Diluted earnings per share (EPS) decreased 61.8% to $0.68
- Adjusted EPS(1) decreased 52.8% to $0.84
- Cash generated by operations decreased by $420.2 million to $205.2 million
(1) Adjusted operating margin, adjusted operating margin – excluding restructuring and adjusted EPS are non-GAAP financial measures. The same factors described in this release that impacted these non-GAAP measures also impacted the comparable GAAP measures. Refer to pages 11 through 13 for further discussion and GAAP to Non-GAAP Reconciliations.
"As has been well documented by many industry participants and observers, global freight demand continued to be weak in the third quarter," said C.H. Robinson's President and Chief Executive Officer, Dave Bozeman. "We are staying focused on what we can control, by providing superior service to our customers and carriers, executing on our plans to streamline our processes by removing waste and manual touches, and delivering tools that enable our customer- and carrier-facing employees to allocate their time to relationship building and exception management. Our focus on delivering quality and improvements to our customers, such as enhanced visibility and increased automation, has been reflected in very positive feedback from customers and validated by net promoter scores this year that are the highest on record for the company, which we believe sets us up well with customers for the eventual positive inflection in the freight market."
"Our customers value the quality, stability and reliability that we provide, as they work to optimize their transportation needs. This has taken on greater importance to shippers who had exposure to transportation providers whose business models were not financially viable. During my many discussions with customers over the past four months, it’s clear that they prefer partners who have financial strength and can invest through cycles in the customer experience. They also want partners who have the expertise to provide innovative solutions, enabled by technology and people that they rely on to serve as an extension of their team. C.H. Robinson is that partner, with people who have deep expertise in the freight market and longstanding relationships with their customers and carriers. Combined with Robinson’s strong technology and large data set, our people are able to provide innovative tech-enabled solutions powered by our information advantage for the benefit of our customers and carriers. This secret sauce is not easy to replicate with a digital-only solution," added Bozeman.
"We’re executing on our plans to streamline our processes by removing waste and manual touches, and the result has been meaningful cost reductions and productivity gains across our business that are ahead of our stated targets. Even though I’m pleased with the progress that the team has made, I’ve challenged them to increase our clock speed on decision making and improvement efforts. We’re now driving focus on a handful of concurrent workstreams that are addressing the highest leverage areas to eliminate productivity bottlenecks."
"Ultimately, our focus on continuously improving the customer and carrier experience and removing waste from our workflows will result in a company that is quicker, more flexible and more agile in solving problems for our customers, providing better customer service and creating operating leverage and profitable growth. I’m excited about the work that we’re doing to reinvigorate Robinson’s winning culture, and I’m confident that together we will win for our customers, carriers, employees and shareholders," Bozeman concluded.
Summary of Third Quarter of 2023 Results Compared to the Third Quarter of 2022
- Total revenues decreased 27.8% to $4.3 billion, primarily driven by lower pricing in our ocean and truckload services.
- Gross profits decreased 28.9% to $626.6 million. Adjusted gross profits decreased 28.4% to $634.8 million, primarily driven by lower adjusted gross profit per transaction in truckload and ocean.
- Operating expenses decreased 13.1% to $521.3 million. Personnel expenses decreased 21.5% to $343.5 million, primarily due to cost optimization efforts and lower variable compensation. Average headcount declined 13.7%. Other selling, general and administrative (“SG&A”) expenses of $177.8 million increased 9.7%, primarily due to $21.4 million of restructuring expenses, partially offset by decreased purchased and contracted services and decreased legal settlements. The restructuring expenses are primarily related to asset impairments driven by our decision to divest our global forwarding operations in Argentina.
- Income from operations totaled $113.5 million, down 60.5% due to the decrease in adjusted gross profits, partially offset by the decline in operating expenses. Adjusted operating margin of 17.9% declined 1,450 basis points.
- Interest and other income/expense, net totaled $20.7 million of expense, consisting primarily of $21.8 million of interest expense, which increased $1.0 million versus last year due to higher variable interest rates.
- The effective tax rate in the quarter was 11.7% compared to 16.9% in the third quarter last year. The lower rate in the third quarter of this year was driven by lower income before taxes and incremental benefits from foreign tax credits.
- Net income totaled $81.9 million, down 63.7% from a year ago. Diluted EPS of $0.68 decreased 61.8%. Adjusted EPS of $0.84 decreased 52.8%.
Summary of 2023 Year-to-Date Results Compared to 2022
- Total revenues decreased 31.9% to $13.4 billion, primarily driven by lower pricing in our ocean and truckload services.
- Gross profits decreased 30.1% to $2.0 billion. Adjusted gross profits decreased 29.7% to $2.0 billion, primarily driven by lower adjusted gross profit per transaction in truckload and ocean.
- Operating expenses decreased 8.3% to $1.6 billion. Personnel expenses decreased 14.8% to $1.1 billion, primarily due to cost optimization efforts and lower variable compensation. Average headcount declined 8.0%. Other SG&A expenses increased 11.3% to $474.9 million, primarily due to a $25.3 million gain on the sale-leaseback of our Kansas City regional center recorded in the prior year and $22.6 million of restructuring expenses in the current year, partially offset by decreased purchased and contracted services.
- Income from operations totaled $407.2 million, down 63.1% from last year, due to the decrease in adjusted gross profits, partially offset by the decline in operating expenses. Adjusted operating margin of 20.5% decreased 1,850 basis points.
- Interest and other income/expense, net totaled $67.3 million of expense, which primarily consisted of $68.6 million of interest expense, which increased $16.3 million versus last year due to higher variable interest rates. The year-to-date results also included a $5.9 million net loss from foreign currency revaluation and realized foreign currency gains and losses, compared to a $6.6 million net loss last year, driven by foreign currency impacts on intercompany assets and liabilities.
- The effective tax rate for the nine months ended September 30, 2023 was 13.5% compared to 19.2% in the year-ago period. The lower rate in the current period was driven by lower income before taxes and incremental benefits from foreign tax credits.
- Net income totaled $294.2 million, down 65.2% from a year ago. Diluted EPS of $2.46 decreased 62.2%. Adjusted EPS of $2.73 decreased 57.0%.
North American Surface Transportation (“NAST”) Results
Summarized financial results of our NAST segment are as follows (dollars in thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
|
2022 |
|
% change |
|||||
Total revenues |
$ |
3,086,970 |
|
$ |
4,002,461 |
|
(22.9 |
)% |
|
$ |
9,470,425 |
|
$ |
12,264,396 |
|
(22.8 |
)% |
Adjusted gross profits(1) |
|
386,510 |
|
|
563,787 |
|
(31.4 |
)% |
|
|
1,213,697 |
|
|
1,694,438 |
|
(28.4 |
)% |
Income from operations |
|
112,121 |
|
|
211,899 |
|
(47.1 |
)% |
|
|
364,002 |
|
|
670,752 |
|
(45.7 |
)% |
____________________________________________ |
|||||||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained later in this release. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||||||
Third quarter total revenues for the NAST segment totaled $3.1 billion, a decrease of 22.9% over the prior year, primarily driven by lower truckload pricing, reflecting an oversupply of truckload capacity compared to soft freight demand. NAST adjusted gross profits decreased 31.4% in the quarter to $386.5 million. Adjusted gross profits in truckload decreased 40.4% due to a 36.5% decrease in adjusted gross profit per shipment and a 6.0% decline in truckload shipments. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 16.5% in the quarter compared to the prior year, while truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 13.5%, resulting in a 34.0% decrease in truckload adjusted gross profit per mile. LTL adjusted gross profits decreased 15.3% versus the year-ago period, as adjusted gross profit per order decreased 13.5% and LTL shipments decreased 2.0%. NAST overall volume growth was down 3.5% for the quarter. Operating expenses decreased 22.0% primarily due to cost optimization efforts, including lower average employee headcount, and lower variable compensation. NAST average employee headcount was down 16.2% in the quarter. Income from operations decreased 47.1% to $112.1 million, and adjusted operating margin declined 860 basis points to 29.0%.
Global Forwarding Results
Summarized financial results of our Global Forwarding segment are as follows (dollars in thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||
Total revenues |
$ |
719,045 |
|
$ |
1,511,115 |
|
(52.4 |
)% |
|
$ |
2,288,890 |
|
$ |
5,798,702 |
|
(60.5 |
)% |
Adjusted gross profits(1) |
|
169,893 |
|
|
248,433 |
|
(31.6 |
)% |
|
|
527,043 |
|
|
894,724 |
|
(41.1 |
)% |
Income from operations |
|
3,491 |
|
|
85,953 |
|
(95.9 |
)% |
|
|
63,254 |
|
|
421,148 |
|
(85.0 |
)% |
____________________________________________ |
|||||||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained later in this release. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||||||
Third quarter total revenues for the Global Forwarding segment decreased 52.4% to $719.0 million, primarily driven by lower pricing in our ocean service, reflecting an oversupply of vessel capacity compared to soft freight demand. Adjusted gross profits decreased 31.6% in the quarter to $169.9 million. Ocean adjusted gross profits decreased 35.0%, driven by a 34.5% decrease in adjusted gross profit per shipment and a 0.5% decline in shipments. Air adjusted gross profits decreased 36.8%, driven by a 35.5% decrease in adjusted gross profit per metric ton shipped and a 2.0% decline in metric tons shipped. Customs adjusted gross profits decreased 10.7%, driven primarily by an 8.0% reduction in transaction volume. Operating expenses increased 2.4%, primarily due to $23.6 million of restructuring expenses, which were partially offset by cost optimization efforts, including lower average employee headcount, and lower variable compensation. Third quarter average employee headcount decreased 13.3%. Income from operations decreased 95.9% to $3.5 million, and adjusted operating margin declined 3,250 basis points to 2.1% in the quarter. Adjusted operating margin, excluding restructuring expenses, was 15.9% for the quarter.
All Other and Corporate Results
Total revenues and adjusted gross profits for Robinson Fresh, Managed Services and Other Surface Transportation are summarized as follows (dollars in thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||
Total revenues |
$ |
535,015 |
|
$ |
501,800 |
|
6.6 |
% |
|
$ |
1,615,241 |
|
$ |
1,566,706 |
|
3.1 |
% |
Adjusted gross profits(1): |
|
|
|
|
|
|
|
|
|
|
|
||||||
Robinson Fresh |
$ |
31,083 |
|
$ |
27,677 |
|
12.3 |
% |
|
$ |
100,123 |
|
$ |
93,163 |
|
7.5 |
% |
Managed Services |
|
29,427 |
|
|
29,595 |
|
(0.6 |
)% |
|
|
87,350 |
|
|
85,295 |
|
2.4 |
% |
Other Surface Transportation |
|
17,936 |
|
|
17,702 |
|
1.3 |
% |
|
|
57,772 |
|
|
57,383 |
|
0.7 |
% |
____________________________________________ |
|||||||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained later in this release. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||||||
Third quarter Robinson Fresh adjusted gross profits increased 12.3% to $31.1 million, primarily driven by a 23.0% increase in case volume in retail and integrated supply chain solutions for foodservice customers. Managed Services adjusted gross profits decreased 0.6% in the quarter. Other Surface Transportation adjusted gross profits increased 1.3% to $17.9 million, primarily due to an increase in Europe LTL adjusted gross profits.
Other Income Statement Items
The third quarter effective tax rate was 11.7%, down from 16.9% last year. The lower rate in the third quarter of this year was driven by lower income before taxes and incremental benefits from foreign tax credits. We now expect our 2023 full-year effective tax rate to be 14% to 15%.
Interest and other income/expense, net totaled $20.7 million of expense, consisting primarily of $21.8 million of interest expense, which increased $1.0 million versus the third quarter of 2022 due to higher variable interest rates.
Diluted weighted average shares outstanding in the quarter were down 5.8% due to share repurchases over the past twelve months.
Cash Flow Generation and Capital Distribution
Cash generated from operations totaled $205.2 million in the third quarter, compared to $625.5 million of cash generated from operations in the third quarter of 2022. The $420.2 million decrease was primarily related to a $304.4 million decline in cash provided by changes in net operating working capital, due to a $54.9 million sequential decrease in net operating working capital in the third quarter of 2023 compared to a $359.3 million sequential decrease in the third quarter of 2022.
In the third quarter of 2023, cash returned to shareholders totaled $75.8 million, with $72.7 million in cash dividends and $3.0 million in repurchases of common stock.
Capital expenditures totaled $16.7 million in the quarter. Capital expenditures for 2023 are expected to be toward the lower end of the previously provided range of $90 million to $100 million.
About C.H. Robinson
C.H. Robinson solves logistics problems for companies across the globe and across industries, from the simple to the most complex. With $30 billion in freight under management and 20 million shipments annually, we are one of the world’s largest logistics platforms. Our global suite of services accelerates trade to seamlessly deliver the products and goods that drive the world’s economy. With the combination of our multimodal transportation management system and expertise, we use our information advantage to deliver smarter solutions for our 100,000 customers and the more than 450,000 contract carriers on our platform. Our technology is built by and for supply chain experts to bring faster, more meaningful improvements to our customers’ businesses. As a responsible global citizen, we are also proud to contribute millions of dollars to support causes that matter to our company, our Foundation and our employees. For more information, visit us at www.chrobinson.com (Nasdaq: CHRW).
Except for the historical information contained herein, the matters set forth in this release are forward-looking statements that represent our expectations, beliefs, intentions or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to, factors such as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; fuel price increases or decreases, or fuel shortages; competition and growth rates within the global logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; risks associated with significant disruptions in the transportation industry; changes in relationships with existing contracted truck, rail, ocean, and air carriers; changes in our customer base due to possible consolidation among our customers; risks with reliance on technology to operate our business; cyber-security related risks; risks associated with operations outside of the United States; our ability to successfully integrate the operations of acquired companies with our historic operations; climate change related risks; risks associated with our indebtedness; interest rates related risks; risks associated with litigation, including contingent auto liability and insurance coverage; risks associated with the potential impact of changes in government regulations; risks associated with the changes to income tax regulations; risks associated with the produce industry, including food safety and contamination issues; the impact of war on the economy; changes to our capital structure; changes due to catastrophic events including pandemics such as COVID-19; risks associated with the usage of artificial intelligence technologies; and other risks and uncertainties detailed in our Annual and Quarterly Reports.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date. All remarks made during our financial results conference call will be current at the time of the call, and we undertake no obligation to update the replay.
Conference Call Information:
C.H. Robinson Worldwide Third Quarter 2023 Earnings Conference Call
Wednesday, November 1, 2023; 5:00 p.m. Eastern Time
Presentation slides and a simultaneous live audio webcast of the conference call may be accessed through the Investor Relations link on C.H. Robinson’s website at www.chrobinson.com.
To participate in the conference call by telephone, please call ten minutes early by dialing: 877-269-7756
International callers dial +1-201-689-7817
Adjusted Gross Profit by Service Line
(in thousands)
This table of summary results presents our service line adjusted gross profits on an enterprise basis. The service line adjusted gross profits in the table differ from the service line adjusted gross profits discussed within the segments as our segments may have revenues from multiple service lines.
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||
Adjusted gross profits(1): |
|
|
|
|
|
|
|
|
|
|
|
||||||
Transportation |
|
|
|
|
|
|
|
|
|
|
|
||||||
Truckload |
$ |
245,439 |
|
$ |
398,418 |
|
(38.4 |
)% |
|
$ |
795,240 |
|
$ |
1,214,465 |
|
(34.5 |
)% |
LTL |
|
137,949 |
|
|
162,130 |
|
(14.9 |
)% |
|
|
413,771 |
|
|
482,740 |
|
(14.3 |
)% |
Ocean |
|
104,116 |
|
|
160,122 |
|
(35.0 |
)% |
|
|
321,692 |
|
|
609,543 |
|
(47.2 |
)% |
Air |
|
30,201 |
|
|
47,831 |
|
(36.9 |
)% |
|
|
95,246 |
|
|
166,136 |
|
(42.7 |
)% |
Customs |
|
24,904 |
|
|
27,881 |
|
(10.7 |
)% |
|
|
73,366 |
|
|
83,196 |
|
(11.8 |
)% |
Other logistics services |
|
64,838 |
|
|
65,441 |
|
(0.9 |
)% |
|
|
196,333 |
|
|
182,638 |
|
7.5 |
% |
Total transportation |
|
607,447 |
|
|
861,823 |
|
(29.5 |
)% |
|
|
1,895,648 |
|
|
2,738,718 |
|
(30.8 |
)% |
Sourcing |
|
27,402 |
|
|
25,371 |
|
8.0 |
% |
|
|
90,337 |
|
|
86,285 |
|
4.7 |
% |
Total adjusted gross profits |
$ |
634,849 |
|
$ |
887,194 |
|
(28.4 |
)% |
|
$ |
1,985,985 |
|
$ |
2,825,003 |
|
(29.7 |
)% |
____________________________________________ |
|||||||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained later in this release. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||||||
GAAP to Non-GAAP Reconciliation
(unaudited, in thousands)
Our adjusted gross profit is a non-GAAP financial measure. Adjusted gross profit is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers. We believe adjusted gross profit is a useful measure of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profit to be a primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profit. The reconciliation of gross profit to adjusted gross profit is presented below (in thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||||
Transportation |
$ |
4,029,407 |
|
$ |
5,724,364 |
|
(29.6 |
)% |
|
$ |
12,442,199 |
|
$ |
18,718,357 |
|
(33.5 |
)% |
Sourcing |
|
311,623 |
|
|
291,012 |
|
7.1 |
% |
|
|
932,357 |
|
|
911,447 |
|
2.3 |
% |
Total revenues |
|
4,341,030 |
|
|
6,015,376 |
|
(27.8 |
)% |
|
|
13,374,556 |
|
|
19,629,804 |
|
(31.9 |
)% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchased transportation and related services |
|
3,421,960 |
|
|
4,862,541 |
|
(29.6 |
)% |
|
|
10,546,551 |
|
|
15,979,639 |
|
(34.0 |
)% |
Purchased products sourced for resale |
|
284,221 |
|
|
265,641 |
|
7.0 |
% |
|
|
842,020 |
|
|
825,162 |
|
2.0 |
% |
Direct internally developed software amortization |
|
8,233 |
|
|
6,457 |
|
27.5 |
% |
|
|
24,299 |
|
|
18,831 |
|
29.0 |
% |
Total direct expenses |
|
3,714,414 |
|
|
5,134,639 |
|
(27.7 |
)% |
|
|
11,412,870 |
|
|
16,823,632 |
|
(32.2 |
)% |
Gross profit |
$ |
626,616 |
|
$ |
880,737 |
|
(28.9 |
)% |
|
$ |
1,961,686 |
|
$ |
2,806,172 |
|
(30.1 |
)% |
Plus: Direct internally developed software amortization |
|
8,233 |
|
|
6,457 |
|
27.5 |
% |
|
|
24,299 |
|
|
18,831 |
|
29.0 |
% |
Adjusted gross profit |
$ |
634,849 |
|
$ |
887,194 |
|
(28.4 |
)% |
|
$ |
1,985,985 |
|
$ |
2,825,003 |
|
(29.7 |
)% |
Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profit. Our adjusted operating margin - excluding restructuring is a similar non-GAAP financial measure as adjusted operating margin, but also excludes the impact of restructuring and related costs. We believe adjusted operating margin and adjusted operating margin - excluding restructuring are useful measures of our profitability in comparison to our adjusted gross profit, which we consider a primary performance metric as discussed above. The comparisons of operating margin to adjusted operating margin and adjusted operating margin - excluding restructuring are presented below:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues |
$ |
4,341,030 |
|
|
$ |
6,015,376 |
|
|
(27.8 |
)% |
|
$ |
13,374,556 |
|
|
$ |
19,629,804 |
|
|
(31.9 |
)% |
Income from operations |
|
113,522 |
|
|
|
287,609 |
|
|
(60.5 |
)% |
|
|
407,178 |
|
|
|
1,102,748 |
|
|
(63.1 |
)% |
Operating margin |
|
2.6 |
% |
|
|
4.8 |
% |
|
(220) bps |
|
|
3.0 |
% |
|
|
5.6 |
% |
|
(260) bps |
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted gross profit |
$ |
634,849 |
|
|
$ |
887,194 |
|
|
(28.4 |
)% |
|
$ |
1,985,985 |
|
|
$ |
2,825,003 |
|
|
(29.7 |
)% |
Income from operations |
|
113,522 |
|
|
|
287,609 |
|
|
(60.5 |
)% |
|
|
407,178 |
|
|
|
1,102,748 |
|
|
(63.1 |
)% |
Adjusted operating margin |
|
17.9 |
% |
|
|
32.4 |
% |
|
(1,450) bps |
|
|
20.5 |
% |
|
|
39.0 |
% |
|
(1,850) bps |
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted gross profit |
$ |
634,849 |
|
|
$ |
887,194 |
|
|
(28.4 |
)% |
|
$ |
1,985,985 |
|
|
$ |
2,825,003 |
|
|
(29.7 |
)% |
Income from operations - excluding restructuring and gain on sale |
|
137,985 |
|
|
$ |
287,609 |
|
|
(52.0 |
)% |
|
|
449,495 |
|
|
$ |
1,077,452 |
|
|
(58.3 |
)% |
Adjusted operating margin - excluding restructuring and gain on sale |
|
21.7 |
% |
|
|
32.4 |
% |
(1,070) bps |
|
22.6 |
% |
|
|
38.1 |
% |
|
(1,550) bps |
||||
GAAP to Non-GAAP Reconciliation
(unaudited, in thousands)
Our adjusted income (loss) from operations, adjusted operating margin - excluding restructuring, and adjusted net income per share (diluted) are non-GAAP financial measures. Adjusted income (loss) from operations and adjusted net income per share (diluted) is calculated as income (loss) from operations, adjusted operating margin - excluding restructuring, and net income per share (diluted) excluding the impact of restructuring and related costs. We believe that these measures provide useful information to investors and include them within our internal reporting to our chief operating decision maker. Accordingly, the discussion of our results of operations includes discussion on the changes in our adjusted income (loss) from operations, adjusted operating margin - excluding restructuring, and adjusted net income per share (diluted). The reconciliation of income (loss) from operations, adjusted operating margin - excluding restructuring, and net income per share (diluted) to adjusted income (loss) from operations and adjusted net income per share (diluted) is presented below (in thousands except per share data):
|
NAST |
|
Global
|
|
All
|
|
Consolidated |
||||||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
||||||||
Income (loss) from operations |
$ |
112,121 |
|
|
$ |
3,491 |
|
|
$ |
(2,090 |
) |
|
$ |
113,522 |
|
Severance |
|
(64 |
) |
|
|
2,530 |
|
|
|
619 |
|
|
|
3,085 |
|
Other selling, general, and administrative expenses |
|
4 |
|
|
|
21,079 |
|
|
|
362 |
|
|
|
21,445 |
|
Other personnel expenses |
|
(9 |
) |
|
|
(17 |
) |
|
|
(41 |
) |
|
|
(67 |
) |
Total restructuring and related costs(1) |
|
(69 |
) |
|
|
23,592 |
|
|
|
940 |
|
|
|
24,463 |
|
Income (loss) from operations - excluding restructuring |
$ |
112,052 |
|
|
$ |
27,083 |
|
|
$ |
(1,150 |
) |
|
$ |
137,985 |
|
|
|
|
|
|
|
|
|
||||||||
Adjusted gross profit |
$ |
386,510 |
|
|
$ |
169,893 |
|
|
$ |
78,446 |
|
|
$ |
634,849 |
|
Income (loss) from operations - excluding restructuring |
|
112,052 |
|
|
|
27,083 |
|
|
|
(1,150 |
) |
|
|
137,985 |
|
Adjusted operating margin - excluding restructuring |
|
29.0 |
% |
|
|
15.9 |
% |
|
|
N/M |
|
|
|
21.7 |
% |
|
|
|
|
|
|
|
|
||||||||
Net income per share (diluted) |
|
|
|
|
|
|
$ |
0.68 |
|
||||||
Restructuring and related costs, net of tax(1) |
|
|
|
|
|
|
|
0.16 |
|
||||||
Adjusted net income per share (diluted) |
|
|
|
|
|
|
$ |
0.84 |
|
||||||
|
|
|
|
|
|
|
|
||||||||
|
NAST |
|
Global Forwarding |
|
All Other and Corporate |
|
Consolidated |
||||||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
||||||||
Income (loss) from operations |
$ |
364,002 |
|
|
$ |
63,254 |
|
|
$ |
(20,078 |
) |
|
$ |
407,178 |
|
Severance |
|
869 |
|
|
|
4,670 |
|
|
|
12,365 |
|
|
|
17,904 |
|
Other selling, general, and administrative expenses |
|
8 |
|
|
|
21,242 |
|
|
|
1,324 |
|
|
|
22,574 |
|
Other personnel expenses |
|
214 |
|
|
|
72 |
|
|
|
1,553 |
|
|
|
1,839 |
|
Total restructuring and related costs(1) |
|
1,091 |
|
|
|
25,984 |
|
|
|
15,242 |
|
|
|
42,317 |
|
Income (loss) from operations - excluding restructuring |
$ |
365,093 |
|
|
$ |
89,238 |
|
|
$ |
(4,836 |
) |
|
$ |
449,495 |
|
|
|
|
|
|
|
|
|
||||||||
Adjusted gross profit |
$ |
1,213,697 |
|
|
$ |
527,043 |
|
|
$ |
245,245 |
|
|
$ |
1,985,985 |
|
Income (loss) from operations - excluding restructuring |
|
365,093 |
|
|
|
89,238 |
|
|
|
(4,836 |
) |
|
|
449,495 |
|
Adjusted operating margin - excluding restructuring |
|
30.1 |
% |
|
|
16.9 |
% |
|
|
N/M |
|
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
||||||||
Net income per share (diluted) |
|
|
|
|
|
|
$ |
2.46 |
|
||||||
Restructuring and related costs, net of tax(1) |
|
|
|
|
|
|
|
0.27 |
|
||||||
Adjusted net income per share (diluted) |
|
|
|
|
|
|
$ |
2.73 |
|
||||||
____________________________________________ |
|||||||||||||||
(1) In the three months ended September 30, 2023, we incurred restructuring expenses of $3.0 million related to workforce reductions and $21.4 million of asset impairment and other charges. In the nine months ended September 30, 2023, we incurred restructuring expenses of $19.7 million related to workforce reductions and $22.6 million of asset impairment and other charges. |
|||||||||||||||
GAAP to Non-GAAP Reconciliation
(unaudited, in thousands)
Our adjusted income from operations and adjusted net income per share (diluted) are non-GAAP financial measures. Adjusted income from operations and adjusted net income per share (diluted) is calculated as income from operations and net income per share (diluted) excluding the impact of the gain on sale-leaseback of our Kansas City regional center. We believe that these measures provide useful information to investors and include them within our internal reporting to our chief operating decision maker. Accordingly, the discussion of our results of operations includes discussion on the changes in our adjusted income from operations and adjusted net income per share (diluted). The reconciliation of income from operations and net income per share (diluted) to adjusted income from operations and adjusted net income per share (diluted) is presented below (in thousands except per share data):
|
Nine Months Ended
|
||
Income from operations |
$ |
1,102,748 |
|
Gain on sale of property and equipment(1) |
|
(25,296 |
) |
Income from operations - excluding gain on sale |
$ |
1,077,452 |
|
|
|
||
Net income per share (diluted) |
$ |
6.50 |
|
Gain on sale of property and equipment(1) |
|
(0.15 |
) |
Adjusted net income per share (diluted) |
$ |
6.35 |
|
_______________________________________ |
|||
(1) The gain on sale of property and equipment related to the sale-leaseback of our Kansas City regional center is included within other selling, general, and administrative expenses in our condensed consolidated statements of income. |
|||
Condensed Consolidated Statements of Income |
|||||||||||||||||||||
(unaudited, in thousands, except per share data) |
|||||||||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||
|
|
||||||||||||||||||||
|
2023 |
|
2022 |
|
% change |
|
2023 |
|
2022 |
|
% change |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Transportation |
$ |
4,029,407 |
|
|
$ |
5,724,364 |
|
|
(29.6 |
)% |
|
$ |
12,442,199 |
|
|
$ |
18,718,357 |
|
|
(33.5 |
)% |
Sourcing |
|
311,623 |
|
|
|
291,012 |
|
|
7.1 |
% |
|
|
932,357 |
|
|
|
911,447 |
|
|
2.3 |
% |
Total revenues |
|
4,341,030 |
|
|
|
6,015,376 |
|
|
(27.8 |
)% |
|
|
13,374,556 |
|
|
|
19,629,804 |
|
|
(31.9 |
)% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchased transportation and related services |
|
3,421,960 |
|
|
|
4,862,541 |
|
|
(29.6 |
)% |
|
|
10,546,551 |
|
|
|
15,979,639 |
|
|
(34.0 |
)% |
Purchased products sourced for resale |
|
284,221 |
|
|
|
265,641 |
|
|
7.0 |
% |
|
|
842,020 |
|
|
|
825,162 |
|
|
2.0 |
% |
Personnel expenses |
|
343,532 |
|
|
|
437,545 |
|
|
(21.5 |
)% |
|
|
1,103,915 |
|
|
|
1,295,670 |
|
|
(14.8 |
)% |
Other selling, general, and administrative expenses |
|
177,795 |
|
|
|
162,040 |
|
|
9.7 |
% |
|
|
474,892 |
|
|
|
426,585 |
|
|
11.3 |
% |
Total costs and expenses |
|
4,227,508 |
|
|
|
5,727,767 |
|
|
(26.2 |
)% |
|
|
12,967,378 |
|
|
|
18,527,056 |
|
|
(30.0 |
)% |
Income from operations |
|
113,522 |
|
|
|
287,609 |
|
|
(60.5 |
)% |
|
|
407,178 |
|
|
|
1,102,748 |
|
|
(63.1 |
)% |
Interest and other income/expense, net |
|
(20,748 |
) |
|
|
(15,972 |
) |
|
29.9 |
% |
|
|
(67,272 |
) |
|
|
(57,541 |
) |
|
16.9 |
% |
Income before provision for income taxes |
|
92,774 |
|
|
|
271,637 |
|
|
(65.8 |
)% |
|
|
339,906 |
|
|
|
1,045,207 |
|
|
(67.5 |
)% |
Provision for income taxes |
|
10,825 |
|
|
|
45,839 |
|
|
(76.4 |
)% |
|
|
45,750 |
|
|
|
200,876 |
|
|
(77.2 |
)% |
Net income |
$ |
81,949 |
|
|
$ |
225,798 |
|
|
(63.7 |
)% |
|
$ |
294,156 |
|
|
$ |
844,331 |
|
|
(65.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per share (basic) |
$ |
0.69 |
|
|
$ |
1.81 |
|
|
(61.9 |
)% |
|
$ |
2.48 |
|
|
$ |
6.60 |
|
|
(62.4 |
)% |
Net income per share (diluted) |
$ |
0.68 |
|
|
$ |
1.78 |
|
|
(61.8 |
)% |
|
$ |
2.46 |
|
|
$ |
6.50 |
|
|
(62.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average shares outstanding (basic) |
|
118,464 |
|
|
|
124,980 |
|
|
(5.2 |
)% |
|
|
118,532 |
|
|
|
127,944 |
|
|
(7.4 |
)% |
Weighted average shares outstanding (diluted) |
|
119,751 |
|
|
|
127,190 |
|
|
(5.8 |
)% |
|
|
119,762 |
|
|
|
129,839 |
|
|
(7.8 |
)% |
Business Segment Information |
|||||||||||||
(unaudited, in thousands, except average employee headcount) |
|||||||||||||
|
|
NAST |
|
Global
|
|
All
|
|
Consolidated |
|||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
$ |
3,086,970 |
|
$ |
719,045 |
|
$ |
535,015 |
|
|
$ |
4,341,030 |
Adjusted gross profits(1) |
|
|
386,510 |
|
|
169,893 |
|
|
78,446 |
|
|
|
634,849 |
Income (loss) from operations |
|
|
112,121 |
|
|
3,491 |
|
|
(2,090 |
) |
|
|
113,522 |
Depreciation and amortization |
|
|
5,882 |
|
|
5,446 |
|
|
14,216 |
|
|
|
25,544 |
Total assets(2) |
|
|
3,162,720 |
|
|
1,081,262 |
|
|
1,073,685 |
|
|
|
5,317,667 |
Average employee headcount |
|
|
6,278 |
|
|
5,082 |
|
|
4,217 |
|
|
|
15,577 |
|
|
|
|
|
|
|
|
|
|||||
|
|
NAST |
|
Global
|
|
All
|
|
Consolidated |
|||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
$ |
4,002,461 |
|
$ |
1,511,115 |
|
$ |
501,800 |
|
|
$ |
6,015,376 |
Adjusted gross profits(1) |
|
|
563,787 |
|
|
248,433 |
|
|
74,974 |
|
|
|
887,194 |
Income (loss) from operations |
|
|
211,899 |
|
|
85,953 |
|
|
(10,243 |
) |
|
|
287,609 |
Depreciation and amortization |
|
|
5,739 |
|
|
5,368 |
|
|
11,868 |
|
|
|
22,975 |
Total assets(2) |
|
|
3,624,333 |
|
|
2,266,923 |
|
|
904,274 |
|
|
|
6,795,530 |
Average employee headcount |
|
|
7,493 |
|
|
5,861 |
|
|
4,691 |
|
|
|
18,045 |
____________________________________________ |
|||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained above. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||
(2) All cash and cash equivalents are included in All Other and Corporate. |
|||||||||||||
Business Segment Information |
|||||||||||||
(unaudited, in thousands, except average employee headcount) |
|||||||||||||
|
|
NAST |
|
Global
|
|
All
|
|
Consolidated |
|||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
$ |
9,470,425 |
|
$ |
2,288,890 |
|
$ |
1,615,241 |
|
|
$ |
13,374,556 |
Adjusted gross profits(1) |
|
|
1,213,697 |
|
|
527,043 |
|
|
245,245 |
|
|
|
1,985,985 |
Income (loss) from operations |
|
|
364,002 |
|
|
63,254 |
|
|
(20,078 |
) |
|
|
407,178 |
Depreciation and amortization |
|
|
17,389 |
|
|
16,410 |
|
|
42,100 |
|
|
|
75,899 |
Total assets(2) |
|
|
3,162,720 |
|
|
1,081,262 |
|
|
1,073,685 |
|
|
|
5,317,667 |
Average employee headcount |
|
|
6,574 |
|
|
5,276 |
|
|
4,390 |
|
|
|
16,240 |
|
|
|
|
|
|
|
|
|
|||||
|
|
NAST |
|
Global
|
|
All
|
|
Consolidated |
|||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
$ |
12,264,396 |
|
$ |
5,798,702 |
|
$ |
1,566,706 |
|
|
$ |
19,629,804 |
Adjusted gross profits(1) |
|
|
1,694,438 |
|
|
894,724 |
|
|
235,841 |
|
|
|
2,825,003 |
Income from operations |
|
|
670,752 |
|
|
421,148 |
|
|
10,848 |
|
|
|
1,102,748 |
Depreciation and amortization |
|
|
18,101 |
|
|
16,394 |
|
|
34,228 |
|
|
|
68,723 |
Total assets(2) |
|
|
3,624,333 |
|
|
2,266,923 |
|
|
904,274 |
|
|
|
6,795,530 |
Average employee headcount |
|
|
7,420 |
|
|
5,735 |
|
|
4,497 |
|
|
|
17,652 |
____________________________________________ |
|||||||||||||
(1) Adjusted gross profits is a non-GAAP financial measure explained above. The difference between adjusted gross profits and gross profits is not material. |
|||||||||||||
(2)All cash and cash equivalents are included in All Other and Corporate. |
|||||||||||||
Condensed Consolidated Balance Sheets |
|||||
(unaudited, in thousands) |
|||||
|
September 30, 2023 |
|
December 31, 2022 |
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
174,733 |
|
$ |
217,482 |
Receivables, net of allowance for credit loss |
|
2,442,297 |
|
|
2,991,753 |
Contract assets, net of allowance for credit loss |
|
204,737 |
|
|
257,597 |
Prepaid expenses and other |
|
137,476 |
|
|
122,406 |
Total current assets |
|
2,959,243 |
|
|
3,589,238 |
|
|
|
|
||
Property and equipment, net of accumulated depreciation and amortization |
|
150,858 |
|
|
159,432 |
Right-of-use lease assets |
|
350,896 |
|
|
372,141 |
Intangible and other assets, net of accumulated amortization |
|
1,856,670 |
|
|
1,833,753 |
Total assets |
$ |
5,317,667 |
|
$ |
5,954,564 |
|
|
|
|
||
Liabilities and stockholders’ investment |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable and outstanding checks |
$ |
1,444,186 |
|
$ |
1,570,559 |
Accrued expenses: |
|
|
|
||
Compensation |
|
134,778 |
|
|
242,605 |
Transportation expense |
|
156,611 |
|
|
199,092 |
Income taxes |
|
6,782 |
|
|
15,210 |
Other accrued liabilities |
|
170,539 |
|
|
168,009 |
Current lease liabilities |
|
73,681 |
|
|
73,722 |
Current portion of debt |
|
662,966 |
|
|
1,053,655 |
Total current liabilities |
|
2,649,543 |
|
|
3,322,852 |
|
|
|
|
||
Long-term debt |
|
920,720 |
|
|
920,049 |
Noncurrent lease liabilities |
|
294,751 |
|
|
313,742 |
Noncurrent income taxes payable |
|
29,640 |
|
|
28,317 |
Deferred tax liabilities |
|
14,656 |
|
|
14,256 |
Other long-term liabilities |
|
3,773 |
|
|
1,926 |
Total liabilities |
|
3,913,083 |
|
|
4,601,142 |
|
|
|
|
||
Total stockholders’ investment |
|
1,404,584 |
|
|
1,353,422 |
Total liabilities and stockholders’ investment |
$ |
5,317,667 |
|
$ |
5,954,564 |
Condensed Consolidated Statements of Cash Flow |
|||||||
(unaudited, in thousands, except operational data) |
|||||||
|
Nine Months Ended September 30, |
||||||
Operating activities: |
2023 |
|
2022 |
||||
|
|
|
|
||||
Net income |
$ |
294,156 |
|
|
$ |
844,331 |
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|
|
|
||||
Depreciation and amortization |
|
75,899 |
|
|
|
68,723 |
|
Provision for credit losses |
|
(4,032 |
) |
|
|
(2,407 |
) |
Stock-based compensation |
|
37,309 |
|
|
|
78,346 |
|
Deferred income taxes |
|
(35,269 |
) |
|
|
(76,362 |
) |
Excess tax benefit on stock-based compensation |
|
(9,899 |
) |
|
|
(12,440 |
) |
Loss on disposal group held for sale |
|
21,113 |
|
|
|
— |
|
Other operating activities |
|
3,740 |
|
|
|
(24,011 |
) |
Changes in operating elements, net of acquisitions: |
|
|
|
||||
Receivables |
|
525,761 |
|
|
|
66,536 |
|
Contract assets |
|
52,810 |
|
|
|
90,481 |
|
Prepaid expenses and other |
|
(7,632 |
) |
|
|
13,437 |
|
Accounts payable and outstanding checks |
|
(122,312 |
) |
|
|
(109,493 |
) |
Accrued compensation |
|
(106,943 |
) |
|
|
6,701 |
|
Accrued transportation expenses |
|
(42,481 |
) |
|
|
(62,278 |
) |
Accrued income taxes |
|
3,131 |
|
|
|
(24,202 |
) |
Other accrued liabilities |
|
(2,636 |
) |
|
|
22,209 |
|
Other assets and liabilities |
|
1,900 |
|
|
|
(2,782 |
) |
Net cash provided by operating activities |
|
684,615 |
|
|
|
876,789 |
|
Investing activities: |
|
|
|
||||
Purchases of property and equipment |
|
(25,889 |
) |
|
|
(50,719 |
) |
Purchases and development of software |
|
(42,086 |
) |
|
|
(49,935 |
) |
Proceeds from sale of property and equipment |
|
1,324 |
|
|
|
63,208 |
|
Net cash used for investing activities |
|
(66,651 |
) |
|
|
(37,446 |
) |
Financing activities: |
|
|
|
||||
Proceeds from stock issued for employee benefit plans |
|
46,061 |
|
|
|
93,415 |
|
Stock tendered for payment of withholding taxes |
|
(23,754 |
) |
|
|
(26,597 |
) |
Repurchases of common stock |
|
(63,884 |
) |
|
|
(1,023,578 |
) |
Cash dividends |
|
(218,942 |
) |
|
|
(216,258 |
) |
Proceeds from long-term borrowings |
|
— |
|
|
|
200,000 |
|
Proceeds from short-term borrowings |
|
2,778,750 |
|
|
|
3,674,000 |
|
Payments on short-term borrowings |
|
(3,169,750 |
) |
|
|
(3,595,000 |
) |
Net cash used for financing activities |
|
(651,519 |
) |
|
|
(894,018 |
) |
Effect of exchange rates on cash and cash equivalents |
|
(6,708 |
) |
|
|
(15,206 |
) |
Net change in cash and cash equivalents, including cash classified within assets held for sale |
|
(40,263 |
) |
|
|
(69,881 |
) |
Less: net increase in cash and cash equivalents within assets held for sale |
|
(2,486 |
) |
|
|
— |
|
Cash and cash equivalents, beginning of period |
|
217,482 |
|
|
|
257,413 |
|
Cash and cash equivalents, end of period |
$ |
174,733 |
|
|
$ |
187,532 |
|
|
As of September 30, |
||||||
Operational Data: |
2023 |
|
2022 |
||||
Employees |
|
15,391 |
|
|
|
17,945 |
|
CHRW-IR
