C.H. Robinson Reports 2022 First Quarter Results

Total revenues increased 41.9% to $6.8 billion, driven primarily by both higher pricing and higher volume across most of services

C.H. Robinson Worldwide, Inc. reported financial results for the quarter ended March 31, 2022.

First Quarter Key Metrics:

• Gross profits increased 29.1% to $900.5 million
• Adjusted gross profits⁽¹⁾ increased 29.0% to $906.2 million
• Income from operations increased 54.7% to $345.5 million
• Adjusted operating margin⁽¹⁾ increased 630 basis points to 38.1%
• Diluted earnings per share (EPS) increased 60.2% to $2.05
• Cash used by operations improved by $42.8 million to $13.9 million

“In our first quarter, we delivered record quarterly profits,” said Bob Biesterfeld, President and Chief Executive Officer of C.H. Robinson. “Sequential improvement was driven by significant operating margin expansion in our North American Surface Transportation business, as we improved the health of our contractual truckload business, continued to grow our truckload volume, and improved the profitability of our LTL business. Our Global Forwarding team continued delivering excellent service to our customers and collaborating with our carriers, driving more business to our platform. And finally, our Robinson Fresh, Managed Services and Europe Surface Transportation businesses all improved their top line growth and operating income on a year-over-year basis.”

Summary of First Quarter Results Compared to the First Quarter of 2021

• Total revenues increased 41.9% to $6.8 billion, driven primarily by both higher pricing and higher volume across most of our services.
• Gross profits increased 29.1% to $900.5 million. Adjusted gross profits increased 29.0% to $906.2 million, primarily driven by higher adjusted gross profit per transaction and higher volume across most of our services.
• Operating expenses increased 17.0% to $560.7 million. Personnel expenses increased 14.6% to $413.4 million, primarily due to higher headcount, which increased 15.1%. Selling, general and administrative (“SG&A”) expenses of $147.4 million increased 24.7%, primarily due to higher purchased and contracted services, a non-recurring legal expense, and increased travel expenses.
• Income from operations totaled $345.5 million, up 54.7% due to the increase in adjusted gross profits, partially offset by the increase in operating expenses. Adjusted operating margin of 38.1% increased 630 basis points.
• Interest and other income/expense totaled $14.2 million, consisting primarily of $14.5 million of interest expense, which increased $2.3 million versus last year due to a higher average debt balance.
• The effective tax rate in the quarter was 18.4% compared to 18.3% in the first quarter last year.
• Net income totaled $270.3 million, up 56.0% from a year ago. Diluted EPS of $2.05 increased 60.2%.

First quarter total revenues for C.H. Robinson’s NAST segment totaled $4.1 billion, an increase of 28.1% over the prior year, primarily driven by higher truckload and less-than truckload (“LTL”) pricing and an increase in truckload shipments. NAST adjusted gross profits increased 20.2% in the quarter to $506.1 million. Adjusted gross profits in truckload increased 19.5% due to a 15.0% increase in adjusted gross profit per load and a 4.0% increase in shipments. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, increased approximately 20.5% in the quarter, while truckload linehaul cost per mile, excluding fuel surcharges, increased approximately 21.0%, resulting in a 17.0% increase in truckload adjusted gross profit per mile. LTL adjusted gross profits increased 25.5% versus the year-ago period, as adjusted gross profit per order increased 27.0% and LTL volumes declined 1.0%, mainly driven by a normalization of business levels as our LTL volumes in the first quarter of 2021 continued to be bolstered by a few large customers that benefitted from the stay-at-home trend during COVID. NAST overall volume growth was up 1.0% for the quarter. Operating expenses increased 13.9% primarily due to increased salaries, incentive compensation, and technology expenses. Income from operations increased 33.3% to $182.4 million, and adjusted operating margin expanded 350 basis points to 36.0%. NAST average headcount was up 12.4% in the quarter.

Global Forwarding Results

First quarter total revenues for the Global Forwarding segment increased 89.8% to $2.2 billion, primarily driven by higher pricing and higher volume in both our ocean and air services, reflecting the strong demand environment, market share gains, and strained capacity. Adjusted gross profits increased 50.2% in the quarter to $321.8 million. Ocean adjusted gross profits increased 63.5%, driven by a 52.5% increase in adjusted gross profit per shipment and a 7.0% increase in volumes. Adjusted gross profits in air increased 33.9% driven by a 10.0% increase in metric tons shipped and a 21.5% increase in adjusted gross profit per metric ton. Customs adjusted gross profits increased 13.5%, driven by a higher mix of value-added services and a 5.0% increase in transaction volume. Operating expenses increased 24.7%, primarily driven by increased salaries, incentive compensation and technology expenses. First quarter average headcount increased 18.5%. Income from operations increased 85.1% to $167.6 million, and adjusted operating margin expanded 980 basis points to 52.1% in the quarter.

All Other and Corporate Results

First quarter Robinson Fresh adjusted gross profits increased 22.3% to $30.5 million, due to a 7.5% increase in case volume and an increase in integrated supply chain and technology services. Managed Services adjusted gross profits increased 9.9% in the quarter, due to growth in business with both new and existing customers. Other Surface Transportation adjusted gross profits increased 19.4% to $19.7 million, primarily due to a 21.7% increase in Europe truckload adjusted gross profits.

Other Income Statement Items

The first quarter effective tax rate was 18.4%, up from 18.3% last year. We expect our 2022 full-year effective tax rate to be 19 to 21 percent. The first quarter rate is typically lower than our full-year rate due to the tax benefits related to delivery of annual stock-based compensation in the quarter.

Interest and other income/expense totaled $14.2 million, consisting primarily of $14.5 million of interest expense, which increased $2.3 million versus last year due to a higher average debt balance.

Diluted weighted average shares outstanding in the quarter were down 2.6% due primarily to share repurchases over the past twelve months.

Cash Flow Generation and Capital Distribution

Cash used by operations totaled $13.9 million in the first quarter, compared to $56.7 million in the first quarter of 2021. The $42.8 million improvement was primarily due to a $97.0 million increase in net income, partially offset by a $288.5 million sequential increase in net operating working capital in the first quarter of 2022, compared to a $251.8 million sequential increase in the first quarter of 2021. The increase in net operating working capital in the first quarter of 2022 resulted primarily from a $479.0 million sequential increase in accounts receivable and contract assets, compared to a $190.4 million sequential increase in total accounts payable and accrued transportation expense.

In the first quarter of 2022, $250.6 million of cash was returned to shareholders, with $177.7 million in total repurchases of common stock and $72.9 million in cash dividends.

Capital expenditures totaled $26.2 million in the quarter. Capital expenditures for 2022 are expected to be $90 million to $100 million, primarily driven by technology investments in our digital platform.

Outlook

“As questions linger about the impact on global economic growth from the Russian invasion of Ukraine, higher energy prices and inflationary pressures, among other impacts, we believe that our global suite of multimodal services, our growing digital platform, and our resilient and flexible non-asset-based business model will continue to deliver strong financial results through the cycle,” Biesterfeld stated. “We will continue to benefit from our product and technology investments while delivering on opportunities to integrate our services to help our customers solve their complex global supply chain issues. We are uniquely positioned to orchestrate end-to-end supply chain success for our customers and to help them not only navigate uncertain market conditions, but to succeed in doing so. One of the core values we live by is to evolve constantly. To advance our industry leadership in a more digital environment, we are evolving to a product-led organization by reorienting the intersection of our growth strategy and our engineering and technology teams with the needs of our customers and carriers, and we’ll continue to differentiate ourselves in the market by having great people that our customers can rely on. I’m excited by the initial results from the enhancements that were rolled out in February for our Navisphere Carrier product. We’ll continue to build on our customer-centric commitment by continuing to invest in smart, customer and carrier-focused products, and we’ll launch several new products that we believe will benefit our customers and carriers as we continue to build out the most powerful supply chain platform.”

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