Home » C.H. Robinson Reports Significant year-over-year increase in profitability, driven by strong execution, disciplined volume growth and improvement in gross profit

C.H. Robinson Reports Significant year-over-year increase in profitability, driven by strong execution, disciplined volume growth and improvement in gross profit

fleetnewsdaily | October 30, 2024

Third Quarter Gross profits increased 15.5% to $723.8 million

C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (Nasdaq: CHRW) today reported financial results for the quarter ended September 30, 2024.

Third Quarter Highlights:

Significant year-over-year increase in profitability, driven by strong execution, disciplined volume growth and improvement in gross profit, productivity and operating leverage
Gross profits increased 15.5% to $723.8 million
Income from operations increased 58.7% to $180.1 million
Adjusted operating margin⁽¹⁾ increased 660 basis points to 24.5%
Adjusted operating margin, excluding restructuring and loss on divestiture⁽¹⁾, increased 1,120 basis points to 32.9%
Diluted earnings per share (EPS) increased 17.6% to $0.80
Adjusted EPS⁽¹⁾ increased 45.5% to $1.28
Cash generated by operations decreased by $97.2 million to $108.1 million provided by operations, due to an increase in net operating working capital related to higher ocean rates

⁽¹⁾ Adjusted operating margin, adjusted operating margin, excluding restructuring and loss on divestiture, 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.

“I’m pleased with our third quarter results that reflect continued improvement in our execution, as we continue to deploy our new operating model. We are raising the bar, even in a historically prolonged freight recession, with strong execution and disciplined volume growth across divisions while delivering exceptional service for our customers and carriers,” said C.H. Robinson’s President and Chief Executive Officer, Dave Bozeman. “I want to thank our people, one of our greatest competitive advantages, for their relentless efforts to embrace our new operating model and execute in a fit, fast and focused way so we can keep pushing that bar higher.”

“Due to a focus on constantly testing market conditions and optimizing yield, we improved the quality of our volume in the third quarter and continued to expand our NAST gross profit margin. We also continued to push our efficiency to higher levels in both NAST and Global Forwarding, and we remain on track to deliver greater than 30% compound growth in productivity over the two-year period from the end of 2022 to end of 2024.”

“Our new operating model has changed how we discover and inspect root cause issues and quickly implement countermeasures to improve the level of our operational execution. The reliability of our operating reviews continues to increase, as we leverage our data rich environment to inform our decision making and enhance our competitive differentiation,” said Bozeman. “At an organizational level, we continue to cascade the operating model deeper into the organization and build operational muscle at various levels of the enterprise to deliver on our strategic roadmap. As part of this effort, an evolving toolkit is being used by our employees in the form of problem resolution, balanced scorecard reviews, daily management, and value stream mapping, to name a few.”

“Empowering our people with the Robinson operating model is creating a flywheel of performance, talent development and accountability that is evolving our culture to be driven by progress, execution and proactive problem identification and resolution. This is showing up in improvements such as more disciplined pricing and better decisions on the volume that we’re seeking. We are still early in our journey, but the operating model is helping us execute a solid strategy even better, and we expect further improvement as our team continues to embrace this new way of operating. As I’ve said before, I know from my past experiences of implementing Lean operating models that improvement isn’t always linear. But I’m confident in the team’s willingness and ability to drive a higher and more consistent level of discipline in our operational execution,” Bozeman concluded.

Summary of Third Quarter of 2024 Results Compared to the Third Quarter of 2023

Total revenues increased 7.0% to $4.6 billion, primarily driven by higher pricing and volume in our ocean services, partially offset by lower pricing and volume in truckload services.
Gross profits increased 15.5% to $723.8 million. Adjusted gross profits increased 15.8% to $735.3 million, primarily driven by higher adjusted gross profit per transaction in our ocean and truckload services.
Operating expenses increased 6.5% to $555.1 million. Personnel expenses increased 5.2% to $361.6 million, primarily due to higher variable compensation, partially offset by cost optimization efforts. Average employee headcount declined 9.6%. Other selling, general and administrative (“SG&A”) expenses increased 8.9% to $193.6 million, primarily due to a $57.0 million loss on the planned divestiture of our Europe Surface Transportation business. The prior year included $21.4 million of restructuring expenses, primarily related to the divestiture of our operations in Argentina. In addition, other SG&A expenses decreased across several expense categories in the current year.
Income from operations totaled $180.1 million, up 58.7% due to the increase in adjusted gross profits, partially offset by the increase in operating expenses. Adjusted operating margin⁽¹⁾of 24.5% increased 660 basis points.
Interest and other income/expense, net totaled $36.3 million of expense, consisting primarily of $22.1 million of interest expense, which increased $0.2 million versus last year, and a $15.1 million net loss from foreign currency revaluation and realized foreign currency gains and losses.
The effective tax rate in the quarter was 32.4%, compared to 11.7% in the third quarter last year. The higher rate in the third quarter of this year was driven by the impact of higher pre-tax income and non-recurring discrete items in the quarter, partially offset by increased tax benefit related to stock-based compensation and higher U.S. tax credits.
Net income totaled $97.2 million, up 18.6% from a year ago. Diluted EPS of $0.80 increased 17.6%. Adjusted EPS⁽¹⁾of $1.28increased 45.5%.

⁽¹⁾ Adjusted operating margin 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.

Summary of 2024 Year-to-Date Results Compared to 2023

Total revenues increased 1.2% to $13.5 billion, primarily driven by higher pricing and volume in our ocean services, partially offset by lower pricing in our truckload services.
Gross profits increased4.4% to$2.0 billion. Adjusted gross profits increased 4.8% to $2.1 billion, primarily driven by higher adjusted gross profit per transaction in our ocean and truckload services.
Operating expenses increased 1.0% to $1.6 billion. Personnel expenses decreased 0.2% to $1.1 billion, primarily due to cost optimization efforts partially offset by higher variable compensation. Average employee headcount declined 10.5%. Other SG&A expenses increased 3.9% to $493.2 million primarily due to the $57.0 million loss on the planned divestiture of our Europe Surface Transportation business. The prior year included $22.6 million of restructuring expenses, primarily related to the divestiture of our operations in Argentina. In addition, other SG&A expenses decreased across several expense categories in the current year.
Income from operations totaled $485.3 million, up 19.2% from last year, due to the increase in adjusted gross profits, partially offset by an increase in operating expenses. Adjusted operating margin⁽¹⁾of 23.3% increased 280 basis points.
Interest and other income/expense, net totaled $74.6 million of expense, primarily consisting of $67.1 million of interest expense, which decreased $1.5 million versus last year, due to a lower average debt balance. The year-to-date results also include a $10.7 million net loss from foreign currency revaluation and realized foreign currency gains and losses.
The effective tax rate for the nine months ended September 30, 2024 was 23.0% compared to 13.5% in the year-ago period. The higher rate in the current period was driven by the impact of higher pre-tax income and non-recurring discrete items in the quarter, partially offset by higher U.S. tax credits.
Net income totaled $316.4 million, up 7.6% from a year ago. Diluted EPS of $2.63 increased 6.9%. Adjusted EPS⁽¹⁾of $3.30 increased 17.9%.

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,
		2024		2023	% change			2024		2023	% change
Total revenues	$	2,934,617	$	3,086,970	(4.9	)%	$	8,924,839	$	9,470,425	(5.8	)%
Adjusted gross profits⁽¹⁾		420,664		386,510	8.8	%		1,237,431		1,213,697	2.0	%
Income from operations		148,767		112,121	32.7	%		398,764		364,002	9.5	%

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⁽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 $2.9 billion, a decrease of 4.9% over the prior year, primarily driven by lower truckload pricing, reflecting an oversupply of truckload capacity compared to freight demand. NAST adjusted gross profits increased 8.8% in the quarter to $420.7 million. Adjusted gross profits in truckload increased 16.6% due to a 21.0% increase in adjusted gross profit per shipment, partially offset by a 3.5% decrease in truckload shipments. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, increased approximately 2.5% in the quarter compared to the prior year, while truckload linehaul cost per mile, excluding fuel surcharges, also decreased 0.5%, resulting in a 21.5% increase in truckload adjusted gross profit per mile. LTL adjusted gross profits increased 3.7% versus the year-ago period, driven by a 2.5% increase in LTL volume and a 1.0% increase in adjusted gross profit per order. NAST overall volume increased modestly for the quarter. Operating expenses decreased 0.9%, primarily due to cost optimization efforts and lower credit losses, which were partially offset by higher variable compensation. NAST average employee headcount was down 10.9% in the quarter. Income from operations increased 32.7% to $148.8 million, and adjusted operating margin expanded 640 basis points to 35.4%.

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,
		2024		2023	% change			2024		2023	% change
Total revenues	$	1,141,190	$	719,045	58.7	%	$	2,921,050	$	2,288,890	27.6	%
Adjusted gross profits⁽¹⁾		234,636		169,893	38.1	%		598,748		527,043	13.6	%
Income from operations		88,115		3,491	N/M			160,649		63,254	154.0	%

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⁽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 increased 58.7% to $1.1 billion, primarily driven by higher pricing and volume in our ocean services. Adjusted gross profits increased 38.1% in the quarter to $234.6 million. Ocean adjusted gross profits increased 57.4%, driven by a 47.0% increase in adjusted gross profit per shipment and a 7.0% increase in shipments. Air adjusted gross profits increased 11.4%, driven by a 20.0% increase in metric tons shipped, partially offset by a 7.0% decrease in adjusted gross profit per metric ton shipped. Customs adjusted gross profits increased 13.5%, driven by both a 7.0% increase in adjusted gross profit per transaction and a 6.5% increase in transaction volume. Operating expenses decreased 11.9%, primarily due to a $23.6 million of restructuring expenses in the prior year, primarily related to the divestiture of our operations in Argentina, and due to cost optimization efforts in the current year. Third quarter average employee headcount decreased 10.4%. Income from operations increased to $88.1 million, and adjusted operating margin expanded 3,550 basis points to 37.6% in the quarter.

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