At C.H. Robinson, improved profitability, productivity and a lot fewer workers
It was the company's performance that drew congratulations and praise from analysts on its earnings call Wednesday. That support was followed through in early trading Thursday, with C.H. Robinson (NASDAQ: CHRW) up 7.55% to $105.02 at approximately 8:15 a.m. EDT.
With C.H. Robinson executives repeatedly using the word 'productivity' during its earnings call with analysts Wednesday, and with productivity at brokerages generally measured on some sort of measure of loads per employee, it brought into focus just how big the drop in employment at the company has been.
The third quarter of 2023 marks the first full quarter after Dave Bozeman became CEO of C.H. Robinson. In that quarter, according to company data, there were 15,577 employees total at the company. Of that, 6,278 were in the North American Surface Transportation (NAST) segment, which includes the company's truck brokerage activities.
In the just-completed second quarter, the average headcount for the company as a whole was 12,858, down 17.4% from the third quarter of 2023. At NAST, the drop was a smaller percentage, down 15.8%, which is a decline in employment to 5,283 from 6,278.
During that time, revenues at C.H. Robinson and in NAST were largely flat, owing to still-weak freight markets. That is the definition of productivity increases: getting done the same amount of work or more with fewer inputs, including labor.
And the trend is likely to continue. For example, in discussing the company's guidance for the rest of the year, Damon Lee, the company's CFO, said C.H. Robinson was reducing its guidance for personnel expenses by about $75 million on both the top and bottom end of its prior range of $1.375 billion to $1.475 billion.
'This reflects our disciplined approach to managing our cost structure and our ability to drive efficiency while positioning the organization for long-term growth, while remaining committed to further decoupling of head count from volume,' Lee said.
Those changes might not need layoffs to be accomplished, based on Lee's further comment: 'With low to mid-teen turnover rates, we are well positioned to manage headcount, primarily through natural attrition, if needed.'
But beyond that, the question was raised by an analyst on the earnings call: how much lower can you go?
Michael Castagnetto, who is the president of NAST, answered with the consistent message that C.H. Robinson executives have not wavered from since Bozeman took over. 'We're going to get more productive every day, every week, every month,' Castagnetto said.
And while some of that could come with further reductions in head count, Castangetto also discussed AI, specifically agentic AI, as a driver as well. Bozeman and others on the call cited numerous instances of productivity improvements brought on by AI that are allowing that reduction in headcount, including using AI to rapidly classify LTL freight under the new categorization regime in that sector implemented by the National Motor Freight Trucking Association.
In ultimately responding to the question of 'how low can you go?,' Castagnetto replied: 'I don't believe I would buy the idea that there's a limit.' But he added: 'I think there's a ton of unknown.'
Lee echoed that idea. 'We really don't see any future of a plateau and productivity for us,' he said. 'Our operating model is going to drive us to incremental evergreen productivity.'
From the outsider's perspective, Jason Seidl of TD Cowen summed up the earnings and the headcount by saying that the margins at NAST 'quickly (moved) closer toward long term targets as tech initiatives continue to enable CHRW to do more with less.'
At NAST, gross profits rose to $423.2 million from $419.7 million, a 3% gain. Other numbers at NAST showed improvement. The operating margin of 38% was better sequentially and year-on-year, and also, according to Seidl, beat forecasts.
Market share gains
C.H. Robinson's internal measurement showed the company gained market share during the quarter. According to the company, truckload volume per business day was up about 4.5% while LTL volume per business day rose 2.5%, numbers that exceeded the volume levels reported in the monthly Cass Index.
Deutsche Bank analyst Richa Harnain noted that the 1% growth in NAST volumes exceeded not only the Cass index but also the volumes reported by the brokerage units of J.B. Hunt (NASDAQ: JBHT) and Knight Swift (NASDAQ: KNX).
Tech keeping capacity alive?
With C.H. Robinson's executives boasting of their own technology, an analyst asked them whether technology in general might be prolonging a market with excess capacity that was referred to several times as a continuing headwind.
Castagnetto agreed there had been 'a democratization of freight brokerage tech over the last couple of years and there are plenty of folks offering capabilities out to smaller brokers.'
He took the opportunity to tout C.H. Robinson's own technology. 'We believe that there is a clear differentiation between what we do in the marketplace and our competition, whether that competition or assets, large brokers or small brokers,' Castagnetto said.
But then he took issue with the thesis: 'I'm not sure I would agree maybe with your sentiment on (tech) being a driver of keeping capacity in the marketplace.'
'I would acknowledge the democratization of freight brokerage tech, but we believe our tech stack, combined with our people, is a clear differentiator for us in the marketplace' Castagnetto added.
Other issues raised in the earnings call:
–With a freight market down for so long, brokerages run the risk of an upturn that leaves them facing higher spot rates to secure capacity against lower-priced contracts to move a customer's freight.
Arun Rajan, chief strategy and innovation officer, said C.H. Robinson believes the technology changes it has made can carry it through that period when rates rise, or in broker parlance, 'inflect.'
'Through…rigor, we've also improved our ability to manage the short-term gross margin compression that typically comes with a spot rate inflection, such that we are confident in our ability to shorten the time and reduce the impact of any margin compression compared to historical spot rate inflections,' Rajan said. 'Over a 12-month time frame, we expect a stronger demand and/or reduction of excess capacity that leads to a spot rate inflection to outweigh any short-term margin compression that may occur. In this regard, we believe our outperformance will continue as spot rates inflect.'
–It doesn't sound like acquisitions are high on the list of priorities at C.H. Robinson, though Lee said 'we're kicking the tires on inorganic opportunities I would say every week.'
C.H. Robinson is an investment-grade credit, but just by two notches. The company remains a dividend aristocrat, having reached that vaunted level just a few years ago by having increased its dividend payout at least 25 consecutive years. Along with keeping that investment grade rating, 'maintaining and growing our dividend are top priorities,' Lee said, without noting the reality that an acquisition gone wrong can often be damaging to a company's debt rating.
And besides, as Lee said, 'the organic opportunities we have internally certainly are attractive.'
The door isn't closed to an acquisition, Lee said. 'We're not going to make a mistake on M&A,' he said. If the company does a deal, 'it will be the right acquisition, and when it is the right acquisition, we'll pull the trigger.'
More articles by John Kingston
Averitt pay increase could be a sign of some acceleration in driver wages
Sequential numbers at diversified trucking operator TFI International may mark a turnaround
Ryder's used vehicle numbers show a bullish corner: tractor sales
The post At C.H. Robinson, improved profitability, productivity and a lot fewer workers appeared first on FreightWaves.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Wall Street Journal
9 minutes ago
- Wall Street Journal
UBS to Pay $300 Million to Settle Credit Suisse Obligations Under DOJ Dea
UBS Group said it reached an agreement with the U.S. Justice Department to pay $300 million to resolve outstanding consumer-relief obligations Credit Suisse committed to. Swiss bank UBS, which in 2023 acquired Credit Suisse, said Monday that its Credit Suisse Securities (USA) LLC subsidiary entered into an agreement with the DOJ to resolve all outstanding obligations under a previous settlement. The obligations stem from a 2017 agreement between Credit Suisse and the DOJ related to the bank's legacy residential mortgage-backed securities business.
Forbes
9 minutes ago
- Forbes
No Friends In The Pipeline: Why 300,000 Black Women Were Pushed Out Of The Workforce
A recently published MSNBC article made headlines for a shocking stat: nearly 300,000 Black women have exited the American labor force in the last three months. The article attributes the mass exodus to reasons like federal job cuts and the dismantling of DEI programs, with issues like inflation, student loan debt, automation, and underrepresentation in growing tech sectors creating a compounded economic risk for Black women. This phenomenon not only hurts Black women but has a ripple effect for the entire U.S. economy, resulting in a loss in the country's gross domestic product (GDP). A less-discussed issue that must be considered is how what is happening is also the cause of a widening network gap faced by Black women. A 2019 article from LinkedIn's Vice President of Social Impact, Meg Garlinghouse, explored the network gap: the unequal access a person has to opportunities based on who they know. Garlinghouse's article cited research that indicates that 70% of professionals get hired at jobs where they know someone who works there. A 2020 study by Chika O. Okafor indicated that non-white job candidates get fewer jobs through referrals because their social network is smaller. With the anti-DEI legislation and a wave of corporate DEI rollbacks, many companies have deprioritized DEI, dismantling programs and initiatives like employee resource groups (ERGs), which provide key opportunities to boost one's professional network. According to Catalyst, ERGs can be thought of as 'voluntary, employee-led groups that foster inclusive work environments aligned with business values, goals, and objectives.' Often ERGs focus on a shared identity (race, religion, being a parent, LGBTQIA+ status, etc.). ERGs provide employees with pathways to network, connect across departments, find mentors, and build relationships but many organizations are quietly shuttering their ERGs amid growing anti-DEI sentiments. Having less opportunities to be in community with employees at different levels in an organization can exacerbate the network gap that Black women face. Mentorship and sponsorship programs, which are often perceived to be DEI or DEI-adjacent, may be halted in the current climate, even though these programs can play an instrumental role in employees' careers, and Black women's career advancement. A wealth of research indicates that Black women leading Fortune 500 companies, as well as those in education, medicine, and tech, routinely report feelings of both hypervisibility and invisibility. Organizational psychologist Dr. Kecia M. Thomas has highlighted the pet to threat concept in her research: the phenomenon in Black women's career trajectories where they go from being the 'pet,' where they are well-liked and celebrated but exploited, to being the 'threat,' where they are seen as posing a risk to the status quo. A 2023 report from Exhale indicated that 36% of Black women have exited a job because they felt unsafe. Black women face a slew of inequities in the workplace and must deal with issues of gendered racism and the angry Black woman stereotype. A 2024 Harvard study also found evidence that when Black women have a higher percentage of white team members, they are more likely to leave their job and less likely to be promoted, revealing the systemic inequities that are entrenched in the workplace. The rise of AI may be making the problem worse. Many of the AI tools that companies lean on to help with hiring decisions may exacerbate existing biases, contributing to hiring gaps when it comes to Black women. Black women are overrepresented in jobs roles that are vulnerable to AI and automation, explained executive leadership coach Margaret Spence in a LinkedIn article. These factors in conjunction with the dismantling of corporate DEI programs makes building and sustaining professional networks for Black women more challenging. What can organizations do to address this issue? First off, workplaces should be intentional about providing employees with opportunities to network with each other. Do you have active mentorship and sponsorship programs in place? If not, how can you get them started? Ensure that equity is foundational in your workplace; frequently audit company policies and practices to ensure fairness and disaggregate employee feedback from anonymous channels, focus groups, and surveys to better understand Black women's experiences. What are Black women saying when they leave your organization? Assess exit interview data to see if patterns are emerging from the Black women who have left. The current anti-DEI legislation was implemented to sow fear and confusion in the workplace. Be aware of the ever-changing laws and stay up to date on local legislation. Consult with legal counsel to better understand what DEI practices are legal. Despite popular misconceptions, there are still many ways to drive fairness and equity while complying with state and federal laws. For Black women, there are some ways to address the network gap. Building community intentionally is vital. Consider joining different community groups, whether in-person or virtually, that align with your goals. This could be an online community for Black women in law, for example, or a meetup group for Black women in cybersecurity. If the community you are seeking doesn't exist, think about ways to create it. Also consider intentional networking on LinkedIn. Many see the platform as a place to go only when job searching but it can also be a great place to build networks, find your people and directly engage with community members. Black women's mass exodus from the U.S. labor market is caused by several different factors. While some reasons, like the DEI rollbacks and federal job cuts, are more obvious, there are issues that are more insidious at play. It's important that we understand what the antecedents are and put measures in place to ensure that Black women are given the support that is needed to thrive. When Black women are given the tools to succeed, everyone across the board will benefit.
Bloomberg
9 minutes ago
- Bloomberg
UBS Settles Credit Suisse Mortgage-Bond Case for $300 Million
UBS Group AG said it has reached an agreement with the US Department of Justice to resolve a legacy Credit Suisse matter related to the former bank's role in selling residential mortgage-backed securities in the US. 'On 1 August 2025, Credit Suisse Securities (USA) LLC entered into an agreement with the DOJ to resolve all of Credit Suisse's outstanding Consumer Relief Obligations under the 2017 settlement by paying $300 million,' the bank said in a statement on Monday.
