C.H. Robinson Worldwide, Inc. 2026 Q3 Earnings Call

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 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 events and presentation 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 accomplished over the past three 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 a logistics business. Some said it would 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've 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 strengthen 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 three 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 agentic AI that responds significantly faster to transactional quotes received via email. 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 headcount 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 Forwarding 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 than this industry's past acquisitions. Those disciplines will be emphasized by our skilled integration team that has proven integration experience and a transformation pedigree. That team is being led by our Vice President of the Robinson Operating Model, Jim Reutlinger, 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 acquisition 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 advisors 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, the data shows that the overlap is limited. We are a data-driven company, and we rely on data to drive our decisions. 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 insurance tower for contingent auto liability claims. Our insurance tower is a differentiator versus many other brokers and is one 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 are also progressing nicely through our 2027 insurance renewal process, and we believe this renewal will result in insurance inflation that is reasonable and manageable. As a reference, we have been absorbing approximately $30 million of annual wage inflation, and we still deliver 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 ship volume to larger brokers with significant insurance coverage and strong carrier vetting 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 will be able to manage the expected insurance inflation, and that we will 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 Cass Freight Shipment Index. They also continued 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 agentic 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 than 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 three 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 are 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 significantly higher spot rates, and to deliver higher levels of productivity as we incorporate agentic AI into our workflows. As Dave mentioned, our total NAST volume outgrew the Cass 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 billion-dollar LTL business, where we move 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.