Company Announcements

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Feb. 1, 2023-- C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (Nasdaq: CHRW) today reported financial results for the quarter ended December 31, 2022.

Fourth Quarter Key Metrics:

• Gross profits decreased 10.5% to $761.5 million
• Income from operations decreased 42.9% to $164.0 million
• Adjusted operating margin⁽¹⁾ decreased 1,220 basis points to 21.4%
• Diluted earnings per share (EPS) decreased 54.0% to $0.80
• Adjusted EPS⁽¹⁾ decreased 40.8% to $1.03
• Cash generated by operations improved to $773.4 million

Full-Year Key Metrics:

• Gross profits increased 13.9% to $3.6 billion
• Income from operations increased 17.1% to $1.3 billion
• Adjusted operating margin⁽¹⁾ increased 100 basis points to 35.3%
• Diluted EPS increased 17.3% to $7.40
• Adjusted EPS⁽¹⁾ increased 20.8% to $7.62
• Cash generated by operations improved to $1.7 billion

"We're increasing our focus on delivering a scalable operating model to lower our costs, improve the customer and carrier experience and foster long-term profitable growth through cycles," said Scott Anderson, Interim Chief Executive Officer. "The current point in the cycle is one of shippers managing through elevated inventories amidst slowing economic growth, causing unseasonably soft demand for transportation services. At the same time, prices for ground transportation and global freight forwarding are declining due to the changing balance of supply and demand. While a correction in the freight forwarding market was certainly expected, the speed and magnitude of the correction in only two quarters was unexpected, with ocean rates on some trade lanes already back to pre-pandemic levels."

"I believe we’re uniquely positioned in the marketplace to deliver for our shippers, carriers and shareholders through a combination of our digital solutions, our global suite of services and our network of global logistics experts," Anderson added.

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

• Total revenues decreased 22.1% to $5.1 billion, driven by lower pricing and volume across most of our services.
• Gross profits decreased 10.5% to $761.5 million. Adjusted gross profits decreased 10.3% to $768.2 million, primarily driven by lower adjusted gross profit per transaction in ocean and air.
• Operating expenses increased 6.2% to $604.1 million. Personnel expenses increased 1.7% to $427.3 million, primarily due to $21.5 million of restructuring-related costs, which were partially offset by a decrease in equity compensation. Selling, general and administrative ("SG&A") expenses of $176.8 million increased 18.7%, primarily due to $15.2 million of restructuring charges, primarily related to an impairment of internally developed software, and increased legal settlements, partially offset by a decrease in credit losses.
• Income from operations totaled $164.0 million, down 42.9% due to the decrease in adjusted gross profits and $36.7 million of restructuring charges. Adjusted operating margin of 21.4% declined 1,220 basis points.
• Interest and other income/expense, net totaled $42.5 million of expense, consisting primarily of $24.8 million of interest expense, which increased $10.7 million versus last year due primarily to higher short-term average interest rates, and $16.9 million of foreign currency revaluation and realized foreign currency gains and losses, which increased $10.4 million versus last year primarily due to foreign currency revaluation on intercompany assets and liabilities denominated in U.S. Dollars in countries where the U.S. Dollar is not the functional currency.
• The effective tax rate in the quarter was 20.9% compared to 14.5% in the fourth quarter last year. The lower rate in the fourth quarter of last year was due primarily to a favorable mix of foreign earnings and an increased benefit related to U.S. tax credits and incentives.
• Net income totaled $96.2 million, down 58.2% from a year ago. Diluted EPS of $0.80 decreased 54.0%. Adjusted EPS of $1.03 decreased 40.8%.

Summary of Full Year Results Compared to 2021

• Total revenues increased 6.9% to $24.7 billion, driven primarily by higher pricing in truckload, less-than truckload ("LTL") and ocean services.
• Gross profits increased13.9% to$3.6 billion. Adjusted gross profits increased 14.0% to $3.6 billion, primarily driven by higher adjusted gross profit per transaction in truckload and LTL services.
• Operating expenses increased 12.4% to $2.3 billion. Personnel expenses increased 11.6% to $1.7 billion, primarily due to higher average employee headcount, which increased 11.7%. SG&A expenses increased 14.6% to $603.4 million, primarily due to increases in purchased and contracted services, legal settlements, travel expenses and an impairment of internally developed software, partially offset by a $25.3 million gain on the sale-leaseback of our Kansas City regional center and a decrease in credit losses.
• Income from operations totaled $1.3 billion, up 17.1% from last year, primarily due to the increase in adjusted gross profits, partially offset by the increase in operating expenses. Adjusted operating margin of 35.3% increased 100 basis points.
• Interest and other income/expense, net totaled $100.0 million of expense, which primarily consisted of $77.1 million of interest expense, which increased $25.0 million versus last year due to a higher average debt balance. The year-to-date results also included a $23.5 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses, which increased $8.4 million versus last year primarily due to foreign currency revaluation on intercompany assets and liabilities denominated in U.S. Dollars in countries where the U.S. Dollar is not the functional currency.
• The effective tax rate for the full year was 19.4% compared to 17.4% in the year-ago period. The lower rate in the year-ago period was due primarily to a favorable mix of foreign earnings and an increased benefit related to U.S. tax credits and incentives.
• Net income totaled $940.5 million, up 11.4% from a year ago. Diluted EPS of $7.40 increased 17.3%. Adjusted EPS of $7.62 increased 20.8%.

North American Surface Transportation ("NAST") Results

Summarized financial results of our NAST segment are as follows (dollars in thousands):

Fourth quarter total revenues for the NAST segment totaled $3.6 billion, a decrease of 8.5% over the prior year, primarily driven by lower truckload pricing and volume. NAST adjusted gross profits increased 5.7% in the quarter to $502.3 million. Adjusted gross profits in truckload increased 2.0% due to a 6.5% increase in adjusted gross profit per shipment, partially offset by a 4.0% decline in truckload shipments. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 21.0% in the quarter compared to the prior year, while truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 24.0%, resulting in a 3.0% increase in truckload adjusted gross profit per mile. LTL adjusted gross profits increased 7.3% versus the year-ago period, as adjusted gross profit per order increased 8.0% and volume declined 1.0%. NAST overall volume growth was down 2.0% for the quarter. Operating expenses increased 4.0% primarily due to $9.5 million of restructuring charges, higher legal settlements and increased technology expenses, partially offset by lower equity compensation. NAST average employee headcount was up 2.9% in the quarter. Income from operations increased 9.5% to $162.6 million, and adjusted operating margin expanded 120 basis points to 32.4%.

Global Forwarding Results

Summarized financial results of our Global Forwarding segment are as follows (dollars in thousands):

Fourth quarter total revenues for the Global Forwarding segment decreased 52.7% to $1.0 billion, driven by lower pricing and volumes in our ocean and air services, reflecting softening freight demand. Adjusted gross profits decreased 39.0% in the quarter to $188.7 million. Ocean adjusted gross profits decreased 42.7%, driven by a 36.5% decrease in adjusted gross profit per shipment and a 9.5% decline in shipments. Adjusted gross profits in air decreased 51.5%, driven by a 40.0% decrease in adjusted gross profit per metric ton shipped and a 19.5% decrease in metric tons shipped. Customs adjusted gross profits decreased 3.3%, driven by a 5.5% reduction in transaction volume. Operating expenses decreased 1.4%, primarily driven by lower incentive compensation and credit losses, partially offset by $7.0 million of restructuring charges and increased technology expenses. Fourth quarter average employee headcount increased 5.8%. Income from operations decreased 80.8% to $28.2 million, and adjusted operating margin declined 3,250 basis points to 14.9% in 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):

Fourth quarter Robinson Fresh adjusted gross profits increased 9.5% to $28.5 million, driven by an increase in adjusted gross profit per case, which is primarily related to integrated supply chain and technology services and a 2.5% increase in case volume. Managed Services adjusted gross profits increased 12.2% in the quarter, due to growth in adjusted gross profit per transaction. Other Surface Transportation adjusted gross profits decreased 1.1% to $18.9 million, primarily due to a 1.4% decrease in Europe truckload adjusted gross profits.

Other Income Statement Items

The fourth quarter effective tax rate was 20.9%, up from 14.5% last year. The lower rate in the fourth quarter of last year was due primarily to a favorable mix of foreign earnings and an increased benefit related to U.S. tax credits and incentives. We expect our 2023 full-year effective tax rate to be 19% to 21%.

Interest and other income/expense, net totaled $42.5 million of expense, consisting primarily of $24.8 million of interest expense, which increased $10.7 million versus the fourth quarter of 2021 due primarily to higher average interest rates, and $16.9 million of foreign currency revaluation and realized foreign currency gains and losses.

Diluted weighted average shares outstanding in the quarter were down 9.2% due primarily to share repurchases over the past twelve months.

Cash Flow Generation and Capital Distribution

Cash generated from operations totaled $773.4 million in the fourth quarter, compared to $75.9 million cash generated from operations in the fourth quarter of 2021. The $697.5 million improvement was primarily due to a $649.9 million sequential decrease in net operating working capital in the fourth quarter of 2022, compared to a $199.9 million sequential increase in the fourth quarter of 2021. The decrease in net operating working capital in the fourth quarter of 2022 resulted primarily from a $916.5 million sequential decrease in accounts receivable and contract assets, compared to a $266.6 million sequential decrease in total accounts payable and accrued transportation expense in the fourth quarter of 2021.

In the fourth quarter of 2022, cash returned to shareholders increased 128% versus last year to $507.2 million, with $438.1 million in repurchases of common stock and $69.1 million in cash dividends.

Capital expenditures totaled $27.8 million in the quarter. Capital expenditures for 2023 are expected to be $90 million to $100 million.

Outlook

"As inflationary pressures continue to weigh on global economic growth and freight markets present cyclical challenges, we need to continue evolving our organization to bring greater focus to our highest long-term strategic priorities, including keeping the needs of our customers and carriers at the center of what we do while lowering our overall cost structure by driving scale," Anderson stated. "I believe in the strategy that the team is executing on to deliver a scalable operating model. We expect this initiative will continue to drive improvements in our customer and carrier experience and amplify the expertise of our people, all of which we believe will drive market share gains and growth. We expect these efforts will also improve our productivity, which will reduce our operating costs and lead to improved returns for our shareholders."

"Thank you to our employees for persevering during the period of extended market disruption and the market correction that has followed, and for continuing to provide industry-leading service to our customers and carriers," concluded Anderson.

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 85,000 contract carriers. 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; risks related to our search for a permanent CEO and retention of key management personnel; 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; 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 Fourth Quarter 2022 Earnings Conference Call
Wednesday, February 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

CHRW-IR

View source version on businesswire.com: https://www.businesswire.com/news/home/20230201005812/en/

Chuck Ives, Director of Investor Relations
Email:chuck.ives@chrobinson.com

Source: C.H. Robinson