Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson First Quarter 2024 Conference Call. As a reminder, this conference is being recorded Wednesday, May 1, 2024. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Please go ahead.

Thank you, Donna, and good afternoon, everyone. On the call with me today is Dave Bozeman, our President and Chief Executive Officer; Arun Rajan, our Chief Operating Officer; and Mike Zechmeister, our Chief Financial Officer. I'd like to remind you that our remarks today may 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 Investors section of our website at investor.chrobinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we'll let you know which slide we're referencing. Today's remarks also contain certain non-GAAP measures, and reconciliations of those measures to GAAP measures are included in the presentation. And with that, I'll turn the call over to Dave.

Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. Our first quarter results and adjusted EPS of $0.86 reflect a change in our execution and discipline as we began implementing a new lean-based operating model. Although we continue to battle through an elongated freight recession with an oversupply of capacity, I'm optimistic about our ability to continue improving our execution regardless of the market environment. As part of my initial diagnosis of the company, I identified an opportunity to refocus our mindset on root causing and definitively solving problems, including making decisions amid uncertainty and acting with greater clock speed. Following my diagnosis, I brought in additional talent to assist the senior leadership team and me on improving operational execution across the business and to deploy a new operating model rooted in Lean methodology. In Q1, we began deploying the new model at the enterprise, divisional, and shared service levels, which is evolving our execution and accountability by bringing more structure to our continuous improvement cadence and culture. This new way of operating is starting to enable greater discipline, transparency, urgency, and consistency in our decision-making based on data and input metrics that can reliably lead to better outputs. It's also setting the tone for how we operate and hold ourselves accountable, helping us make systemic improvements, build operational muscle, and drive value at speed. We began to see the benefits of our new operating model in our Q1 execution. As a result of disciplined pricing and capacity procurement efforts, we executed better across our contractual and transactional portfolios in our NAST business in Q1, particularly in our truckload business. This resulted in improved optimization of volume and adjusted gross profit per truckload, which improved sequentially despite an increase in our line haul cost per mile for the full quarter versus Q4. Additionally, our truckload volume reflects growing market share, and we outpaced the market indices for the third quarter in a row. In this difficult environment, our resilient team of freight experts is responding to the challenge and embracing the new operating model and the innovative tools that we continue to arm them with. Our people have a powerful desire to win, and I thank them for their tireless efforts. They continue to be a differentiator for us and for our customers and carriers, and I'm confident in the team's willingness and ability to drive a higher level of discipline in our operational execution. We're moving in the right direction, and everyone understands that we have more work to do. Now I'll provide some details on our Q1 results in our NAST and Global Forwarding businesses. In our NAST truckload business, our Q1 volume declined approximately 0.5% year-over-year, which outpaced the market indices. Our truckload AGP per load improved as we moved through the quarter. Although spot costs within the market came down after the winter storms in January, our new operating model and improved pricing discipline led to better AGP yield within both our committed and transactional business, while our procurement teams improved our cost of hire more than the market average. We had an approximate mix of 65% contractual volume and 35% transactional volume in our truckload business compared to the same mix in Q4 and a 70-30 mix in Q1 last year. In our LTL business, Q1 shipments were up 3% on a year-over-year basis, and 1% sequentially on a per business day basis. AGP per order declined 1% on a year-over-year basis, driven primarily by lower fuel prices. Our LTL AGP per order improved within the quarter and also benefited from our pricing discipline and the new operating model that I mentioned earlier. In our Global Forwarding business, we've been highly engaged with our customers to help them navigate the ongoing conflict in the Red Sea and to ensure flexibility and resilience in their supply chains. The transit interruptions in the Red Sea and resulting vessel reroutings have extended transit times, which has reduced global ocean capacity. While the Asia-to-Europe trade lane has been most affected, the impact has also extended to other lanes as carriers adjust routes based on shipping demand. As a result, ocean rates increased sharply in Q1 on several trade lanes, including Asia to Europe and Asia to North America. While the Red Sea disruption continues without any clear timeline of when it will be resolved, ocean rates have come down from the February peak as capacity has been repositioned and new vessel capacity enters the market. While rates remain elevated compared to 2023, as a global logistics provider with the scale and expertise to strategize and implement contingency plans, we have grown our ocean market share by providing differentiated solutions and customer service, and by leveraging investments in technology and talent, leading to the addition of new customers and diversification of the verticals and trade lanes that we serve. In Q1, our ocean forwarding AGP increased by 2.5% year-over-year, driven by a 7% increase in shipments and partially offset by a 4% decrease in AGP per shipment. Sequentially, AGP per shipment increased 13.5%. As the Global and North American freight markets fluctuate due to seasonal, cyclical, and geopolitical factors, we remain focused on what we can control, including deploying our new operating model, providing best-in-class service to our customers and carriers, gaining profitable share in targeted market segments, reducing complexity in the organization and optimizing our structural costs, streamlining our processes by removing waste and manual touches, and delivering tools that enable our customer and carrier-facing employees to allocate their time to relationship building, value-added solutions, and exception management. Our continued focus on productivity improvements is one part of our plan to address and optimize our enterprise-wide structural cost. After exceeding our productivity targets in 2023, with a 17% improvement in NAST and a 20% improvement in Global Forwarding, we have carried our productivity momentum into 2024. We are on track to hit our 2024 target of an additional 15% improvement in NAST shipments per person per day and an additional 10% improvement in Global Forwarding shipments per person per month, both of which will result in compounded productivity improvements of 32% or better over '23 and '24 combined. Our commitment to deliver quality, value, and continuous improvements to our customers continues to be validated by high Net Promoter Scores. Over the past 4 quarters, these scores have been higher than any point over the past few years and higher than the last similar point in the cycle, which we believe has contributed to our market share gains and puts us in a good position with customers ahead of the eventual rebound in the freight market. Our customers continue to value the quality, innovation, and reliability that we provide as they work to optimize their transportation needs. They want a partner who has financial strength and the ability to consistently invest through cycles in customer experience. They also want a customer-centric partner who can meet their increasingly complex logistics needs by providing expertise and a breadth of innovative solutions, enabled by technology and people that they can rely on to serve as an extension of their team. C.H. Robinson is that partner, with the combination of people, technology, and scale to deliver an exceptional customer experience and with the breadth of capabilities to meet all their logistics needs, including value-added solutions for cross-border freight, drop trailer capacity, and retail consolidation. We deliver integrated global solutions with no equal, as evidenced in how we are helping our customers navigate disruptions in the Red Sea and restrictions on transit via the Panama Canal, as well as supporting their growth in cross-border trade between the U.S. and Mexico. As we continue to improve the customer experience and our cost to serve, I'm focused on ensuring that we'll be ready for the eventual freight market rebound with a disciplined operating model that decouples volume growth from headcount growth and drives operating leverage. Our commitment to continuously improving the experience of our customers and carriers and eliminating inefficiencies from our processes will make us a company that is faster, more flexible, and more effective in solving problems for our customers, delivering better customer service, and creating operating leverage and profitable growth. I'll turn it over to Arun now to provide more details on our efforts to strengthen our customer and carrier experience, increase AGP yield, and improve operating leverage.

Thanks, Dave, and good afternoon, everyone. As Dave mentioned, we increased the rigor and discipline in our pricing and procurement efforts in Q1, resulting in improved AGP yield across the contractual and transactional portfolios in our NAST business. With continued investment in our pricing science, contract management, and digital brokerage technology and the deployment of our new operating model, we are responding faster than ever to dynamic market conditions with the tools and capabilities we've developed. These tools and operating routines, together with our scale, data, and customer and carrier relationships, underpin our revenue management function, through which we can be more surgical in how we implement the disciplined pricing and profitable growth strategy based on individual customer value propositions. We also continue to make progress in Q1 on concurrent work streams that are improving the customer and carrier experience and delivering process optimization by eliminating productivity bottlenecks. One of those work streams is aimed at using generative AI to automatically respond to transactional truckload quote emails to drive faster speed to market, increase our addressable demand, and reduce manual touches. Responding to transactions with truckload quote requests is time-consuming for account teams, and we must respond quickly to be competitive. Through our automated process and utilizing our GenAI technology, more than 2,000 truckload customers are getting the benefit of faster response time with our automated email quotes, and we will continue to scale this technology to cover more customers and other modes. GenAI puts the power of large language models into the hands of our frontline teams. With more data and history to leverage than any other 3PL, we have opportunities to harness the power that generative AI now offers us to further capitalize on our information advantage, and we'll continue to look for and pursue those opportunities. In addition to an improved customer experience, our efforts are increasing the digital execution of critical touchpoints in the life cycle of an order, from quote to cash, thereby reducing the number of manual tasks per shipment and the time per task. This translates to productivity improvements measured in terms of shipments per person per day, which creates operating leverage. As we deliver further process optimization and an improved customer experience, we plan to deliver the compounded cost structure benefits of additional 2024 productivity improvements of 15% NAST and 10% in Global Forwarding, with technology that supports our people and processes. With that, I'll turn the call over to Mike for a review of our first quarter results.

Thanks, Arun, and good afternoon, everyone. The continued soft freight market conditions outlined by Dave resulted in first quarter total revenues of $4.4 billion and adjusted gross profit, or AGP, of $658 million, which was down 4% year-over-year, driven by a 7% decline in NAST and partially offset by a 1% increase in Global Forwarding. On a monthly basis compared to Q1 of last year, our total AGP per business day was down 16% in January, down 3% in February, and up 7% in March, reflecting market conditions and improved execution driven by the rollout of our new operating model. The new operating model will help simplify decision-making for our teams by focusing on what matters most and helping to ensure clear accountability around delivering results. Turning to expenses. Q1 personnel expenses were $379.1 million, including $7.9 million of restructuring charges related to workforce reductions. Excluding restructuring charges this year and last year, our Q1 personnel expenses were $371.1 million, down $8.4 million or 2.2% year-over-year, driven by our cost optimization efforts and partially offset by expected higher incentive compensation. Our average Q1 headcount was down 11.3% compared to Q1 last year, and our ending headcount was down 10.2% to 14,734. We continue to expect our 2024 personnel expenses to be in the range of $1.4 billion to $1.5 billion, excluding restructuring charges, with productivity initiatives and lower headcount offsetting increases driven by the restoration of target incentive compensation related to the expected improvement in our financial performance. We continued to eliminate non-value-added tasks to enable our teams to handle more volume. We expect these initiatives will help drive a 15% increase in shipments per person per day in NAST and a 10% increase in Global Forwarding, which comes on top of improvements last year of 17% in NAST and 20% in Global Forwarding that Dave and Arun referenced earlier. Moving to SG&A. Q1 expenses were $151.5 million, including $5 million of restructuring charges, driven by the impairment of certain internally developed software as we focus the efforts of our product and technology teams on the strategic initiatives that best accelerate the capabilities of our teams. Excluding restructuring charges this year and last year, SG&A expenses were $146.5 million, up $5.1 million or 3.6% year-over-year, primarily due to a nonrecurring benefit in Q1 last year related to our credit loss reserve. We continue to expect SG&A expenses for the full year to be in the range of $575 million to $625 million, excluding restructuring charges, with cost reduction efforts offsetting expected inflation. SG&A includes depreciation and amortization expense, where we continue to expect $90 million to $100 million in 2024. Shifting to expenses below operating income. Our Q1 interest and other expense totaled $16.8 million, which was down $11.5 million year-over-year. This included $22.1 million of interest expense, which was down $1.5 million versus Q1 last year, driven by the $307 million year-over-year reduction in our average debt balance. Another factor that drove Q1 results in other was a $3.9 million gain on foreign currency revaluation and realized foreign currency gains and losses, which compared to the $9.6 million loss in Q1 of last year. As a reminder, our FX impacts are predominantly noncash gains and losses related to intercompany assets and liabilities. Our effective tax rate in Q1 was 15.8% compared to 13.5% in Q1 last year. As a reminder, our tax rate is typically lower in the first quarter of the year due to the incremental tax benefits from stock-based compensation deliveries in Q1. We continue to expect our 2024 full-year effective tax rate to be in the range of 17% to 19%. Our Q1 adjusted or non-GAAP earnings per share of $0.86 excluded $12.9 million of restructuring charges and the $3.1 million tax provision benefit related to those restructuring charges. Turning to cash flow. Q1 cash flow used by operations was $33 million compared to $255 million generated in Q1 of last year. The year-over-year decline in cash flow was primarily driven by changes in net operating working capital. In Q1 of last year, we had a cash inflow of $235 million from a sequential decrease in net operating working capital driven by the declining cost and price of purchased transportation in the market at that time. In Q1 of this year, we had a cash outflow of $135 million from a sequential increase in net operating working capital driven primarily by higher ocean rates in Global Forwarding. In Q1, our capital expenditures were $22.5 million, down 16.6% on more focused technology spending. We continue to expect 2024 capital expenditures to be $85 million to $95 million. We also returned $91 million of cash to shareholders in Q1, primarily through dividends. Now on to the balance sheet. We ended Q1 with approximately $842 million of liquidity, comprised of $720 million of committed funding under our credit facilities and a cash balance of $122 million. Our debt balance at the end of Q1 was $1.7 billion, which was down $172 million from Q1 last year but up $120 million from the end of Q4 due to the increase in net operating working capital that I mentioned earlier. Our net debt-to-EBITDA leverage at the end of Q1 was 2.73x, up from 2.34x at the end of Q4, primarily driven by the sequential increase in our net debt balance. Our capital allocation strategy remains grounded in maintaining an investment-grade credit rating, which allows us to optimize our weighted average cost of capital. Overall, I'm encouraged by our improved execution, the deployment of the new operating model, opportunities for continued market share gains, and the plans in place to deliver the compounded benefits of continued productivity improvements in 2024. Improved growth and cost savings are expected to continue from the robust pipeline and process simplification, technology enablers, and waste elimination initiatives. Continuing to leverage AI to take the capability of our people to an even higher level positions Robinson well to further reduce waste and drive structural cost changes that improve our operating leverage and help deliver on the long-term operating income margin expectations that are imperative to the success of the business. With that, I'll turn the call back over to Dave for his final comments.

Thanks, Mike. I want to commend our people for their performance in what continues to be a challenging market. I believe our team of logistics experts are the best in the business, and they continue to embrace the innovative technology that is acting as a force multiplier and making the industry's best people even better. I'm excited about the work that we're doing to reinvigorate Robinson's winning culture and instill discipline with our new operating model. If what you're hearing about our execution sounds different, it's because it is. As we continue to deploy our new operating model, we're now monitoring key input metrics and responding faster to error states and changing market conditions with countermeasures that improve our execution. As we continue to chart our path forward, we're on a mission to be fit, fast, and focused in order to win now and to be ready for the eventual freight market rebound. We'll get fit by embedding lean practices, removing waste, and expanding our digital capabilities. This will enable us to strengthen our productivity and optimize our organizational structure to be the most efficient operator as well as the highest value provider in achieving our profitable growth objectives. As our customers' logistics needs continue to become increasingly complex, we'll leverage our robust capabilities to power vertical-centric and value-added solutions. We'll move fast with greater clock speed and urgency to seize opportunities and solve problems for our customers and carriers. We will arm our team of experts with the right capabilities to bring us into the future, enabled by our innovative and cutting-edge technology. And we'll focus on profitable growth in our four core modes: North American truckload and LTL, and global ocean and air, as the engines that ignite growth by continuing to reclaim share and expand our addressable market through value-added services and solutions that drive new volume into the core modes. As we take action on all of these fronts, our journey to unlock the power of our portfolio is moving forward. I continue to see an opportunity for the company to reach its full potential and create more shareholder value by improving our value proposition, increasing our market share, accelerating growth, further reducing our structural costs, and improving our efficiency, operating margins, and profitability. I'm confident that together, we will win for our customers, carriers, employees, and shareholders. This concludes our prepared remarks. I'll turn it back to Donna now for the Q&A portion of the call.

Today's first question is from Scott Group of Wolfe Research.

You mentioned the new operating model several times, but I don't think we have a clear understanding of what it entails. Could you provide some specifics on what is changing? Regarding the net revenue increase in March, is it primarily due to truckload spot rates that eased during the quarter? How sustainable is this trend? Can we expect positive net revenue in Q2? Additionally, what will happen with the new model when we experience a rise in spot rates and see gross profit per load decrease? There are quite a few questions, but...

Yes. Scott, this is Dave. Thanks. A big question there. Let's unpack that a bit. First one on the operating model, I just want to start by saying, hey, I'm pretty serious about this model, and I've got the experience with this model. I've done it in other places, and I know it works. And Scott, I told you before we want to take time to diagnose the company for a few months. After coming out of that, one of the things that we looked at was really the need to drive better discipline, accountability, and responsibility. As we went to implement that, bringing in the right talent to help do that, it's really embedded in Lean principles in driving input versus output. So we took the time to put all of the critical inputs and instead of being an output-based company, just looking at outputs and going backwards. Now we have the discipline that we're starting to drive. And again, it's early innings. A lot more work to do. But as we're driving our enterprise strategy maps and our scorecards, we're looking at ourselves from inputs. And what that allows you to do is really binary. It's red or green, and we drive countermeasures to when we're off plan. What are the things we're going to do to get back on plan? But it also brings up error states. It allows us to solve problems fast and allows us to really attack the things we need to attack and just be aggressive and focused. And so I'd say it really comes down to discipline. This is embedding discipline into a company that was already a great company but a company with scale. And now you kind of supercharge it by putting that discipline and accountability and responsibility. And that's what you're really kind of seeing in the first quarter. Now again, a lot more work to do, but I feel really good about where we're going. I feel good about the momentum, and that really is going to attack the other parts of your questions. I'm going to have Mike and Arun jump in on that, but this is why the base of that operating model was so important about us going forward when it comes to the other two parts of your question.

Yes. So Scott, you asked about the inflection that we saw in March, and you're referring back to the comments I made about our enterprise AGP per day, and we went from down 3% in February to up 7% year-over-year in March. And Dave talked about the implementation of the operating model, which is part of the success there. You've heard enough from the industry about how difficult January was related to snowstorms across the U.S. and things like that. And so while that was happening, we were putting our operating model in and we were beginning to execute better. We are quite pleased with the progress we made throughout the quarter. While we don't usually provide monthly results, we do share our total enterprise AGP per shipment or per day to give you insight. We're optimistic about the advancements we've achieved, although there's still a lot more to do, and we need to keep advancing in that direction. As we look ahead to the second quarter, it has typically shown an increase in volumes compared to the first quarter, historically speaking, while factoring in the pandemic's influence. Generally, we expect to see this trend because the produce and beverage markets tend to recover in Q2. There are seasonal factors that contribute to our sequential growth, and we usually observe this as we enter the second quarter. We will focus on what we can control, and we feel confident about our transition into Q2 and will continue to move forward.

Scott, just a little bit more on that in terms of how we actually achieved some of these results and input to the operating model, is our revenue management practice that we discussed in the last call. And while we're not immune to market inflections, the point is we've invested in pricing science, costing science, and technology that allows us to respond quickly to whatever event causes an inflection, whether that be short-term or long-term. You saw a short-term inflection due to weather, but we had signals that we could respond to quickly and adjust based on revenue management principles.

To conclude, Scott, this really comes down to our company. The way we operate is evolving. If you observe the quality of our discussions, the rapidity with which we engage, our capacity to adapt quickly, and our focus on identifying and remedying issues, it's clear that things are changing for the better. I want to highlight what's different this time. The key difference lies in the quality of our interactions and our approach to tackling challenges, pinpointing the problems, and driving solutions. This approach is closely connected to our divisional scorecards and flows up to our enterprise scorecards. When this connection is established, we begin to link across the entire organization. I believe we have built a solid foundation, and we are embarking on a sustainable path forward, feeling optimistic about our progress.

The next question is coming from Jeff Kauffman of Vertical Research Partners.

Congratulations to see numbers like this. Mike, a question on the working capital because I want to come back to this. Thank you for explaining that the ocean rates were driving the use of working capital. But I guess given what's going on in the world, is this going to continue to be a drain? And could we be looking at negative free cash flow for the first half or two-thirds of the year?

Thanks for your comments, Jeff, and your question. As you've observed, the cost of purchased transportation has an impact on our working capital throughout the cycle. When costs and prices begin to rise, our DSO exceeds our DPO, causing us to use cash as we navigate that upward trend. This scenario might be ahead of us. Conversely, when the cost of purchased transportation decreases, we have previously seen about $1.5 billion returned to our cash flow by the end of the last cycle. Therefore, consider how you view the trends in costs and pricing across truckload, LTL, ocean, and air. Our working capital trends will typically align with those. Nonetheless, we do expect to generate positive cash flows throughout the cycle, as we have demonstrated in the past.

Okay. And if we weren't having this unusual increase in some of these ocean rates and things going on around the world, just seasonally, should we be seeing better free cash flow as the year moves forward?

Yes.

The next question is coming from Christopher Kuhn of Benchmark Company.

Dave, can you maybe just talk about any changes to the compensation structure as part of this new model and if some of those changes impact maybe some of your better agents? And how are people reacting to some of the changes that you've implemented?

Thank you, Christopher. That's a great question. It ties into our operating model, which emphasizes discipline and connecting the company. One aspect of this is our compensation structure, which we feel confident about in two key ways. First, it’s about balance. You've heard us mention being fit, fast, and focused. Achieving balance is essential for both the company and its culture. We are committed to driving productivity and growth, specifically focusing on profitable growth along with volume. Our base compensation reflects a 50-50 split for our employees, incentivizing them to achieve this balance. This approach is vital for us, and you can see that in our operations. Now using the model to actually bring that forward, I mean, we do that on a good timely basis that would allow us to see kind of some of those inflections of inputs. Then that allows us to inspect, go deeper, and really try to see if we're off on some of those metrics here. But it's really about that balance of profitable growth and volume, and that's what we're going to continue to drive here.

Okay. Do you have any thoughts on the portfolio review and some of the non-core businesses after being in your position for over a year? Where do you see those heading in the future?

Yes. As I mentioned earlier, the four essential elements—people, product, process, and portfolio—are not static; they are dynamic. I will continue to assess the company through these four elements while also emphasizing focus within our North America operations, specifically in truckload, LTL, ocean, and air. The goal is to refocus the company and execute effectively within these core areas. This will be my immediate priority, and I will consistently evaluate the company in relation to these four elements, making necessary decisions to reinforce our focus. In the end, this approach will yield better outcomes for our customers, employees, and ultimately, our investors and shareholders.

The next question is coming from Stephanie Moore of Jefferies.

Dave, I appreciate your efforts in outlining the company's future and vision. It's clear to us where you're aiming, and we've seen some progress as we transitioned from year-end into the first quarter. Could you provide some insight into what changes have been made within the organization to help you move more quickly or react to inputs? For example, are there updates like shifting from a more centralized approach, implementing new systems that enable daily key performance indicators, or revisions to the compensation structure? Any specific examples that have contributed to these results would be helpful.

Yes. Thanks for the question. There's been a number of things in these first 10 months. As we talked, the first thing is to really diagnose. You can't start any type of fix or treatment if you don't really understand or, as I said before, I needed to go to Gemba, right? That's goal to the work and really understand the company. So I took a good amount of time to just go down to the desk, visit various offices, and make sure just kind of understand the life of an order, just understand the company itself. I was really happy when I did that because our team is truly amazing. Wherever I go, they have wonderful stories to share. They are passionate about this company and put in a lot of hard work. I felt good about that. However, I also noticed that there are opportunities for us to simplify processes, reduce complexity, enhance discipline, and embrace a quicker approach to learning from mistakes. I believe that at our scale, we can improve. Consequently, I brought in some external expertise, specifically Jim Reutlinger, to establish the project management office and assist in implementing Lean practices. After a few months of observing and understanding the company, Jim and I, alongside the senior leadership team, began to implement this operating model, which now incorporates many of our key metrics. We examine various inputs such as headcount, daily shipments per person, shipment costs, service costs, customer service effects, and our AGP dollars per shipment, among other factors linked to different divisions. We organized this into a scheduled routine that drives our operating model, starting with the senior leadership team and cascading down through the divisions and the rest of the organization. Developing and implementing this took time and is a departure for this company as it requires addressing these aspects. Our new President of North American Surface Transportation, Michael Castagnetto, has done a great job at really starting and driving that execution and that discipline into NAST. He has to drive his particular meetings that link to the enterprise, with meetings on our inputs. We don't talk about just outputs now. It's driving those inputs. And why? You do that because we can move the timescale up. When we're driving something and Michael is on a red for a particular input metric that we're looking at, we attack it then. We attack it right away. What resources do we need in the company to go attack it? What help do you need? It's visual management and driving that. That has moved us into solving things much faster and deliberately, but it's also given us learning about other things that are happening in the company that we can solve. So that's been different. We've moved and I've combined marketing and communication and just making sure we drive synergies for that. There are a number of other things that are internal in the company that we're moving forward with, but you do that off of learnings and making sure that whatever moves we're doing ultimately supports our strategy for more profitable growth and better returns to shareholders, a better environment for employees but better value and execution for customers as well. So that's how we're going about this, Stephanie. Anyone that's been in Robinson, it feels different because it is different, and we're not going to stop at it. We're on early innings here, as I said before, and you're going to keep seeing that as we go through the year.

Understood. I want to follow up on a previous question. Regarding the shift in AGP per day from January to a positive trend in March, we're still hearing consistent reports about a weak freight environment over the past week. The rates we monitor haven't fluctuated significantly. Can you elaborate on the actions taken to achieve such a positive change in results?

Yes, Stephanie, I'll take that one. And so you hear from Dave. You've heard about our operating model. There's execution inside that. We could pile on in terms of some of the examples. Dave talked about incentive changes coming into this year, the balanced volume and margin expectations on the business. I think when you compare our results to the results of maybe some others, what you see is that we did have differential improvement as we went through the quarter. One thing I would emphasize is, for example, on truckload. Our truckload cost per mile went up in Q1 versus Q4. So we had a sequential increase there, but we were still able to deliver margin expansion, both at the AGP level and at the operating income level. So the yield management, the science, the data behind pricing, the work that's been going on, on that front, you want to see results, right? So one indication, one metric that we try to show you guys to help understand that we're getting traction here and delivering results is in our shipments per person per day because that's really the measure of how productive our folks have been. One of the pivots we've made on that front is that we've done a better job of balancing how technology can support the talent of our people. One of the things we're most proud of is the expertise, the deep knowledge, the talent, the relationships with customers that our folks have. What we've tried to do with our technology is figure out how to reduce manual tasks, manual touches, and we really target those areas so that our people can focus on what they do best, solving problems for our customers. And you see some of that starting to get traction. The other thing I would point to is generative AI. One of the hallmarks of the freight industry is the variation that exists. That variation runs counter to some of the productivity that has historically been machine learning, which requires a lot of programming inside of our proprietary software. But the high variation is actually something that generative AI can handle much more effectively. A lot of the efforts there have also been beneficial to helping us deliver those productivity numbers, the shipments per person per day numbers, and the 17% NAST last year, the 20% in GF. We have targets of 15% in NAST and 10% in GF this year.

Yes. I'll just add that in terms of optimizing yield, this goes back to revenue management. I'd say I'd describe it as Dave has the operating model installed, and I'd describe it as active management of optimizing volume and AGP. That happens every day, and it's a marriage of our science and our people. We just manage it much more actively than we ever have, both on the cost side as well as a pricing side. That's what yields the AGP.

The next question is coming from Elliot Alper of TD Cowen.

This is Elliot Alper on for Jason Seidl. I wanted to ask about ocean capacity. We've heard some other ocean players that shippers have already adapted to a lot of the concerns, whether it be the Red Sea or Panama Canal that appears to have been easing a bit. I guess we've seen spot rates come down notably from mid-February levels. How should we think about pricing sequentially and maybe the puts and takes on growing the ocean business in the second quarter?

Yes, Elliot, this is Mike. I'll address that question. Our perspective aligns with what you suggested. The disruptions in the Red Sea and the issues with the Canal have created challenges that have not been fully resolved, but there has been some improvement. This shift in capacity has really tightened the market and driven prices upward. Once that capacity has been repositioned, and it largely has, then those prices have come back down, and you're now back to the basic principles of supply and demand. On the supply side, the capacity side, the observation for the remainder of the year is there's more capacity coming into the ocean market than is coming out. There should be a fair amount of capacity there. Now there may be some repositioning to accompany some of the changing dynamics in trade lanes where there's more density there, but net-net, more capacity coming in. Now there may be some repositioning to accompany some of the changing dynamics in trade lanes where there's more density there, but net-net, more capacity coming in. So then you're back to the demand side. We've seen a little bit of demand there, but no green shoots yet to suggest that we've got a trend moving for the remainder of the year. Your prediction of where it goes really depends on your view about the world economy and the U.S. economy, and we'll see how that plays out.

Yes, Elliot, and just to pin a couple of things on that as well. I mean we've said this in the past. On average, our contract business for Global Forwarding is 30% to 40% in contract. So the remaining 60%, 70% of spot, obviously, we have an opportunity to do business in. But also, as Mike said, on the Panama Canal and to the essence of your question, I mean, it's improved as far as water levels. The crossings, and we track that right now, are 27 a day, but that's normally 36 a day. So it's somewhat muted. As Mike said, we haven't seen any major green shoots there, but we watch that business intently.

The next question is coming from Tom Wadewitz of UBS.

Could you share your thoughts on the current situation in April? Are you observing a similar trend in margin improvement as you mentioned earlier? Is this improvement primarily due to an increase in volume, or is it more related to gross margin percentage in NAST? Additionally, I’d like to discuss productivity drivers. You’ve done well with the 15% productivity increase in NAST. Do you believe this will continue through volume growth, further headcount reductions, or is it contingent on market conditions?

Yes, I'll take your productivity side and then maybe pass it off to take another shot at the trends going forward in the market. On the productivity front, the shipments per person per day front, we really have to be flexible to adapt our productivity delivery based on what kind of market we're in. So what we're really doing, I think, now differentially from the past is thinking about installed capacity, thinking about how to handle demand without the need to bring on people when the demand comes back. If the demand does not come back, we still got to deliver that productivity number. We are trying to build the flexibility into our model to handle both a demand-based year or a soft market like we're in right now.

Yes, Tom, this is Dave. The team is doing an excellent job by changing the way we approach work and reducing the manual tasks that limit our capacity. When our team members are engaged in repetitive activities, it takes away from their overall capacity. Arun and the team have effectively utilized technology, including large language models, to eliminate many of these menial tasks, enabling our employees to concentrate on their essential responsibilities and ultimately increase their capacity. I just want to add on to that. I think on trends, and Mike, you could jump in too. We feel good about where we're at, and we're concentrated on what we can control. This is a soft market, and everyone is dealing with that. This is why we're staying disciplined, driving our model to execute. What we're saying is no matter what the marketplace is going into Q2, we want to execute within that market. I mean dealing with the lows of the markets and excelling at the highs of the market is something that we're laser-focused on. We're going to do that with our operating model, with our science and pricing, and a number of the things we talked about today.

Does anybody else want to add any comments on kind of April and what it looks like and what might be driving it, kind of volume or gross margin?

Yes, we made comments earlier about Q1 and the progression that we made Q1 and our confidence in some of the progress we've made and the various elements inside the operating model. As we move into Q2, just the way that a typical Q2 unfolds is that we get the produce business. We get the beverage business, and that strength is usually in the back half of Q2 for our business model.

Okay. So the year-over-year is still looking good.

The next question is coming from Jonathan Chappell of Evercore ISI.

Just a quick one on the competitive landscape. You're winning share. You've done better than other markets for three straight quarters, but at the same time, you're being disciplined on price. So is this a function of maybe smaller players exiting the market? There's been an interesting chart that's been circulating on the, I guess, exit of brokers. Do you feel like the capacity in the broker industry is closer to balance than maybe it is in the asset-heavy side of the equation? And is that helping you win share? Or is it more company-specific and the things that you've been talking about for the last half an hour or so that's driving those share gains?

Yes, thanks for the question. I believe it's a combination of factors. We have been executing with discipline, which we've discussed frequently. However, there is clear pressure in the brokerage industry, evident from the exits we've seen, such as Convoy last year. We are also receiving reports about smaller brokers struggling in this market. Therefore, I think it's both influences at play. While there may be some advantages stemming from the difficulties faced by smaller brokers, I would emphasize that our success largely arises from our operating model, the supporting factors, and our disciplined approach in that regard.

That makes sense. Do you have a sense, just as a quick follow-up, that the broker business at large is closer to balance, maybe closer to, let's call it, 2019 levels than the truckload market from an asset-heavy perspective is?

No, Jonathan, this is Dave. I would say it's not at the levels of 2019. We don't see that. While we observe a decrease in capacity and carrier capacity, it's not where we believe it should be at this point in the cycle. Specifically regarding brokers, I would say we are not at those levels of 2019.

At this time, I'd like to turn the floor back over to Mr. Ives for closing comments.

Thanks, everyone, for joining us today. That concludes today's earnings call, and we look forward to talking to you again. Have a great evening.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.