C.H. Robinson Worldwide, Inc. Q2 2026 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the C.H. Robinson second quarter 2026 conference call. At this time, all participants are in a listen-only mode. Following the company's prepared remarks, we will open the line for a live question and answer session. To ask a question, please press star one on your telephone keypad. If anyone needs assistance at any time during the conference, please press star zero. As a reminder, this conference is being recorded Wednesday, July 29, 2026. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Thank you, operator. Good afternoon, everyone. On the call with me today is 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 two 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 investor 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 afternoon, everyone. Thank you for joining us today. I want to begin by thanking our people for their relentless efforts to provide exceptional service to our customers and carriers, for embracing the Robinson operating model and continuing to execute with discipline. These efforts contributed to the high-quality earnings we reported today. When I became CEO three years ago, we committed to delivering higher highs and higher lows across freight market cycles. Our second quarter results are yet another example of delivering on that commitment. Despite being in the trough of the freight market demand cycle, with the Cass Freight Shipment Index declining on a year-over-year basis for the 15th consecutive quarter, we hit our mid-cycle operating margin targets in both NAST and Global Forwarding in Q2.

We achieved this through disciplined execution of our Lean AI strategy, which has enabled us to identify and remove waste and to automate manual processes in the quote-to-cash life cycle of an order. The result has been evergreen productivity improvements of over 60% since the end of 2022 in both NAST and Global Forwarding. The execution of our strategy has also enabled us to build a scalable model with significant operating leverage, which contributed to the 20% year-over-year increase in our adjusted operating income. Our Lean AI strategy isn't just about generating higher productivity. First and foremost, it needs to result in better service to our customers and carriers. Our scores related to customer satisfaction are exceptionally strong.

As we continue to purposefully engineer our work to drive higher automation and industry-leading cost to serve and service to our customers and carriers that is better than ever, we've consistently gained market share in our NAST business. Q2 was the 13th consecutive quarter in which our year-over-year NAST volume growth outpaced Cass Freight Shipment Index. Our team also continued to exercise our disciplined revenue management practices while the North American trucking market reflected a period of significant supply-driven tightening. This tightening caused our truckload line haul cost per mile to increase 29% year-over-year, putting significant pressure on our contractual margins. We still delivered a truckload AGP per load that was approximately flat year-over-year.

As we've said consistently, we're not immune to an increase in spot rates, but our revenue management disciplines and our improved price and cost discovery enable us to manage through spot rate inflections better than we ever have in the past. In our Global Forwarding business, the team continues to help our customers navigate ongoing disruptions across global shipping networks, and they continue to implement the same revenue management disciplines that have been successfully deployed in NAST. Additionally, they are moving from manual reactive work that is dependent on manual handoffs towards automated workflows that are faster, more connected, and easier to manage at scale. While this journey is still ongoing, we're already seeing encouraging progress in several areas. As a result, the Global Forwarding team delivered year-over-year productivity improvements of more than 15% in Q2 and achieved an adjusted operating margin, excluding restructuring, of 33.4%.

Our ability to consistently deliver secular earnings growth over the last two-plus years is a result of focusing on controlling what we can control and the strength of our Lean AI strategy. Lean AI is our unique, disciplined approach to AI innovation that is transforming supply chains. It 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 our customers and carriers. We'll continue to focus on providing differentiated service and solutions to our customers and carriers, executing with discipline, and improving our business model and our cost to serve. We're highly confident in our ability to continue executing on all of our strategic initiatives. The strategies that our team is executing are built to be effective in any market environment.

We're excited about the prospects for a possible return to a healthier demand 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 overload. AI is changing the way the world works. We recognized that early on and embrace it as an important part of transforming Robinson into a different and better company. We also recognize that it can amplify the expertise of our people and help them thrive in more strategic roles. As the industry pacesetter for cutting-edge innovation and differentiated solutions, we will continue to use our domain expertise to build technology that delivers on our customer promise and drives higher value for all of our stakeholders.

While we're pleased with our secular earnings growth over the past two-plus years, our transformation is still in its early stages. We have significant runway remaining as we continue to strengthen the lean mindset and scale custom-built AI agents across the enterprise. I'll turn it over to Michael now to provide more details on our NAST results.

Thanks, Dave, and good afternoon, everyone. I'm very proud of the team's execution in Q2, which again demonstrated our improved ability to offset the pressure of significantly higher spot rates on our profitability and displayed our ability to hit our mid-cycle operating margin targets despite still-depressed freight demand. Let's dig into everything that the NAST team accomplished in Q2. As Dave mentioned, for the 13th consecutive quarter, our total NAST volume outgrew the Cass Freight Shipment Index. Our focus on winning a higher percentage of contractual bids has been a primary driver of our sustained market share gains, and we expect they will continue to be going forward. Similar to Q1, our contractual truckload volume grew year-over-year as a result of a higher win rate on contractual bids. Our mix of contractual truckload volume held sequentially at approximately 70%, but increased from 65% in Q2 of last year.

At the same time, multiple enforcement actions and events, such as Road Check Week, have reduced the supply of carriers in the market and caused truckload spot market cost to increase sharply. Excluding fuel, DAT spot rates in Q2 increased approximately 34% year-over-year, up from approximately 19% in Q1. As a result, load-to-truck ratios and tender rejection rates remained elevated, which continue to create opportunities for transactional volumes at higher margins. Equipped with stronger disciplines and tools, our freight experts effectively captured the right transactional volume at a substantially higher AGP per shipment compared to last year. Combined with an ongoing repricing of our contractual business to reflect the new market realities, we were able to offset the pressure on our contractual margins and deliver a truckload AGP per shipment that was flat year-over-year.

This is quite remarkable given the dramatic increase in spot rates and the increase in our contractual volume. It's also different than what we've been able to accomplish during historical spot rate inflections, which is a testament to our revenue management disciplines and our improved price and cost discovery capabilities. As truckload contracts continue to be repriced across the industry, we've seen improvement in contractual route guides and overall route guide depth decreased in Q2 versus Q1. Absent an inflection in freight demand, we expect this will lead to less transactional opportunities. This, and the fact that 75%-85% of truckload freight moves on contracts, is why continuing to win contractual bids is critical to sustainable market share growth. We will continue to stay focused on the long game rather than chase short-term volume bumps.

While we did maintain our truckload AGP per shipment, our NAST gross margin % did experience some compression in Q2. This was due to the sharp increase in spot rates and due to the higher cost of fuel, which is a pass-through cost in our truckload brokerage model. While higher fuel costs have a very minimal impact on our gross profit dollars in our truckload business, it does reduce our gross margin % due to the pass-through nature. Similarly, while we were able to hold our truckload profit per shipment flat year-over-year, that profit level was on a higher revenue per load, resulting in the reduced gross margin %. Our contractual repricing activity is continuing into Q3 as spot rates are expected to remain at elevated levels and spike again during the Q4 holidays.

As I mentioned earlier, the NAST team outgrew the Cass Freight Shipment Index for the 13th consecutive quarter. Our total NAST volume grew 1.5% year-over-year compared to a 3.3% decline in the index. Our LTL volume increased approximately 2% year-over-year, while our truckload volume grew approximately 0.5% year-over-year, reflecting market share gains in both modes. As truckload rates continued to move higher through Q2, some of what we refer to as bubble shipments, those that sit on the margin between LTL and truckload and had previously migrated to truckload during softer market conditions, have moved back into LTL network. Having leading solutions in multiple modes is a competitive advantage for Robinson. We'll continue to drive the best solutions for customers and move their freight in the most optimal way that fits their supply chain.

One of the keys to our consistent market share gains has been volume growth in key verticals that we specifically targeted. During Q2, we continued to deliver year-over-year truckload volume growth in the automotive, retail, and technology verticals. These results reflect the strength of our expanded capabilities that directly support these segments and evolving customer needs, such as our leading drop trailer, cross-border, expedited, and short-haul capabilities. In our more than $3 billion LTL business, where we move more LTL freight than any other 3PL in North America, we delivered year-over-year volume growth for the 10th consecutive quarter, underscoring our sustained outperformance versus the broader LTL market. Our deep, longstanding carrier relationships and proven ability to manage service variability at scale enables us to deliver reliable, high-quality service for customers. As a result, customers continue to rely on Robinson to reduce LTL complexity, improve service outcomes, and lower costs.

Across NAST, we continue to expand the use of our proprietary digital capabilities, giving our freight experts faster access to actionable data and AI-powered tools so they can make better decisions and capture the optimal freight for our business. Those digital capabilities also enabled us to continue delivering double-digit increases in NAST shipments per person per day with a 15% year-over-year increase in Q2, and a greater than 60% increase since the end of 2022 in shipments per person per day, measured across the entirety of our NAST organization. This enhanced efficiency is not only lowering our industry-leading cost to serve, but is also elevating the customer experience by enabling faster, more reliable service. Looking ahead to Q3, market volumes are typically comparable to Q2, with the 10-year average of the Cass Freight Shipment Index, excluding the pandemic-impacted year of 2020, reflecting a 0.2 sequential volume decline in Q3.

On a year-over-year basis, we expect to continue outperforming the market index. Truckload spot rates are expected to remain elevated. We're now forecasting a 34% year-over-year increase in drive and spot rates for the full year, up from 17% only three months ago. As we look forward, we will remain focused on what we can control. We will continue to deliver industry-leading solutions and flexibility to our customers and carriers. We also continue to appropriately exercise our optionality on a monthly, weekly, and daily basis to pivot toward volume or margins as market dynamics evolve, making disciplined, data-driven adjustments in order to optimize for the most effective combination that drives earnings growth and long-term value creation. Our people and their unmatched expertise enable us to deliver exceptional service, create greater value, and drive sustained improvement.

We remain in the early innings of our transformation journey, with significant runway for improvement still ahead. With that, I'll turn it over to Arun to provide an update on the durable advantages of our Lean AI strategy.

Thanks, Michael. Good afternoon, everyone. Last quarter, I shared some of our thoughts on why we believe our approach to AI is differentiated. We call it Lean AI because it pairs our AI transformation with our proven lean operating model. What further sets us apart is that we own our application layer. We have a builder culture supported by more than 450 in-house engineers and data scientists. Our AI agents are powered by proprietary data, deep logistics expertise, and an engineered context layer that simply cannot be purchased or built overnight. Today, I want to focus on how those advantages enable us to continually operationalize and scale innovations across our business. This is not about automating tasks or taking people out of the process.

It is about fundamentally improving how work gets done, raising the level of service we provide to our customers, and improving the quality of work and experience for our employees, all while enabling the business to scale more efficiently and drive sustainable operating performance in any market environment. A critical element of our strategy is that we don't just treat AI as another tool. We make it part of how we run the business. The companies creating lasting value from AI are not experimenting at the edges of their business or chasing the latest technology. They own it. AI becomes part of the foundation that the business operates on. At C. H. Robinson, we own the application layer.

We embed our AI agents directly into the workflows across our quote-to-cash life cycle, pairing them with the same disciplined operating model that has driven our broader transformation and measuring their success by the outcomes they deliver. Our AI strategy has already shown up to sustain productivity gains of more than 60% since the end of 2022, margin expansion, and consistent market outperformance. The benefits also go well beyond productivity. It's also improving decision-making, expanding revenue opportunities, and enhancing the customer experience. One of the most important lessons in scaling AI is that autonomy needs structure, and this is where our lean operating model plays a crucial role. It acts as the guardrails of our AI framework, enabling our technology to generate real results pointed at real problems. Our agentic AI is not designed to improvise or operate without boundaries.

We have hundreds of AI agents trained to perform very specific jobs across the shipment life cycle with defined responsibilities, clear guardrails, and access to the operational context needed to do those jobs well. By design, this reduces the risk of experimentation, keeps the system focused on the work that it is intended to do, and allows us to scale AI with confidence. Humans remain in the loop where judgment, exception management, and customer nuance matter most. The result is a system that is tailored, controlled, and grounded in real logistics operations. As I've said before, AI is only as valuable as the data, context, and workflows behind it. Supply chains are dynamic, fragmented, and highly interconnected, which makes them one of the most challenging environments for AI to operate in effectively. It is also what makes C. H. Robinson's position unique. We are not applying AI from the outside looking in.

We are building it from within the daily reality of global logistics at scale. That real-world foundation enabled us to launch the world's first closed-loop agentic logistics system designed to operate a global supply chain autonomously while continuously improving. In our 4PL Managed Solutions business, our new technology, called Lean AI Engineer, works in concert with our Lean AI Planner to create one connected system that uniquely enhances a supply chain as it runs. The Lean AI Engineer can assess an entire supply chain in 25-30 minutes and determine improvements before performance is impacted, compared to supply chain assessments that typically take up to four weeks and look backward at what has happened instead of what should happen.

While the Lean AI Engineer delivers intel, the Lean AI Planner manages shipments through hundreds of interconnected AI agents and, in turn, feeds more data back to the Lean AI Engineer to develop even smarter refinements. When those capabilities are embedded directly into customer workflows, the outcome is faster decisions, smarter execution, and better performance, even as complexity increases. Global Forwarding is another example of our Lean AI strategy in action. The first half of 2026 in Global Forwarding has been about making a deliberate shift in how work gets done across the network. We are simplifying and standardizing workflows, engineering the necessary context, and developing AI-powered capabilities that can be deployed at scale. Across Global Forwarding, we are rolling out AI-powered automations designed to reduce manual effort, improve data quality, and enable our teams to focus on higher-value work.

These capabilities connect activities that have historically been manual and fragmented. They allow work to begin earlier, information to move more accurately, and potential issues to be identified sooner. That enables our teams to operate more proactively and creates a faster, more consistent, and more predictable experience for our customers. Importantly, the objective is not simply to remove work. It is to improve the work. For our employees, this means spending less time on repetitive and reactive activities and more time applying their expertise to complex problem-solving, managing exceptions, and strengthening customer relationships. It also means giving them better information and workflows that make their work more efficient and rewarding as they operate in one of the most complex environments in the world, supply chains. We are delivering real, tangible results that demonstrate our approach to AI is not theoretical.

We are still in the early innings of our Lean AI transformation, with substantial runway across NAST and Global Forwarding. As innovations move into broader deployment, as we continue to combine our proprietary data, engineered context, logistics expertise, and lean operating model, we can continue to widen our competitive moats and deliver better outcomes for all our stakeholders. With that, I'll turn the call over to Damon for a review of our second quarter results.

Thanks, Arun, good afternoon, everyone. Our Q2 results demonstrate again how disciplined execution and our Lean AI strategy are driving secular earnings growth and meaningful progress against our strategic priorities, including market share gains, gross profit optimization, and improved operating leverage. Despite continued macro environment pressure in Q2, with the Cass Freight Shipment Index down 3.3% year-over-year, total revenues increased 19.3% AGP increased 6.5% year-over-year. This was due to NAST's continued outperformance versus the index, higher pricing in NAST and Global Forwarding, and improved profitability in all of our business segments. For the total company on a monthly basis, our AGP per business day compared to the prior year was up 9% in April, up 7% in May, and up 3% in June.

On a sequential basis, our absolute amount of AGP per business day increased each month, primarily reflecting an improving trend in Global Forwarding throughout the quarter. Turning to expenses, Q2 personnel expenses were $338.5 million, including $8 million of restructuring charges related to workforce reductions. Excluding restructuring charges, our Q2 personnel expenses were $330.5 million, down $1 million or 0.3%. Primarily due to our continued productivity improvements and cost optimization efforts. The benefit of those efforts was partially offset by higher incentive compensation in alignment with our strong results. Our average head count was down 10.8% year-over-year in Q2, was down 2% sequentially, illustrating how we continue to decouple head count growth from volume growth while growing volume.

Due to an expectation that our people will be rewarded for our strong 2026 performance, we believe that higher incentive compensation will push our 2026 personnel expenses towards the higher end of our range of $1.25 billion-$1.35 billion. This includes an expectation that incentive compensation will be higher in Q3 and lower in Q4, in line with our sequential earnings trend and seasonal demand trends. It also still includes an expectation that we will continue to generate double-digit productivity improvements in both NAST and Global Forwarding as we continue to implement agentic AI solutions across our quote-to-cash life cycle of an order. Our Q2 SG&A expenses totaled $143.8 million. Excluding a $0.5 million net gain driven by the favorable termination of an operating lease, SG&A expenses were up $2.7 million or 1.9% year-over-year, primarily due to increases across several expense categories.

Based on our first half execution and greater visibility into the remainder of the year, we are narrowing our SG&A range by $10 million and now expect our 2026 SG&A expenses to be in the range of $540 million-$580 million, compared to our prior range of $540 million-$590 million. Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact. Within the revised SG&A expense range, we now expect depreciation and amortization to be towards the lower end of previously stated range of $95 million-$105 million for the year. As Dave mentioned, both NAST and Global Forwarding achieved their mid-cycle operating margin targets in Q2. This is the result of our Robinson operating model and Lean AI strategy at work, which has created greater operating leverage in our model.

In Q2, this manifested itself in a 96% incremental operating margin with 96% of our year-over-year increase in AGP falling to our adjusted operating income. By segment, NAST expanded its operating margin, excluding restructuring costs, by 280 basis points year-over-year to 40.9%. Global Forwarding expanded its operating margin, excluding restructuring costs, by 470 basis points year-over-year to 33.4%. Moving below operating income, our effective tax rate for the quarter was 21.5%, and we are maintaining our tax rate guidance of 18%-20% for the full year. That said, I'd like to provide some additional color on the tax rate for the next two quarters.

In Q3, we expect our effective tax rate to be similar to Q2 or slightly higher, and in Q4, we expect our effective tax rate to be lower due to incremental tax benefits from stock-based compensation deliveries that occur in the quarter, similar to Q1. Turning to cash and our balance sheet, we generated $35.9 million in cash from operations in Q2. Cash flow was negatively impacted by the significant increase in freight rates, which caused our receivables balance to increase substantially, driving up our net operating working capital. Our capital expenditures were $18.2 million during the quarter, and we are lowering our 2026 capital expenditures expectations to be in the range of $65 million-$75 million, down from the previous range of $75 million-$85 million. We ended Q2 with approximately $900 million of liquidity.

Our financial strength continues to be a key differentiator in our industry, giving us the ability to invest throughout the freight cycle to further enhance our capabilities and to return capital to our shareholders. Our net debt to EBITDA ratio at the end of Q2 was 1.64 times, up from 1.32 times at the end of Q1 as we opportunistically deployed capital for share repurchases and strategic M&A investment. While our capital allocation strategy remains grounded in maintaining an investment-grade credit rating, our balance sheet strength enabled us to return $301.3 million of cash to shareholders in Q2. This represents an increase of approximately 88% compared to Q2 of last year and includes $226 million of share repurchases and $75.3 million of dividends. We also allocated $79 million of capital for acquisitions in Q2, including the acquisition of DeSpir Logistics in June.

DeSpir brings differentiated expertise in premium transportation solutions for high-value freight, which when combined with C. H. Robinson scale, we expect to deliver superior results for our customers, carriers, and shareholders. We will continue to deploy capital in a disciplined manner, investing in high ROI organic initiatives, returning capital to shareholders, and pursuing strategic M&A opportunities, all aimed at maintaining a high quality of earnings for all of our stakeholders. Based on our first half performance, we remain confident in our ability to achieve our 2026 operating income target within the range that we raised in October of 2025, which is on slide 17 in our earnings presentation. That range was originally based on an assumption that market volume growth would be 0%-5% in 2026, which seems increasingly unlikely given that the Cass Freight Shipment Index was down 4.7% in the first half of 2026.

The consistency of our disciplined execution and continued progress in growing market share, optimizing gross profit, improving productivity, and expanded operating leverage reinforces our confidence in both our operating model and our path to achieving our 2026 target. We have strong conviction in the strategy we are executing and in the intrinsic value of the business. There is tremendous runway for improvement ahead, and our operating model, our technology, and our people continue to differentiate Robinson and widen our competitive moats. With that, I'll turn the call back to Dave for his final comments.

Thanks, Damon. As you've heard in our prepared remarks today, we've continued to deliver higher highs and higher lows from the disciplined execution of our strategy. In an industry where disruption is constant and agility is essential, our differentiating Lean AI gives us a unique ability to create new ways to solve complex challenges at scale, helping our customers build supply chains that are smarter, faster, and more resilient. In my first three years leading this company, I'm proud of the progress we've made to transform C. H. Robinson into the global leader in Lean AI supply chains. I want to thank our people for embracing the culture shift that has fundamentally changed this company.

With our lean operating model, our commitment to continuous improvement, and our AI innovations at the core of our transformation, I continue to be even more excited about what we believe we can deliver in the coming years. The strength of our strategies, our technology, our people, and our operating model disciplines are differentiating and sustainable in any market environment, including an inflecting spot rate environment like we've seen recently, or eventually, an inflecting demand environment. Finally, I want to address the evolving legal environment regarding trucking accidents. These accidents are tragic, and every loss of life on our nation's highways is one too many. Acknowledging that a terrible tragedy occurred is not the same as having caused it. Last week, a jury in Texas issued an advisory verdict that we strongly disagree with and will immediately appeal if the jury's verdict is entered as final. C. H. Robinson did not act negligently and should not be held liable in this case.

The carrier safely delivered nearly 270 loads for our customers, and it held the highest rating from FMCSA when we selected it and after a federal review of this accident. The carrier is an independent motor carrier, and the driver worked for them. C. H. Robinson does not employ drivers. Safety is core to how we operate and always has been. We go beyond federal requirements and apply multiple layers of safety and risk criteria that we continuously reevaluate and strengthen. The extreme nature of this verdict means it is even more imperative that Congress and the federal government act with urgency to establish clear and proper accountabilities across the transportation industry that enhance highway safety and support the uninterrupted flow of goods across the United States.

Events like this also reinforce why scale and financial strength matter. Customers and carriers rely on and benefit from providers like C. H. Robinson that have the resources and financial stability to manage complex legal and regulatory environments while continuing to invest in service, technology, safety, and compliance. These verdicts also highlight the risks shippers take on when purchasing freight services and underscore the value of working with a provider that helps manage that complexity. Reducing risk in customers' transportation networks is an important benefit of the solutions we provide. As we uphold our standards, we will continue to lead with purpose and move with urgency to disrupt ourselves and the industry, and we expect to drive sustainable outperformance, profitable growth, and long-term value for all of our stakeholders. That concludes our prepared remarks. I'll turn it back to the operator now for the Q&A portion of the call.

Thank you. With that, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Tom Wadewitz with UBS. Please proceed with your question.

Yeah. Good afternoon. Let's see. Congratulations on the good results and progress. I guess I've got two. I guess first on just the way that things are developing in NAST. Michael, I understand the comment of focus on contract and business, that that's kind of more sustainable, maybe more longer-term way to grow. I guess I'm surprised there isn't maybe more opportunity for you to see a participation that is stronger in spot, just because the market's gotten so tight. I think, your investment in systems and AI and customer connections, it seemed like that would make it fairly seamless for you to do that. Just wanted to see if you could offer some thoughts on maybe why that doesn't come through in terms of stronger spot, and that would maybe also help what the gross margin or GP per load looks like.

The second one would just be, I know, Dave, you offered some perspective on the jury verdicts, but are there other things you could point to that would say, "Hey, this would help investors to better understand the risk," or what could help people to see that risk being reduced? Just what could give us more visibility on how this plays out? Is this really a waiting game for the appeals process and for more information that unfortunately could take a while through the courts? You think there's something we might get from the government, from FMCSA that would maybe provide some more clarity and help you as you move through that? Thank you. Hey, Tom. Thanks for the question.

This is Michael. Maybe I'll clarify some of the comments because I think it's important. We certainly feel good about our position in the contractual space, and we continue to win business in that space. I'm really proud of how the team executed that work in Q2. We absolutely participated and feel really good about our transactional performance in the quarter. Our transactional performance was significantly up year-over-year. It's significantly up sequentially from Q1 to Q2. As the Cass Freight Index shows, there's still not a lot of demand growth in the marketplace. As companies like ourselves repriced contracts that was necessary in Q2, that naturally starts to raise acceptance levels, then the number of transactional loads in the marketplace does lower as repricing continues. I think it's super important.

We feel really good about our transactional performance in Q2 and feel like our win rates in that space are healthy and really focused on that optionality of winning the right freight with a combination of our contractual business. Our comment was more specific to the fact that longer-term, especially in a marketplace that's still supply driven in terms of why rates are up, it's important that we continue to win share in the contractual space if we're going to see long-term market share outgrowth. We absolutely take advantage of the T space, transactional space, and did so in Q2 at levels we're very proud of.

Tom, I'll just add to that discussion before Dave jumps in is, look, as Michael mentioned, we feel very good about our spot market wins. We feel very good about our contractual market wins. As Michael mentioned, we're in this for the long game, right? We're repricing our book for not just one quarter or the next quarter, right? For the next six, 12, 18 months of continued market share gains at accreted pricing. What I would tell you is different about us, and I think a lot of companies we compete with is we're making good margins in the contractual space. With our revenue management capabilities, the way the team is managing this squeeze, I think you're going to see sustained repricing and profitability efforts out of Robinson that you see nowhere else, and certainly that you haven't seen from Robinson historically.

Hey, Tom, this is Dave. Hey, thanks for the call out on the quarter. Really proud about what the team did. Tom, I'm going to go a bit deeper, give some more color to your question as I feel there might be others that have a version of the question that you asked. I'll go a little bit deeper and give you guys some color on here. First of all, we really believe this case was decided based on emotion rather than the law. We believe the law and the facts support our position, and we strongly disagree with the jury's verdict in this case, as I said previous. If the jury's advisory verdict is entered as final, we will immediately appeal, and we are very confident in the facts and the law on appeal.

It's important to know the carrier in this case is an independent motor carrier that worked with many brokers and shippers. The driver worked for the carrier, not C. H. Robinson. He did not communicate with C. H. Robinson, and we did not supervise, direct, or control his actions. C. H. Robinson does not employ or control drivers. A carrier only having $1 million in insurance doesn't make a brokerage company with a strong balance sheet liable. Now, based on the facts of this case, we and our insurance carriers were not willing to settle based on the plaintiff attorney's demands. We and our insurance carriers, who had appellate counsel present at the proceedings, expect to be successful on appeal. Since this is an ongoing legal matter, we're not going to discuss any other details of this case or our defense.

A jury's advisory verdict, and this is to your question, is only one step in the legal process. The advisory verdict does not determine what C. H. Robinson will ultimately pay, if anything. Any final outcome remains subject to post-trial motions, appeals, and other legal proceedings. We're also not going to get into the details of our legal docket, because I'm sure there's some questions there. C. H. Robinson has been named in court cases in a normal course for many years, we've successfully defended ourselves against many negligent hiring and vicarious liability claims, and we expect to continue doing that. I know I'm sure many of you have talked to our competitors, both brokers and asset-based carriers, and shippers in the industry.

One thing I want to make clear is that as much as the whole industry tries to be safe, as much as we all work to continuously improve our vetting, there will inherently be trucking accidents. Nuclear verdicts such as this are a transportation issue overall, not just a Robinson issue, not just a brokerage issue. It's an issue for all transportation providers and shippers. Now, if nuclear verdicts like this one are the new normal, and by the way, I don't think that is the case, there will be an impact to three key things. The movement of goods will be substantially impacted within the country. Service levels will be significantly impacted. Of course, the cost of transportation will certainly soar.

While risk grows from more complex industry, and you can see that, we're super confident in our scale, our technology, and expertise, and as stewards of the industry in our ability to adapt and deliver solutions for our customers and all our stakeholders. I think we've shown that today in the outstanding results that the team have done. Appreciate the questions, and I wanted to just add that color, and I may answer some of the other questions that were on there.

Thank you. Our next question comes from the line of Jeff Kaufman with Citizens Bank. Please proceed with your question.

Thank you very much, congratulations in a very challenging environment. Dave, I just wanted to hop on some of your comments earlier. You've come in, I can't believe it's been three years already, and just brought in a great team and just have been very successful in fixing maybe what needed to be fixed in a tough environment. What pivots do you think are necessary from where you are today to accommodate the types of growing environment that may lie ahead of us?

Yeah, Jeff, thanks a lot, and appreciate that call out. When we started this 3 years ago, and you're right, I can't believe it's been 3 years. We started off with a strategy and that strategy was real simple. It was go and grow market share, expand margins, and do that with an operating model and discipline, and just drive our say to ratio higher. I think we did that, and we continue to do that, and we continue to get stronger. Right now, I'm really happy with where we are, but more so where we're going. As much as it's been really fun and successful, Jeff, in the past 3 years, I can tell you, we have a whole lot of grass to cut. It really is early innings.

The difference in the company right now, we continue to learn and drive our Lean prowess, our technology prowess. It continues to be early days. The things we see on the docket and what's coming forward are really exciting at Robinson. Growth is part of that strategy, and I think hopefully you're seeing that quarter after quarter, and we continue to show that. This quarter was no different in showing what we continue to do and what we continue to expect to do.

Thank you. Our next question comes from the line of Ken Hoexter from Bank of America. Please proceed with your question.

Hey, great. Good afternoon. Dave, thanks for the rundown. I think a solid kind of feedback on the process for the courts and what we can expect. I don't know if there's any I think the one thing you missed was, if you can say anything, is a timeframe or anything just to help people out. I guess, Damon, you had previously mentioned maybe some more M&A was part of your thought process. I think you had an acquisition you announced. Does this give you pause, given the ruling, until appeals are done to ensure you know what you buy or that there's no unforeseen liabilities. Do you need any kind of standard set up before this, or is it still full throttle from your point of view in terms of how you commercially attack the market?

Thanks for the question, Ken. I'll start here. I would say our capital allocation strategy has not changed, and this verdict does not influence that strategy. Certainly, a large portion of that strategy for consideration is M&A. You mentioned the acquisition that we closed on in the quarter being DeSpir Logistics. As we've mentioned, that one fits perfectly in our strategy, right? We mentioned that one of our target areas for M&A is to acquire niche tuck-in companies that have incredible capabilities, but yet we, or I would say they're under-scaled, right? You can take that incredible capability, you put Robinson scale behind it. We think that creates a tremendous amount of ROI and benefit. Certainly, we're very excited about being able to demonstrate what we can do with DeSpir Logistics, right?

We've also said that, look, we're looking at larger acquisitions as well, and that's still part of our strategy. The thought that's on everybody's mind is one I'll just address, which is certainly as part of our due diligence. We go through every legal docket of any potential acquisition target, get comfortable with that docket, and certainly take any provisions in the process related to that docket. We'll certainly execute that diligence with any deal we do. Make no mistake, right? This verdict, as Dave mentioned, we feel very good about the law in this verdict. We feel very good about the facts of the case on this verdict, and we feel very good about the appellate process. To summarize it does not at all change our capital allocation strategy, nor does it change our focus on M&A.

Ken, just to put a bow on that. You asked about timing, and I'm glad you said that's the only thing I missed in that rundown. Listen, there's judicial discretion on the timing of post-trial motions. This could be years from an appeal perspective because there's various stages of appeal as well. That's what I would say on that, and hopefully that's helpful.

Thank you. Our next question comes from the line of Bascome Majors with the Stephens Inc. Please proceed with your question.

Thanks for taking my questions. This quarter, you hit your target mid-cycle margins in both the segments. You've talked about once you get there or past there, sort of metaphorically turning the knobs and starting to focus more on volume as a lever to grow gross profit. Are we there yet? If not, what metrics or performance or market conditions are we looking for to get to the point where volume becomes the biggest part of the growth story? Maybe related, when we get there, how do you measure success of that strategy internally, and how should we think about measuring it from some of the public data that we can see? Thank you. Yep. Thanks, Bascome.

Appreciate the question. Look, I would say, we are there, right? Now, as we've mentioned, it is optionality, which means the market conditions, the freight conditions dictate when we apply that optionality, right? We've been very clear that this is not something that on a ratable basis is going to have kind of an equal up and to the right graph, right? Is when we see freight conditions that justify getting aggressive on price to take share that we want, and desirable freight that we want, now that we're above that threshold, specifically on NAST, we'll execute that strategy, right? As we've said many, many times, and again, I think this is a different philosophy than how this industry, and quite frankly, even C. H. Robinson has operated historically. Freight is different every day, right?

There's a certain percentage of desirable freight on Monday, and that percentage changes on Tuesday, just based on the dynamics of the freight market. By putting that optionality in place, is we're not going to put ourselves in a box to hit an artificial target we don't need to define or hit. Right? What we have committed to is, we will use that optionality above those targets that we've now achieved to drive incremental earnings growth and incremental return for our shareholders, right? It gives us now one more weapon in our toolkit to drive earnings growth, right? I'd argue before we got to those margin levels, that was one constraint that we had.

Now that that constraint has been achieved, and we believe that is a sustainable level of margins right now, we have one more weapon that Michael can use in the NAST business to drive growth, right? I would say as we continue to execute the strategy, we'll certainly comment on areas where we've used that optionality and where we haven't. I don't know that there's a specific metric other than just what we've continued to demonstrate, which is earnings growth and market share outgrowth. I think my last comment, and I'll see if Michael has any color here, is I think the thing that gets missed With our outgrowth is that it's been for 13 consecutive quarters.

We've done that for 13 consecutive quarters while growing earnings over that same period of time, while expanding operating margins over that same period of time, while delivering demonstrable productivity over that same period of time. Right? We believe that recipe of the outgrowth that we're generating, the productivity we're generating, the revenue management capabilities that's driving accretive price and cost of transportation advantages, we think the combination of all of those things is what makes Robinson special. Right? The outgrowth is just one piece of those. I think when you compare us versus others, it goes well beyond one quarter, right? Find somebody else that's outgrown the market for 13 consecutive quarters. I think that's a pretty tall bar to climb.

Yeah, Bascom, this is Michael. I think from my perspective, I'm just really proud of how the team handled what was a unique quarter in terms of a significant cost increasing marketplace, almost exclusively supply driven. Right? As the Cass Freight Index showed, you still had a declining marketplace. We showed outgrowth and actually positive year-over-year growth in both modes, doing so while navigating a version of the squeeze. The team repriced significant business, getting our route guides back into position of positive growth, as well as taking advantage of a transactional marketplace that we took advantage of where we could. Feel really good about being able to deliver all of those things and then deliver the mid-market or mid-cycle targets while cost was up 30%.

I think it's important context, I think is something that's really important in a quarter like this, just super proud of what the team accomplished during a very difficult external environment.

Thank you. Just to mention, the company have decided to extend the call by a few minutes beyond 6:30 P.M. Eastern Time. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.

Hey, thanks. Good evening. Damon, just a couple things for you. I didn't see the $6 number in the slide. Just any comment there? You mentioned 3% gross profit growth in June. Is that you think a good run rate to use or with contract accelerating and spot maybe leveling off, do we see a re-acceleration in net revenue growth? Maybe just along those lines, LTL up 22%, truckload flat. Why such a big divergence and, I don't know, any thoughts there? I know there's a few things. Appreciate it. Yeah. I'll try to remember them all here, Scott.

Let's talk about the monthly sequence because as you know that one we've commented on before, which is, look, we don't recommend you spend a lot of time trying to do the math on the monthly sequence, right? I mean, at the end of the day, your monthly sequential performance doesn't mean that it's going to continue into the next quarter, right? It is a data point, but it's just that. It's a data point. Every month's not the same. Certainly, one month, actually one quarter, doesn't mean that trajectory continues into the first month of the next quarter. Take it as a data point, but I wouldn't take it much beyond that.

Related to our 2026 operating income target, I think what the key takeaway from our update is that we've kept the same operating income range of $964 million-$1.04 billion. I think the key difference is, if you remember, the lower end of that range was based on market being flat. Right? The high end of that range was based on 5%. What we've updated in our revised slide is now that we're committed to the low end of that operating income range on a market at minus 3%, right? That is on the back of generating another $40 million of self-help initiatives that did not exist when we entered this year.

I think the key takeaway is certainly the math will get you to an EPS number, but the key takeaway is we've committed to the same operating income range, but with a quite substantially different backdrop from a market perspective. Now being able to achieve the low end of that range at minus 300 basis points of market contraction versus the requirement there being flat when we originally set the updated target.

Thank you for the question on LTL. Great to get a question on that group who've done just incredible work over the last several years. Really, it's a combination of a couple factors. We mentioned the pass-through nature of fuel in truckload, where LTL, you tend to see benefit on LTL margins as fuels go up, not just ourselves, but you see that with the LTL carriers as well. The higher cost of shipment in LTL, we certainly benefited from. Secondly, I'd say we showed market outgrowth as well as some really strong performance in key verticals of landing customer business that we're really proud of. The last part is just there's a mix of more standard LTL shipments and complex shipments, and we saw some growth in some of our larger, complex businesses that have a bit higher margins in that business.

Feel really good about our LTL performance in the quarter, but to be honest, feel really good about that team and what they've produced for the better part of, as we said, 10 quarters in a row of positive volume growth. Feel really good about where we're heading.

Scott, I'll just put a bow on what Michael said. We've said this for a while now, right? Having both truckload and LTL capabilities is a significant competitive advantage for C. H. Robinson, both external to our customers, but it also allows us to optimize performance between those two modes to generate the ultimate performance for C. H. Robinson, right? Having two businesses of the scale and the performance nature of both our truckload and our LTL business, we think combined, there's really a synergistic benefit of having both of those modes under one roof.

Thank you. Our next question comes from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.

Thank you. Good evening. Damon, when you first laid out the operating income target bridge, you were speaking to Global Forwarding, kind of going back to the cycle lows of late 2023. Here you are hitting these mid-cycle margin targets already with an EBIT contribution from that business that's much stronger than what we'd anticipated a couple of years ago. The question is basically, how much of that improvement in Global Forwarding is C. H. specific that's sticky through cycle versus did you get a lot of help with a rise in container ship market environment in ocean with stronger air? As we think about the progression to the rest of this year and even into next year, do we kind of extrapolate what that business did in Q2, or is there some kind of market reversion, so to speak, that maybe lowers the EBIT levels going forward?

Yeah. Thanks for the question, Jonathan. What I would say about our Global Forwarding business is that business is performing at an extremely high level, right? It has been performing at a high level for a while, right? It's performing at that level on the same basic principles of why NAST has achieved the performance it's achieved related to just unlocking the Lean AI toolkit, the Lean principles, the continuous improvement mindset, as well as the productivity that we've generated in that business on the back of the Lean principles. I'd say what we're really excited about and what we've talked about for a while now is Global Forwarding is now starting to use that same tech stack that NAST has received so much benefit from, right?

That certainly will touch revenue growth, that'll certainly touch revenue management capabilities and pricing, and that'll continue to aid our productivity. I would end my comment with saying we think the margins we've demonstrated, and I'll just say that mid-cycle margin at 30%, we think that is a very sustainable margin and profitability level for the Global Forwarding business.

Thank you. Our next question comes from the line of Stephanie Moore with Jefferies. Please proceed with your question.

Great. Good afternoon. Thank you. I guess maybe one follow-up question to some of these questions in the Q&A. As we think about maybe this post-Montgomery world and maybe what could be increasingly higher nuclear verdicts or other verdicts coming maybe more negative towards CH, can you talk a bit about what this could mean from an ongoing insurance as well as legal cost that you could face and what protection you have currently and how we should think about how that could change going forward? Just one point of clarification there, and then I do have a follow-up.

Yeah. Stephanie, I'll start and certainly jump in here if you want to. Look, first of all, I would just state by saying we don't think this nuclear verdict is unique to C. H. Robinson, right? As Dave mentioned earlier, if these are the type of verdicts that are going to be pronounced, right? They will happen to others, right? Brokers and assets alike, right? There's nothing unique in this case that is unique to C. H. Robinson, right? As Dave kind of ended his opening statement, if you think about the facts of this case, there is nothing unique to C. H. Robinson, and we do believe this is a transportation industry issue that has to be dealt with, not a C. H. Robinson issue. As it relates to go-forward operating cost related to insurance, certainly we know insurance is going to inflate year-over-year.

Now as we've mentioned, we're on a calendar year as far as insurability. We are covered through the end of 2026. We are just now starting to have preliminary discussions with the various insurance carriers that we deal with on insurance coverage. As we've said before, look, higher insurance cost is just another headwind, right? We get paid to solve problems and headwinds every single day, every single week, every single month. Higher insurance cost is just another problem we have to go solve, right? We're confident as a business that higher insurance costs will not derail or impede the progress that we've had in our Lean AI journey, right? Again, it'll affect the industry, it'll affect us. We'll solve that problem like we solve many other problems, right?

As we've mentioned historically, our insurance stack has been, I'd call it more like an asset carrier than a broker historically, right? We think certainly that prudence that we've had around risk management is going to make this transition into a post-Montgomery world an easier transition than, say, a broker that has very de minimis Insurance, right? We feel like, again, our insurance coverage today is more like an asset provider than it is a broker. Again, we'll make that transition an easier transition than somebody that's coming from a much lower base.

Thank you. Our next question comes from the line of Richa Harnain from Deutsche Bank. Please proceed with your question.

Hey, thanks for the time. First, I'm just going to echo someone's comments earlier. I thought the discussion around this case was pretty comprehensive and helpful, so thanks for all the information. Just a quick follow-up just on the timeline. You mentioned that this was an advisory verdict and we'll see if it's entered as final. Just curious on the timeline for that, when we find out if it's entered as a final judgment or not, and it has to go through the appeals process. Then maybe just beyond that, I wanted to talk more about growth margins. They did step down sequentially to 13.1% from 14.6%. Michael, you said a lot of that was maybe fuel related. I'm just curious how much.

Then, taking a step back, in the early stages of a truckload recovery cycle, you do see this type of margin pressure in your model. To your credit, you've largely avoided that dynamic so far. If we think about the positive reset from here, Damon, I hear your comments. The renewals we see at CH maybe won't be seen elsewhere. Is it just going to take longer, given the uniqueness of the cycle being supply led to kind of see that? Could we see growth margin begin to move higher as we progress through the back half of the year or early into early 2027? Thank you. Hey, Richa. Thanks for the call out and the question.

Listen, just real quick on that timing. Again, and I'll repeat this, the judicial discretion on the timing of post-trial motions, that happens. There is just judicial discretion with that for post-trial motions. We really don't know on that. I would say that when that happens, we feel really strong again about the facts of this case on appeal, and we'll be set for that. That timing, again, there's just discretion in that within these post-trial motions.

Richa, this is Michael, and thank you for the second question on margins. First of all, I think the team did a really good job managing what was a difficult environment to get AGP per load back to flat on a year-over-year basis. Really, fuel was a factor, certainly in truckload, and we covered that. Really what I'd say is it was the impact of the contractual book and the squeeze that that felt that we were really managing that repricing process during the quarter, as well as then taking advantage of the transactional marketplace, as we mentioned earlier, to expand margins where we could. It is a unique marketplace right now in that you have costs skyrocketing while demand stayed where it did, negative 3.3% according to Cass. A very unique squeeze environment.

I would tell you our expectation of our revenue management capabilities as we continue to get better and better at it is to push margins back upwards. It's really going to be, as Damon mentioned, the uniqueness of each day, each week, each month in the marketplace on how we do that. Again, I'd point back to I feel really good about how the team managed this process and was able to deliver the bottom line results that we did during the quarter, but feel very strongly that our revenue management practices as we go forward will allow us to manage through this process.

Rich, I'll just put a bow on what Michael said. I think it's critical to hear AGP per load was flat, with spot costs up over 30% in the quarter. I don't think you're going to find another company that's going to demonstrate that level of performance while outgrowing the market at the same time, right? I think you got to look at AGP per load and gross margins in concert with the outgrowth and the dynamic nature of the spot market increase within the quarter. To your comment on the contraction on gross margins, I would say historically, Robinson's gross margins would have contracted hundreds of basis points in the environment that we just went through. Right? The cycle time in which we're getting through this squeeze, I think you'll find out when we get on the other side of it is going to be quite demonstrable as well.

I would say to Michael's point, I think we feel really good about what we've demonstrated versus the marketplace for the quarter. We're going to continue to demonstrate that revenue management capability as we get on the other side of the squeeze.

Thank you. With that, ladies and gentlemen, this does conclude the question and answer session. I would like to turn the call back over to Chuck Ives for closing comments.

Yeah, thank you. That does conclude today's earnings call. Thank you for joining us today, and we look forward to speaking with you again. Have a great evening. Thank you.

Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time. Have a wonderful rest of your evening.