Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - C. H. ROBINSON WORLDWIDE, INC. | ex991earningsreleaseq12018.htm |
| 8-K - 8-K - C. H. ROBINSON WORLDWIDE, INC. | chrw33118earnings8-k.htm |
1
Earnings Conference Call – First Quarter 2018
May 2, 2018
John Wiehoff, Chairman & CEO
Andrew Clarke, CFO
Robert Biesterfeld, COO & President of NAST
Robert Houghton, VP of Investor Relations
2
Safe Harbor Statement
Except for the historical information contained herein, the matters set forth in
this presentation and the accompanying earnings release are forward-looking
statements that represent our expectations, beliefs, intentions or strategies
concerning future events. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ materially
from our historical experience or our present expectations, including, but not
limited to such factors as changes in economic conditions, including uncertain
consumer demand; changes in market demand and pressures on the pricing for
our services; competition and growth rates within the third party logistics
industry; freight levels and increasing costs and availability of truck capacity or
alternative means of transporting freight, and changes in relationships with
existing truck, rail, ocean and air carriers; changes in our customer base due to
possible consolidation among our customers; our ability to integrate the
operations of acquired companies with our historic operations successfully; risks
associated with litigation and insurance coverage; risks associated with
operations outside of the U.S.; risks associated with the potential impacts of
changes in government regulations; risks associated with the produce industry,
including food safety and contamination issues; fuel prices and availability;
changes to our share repurchase activity; risk of unexpected or unanticipated
events or opportunities that might require additional capital expenditures; the
impact of war on the economy; and other risks and uncertainties detailed in our
Annual and Quarterly Reports.
2
3
Q1 2018 – Key Themes
▪ Created Chief Operating Officer role to drive
operating efficiencies and accelerate digital
transformation
▪ Strong demand and tight capacity driving robust
freight market
▪ Double-digit increase in truckload cost and price
▪ Acceleration in spot market freight opportunities
▪ Emphasis on award management
3
4
Results Q1 2018
Three Months Ended March 31
in thousands, except per share amounts and headcount
4
2018 2017 % Change
Total Revenues $3,925,327 $3,415,125 14.9%
Total Net Revenues $625,925 $568,566 10.1%
Net Revenue Margin % 15.9% 16.6% (70 bps)
Personnel Expenses $328,297 $290,504 13.0%
Selling, General, and Admin $106,043 $90,104 17.7%
Income from Operations $191,585 $187,958 1.9%
Operating Margin % 30.6% 33.1% (250 bps)
Depreciation and Amortization $24,241 $22,431 8.1%
Net Income $142,297 $122,080 16.6%
Earnings Per Share (Diluted) $1.01 $0.86 17.4%
Average Headcount 15,088 14,279 5.7%
▪ Total revenues increase driven by higher pricing, volume and fuel costs
▪ Operating expenses growth driven by increases in headcount, variable
compensation and bad debt expense. Prior year period included a $8.75M
favorable legal settlement.
▪ Net income and earnings per share increases include favorable impact of U.S.
corporate tax reform
‹#›
Q1 2018 Other Income Statement Items
▪ Q1 effective tax rate of 21.3% vs. 31.7% last year
▪ Adopted new revenue recognition accounting policy
in 2018 Q1
▪ Interest expense increase due to higher debt levels
and an increase in variable interest rates
▪ Weighted average diluted shares outstanding is
approximately flat
5
‹#›
Q1 2017 Q1 2018
Q1 2018 Cash Flow and Capital Distribution
▪ $107.9 million increase in cash
flow driven by improved working
capital
▪ $134.7 million of net income
returned to shareholders
▪ $65.4 million cash dividends
▪ Dividend payout ratio of 45.9%
▪ $69.3 million in share repurchases
▪ 750,130 shares repurchased in
the first quarter at an average
price of $92.37 per share
▪ $15.5 million in capital
expenditures
$92.7M
$200.6M
+ 116.4%
Q1 Operating Cash Flow
6
‹#›
▪ Total debt balance $1.40 billion
▪ $500 million long-term debt, 4.28% average coupon
▪ $651 million drawn on credit facility, 2.83% average rate
▪ $250 million accounts receivable securitization debt facility,
2.37% average rate
Q1 2018 Balance Sheet
in thousands
7
(1) Balance sheet as of March 31, 2018, includes contract assets and accrued transportation expense as the result of an
accounting policy change that recognizes revenues for in-transit shipments.
(2) Net operating working capital is defined as net accounts receivable and contract assets less accounts payable,
outstanding checks and accrued transportation expense.
March 31,
2018
December 31,
2017 % Change
Accounts Receivable, Net $2,019,333 $2,113,930
Contract Assets(1) $161,028 —
Accounts Payable and O/S Checks $1,064,961 $1,096,664
Accrued Transportation Expense(1) $111,920 —
Net Operating Working Capital(2) $1,003,480 $1,017,266 (1.4%)
8
Inaugural Bond Offering
▪ Inaugural public debt offering on April 9, 2018
▪ $600 million of 10-year senior unsecured notes due April 2028
▪ 4.2% fixed rate
▪ Investment grade rated by both S&P and Moody's
▪ Proceeds used to repay outstanding balance on credit
facility
▪ Provides additional capital structure flexibility
8
9
Second Quarter Trends – April
▪ April to date total company net revenue per day has
increased approximately 11 percent when compared
to April 2017
▪ Truckload volume has declined approximately 6
percent on a year-over-year basis in April
9
‹#›
TRANSPORTATION NET REVENUE MARGI
N
▪ North America Truckload cost and price change chart
represents truckload shipments from all North America
segments. Transportation net revenue margin represents
total Transportation results from all segments.
(1) Cost and price change exclude the estimated impact of fuel.
North America Truckload Cost and Price Change(1)
10
Transportation Net Revenue Margin
YoY Price Change
YoY Cost Change
North America
Truckload Q1
Volume (7.0%)
Price 21.0%
Cost 21.5%
Net Revenue
Margin
20%
15%
10%
5%
0%
-5%
-10%
-15%
Y
O
Y
%
CH
A
N
G
E
IN
CO
ST
A
N
D
P
R
IC
E
23%
21%
19%
17%
15%
13%
11%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
‹#›
Q1 2018 NAST Results by Service Line
Truckload, Less Than Truckload and Intermodal
in thousands
11 (1) Represents price and cost YoY change for North America shipments across all segments.
(2) Pricing and cost measures exclude the estimated impact of the change in fuel prices.
Three Months Ended March 31
▪ Double-digit price
increases in most service
lines
▪ Aggregate volume increase
of 1 percent
▪ Volume increases in LTL
and intermodal
▪ Added 4,200 new carriers
in the quarter
Net Revenues 2018 2017 % Change
Truckload $294,757 $267,605 10.1%
LTL $107,348 $93,517 14.8%
Intermodal $6,182 $7,175 (13.8%)
Other $6,482 $4,143 56.5%
Total $414,769 $372,440 11.4%
Truckload(1) LTL(1) Intermodal(1)
Pricing(2) 21.0%
Cost(2) 21.5%
Volume (7.0%) 8.0% 3.0%
Net Revenue
Margin
‹#›
Q1 2017 Q1 2018
Q1 2018 NAST Operating Margin
▪ Prior year period includes $8.75
million favorable legal
settlement
▪ Technology investments driving
labor productivity
▪ Selective office consolidation
▪ Flat headcount
12
41.9% 42.0%
+ 10 bps
Q1 Operating Margin
‹#›
Ocean Air
Pricing
Volume
Net Revenue
Margin
Net Revenues 2018 2017 % Change
Ocean $68,694 $63,419 8.3%
Air $26,037 $20,396 27.7%
Customs $20,655 $16,077 28.5%
Other $7,651 $6,654 15.0%
Total $123,037 $106,546 15.5%
Three Months Ended March 31
Q1 2018 Global Forwarding Results by Service Line
Ocean, Air and Customs
in thousands
13
▪ Double-digit volume
increases in all service
lines
▪ Milgram & Company
acquisition net revenue
impact to Global
Forwarding:
▪ Ocean +3 ppts
▪ Air +2 ppts
▪ Customs +21 ppts
‹#›
Q1 2018 Global Forwarding Operating Margin
▪ Investments in headcount,
technology and leased
warehouses
▪ 21.4 percent headcount increase
▪ Milgram headcount impact of
7.5 percentage points to
Global Forwarding
▪ Margin improvement plan
underway
▪ Technology deployment
▪ Process automation
14
Q1 2017 Q1 2018
15.2%
6.7%
(850 bps)
Q1 Operating Margin
‹#›
Q1 2018 Robinson Fresh Results
Transportation and Sourcing
in thousands
15
(1) Does not include intersegment revenues.
Three Months Ended March 31
Sourcing 2018 2017 % Change
Total Revenues(1) $287,687 $313,082 (8.1%)
Net Revenues $29,887 $30,408 (1.7%)
Net Revenue Margin % 10.4% 9.7% 70 bps
Transportation 2018 2017 % Change
Total Revenues(1) $262,782 $237,363 10.7%
Truckload $18,029 $21,369 (15.6%)
Other $5,954 $5,060 17.7%
Net Revenues $23,983 $26,429 (9.3%)
Net Revenue Margin % 9.1% 11.1% (200 bps)
▪ Sourcing net revenue
decline due to strategic
customer exiting fresh
produce
▪ Sourcing case volume flat
▪ Truckload net revenue
decline driven by lower
volume
▪ Truckload volume decline
of 9 percent
‹#›
Q1 2018 Robinson Fresh Operating Margin
▪ Increased variable
compensation expenses
▪ Write-off of a supplier
advance
▪ Operating expense reduction
initiatives underway
▪ Headcount reduction
▪ Service center closure
▪ Operating expense
controls
16
Q1 2017 Q1 2018
25.8%
17.3%
(850 bps)
Q1 Operating Margin
‹#›
Managed Services
▪ $1 billion in freight under management in Q1 (19 percent increase
versus first quarter of 2017)
▪ 40 bps of operating margin expansion
Europe Surface Transportation
▪ Volume growth in truckload and LTL
Q1 2018 All Other and Corporate Results
Managed Services and Other Surface Transportation
in thousands
17
Three Months Ended March 31
Net Revenues 2018 2017 % Change
Managed Services $18,317 $17,193 6.5%
Other Surface
Transportation $15,932 $15,550 2.5%
Total $34,249 $32,743 4.6%
‹#›
Final Comments
▪ Expect current freight market fundamentals to
continue
▪ Strong demand
▪ Tight capacity
▪ Increased costs and pricing
▪ Continued investment in people, processes and
technology
▪ Digital transformation
▪ Increased insights and capabilities
▪ Improved efficiency
18
19
Appendix
‹#›
Q1 2018 Transportation Results(1)
in thousands
(1) Includes results across all segments.
20
Three Months Ended March 31
Transportation 2018 2017 % Change
Total Revenues $3,637,640 $3,102,043 17.3%
Total Net Revenues $596,038 $538,158 10.8%
Net Revenue Margin % 16.4% 17.3% (90 bps)
Transportation Net
Revenue Margin % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Q1 22.6% 17.4% 17.2% 16.9% 16.3% 15.3% 16.8% 19.7% 17.3% 16.4%
Q2 20.6% 15.8% 16.2% 14.9% 15.4% 16.0% 17.5% 19.3% 16.2%
Q3 19.8% 16.6% 16.4% 15.6% 15.0% 16.2% 18.4% 17.6% 16.4%
Q4 18.3% 17.6% 16.3% 15.8% 15.1% 15.9% 19.0% 17.2% 16.6%
Total 20.2% 16.8% 16.5% 15.8% 15.4% 15.9% 17.9% 18.4% 16.6%
‹#›
Q1 2018 NAST Results
in thousands, except headcount
21
(1) Does not include intersegment revenues.
Three Months Ended March 31
2018 2017 % Change
Total Revenues(1) $2,663,011 $2,259,252 17.9%
Total Net Revenues $414,769 $372,440 11.4%
Net Revenue Margin % 15.6% 16.5% (90 bps)
Income from Operations $174,078 $155,877 11.7%
Operating Margin % 42.0% 41.9% 10 bps
Depreciation and Amortization $6,133 $5,590 9.7%
Total Assets $2,383,229 $2,126,900 12.1%
Average Headcount 6,855 6,844 0.2%
‹#›
2018 2017 % Change
Total Revenues(1) $553,754 $468,788 18.1%
Total Net Revenues $123,037 $106,546 15.5%
Net Revenue Margin % 22.2% 22.7% (50 bps)
Income from Operations $8,221 $16,206 (49.3%)
Operating Margin % 6.7% 15.2% (850 bps)
Depreciation and Amortization $8,909 $8,020 11.1%
Total Assets $805,184 $699,139 15.2%
Average Headcount 4,767 3,926 21.4%
Q1 2018 Global Forwarding Results
in thousands, except headcount
22
(1) Does not include intersegment revenues.
Three Months Ended March 31
‹#›
in thousands, except headcount
Q1 2018 Robinson Fresh Results
23
(1) Does not include intersegment revenues.
Three Months Ended March 31
2018 2017 % Change
Total Revenues(1) $550,469 $550,445 0.0%
Total Net Revenues $53,870 $56,837 (5.2%)
Net Revenue Margin % 9.8% 10.3% (50 bps)
Income from Operations $9,307 $14,652 (36.5%)
Operating Margin % 17.3% 25.8% (850 bps)
Depreciation and Amortization $1,173 $1,146 2.4%
Total Assets $412,415 $409,972 0.6%
Average Headcount 907 961 (5.6%)
‹#›
Q1 2018 All Other and Corporate Results
in thousands, except headcount
24
Three Months Ended March 31
2018 2017 % Change
Total Revenues(1) $158,093 $136,640 15.7%
Total Net Revenues $34,249 $32,743 4.6%
Income from Operations ($21) $1,223 NM
Depreciation and Amortization $8,026 $7,675 4.6%
Total Assets $706,948 $539,733 31.0%
Average Headcount 2,559 2,548 0.4%
(1) Does not include intersegment revenues.
25