C.H. Robinson (CHRW) Q3 2026 Earnings Call Transcript

DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Senior Director of Investor Relations - Charles S. Ives
• President and Chief Executive Officer - David Bozeman
• President of North American Surface Transportation - Michael D. Castagnetto
• Chief Strategy and Innovation Officer - Arun Rajan
• Chief Financial Officer - Damon Lee

TAKEAWAYS

• Total Revenues -- $5.4 billion, a 29.5% increase primarily due to higher pricing in truckload, ocean, and less-than-truckload (LTL) services.
• Net Income -- $198.5 million, a 21.8% increase compared to $163.0 million in the prior year period.
• Adjusted Diluted EPS -- $1.80, representing a 28.6% increase driven by disciplined revenue management and gross profit optimization.
• NAST Revenue -- $3.8 billion, a 29.1% increase driven by market share gains and higher pricing in truckload and LTL modes.
• NAST Volume -- 3.5% growth, outperforming the Cass Freight Shipment Index for the 14th consecutive quarter.
• NAST Truckload AGP Per Shipment -- 17.0% increase, reflecting successfully repriced contractual portfolios and capture of transactional volumes at higher margins.
• LTL Adjusted Gross Profit -- $171.4 million, an 8.3% increase driven by a 4.0% rise in adjusted gross profit per order and a 3.5% increase in volume.
• NAST Operating Margin -- 40.3% on an adjusted basis, an increase of 110 basis points year over year reflecting productivity gains.
• Global Forwarding Revenue -- $1.1 billion, a 46.1% increase driven by higher pricing in ocean and air services.
• Ocean Adjusted Gross Profit -- $136.1 million, a 23.2% increase resulting from a 20.5% rise in profit per shipment and a 2.0% increase in volume.
• Air Adjusted Gross Profit -- $43.6 million, a 22.6% increase due to a 28.5% rise in profit per metric ton despite a 4.0% decline in tonnage.
• Global Forwarding Operating Margin -- 36.6% on an adjusted basis, representing a 660 basis point expansion year over year.
• Total Adjusted Gross Profit -- $808.4 million, representing a 14.5% increase driven by growth across major transportation modes.
• Total SG&A Expenses -- $176.3 million, a 29.7% increase primarily due to higher claims expenses and a $12.5 million real estate impairment.
• Average Employee Headcount -- 11,253, a 10.4% decline year over year reflecting the company's efforts to decouple headcount growth from volume.
• NAST Shipments Per Person Per Day -- 15.0% increase, driven by the automation of manual processes through Agentic AI workflows.
• Full-Year Personnel Expenses Guidance -- $1.36 billion to $1.37 billion, reflecting higher incentive compensation aligned with strong financial performance.
• Full-Year SG&A Guidance -- $585 million to $590 million, updated from the prior range of $540 million to $580 million.
• Full-Year CapEx Guidance -- $65 million to $75 million, focused on technology investments and process automation.
• Cash Returned to Shareholders -- $289.1 million in the third quarter, including $214.3 million in share repurchases and $74.8 million in dividends.
• Net Debt to EBITDA Ratio -- 1.71x, up slightly from 1.64x at the end of the second quarter.
• RXO Synergy Target -- $300 million in net synergies, which management expects to achieve following the planned acquisition.
• AI Token Usage Cost -- less than $2 million on an annual run rate basis, despite usage increasing 40-fold over the last two years.
• Auto Liability Insurance -- 25 basis points of total gross revenue, which management noted remains a de minimis cost relative to the overall enterprise.
• Annual Wage Inflation -- $30 million, a headwind the company has consistently absorbed while delivering double-digit earnings growth.

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RISKS

• Lee stated, "net operating working capital remains elevated as higher freight rates continued to drive an increase in receivables, and negatively impacted cash flow," explaining the $151.3 million decrease in cash generated from operations.
• Bozeman noted that while the company believes 2027 insurance inflation will be manageable, the renewal process for auto-liability coverage remains pending and will not be finalized until the end of December.

SUMMARY

C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) reported a period of earnings growth attributed to the execution of its lean operating model and the deployment of custom AI technology across its logistics segments. Management indicated that the company achieved its mid-cycle operating margin targets in both the North American Surface Transportation (NAST) and Global Forwarding divisions despite facing a tightening truckload market and inflationary headwinds. The company stated that it continues to focus on the integration of RXO to accelerate growth and profitability while maintaining an industry leading cost-to-serve model. Management reported that the company has successfully decoupled volume growth from headcount growth through productivity gains and agentic workflows, resulting in a 10.4% reduction in average headcount during the quarter.

• Management reported that productivity gains in the NAST segment have reached 65% since the end of 2022. Bozeman stated, "Our industry leading cost-to-serve model is highly scalable, and we expect it to strengthen further as we harness AI's capabilities to automate more of the quote to cash life cycle of a load."
• The company indicated that its pending acquisition of RXO will target $300 million in net synergies. Bozeman stated, "the data shows that the overlap is limited," in reference to an analysis of the top 100 truckload brokerage customers of RXO.
• Management stated that custom AI agents have reduced manual ocean quoting work and enabled faster responses to customers. Strategy Officer Rajan noted, "while our token usage has increased over 40x versus 2 years ago, our annual token cost on a run rate basis is still less than $2 million."
• The company noted that it has paused share repurchases following the RXO acquisition announcement to focus on deleveraging and maintaining an investment grade credit profile.
• CFO Lee reported that higher than usual claims expenses in the third quarter were due to a nonlinear accumulation of cargo and auto liability settlements, rather than a change in the long-term run rate.
• Management highlighted its insurance tower for auto-liability claims as a differentiator. Bozeman stated that inflation in the 2027 auto-liability premium "will be less than what other brokers will have to absorb and much less than the extreme scenarios that some have suggested."

INDUSTRY GLOSSARY

• NAST: North American Surface Transportation, a business segment focused on truckload and less-than-truckload brokerage.
• AGP: Adjusted Gross Profit, a non-GAAP measure representing total revenues minus the cost of purchased transportation and related services.
• LTL: Less-Than-Truckload, a shipping mode for relatively small freight that does not require the use of an entire trailer.
• 3PL: Third-Party Logistics, a provider of outsourced logistics services for part or all of a company's supply chain management.
• Cass Freight Shipment Index: A leading indicator of North American freight market trends and volume activity.
• Agentic AI: Advanced AI systems capable of executing complex multi-step workflows and tasks autonomously within a proprietary system.
• NVOCC: Non-Vessel Operating Common Carrier, a carrier that provides ocean transportation services without owning the vessels.
• Managed Solutions: A business unit providing transportation management services and supply chain modeling using specialized technology.

Full Conference Call Transcript

Operator: Greetings, ladies and gentlemen, and welcome to the C. H. Robinson Third Quarter 26 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. As a reminder, this conference is being recorded. Wednesday, 10/28/2026. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Charles S. Ives: Thank you, Donna, and good morning, everyone. On the call with me today are David Bozeman, our president and chief executive officer Michael D. Castagnetto, our president of North American Surface Transportation Arun Rajan, our chief strategy and innovation officer and Damon Lee, our chief financial officer. I would like to remind you that our remarks today contain forward-looking statements. Slide 2 in today's presentation lists factors that could cause our actual results to differ from management's expectations. Our earnings presentation slides are supplemental to our earnings release, and can be found in the Events and Presentations 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 will turn the call over to David.

David Bozeman: Thank you, Chuck. Good morning, everyone. Thank you for joining us today. To talk about another quarter of strong results delivered by the Robinson team, I want to take a moment to review what the team has accomplished over the past 3 years to revolutionize our business, and why we can replicate that transformation with the acquisition of RXO. 3 years ago, many doubted that a lean operating model was applicable. Or could be adequately implemented to drive significant benefit in a logistics business. Some said it would be impossible to outgrow the market and expand margins at the same time. As it turns out, we have consistently outgrown the market.

We have expanded our gross margins and optimized our portfolio and we have significantly increased the productivity and operating leverage of our business. We have achieved all of the things we said we would do. Building a strong say-do ratio. Let's talk about how we delivered all of this and how this put us in a position to have a business model that can now be applied to inorganic solutions. As always, it starts with the customer. We strengthen our value proposition by improving the horizontal capabilities that support the verticals our customers operate in.

We have invested in our customer facing roles, and we have improved our go to market approach in order to emphasize the full breadth of our domestic and global services. As a result of providing better service and solutions to our customers, our NAST business has outgrown the market every quarter over the past 3 years, and we expect this consistent organic market share growth to continue for many years to come. We have implemented disciplined revenue management practices that dictate the responsible nature in which we obtain market share at an appropriate gross margin.

These practices have enabled us to be more selective about the volume that we seek and accept and they have improved the speed and success of repricing our contractual portfolio when the market conditions require it. At the same time, we have improved our ability to capture spot market volume with enhanced price and cost discovery and with an AI agent that responds significantly faster to transactional quotes received via email. All of these initiatives have enabled us to expand our gross margins. Last, but certainly not least, we have lowered our cost to serve. and improved our operating leverage by removing waste and automating manual processes through lean disciplines and custom built AI agents.

This has enabled us to decouple headcount growth from volume growth. As a result, since the end of 2023, we have expanded our NAST operating margin by over 1.5 thousand basis points and achieved our mid cycle target of a 40% operating margin. And we have done it despite facing headwinds from the overall market. Similarly, we have expanded the operating margin in our Global Forwarding business by over 2.5 thousand basis points and exceeded our mid cycle target of a 30% operating margin by applying the same Lean AI strategy. 3 weeks ago, we announced our agreement to acquire RXO.

And we continue to be very excited about the benefits of the plan acquisition for our customers and carriers. our employees, and our shareholders. The same lean operating model and AI technology have been vitally important in the transformations of our NAST and Global Forwarding businesses are what will enable us to successfully integrate and transform the RXO business. These disciplines do not disappear as we integrate a strong team and book of business with additional capabilities. Rather, we believe these disciplines are what will enable us to deliver different results than this industry's past acquisitions. Those disciplines will be emphasized by our skilled integration team that has proven integration experience and a transformation pedigree.

That team is being led by our vice president of the Robinson operating model, Jordan Kass. Who was instrumental in several successful integrations at Danaher and in helping me stand up the lean operating model at Robinson in January 2024. There are also a few other things that I wanna reemphasize related to our plan acquisition of RXO. It is not a substitute for our organic growth or an indicator that our organic growth is slowing. As I said earlier, we expect our organic outgrowth to continue. Supported by the same initiatives that we have been executing on. We believe the inorganic growth from the RXO acquisition will accelerate our growth and profitability.

For example, in addition to our own knowledge of where we do and do not compete with our team of external advisers did a thorough analysis of potential customer overlap focusing on the top 100 truckload brokerage customers of RXO. Even though this seems hard for some to believe, the data shows that the overlap is limited. We are a data driven company. And we rely on data to drive our decisions. And finally, a thorough analysis of RXO's legal docket was an important piece of the diligence that was completed. That analysis revealed that RXO's legal docket is a neutral factor when compared to our own docket.

And like us, RXO has a significant assurance power for contingent auto liability claims. Our insurance tower is a differentiator versus many other brokers. And is 1 reason that we believe an inflation in our 2027 auto-liability premium will be less than what other brokers will have to absorb and much less than the extreme scenarios that some have suggested. We continue to manage our legal docket as we have for years. With most cases being either dismissed or settled for amounts below our deductible. We are also progressing nicely through our 2027 insurance renewal process. And we believe this renewal will result in insurance inflation that is reasonable and manageable.

As a reference, we have been absorbing approximately $30 million of annual wage inflation. And we still delivered double digit earnings growth in 2024 through 2026. Our insurance renewal process will be finalized by the end of December. And we will share an update on our 2027 insurance costs as soon as we can. Lastly, we continue to see examples of our customers deciding to alter their sourcing strategy to shift volume to larger brokers with significant insurance coverage and strong carrier vetting processes. Everything that I just discussed is why we strongly believe that we can deliver the $300 million of net synergies from the acquisition of RXO.

Continuing to drive organic outgrowth that we will be able to manage the expected insurance inflation, and that we will continue to deliver significant value for our shareholders. Now turning briefly to our third quarter results that Michael and Damon will discuss in more detail. I wanna thank our people for continuing to provide exceptional service to our customers and carriers. Embracing the Robinson operating model, and executing with discipline. Resulting in another quarter of double digit year over year earnings growth. Q3 marked the 14th consecutive quarter in which the NAST team delivered year over year volume growth that outpaced the Cass freight shipment index.

They also continue to deploy our disciplined revenue management practices as the North American trucking market continued to reflect a period of significant supply driven tightening. By successfully repricing a large portion of our contractual truckload portfolio and by capturing spot volumes at higher margins, the team achieved a 17% year over year increase in truckload AGP per load. In NAST and Global Forwarding, the team continues to turn manual processes into agentic workflows that are increasingly automated. More connected, and easier to manage at scale.

As a result, both businesses delivered a higher level of year over year productivity improvements than they achieved in the first half of 2026 and both businesses achieved their mid cycle operating margin targets again. Our ability to consistently deliver secular earnings growth over the last 3 years is a result of the disciplined execution of our lean AI strategy. Lean AI is our unique approach that combines the principles of our Robinson operating model rooted in lean methodology with the power of custom built AI. and the expertise of our people To maximize value minimize waste, and drive better outcomes for customers and carriers.

We are highly confident in our ability to continue to execute on all of our strategic initiatives in any market environment. Our industry leading cost-to-serve model is highly scalable, and we expect it to strengthen further as we harness AI's capabilities to automate more of the quote to cash life cycle of a load. As the industry pacesetter for cutting edge innovation, and differentiated solutions, we will continue to use our domain expertise and lean mindset to build technology that delivers on our customers' promise and drives higher value for all of our stakeholders. I will turn it over to Michael now to provide more details on our NAST results.

Michael D. Castagnetto: Thanks, David, and good morning, everyone. In Q3, the NAST team continued to demonstrate our ability to consistently gain market share, to optimize our profit per load despite significantly higher spot rates, and to deliver higher levels of productivity as we incorporate Agentic AI into our workflows. As Dave mentioned, our total NAST volume outgrew the Cass freight shipment index for the fourteenth consecutive quarter. Our total NAST volume grew 3.5% year-over-year compared to a 0.3% decline in the index. Our growth was balanced with both truckload and LTL volume growing 3.5%. Reflecting market share gains in both modes. Having industry leading solutions in both truckload and LTL is a competitive advantage for Robinson.

In our billion dollar LTL business, where we move more LTL freight than any other 3 PL in North America. We delivered year over year volume growth. For the 11th consecutive quarter. Underscoring our sustained outperformance versus the broader LTL market. We will continue to drive the best solutions for our customers and move their freight in the most optimal way that fits their supply chain. 1 of the keys to our consistent market share gains has been volume growth in key verticals that we have specifically targeted. During Q3, we continued to deliver truckload volume growth in the retail, health care and technology verticals. Supported by our horizontal solutions such as drop trailer, cross border, and short haul capabilities.

We continue to win volume in both the contractual and transactional markets. As a result, the mix of our truckload volume remained at 70% contractual and 30% transactional, which was unchanged year-over-year and sequentially. At the same time, stricter driver requirements federal enforcement actions, other carrier challenges continue to remove capacity from the market. Creating an environment that is increasingly sensitive to disruptions, and sudden changes in freight demand. It has also caused truckload spot market costs to increase significantly in 2026. Excluding fuel, DAT spot rates in The U. S. Increased approximately 37% year over year in Q3. As a result, load to truck ratios and tender rejection rates remained elevated.

Which continued to create opportunities for transactional volumes at higher margins. In Q3, our team continued to effectively capture the right transactional volume at a substantially higher AGP per shipment compared to last year. Combined with ongoing repricing of our contractual business, to reflect the new market realities, we were able to achieve a 17% year-over-year increase in our truckload AGP per shipment. Our revenue management disciplines, our improved price and cost discovery, and our strong customer relationships have enabled us to reprice our contractual portfolio much faster than we have historically. Our customers know they can trust the market and rate information we are bringing to them.

Which has resulted in historically high levels of acceptance in our repricing campaigns. Across NAST, we also continue to integrate Agentic AI into our workflows. Lowering our industry leading cost to serve, and elevating the customer experience by enabling faster, more reliable service. The increased automation of our workflows enabled us to continue delivering double digit increases in NAST shipments per person per day with a greater than 15% year over year increase in Q3 and a greater than 65% increase since the end of 2022. Measured across the entirety of our NAST organization.

Looking ahead to Q4, market volumes are typically softer compared to seasonal peak in Q3, with the 10-year average of the Cass Freight shipment index excluding the pandemic impacted year of 2020, reflecting a 3.4% sequential volume decline in Q4. On a year over year basis, we expect our consistent outperformance versus the market index to continue. Truckload spot rates are expected to inflect higher during Q4 as capacity seasonally tightens during the holiday time frame between Thanksgiving and New Year's Day. As we look forward, we will continue to deliver industry leading solutions and flexibility to our customers and carriers.

We will 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 combined with our operating model enable us to deliver exceptional service and drive sustained improvement. With that, I will turn it over to Arun to provide an update on the advancement of our lean AI strategy.

Arun Rajan: Thanks, Michael, and good morning, everyone. Today at CH Robinson, we are faster and more disciplined in how we design, build, and scale technology across the company. We adapt faster to changing market conditions, with actionable data into the hands of our people faster,, and respond faster to our customers and carriers all while solving increasingly complex logistics challenges at scale. Speed alone is not the only objective. What matters is creating sustainable value by reengineering how work gets done. That includes raising the level of service we provide to customers, improving the quality of work and experience for our employees, and delivering measurable scalable outcomes in any market cycle.

Our approach of pairing AI with our proven lean operating model continues to differentiate us. A key part of that differentiation is our builder culture, and more than 450 in house engineers data scientists. They enable us to design fit for purpose technology and better agents directly into our proprietary systems and workflows. They understand logistics, our business, and how work gets done at Robinson enabling us to build for real world complexity rather than rely on generic solutions. That same expertise also enables us to engineer workflows for efficiency, optimizing token usage, selecting the right large language model for each task based on effectiveness and cost.

We do not need the newest or most extensive model for every use case. And we are not dependent on any single provider. Our focus is on achieving the best business outcome at the best economics. As a result, while our token usage has increased over 40x versus 2 years ago, our annual token cost on a run rate basis is still less than $2 million. As we continue to integrate, our custom built AI agents into more workflows, within the quote to cash life cycle the value of our Lean AI is showing up across the enterprise.

This includes group service, and responsiveness to the customer and productivity gains of more than 65% in both NAST and global forwarding since the end of 2022. These outcomes reflect the combination of our custom built technology and our proprietary data and context. More than ever before, we are now putting these advantages to work in our global forwarding business and leveraging the learnings from the same journey in NAST. 1 example is ocean quoting, where we are enabling faster responses for customers and less manual work for our teams. Our lean operating model turns those advantages into repeatable execution. We simplify and standardize workflows identify high friction work, and prioritize opportunities based on measurable outcomes.

Our people are central to that continuous improvement. Understanding of the work helps us identify where processes need to change, and where technology can make a meaningful difference. We are not simply automating existing processes. We are applying logistics expertise and lean problem solving to improve the processes themselves. That discipline also provides a structure AI needs. Our agents has specific responsibilities, defined guardrails, and human oversight. We measure what works, learn from what does not work, and continuously improve. This is not technology operating separately from the business. It is embedded in how we run the business.

As we said before, we remain in the early innings of our Lean AI transformation, We have automated only a fraction of the hundreds of processes across the quote to cash life cycle. With substantial runway remaining across NAST and global forwarding. Our logistics expertise proprietary data and context, custom built technology, and lean operating model work together to deliver measurable outcomes, create advantages that are difficult to replicate. With that, I will turn the call over to Damon for a review of our third quarter results.

Damon Lee: Thanks, Arun, and good morning, everyone. Our Q3 results provide further evidence that our Lean AI strategy and our disciplined execution are driving secular earnings growth We continue to make meaningful progress against our strategic priorities, including market share gains, gross profit optimization, and improved operating leverage. Our Q3 total revenues and adjusted gross profit, or AGP, grew year over year by 29.5% and 14.5%, respectively. This was due to NAST's continued outperformance versus the Cass index, higher pricing in NAST, and Global Forwarding. And further progress on optimizing our truckload gross profit.

On a monthly basis, our total company AGP per business day compared to the prior year was up 6% in July up 14% in August, and up 24% in September. On a sequential basis, AGP per business day declined in July before increasing in August and September. Reflecting improving truckload profitability and stronger ocean rates. Turning to expenses. Q3 personnel expenses were $360.3 million, including $3.6 million of restructuring charges related to workforce reductions. Excluding restructuring charges, our Q3 personnel expenses were $356.7 million, up $17 million or 5%. Primarily due to higher incentive compensation that is aligned with our strong financial performance. This increase was partially offset by our cost optimization efforts and productivity improvements.

Our average headcount was down 10.4% year over year in Q3. And was down 2% sequentially. Illustrating how we continue to decouple headcount growth from volume growth while growing volume. Due to our continued volume outgrowth in NAST, our strong 2026 earnings growth and our pay for performance compensation plan, we now expect personnel expenses to be in the range of $1.36 billion to $1.37 billion. Sequentially, we continue to expect incentive compensation to be lower in Q4 than in Q3. In line with our sequential earnings profile. Our Q3 SG&A expenses totaled $170.3 million, including $15.4 million of other charges that consisted primarily of $12.5 million of impairment charges associated with continuing to optimize our real estate footprint.

Excluding these charges, SG&A expenses of $161 million increased $25.1 million year over year primarily due to higher claims expenses. While our claims expenses are typically linear throughout our year, periodically, some quarters are higher than others as demonstrated in Q3. However, even with the higher than usual claims expenses in Q3, our year to date insurance and claims expense remains at less than 50 basis points of our total revenues. Based on our expenses to date, and our expectations for Q4, we now expect our total SG&A expenses to be in the range of $585 million to $590 million. Compared to our prior range, of $540 million to $580 million.

This includes an expectation that depreciation and amortization expense will still be toward the lower end of our previously stated range of $95 million to $105 million. For the year. As Dave mentioned, we hit our mid cycle operating margin targets again in Q3. By segment, NAST delivered operating margin excluding restructuring costs, of 40.3%, an increase of 110 basis points year over year. Global forwarding delivered an operating margin of 36.6%, an increase of 660 basis points year over year. This reflects the continued impact of our Robinson operating model and Lean AI strategy which creates greater operating leverage, across the enterprise.

Based on our performance through the first 9 months of the year, we remain confident in our ability to deliver full year operating income within our target range that is shown on slide 17 of our earnings presentation. The bottom end of our target range remains equivalent to at least $6 of diluted EPS. But we are not guiding towards any part of the target range. The range itself is unchanged from the target we raised in October 2025 despite year to date market volume growth that has been negative on a year over year basis.

We have been able to offset that headwind and absorb other cost increases by consistently over delivering on our strategic initiatives aimed at growing market share optimizing gross profit, improving productivity, and expanding operating leverage. Moving below operating income, our effective tax rate for the quarter was 20.6% and we are maintaining our tax rate guidance of 18% to 20% for the full year. Turning to cash flow on our balance sheet. We generated $124.1 million of cash from operations in Q3. However, net operating working capital remains elevated as higher freight rates continued to drive an increase in receivables, and negatively impacted cash flow.

Our capital expenditures were $17.5 million in Q3, and we continue to expect full year capital expenditures to be in the range of $65 million to $75 million. We ended Q3 with approximately $747 million of liquidity. While our capital allocation strategy remains grounded in maintaining an investment grade credit profile, Our balance sheet enabled us to $289.1 million of cash to shareholders in Q3. Including $214.3 million of share repurchases and $74.8 million of dividends. This represents an increase of approximately 52% compared to the third quarter of last year. Our net debt to EBITDA ratio at the end of Q3 was 1.71x, up slightly from 1.64x at the end of Q2.

As a reminder, following the announcement of the RXO acquisition, we expect our leverage ratio to increase upon closing. Consistent with our commitment, to maintain investment grade credit ratings, we have now paused share repurchases and remain committed to deleveraging and returning to our target leverage range by the end of 28. Our strong conviction in the strategic and financial merits of the RXO acquisition have not wavered. RXO's portfolio of customers and capabilities will add to our growth strategy and we remain confident in our ability to execute the integration and achieve our synergy targets. We have strong conviction in the strategy we are executing and in the intrinsic value of the business.

Significant transformational runway remains across the enterprise. And we believe our lean operating model our technology, and our expertise position us well to create value through both organic initiatives and future inorganic additions. With that, I will turn the call back to David for his final comments.

David Bozeman: Thanks, Damon. As you have heard our prepared remarks today, we have continued to deliver higher highs and higher lows from the disciplined execution of our strategy. And we continue to strengthen our say-do ratio. I am proud of the progress we have made to transform CH Robinson into the global leader in lean AI supply chains And I wanna 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 have the opportunity to deliver in the coming years.

Through both our organic growth and through the addition of RXO. When I joined this company a little over 3 years ago, I told the CH Robinson employees that we needed to provide such exceptional service and value to our customers and carriers that they would view us as the trusted partner that they choose to do business with. We have made significant strides in delivering on that mantra. And we believe the addition of RXO will only magnify our value proposition. The strength of our strategies our technology, our people, and our operating model disciplines are differentiating and sustainable. We will continue to lead with purpose, and move with urgency to disrupt ourselves and the industry.

And to deliver customer success through our unmatched expertise, our unrivaled scale, and our tailored solutions. And we expect to drive sustainable outperformance profitable growth, and long term value for all of our stakeholders. That concludes our prepared remarks. I will turn it back to the operator now for the Q and A portion of the call.

Operator: Thank you. The floor is now open for questions. [Operator Instructions]. Order to allow as many questions as possible, we are asking you to please limit yourself to 1 question. Again, that is star 1 to register a question at this time. Today's first question is coming from Jeffrey Kauffman of Citizens Bank. Please go ahead.

Jeff Kaufman: Thank you very much, and congratulations for maintaining momentum in such a tough market. I just want to dig down a little bit into other SG&A. Obviously, expenses can be lumpy. And that is what happened with claims. And you also had the real estate impairment that came through the quarter. So I guess my question is, I know you have raised the SG&A range, and your view is let's just run these through operations. But in theory, was this kind of an odd lumpiness of expenses this quarter? And do we go back to more of a run rate like we were seeing in the quarters prior?

Or is there a quarter where you probably have lower than expected versus the run rate because, claims should average this, and we were very, very lumpy in Q3.

Damon Lee: Thanks, Jeffrey. For the question. Good morning. Look, first of all, before I get into SG&A expenses, let me just say I am very proud about the performance the team delivered in Q3. As you mentioned, 14 consecutive quarters of outperformance versus the market for our NAST business. 3 years ago, I do not think anybody would have thought that was possible for the team. Another quarter of exceeding expectations. And another quarter of exceeding mid cycle margin targets for both businesses. So we felt really good about the performance of the team in the quarter. Specific to SG and A, I think you are on some right themes there, Jeffrey, which has SG&A by quarter is nonlinear.

I mean, think we certainly focus on the full year. And to your point, there is quarters that are below. Run rate, and there is quarters that are above run rate. And we certainly view Q3 as a quarter that was above run rate. But if you look at our revised SG&A guidance, you will see that we have got Q4 SG&A coming down. Versus Q3 levels, right? So we certainly do not view Q3 as a new run rate for SG&A expenses. And I would also say I do not view anything unusual I think as all of you know, we have multiple types of claims. That go into claim expenses. You have cargo claims.

You have various types of customer settlements. You have auto liability claims. You have auto liability settlements. And all those things just by their nature are nonlinear. And you just saw a higher accumulation of those in Q3. But as I said before, we certainly have the expense level for SG&A coming down in Q4. And we do not see Q3 setting any type of new run rate for the company.

David Bozeman: Hey, Jeffrey. I am a little bit curious on what-- I want to put a period on what Damon said, and I like the way you framed the question. Again, I could not be more proud of this team. In a really, really tough kind of macro backdrop they continue to be consistent and deliver. And That is our say-do ratio. That is the system, the model that we built and we continue to drive through at Robinson. So I like that framing. Love Damon's answer, but I appreciate the question.

Damon Lee: Yeah. And Jeffrey, I will just put a final bow on my answer as it relates to SG and A. And we speak about this a lot. We typically refer to total insurance and total claims expense as being targeted at 50 bps of total gross revenue And certainly, to date, we are below that 50 bps of total gross revenue, even with the higher the higher Q3 level. And so we typically look at these type of expenses, as I mentioned, on a longer trajectory than certainly 1 quarter. And we are still well within that guidance that we have given on where total claims and total insurance expense lies. Thanks for the question.

Operator: Thank you. You. The next question is coming from Tom Wadewitz of UBS. Please go ahead.

Tom Wadewitz: Yes. Good morning. and, you know, nice to see the good results. And I think in truck volume picking up a bit, that is a good thing too. The 3.5% growth. So I guess David, I wanted to ask you about. I do not know if this is, for you or for Jordan Kass or Michael D. Castagnetto. But if you could appreciate your comments on RXO and kind of the 100 customer overlap analysis.

I just wonder if you could give a little more thoughts on how you plan the integration with RXO to avoid maybe not an overlap issue, but what if your approach you know, what if you reject more loads because they are not as than RXO and the customer does not like that? Or they really like the customer rep or just things like that. That, you know, could be friction points that could cause some attrition, not necessarily because of overlap. So what would your approach be on the integration really to avoid some of the more negative experiences that have happened with prior brokerage deals.

David Bozeman: Yes, Tom. Thanks the question. First of all, could not be more excited about this deal. I think you know that. Look, we have assembled a team that is, experienced and ready for this deal. We have playbooks that are detailed, ready to execute, And all of what you are talking about are things that you have to execute on integration. And we feel really good about setting up for execution. This is a really good company, incredible top line, that is gonna come into a company that has built, you know, the best, lowest cost-to-serve model in the industry. And we have the details to do that.

But Michael can go in further on the customer overlap that you talk about because this is this is front and center for us.

Michael D. Castagnetto: Yeah. Tom, first of all, thanks for the question. And we did cover in some of our previous remarks how we feel strong about the overlap number being very manageable for us in terms of the process. In terms of some of the more direct engagement post close, first of all, I would say we are gonna operate from a work backwards from the customer mentality. And make sure that they get the best experience possible of the 2 companies coming together. And that means we will be incredibly you know, no ego about this and make sure that the right people are talking to the customer to maximize growth for the customer, maximize the service we bring to them.

Your second part is actually something I am really excited about in terms of profitability, maybe something they have that is different that we have at different levels of profitability. David really covered it, which is we have got this incredible top line growth company that we have we are acquiring. We feel really good about that. But combining them with our industry leading cost to serve, our industry leading pricing and cost costing engines our ability to put our data combined with their data in front of our people, our combined teams, really makes me excited about what that profitability can be.

And I think a lot of business that others would struggle to execute, we are gonna be really in prime position to go grow and execute at a highly profitable level.

Damon Lee: Okay. Tom, I would only add 1 last thing, which is when you mentioned would we be inclined to decline volume because it is less profitability than Robinson's current levels. Remember, 1 of the things we are excited about this acquisition is RXO's book of business is very healthy. Right? Their gross margins are actually what we consider very healthy. And so therefore, from a quoting perspective, I do not think you have much of a falloff between RXO and CH Robinson in the marketplace, where they are challenged on profitability is cost to serve. We are certainly. We have industry leading capabilities.

So to your point, I do not see I do not see a possibility of us walking away from new business because of profitability. Because as I just mentioned, their AGP margins are quite healthy.

David Bozeman: And keep in mind, Tom, and great questions. You can see we are pretty passionate about it. You have 2 of the companies that are the strongest when it comes to customer interaction, customer retention, customer execution. These 2 are the strongest in the industry, and now, they are gonna be coming together. So could not be more excited about that, and I hope you will be as well.

Tom Wadewitz: Thanks. Yeah. I just. That. that is a great answer. I appreciate it. I just wondered if there is a room for, like, a clarification on 1 comment you made, David. You said that $30 million kind of inflation on comp and benefits you absorb each year. Are you trying to imply, like, should we assume that the increase in insurance would be less than that $30 million or of that magnitude? It seemed like you might be implying that with the way you presented that comment, but I just I do not want to, you know, read it the wrong way.

David Bozeman: Yeah. I mean, Tom, look, we provide that as an example of a magnitude just so you guys can get your head around the headwinds that we absorb every day and never talk about. Right? And so we talk about the $30 million on labor inflation, we have never referenced that number before. that is a number we absorb year in and year out. It compounds year in and year out, and we still deliver demonstrable earnings growth. Even with that inflation. So we have given that example just to show the community, the external community here, how we are built. How we are built to offset headwinds, how we are built to absorb inflation and still deliver demonstrable results.

So we thought that was a pertinent example to give just to give you some context around how insurance on. Or inflation on insurance is not gonna be something that derails our earnings trajectory going forward. I mean, yeah, we Okay. Look. Yeah. it is it is good stuff. Thanks. Okay. Thanks for the time. I appreciate it.

Operator: Thank you. Thank you. The next question is coming from Stephanie Benjamin Moore of Jefferies. Please go ahead.

Stephanie Benjamin Moore: Great. Thank you. Actually, I think I will jump off of Tom's last question here and maybe to dig in for a little bit of finer point here. So 2 part question, but same topic. So first, maybe just remind us when we should expect to hear any update on incremental insurance and its, like, insurance costs for 2027 So when we should kind of see that come through, you will be able to speak to the headwinds there. And then second part of the question, you know, I think maybe just talk a little bit about how you think you could manage these inflationary pressures. So I appreciate that you just gave that $30 million example.

You are very confident that you have been able to, but you have already done a lot of work behind the scenes, and you have made a lot of headway to obviously, reduce your cost to serve. So what is the next leg to the story here that gives you the confidence that. And probably an accelerating inflationary environment, you can still be that successful and offset the new cost. Thank you.

Damon Lee: Thank you for the question, Stephanie. So on the timing of insurance, updated information or clarity, Certainly, the definitive date is sometime in mid to late December. That is typically when we get finality on what makes insurance policies will look like. Now as you know, we are trying very hard this year to finalize those negotiations. Right? And we will not wait to provide guidance once we have it. Right? And so once we have insight, onto insurance inflation going into 2027, we will not wait for the next earnings call to provide that information, right? that is information that we would more likely file an 8-K and provide that information as soon as it is available.

But as we said last call, and is the reality of what we are going through today, is those negotiations are still pending. They are still in progress. And what I would say, though, is we still feel very good about those proceedings. We have said multiple times that we feel like the outcome of our insurance negotiations will be close to industry leading, if not industry leading, And we certainly do not feel like the inflation on those costs will be anything that will derail our earnings going forward. Again, just to remind everybody, you know, automobile liability insurance is only 25 bps. Of total gross revenue for us.

And so, you know, therefore, it is a de minimis cost today. With inflation tomorrow, it will be a de minimis cost tomorrow. So that is what I would say. Now how do we offset inflation? it is a great question. This is at the core of our lean operating model and our lean AI strategy. Certainly, our whole organization is working on a pipeline of initiatives every single day. And that pipeline of initiatives far exceeds what we need to deliver any given month, any given quarter, any given year. Right? And so we have the ability to pull initiatives to the left when we need to or when we are capable of doing so. Right?

And so, therefore, I think that is what differentiates us versus so many companies is our ability to react to the conditions that we are seeing today. And be able to improve our performance based on those funnels of initiatives. That we are working on. So I would just say that is really our funnel management and just the forward thinking the forward planning that we do as a company allows us to plan past things like inflation on labor and inflation on insurance.

Arun Rajan: And Stephanie, I will just add that our road map of opportunities to Damon's point, with Lean AI, and sort of what the tools deliver or the new tools as they roll out and the way we are able to leverage it. Both on Global Forwarding. You have seen us make some announcements. We still have a lot of room to scale up. Opportunities that we have already got We started to roll out. And then we have rolled out. We have talked about this before. there is still plenty of opportunity in the cash life cycle across all of our businesses as we go deeper We have deployed a lot of agents to automate various tasks.

But the ability to stitch together those agents and automate entire workflows is still a lot. Plenty of opportunity, to invest to cut. Yep.

Damon Lee: And I would just end that Stephanie was saying, look. It would not be a Robinson call if we did not talk about the early innings of our transformation. Very early innings of the lean transformation, I think we have gone on at length on what that means and why we feel that way. And then as Arun just walked through, I mean, certainly early innings on our tech deployment as well. And I think we have only touched a fraction of the processes that we can touch within Robinson. But I would also I would also say that even processes that we have already touched, we are going back and touching it multiple times.

We are making them better as the technology evolves as our understanding of processes evolves. And so when we say we are in the early innings of this transformation, that is why we have such a robust pipeline of opportunities going forward. Thank you for the question.

Operator: Thank you, guys. Thank you. The next question is coming from Jonathan Chappell of Evercore ISI. Please go ahead.

Jonathan Chappell: Thank you. Good morning. I kind of wanted to reframe the opportunity for Global Forwarding now that you have run out some of your initiatives there. Let's go back to the Investor Day and the anticipation for Global Forwarding that underwrote your 2026 estimates. You were not expecting much at all. You are saying go back to kind of late 2023. And, clearly, that business has done well on its own without you implementing a lot of the lean AI principles that you have done at NAST.

So now that you are kicking that off, but understanding you are coming from a much higher starting point, on global forwarding than what you were underwriting to begin with, what is the potential there? Whether that is mid cycle, margins, whether it is outsized market growth, how do we measure the medium term for Global Forwarding today versus 2 years ago at Investor Day?

David Bozeman: Yeah. Thanks a lot, Jonathan. A couple of things I wanna clarify on Global Forwarding. When we started our journey and our transformation, I would I would say this. As we kicked off our operating model, we put that business under that operating model. Here for the last, 2.5, 3 years. And we like the progression that we have seen on the self help of that business and the health of that business. and I agree with you on the acknowledgment of how it is kind of gone up into the right But as Damon said, we are just getting started on that.

And as we signaled earlier, or later last year in the beginning of this year is that we will continue to now roll out in a purposeful manner our technology stack into Global Forwarding similar to how we did with NAST. So kind of a 2 part approach and we are starting to see, the benefits of that as well. But make no mistake, the lean operating model really has begun. Has transformed that business. And there is more to come on that. That Arun just alluded to, but we can go a little bit further, and deeper on that.

Damon Lee: Yeah. John, I will just add to what David said. I mean, certainly, we are we are in a different position in global forwarding than we are in our NAST business. Certainly, the NAST business is starting at the top And of course, we have improved that gap between us and everyone else. But Global Forwarding is not, right? I mean, Global Forwarding is a much smaller competitor in the forwarding space. And so therefore, there is tremendous opportunity on all levels, right, on margin enhancement. On revenue growth, And I would say the same playbook we have run on NAST is the exact same playbook we are running on global forwarding. So to your.

Specific to your question, we believe there is demonstrable revenue growth opportunities in global forwarding. We think there is demonstrable revenue management opportunities in Global Forwarding to improve their price and cost of purchased transportation. And then we think there is always continued opportunities on driving productivity to improve their cost serve model.

David Bozeman: And if you look at our press release, right, and I have said and David said historically, is we do believe we will have the best tech stack in forwarding. Right? And that will be the best tech stack and not being the number 1 player in the industry. So I think, to your point, I think there is a lot of opportunity to continue to expand the performance of Global Forwarding just because of, A, everything we have said They are getting the same playbook that NAST has been so successful on. but where we are starting in the industry, is a much different starting point than where NAST is.

Arun Rajan: Yes. To just sort of amplify what Damon just said, our agentic AI platform that powers all the NAST productivity that you have that you have seen us deliver and all of our machine learning models that power our price discovery and cost discovery, basically, our algorithmic pricing and costing in NAST. We are deploying all of that into global forwarding. Right? And so to Damon's point around our confidence in building and deploying the best technology stack in the industry, we feel very confident about that. We have got the playbook We deployed it in mass. You see the results.

And, we are in the early innings of deploying the same capabilities both on productivity and gross margin, i.e., revenue management, in Global Forwarding forward.

Damon Lee: Yeah. And 1 final comment. Jonathan, on mid-cycle margin targets. Right? We do not envision changing that target for either NAST or Global Forwarding, right? We believe those targets are solid targets. We believe they are anchored in our strategy. And we want to use that optionality around those targets to drive even more demonstrable benefits for the enterprise. So I do not necessarily see a future where we give revised mid cycle targets. We believe those are appropriate targets for both businesses. As they said, But what we have committed to is making sure that the optionality above those targets drives optimal earnings for the company. Thanks for the question.

Operator: Thanks. Thank you. The next question is coming from Christian Wetherbee of Wells Fargo. Please go ahead.

Christian Wetherbee: Hey, thanks. Good morning, guys. Maybe wanted to come back to the RXO acquisition. I think the market is looking at this and is expressing some concern about revenue attrition as you put these 2 companies together. And Dave, I thought it was helpful, some of the comments early in the call about the 100 customer analysis that you guys have done. And your comfort with that overlap. I do not know if there is any way you can unpack or expand on that.

Give us a little bit more comfort, give investors a little bit of an idea of how you see, whether it be by service or you know, by vertical, where there is that overlap and just maybe put a little bit of a finer point around it if possible. I think that would be very helpful.

Michael D. Castagnetto: Hey. Hey, Christian. This is Michael. I will try and expand on this a little bit. So, first, I think David did cover it really around the top 100. And we have said even in our external statements post the announcement. Right? there is a couple places where we are really strong in the industry LTL is an example. Couple places, they are super strong in the industry. Last Mile, Expedite, where we do not cross over really at all. And so there is a lot of opportunities, we think, from a synergy perspective there When you take some areas that there is large parts of the you know, the for-hire market where we do not. We have zero crossover.

In places where we do have some crossover, you know, we have heard from customers that they are excited about this. Because there is opportunities that even within customers, we do not do the same thing. And so, you know, we feel really good that while we are not naive that there will be some attrition, but we have built that into the synergies number that we have shared externally. We feel really good about the future growth opportunities of the 2 entities coming together. And when you start to combine our capabilities that is the part where we feel really good about our opportunities.

You know, when we think about how we go to market you know, 1 of the maybe unknowns is that when we go to market in compete for business, we are not competing just with other brokers. We are competing with assets. We are competing in supply chain solution modeling. We are really going after how do we provide the best solutions to customers. And in that case, when you combine our 2 capabilities of what we offer I think it is going to be a very, very strong value proposition for customers. And so from that aspect, I would say we feel really good about the net endgame of where this plays out.

David Bozeman: And, Christian, listen, I feel I felt really good when customers have reached out, as Mike said, and felt good about doing business with us going forward, I mean, again, last mile expedite, these are not you know, things that you know, Robinson was exactly, strong in or even did And so that is why we feel really good. We always said, now you have 2 companies that you know, you take the steamship and go to the to the front door. And so it is a lot of different customers for us. And that is why we are so excited about this. And you.

You will see that, and we just cannot wait to really get started on doing this. Okay. Great. Appreciate the perspective. Thank you.

Operator: Yeah. Thank you. Thank you. The next question is coming from Brandon Oglenski of Barclays. Please go ahead.

Brandon Oglenski: Hey, good morning and thanks for taking the questions. So maybe I will continue with the third question on RXO here. But if we look at their recent acquisition of Coyote, it was kind of hard to see the synergies drop into the bottom line for them. And I know Damon talked about maybe the cost headwinds at RXO today or excess cost in the business. So, when we think about key relationships with key employees and customers, how do you really address the potential for attrition in the employee side of RXO? Especially the key folks there. Thank you.

David Bozeman: Well, I think a couple of us have jumped on this question, Brandon. I wanna start and be really, really clear to everyone in hearing this. And hopefully, guys, a number of you have been with us here in this transformation in the last 3.5 years. Yep. The operating model that Robinson, has developed and has executed. We have basically transformed this company through a disciplined measured approach. it is a say-do ratio that we always put up with our receipts on being consistent. Super, super important. But it is something that we operate this company with discipline. That will be no different than we go in and do the integration with RXO. Which is why it is so exciting.

Damon hinted to it. Really good healthy book of business on the gross profit line. Where our strength is operating and I do not know that there is a debate with that. And our operating model, will allow us to bring this company in with confidence and drive that. that is a bit different We cannot speak to every deal out there in the industry, but we can speak to is how we execute. And I think and I think we execute pretty consistently, and that is what we will do with this deal as well. Mike, why do not you double in on some of the attrition?

Michael D. Castagnetto: Well, I think what I would start with is looking back on what we accomplished inside our NAST business. And our ability to get our cost to serve where it is been has been driven through process improvement, our Lean AI capability combined with our operating model. It has also been focused on how do we get the best information and data into our relationship and revenue driving job families. So that we can go grow our business.

And so when I think of potential attrition, what I would say to the folks on that team is I would be super excited about the opportunity to have the combined data stack the information and capabilities that we have, and put those into the revenue and management job families that RXO has. Know, we have not prioritized cost cuts in those job families here at Robinson. We have improved our operating processes, And I think and we said this and it showed in our Q3 results in terms of our reprice We were able to put better information into our people's hands and we were able to reprice our contractual book faster than any time in our history.

And that comes from the operating model and putting our capabilities into our revenue and relationship managing job families as fast as possible. And so if I was in those job families at RXO, I would be super excited about the combined capabilities of our entities and how quickly we are gonna get information and opportunities for growth into their hands in the future.

Damon Lee: we have generated over 65% productivity, since the end of 22, that has been-- Yeah, Brandon, that I would only add is just remember on our productivity journey here, significantly over indexed operational roles, right? Not customer facing roles. Richa? We have retained. We have promoted. We have enhanced our customer facing talent. In many areas, we have added, not reduced, resourcing and headcount in those areas. And as Michael said, we have used our technology to enhance those relationships between our customer facing teams and their respective customers. Right? And so as we said over and over again, you guys will get tired of hearing this. Right? We are gonna run the same playbook. with RXO. Right?

And so if you run the same playbook on RXO, right? You are gonna keep a lot of those relationships. You are gonna keep a lot of that talent. Right? You are gonna keep those customer relationships And the productivity is going to be driven. In the back office and the operations. And so again, anytime I think you guys think about what is going to be different versus what is not, just look at the playbook we have run on Robinson, We are gonna run the same playbook on RXO.

Arun Rajan: And just to kind of underscore that, you know, all the technology we have invested in to and Dana's point, this ability to send targeted signals to the desk such that they can action changes in the market. Is. You know, we have invested in this for many years, and, the platform's there to be applied. To RXO as well. Thanks for the detail, Arun.

David Bozeman: Yep.

Operator: Thank you, Thank you. We are showing time for 1 final question. Today's final question is coming from Bruce Chan of Stifel. Please go ahead.

Analyst: Good morning, gents. Appreciate all the great color so far. Maybe 1 on freight forwarding. You gave a lot of good detail on the internal opportunities. it is obviously been a big beneficiary on the rate side from global disruption. But as you think about demand, maybe you can give us a sense for what you are seeing in terms of strength by end market. And then maybe as part of that, how much of a benefit are you seeing from the data center build out to airfreight right now? And how are you thinking about that as an opportunity?

Damon Lee: Yes. Thanks for the question. Bruce, certainly, of our vertical strategy is focused on those areas of the market that are outgrowing the overall market. So you mentioned certain areas of technology and data centers And certainly, that is a focused area of growth for us. In aggregate, what I would say about forwarding is very similar to what we have said about the overall freight market, which is certainly we are seeing signs of life There are pockets of life in the freight market. So certainly, in technology, certain areas of manufacturing, you are seeing growth. And I think you are starting to see that show up in the Cass index as an overall representation of the NASC market.

And I would say there is there is a correlation to global forwarding as well. But what I would say is consistent to what we have said, which is we are optimistic that there signs of growth But the contributors to the overall freight market growth are still somewhat tepid, right? I mean, housing is certainly a tepid market. I would say overall manufacturing is still a tepid market. And there is certainly large areas of retail that is still tepid. And so until you see significant participation from those industries, it is going to be hard to have meaningful, absolute growth in the overall freight market. So we are cautiously optimistic.

Now finally, Cass, at least on a month to month sequential basis, is showing some of that optimism even though the quarter was still slightly negative. You see some of that exit rate on August and September. I would say that theme does hold for global freight markets as well. So cautiously optimistic, but we have not seen what I would consider demonstrable catalysts yet. To say that we are gonna see sustained absolute growth in the overall freight markets.

Operator: Thank you. And with that, I would like to turn the floor back over to Mr. Chuck Ives for closing comments.

Charles S. Ives: Yes. Thank you, everyone, for joining us this morning for the call. We look forward to talking to many of you throughout the quarter. And have a great day.

Operator: 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.

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