C.H. Robinson(US:CHRW)2025-02-14 16:32Part I - Business and Risk Factors Business Overview C.H. Robinson is a major global logistics provider with $17.7 billion in 2024 revenues, operating through NAST and Global Forwarding segments, leveraging its Navisphere® technology to connect customers and carriers for diverse logistics services, with transportation accounting for 95% of adjusted gross profits - In 2024, C.H. Robinson generated consolidated total revenues of $17.7 billion, managed approximately 37 million shipments, and connected 83,000 customers with 450,000 carriers via its proprietary technology platform1618 - The company's business is structured into two primary reportable segments: North American Surface Transportation (NAST) and Global Forwarding, with other segments reported under 'All Other and Corporate'20 - Transportation services accounted for approximately 95% of adjusted gross profits in 2024, with sourcing services (Robinson Fresh) making up the remaining 5%3437 Adjusted Gross Profits by Transportation Mode (in thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Truckload | $1,072,691 | $1,039,079 | $1,561,310 | | LTL | $572,169 | $550,373 | $632,116 | | Ocean | $519,970 | $420,883 | $729,839 | | Air | $135,901 | $123,470 | $198,166 | | Customs | $107,480 | $97,096 | $107,691 | | Other Logistics Services | $225,599 | $255,735 | $251,547 | | Total | $2,633,810 | $2,486,636 | $3,480,669 | Human Capital and Sustainability As of December 31, 2024, the company employed 13,781 people globally, focusing on talent development and a performance-driven culture, while also exceeding its 2025 Scope 1 and 2 carbon intensity reduction goal two years early - As of December 31, 2024, the company had 13,781 employees in 38 countries, with 9,523 in North America6770 - Employee turnover in 2024 was 23%, with a voluntary turnover rate of 13%, which is noted as being lower than industry peers73 - The company's equity compensation program grants equity to about 10% of employees, and 32% of eligible employees participate in the employee stock purchase plan83 - The company met and exceeded its science-aligned goal to reduce Scope 1 and 2 carbon intensity by 40% by 2025, achieving this milestone in 202388 Risk Factors The company faces material risks including economic downturns, intense competition, reliance on technology and cybersecurity, international operational challenges, staffing issues, potential AI liabilities, customer concentration, and various regulatory and legal exposures - Economic downturns pose a significant risk, potentially leading to decreased freight volumes, increased customer credit risk, and failures of transportation providers102104 - The company is heavily reliant on its proprietary and third-party technology, making it vulnerable to cybersecurity events like ransomware and phishing, which could cause material service outages and reputational damage110111113 - A significant portion of revenue is derived from top customers; in 2024, the top 100 customers accounted for 34% of consolidated total revenues, with the largest single customer representing 2%118 - The company is subject to claims arising from transportation operations, including accidents involving third-party carriers, and maintains an umbrella liability policy of $125 million with a retention of up to $10 million126127 - The sourcing business is exposed to product liability risks, such as contamination and recalls, and carries product liability insurance of $125 million and product recall/contamination insurance of $30 million128 Cybersecurity The company's cybersecurity program, managed by a CISO and global team, aligns with NIST standards, undergoes regular audits, and is overseen by the Board's Audit Committee, supported by an ERM program and cybersecurity risk insurance - Cybersecurity is managed by a global team led by the Chief Information Security Officer, with oversight from the Board's Audit Committee, which receives quarterly updates139148 - The company's cybersecurity framework is aligned with NIST standards and undergoes regular independent assessments, including SOC 2 Type 2 audits for key applications146 - Processes are in place to manage risks from third-party technology, and the company maintains a cybersecurity risk insurance policy to limit financial exposure from incidents144145 Part II - Financial Information Stockholder Matters and Equity Purchases C.H. Robinson's common stock trades on Nasdaq, with 6,763,445 shares remaining for repurchase authorization as of December 31, 2024, though Q4 2024 purchases were solely for tax obligations under stock incentive plans - As of December 31, 2024, 6,763,445 shares remained available for repurchase under the company's authorized plan161 Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :--- | :--- | :--- | :--- | | October 2024 | 2,182 | $109.27 | — | | November 2024 | 10,184 | $106.69 | — | | December 2024 | 67,479 | $103.58 | — | | Fourth quarter 2024 | 79,845 | $104.13 | — | - The shares purchased in Q4 2024 were shares surrendered to satisfy statutory tax withholding obligations under stock incentive plans, not open market repurchases162 Management's Discussion and Analysis (MD&A) In 2024, total revenues increased slightly to $17.7 billion, net income rose significantly to $465.7 million, and adjusted gross profits grew 6.2% to $2.8 billion, despite mixed market conditions and one-time restructuring and divestiture charges Consolidated Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $17,725M | $17,596M | 0.7% | | Adjusted Gross Profits | $2,765M | $2,605M | 6.2% | | Income from Operations | $669.1M | $514.6M | 30.0% | | Net Income | $465.7M | $325.1M | 43.2% | | Diluted EPS | $3.86 | $2.72 | 41.9% | | Adjusted Operating Margin | 24.2% | 19.8% | 440 bps | - Market conditions in 2024 were mixed: the North American surface transportation market was soft with excess carrier capacity, while the global forwarding market experienced volatility and elevated rates due to geopolitical factors like the Red Sea conflict168169 - The company recorded significant one-time expenses in 2024, including a $44.5 million loss on the divestiture of its Europe Surface Transportation business and $45.7 million in charges from its 2024 Restructuring Program172180373 Segment Performance In 2024, NAST operating income grew 15.5% to $531.3 million, Global Forwarding operating income surged 147.6% to $212.5 million due to favorable ocean conditions, while the All Other and Corporate segment reported a wider operating loss of $74.6 million, impacted by divestiture NAST Segment Performance (2024 vs. 2023) | Metric (NAST) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $11,728M | $12,471M | (6.0)% | | Adjusted Gross Profits | $1,641M | $1,594M | 3.0% | | Income from Operations | $531.3M | $460.0M | 15.5% | Global Forwarding Segment Performance (2024 vs. 2023) | Metric (Global Forwarding) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $3,805M | $2,998M | 26.9% | | Adjusted Gross Profits | $802.5M | $689.4M | 16.4% | | Income from Operations | $212.5M | $85.8M | 147.6% | All Other and Corporate Segment Performance (2024 vs. 2023) | Metric (All Other & Corp) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $2,192M | $2,128M | 3.0% | | Adjusted Gross Profits | $321.3M | $321.4M | 0.0% | | Loss from Operations | $(74.6)M | $(31.2)M | N/M | Liquidity and Capital Resources The company generated $509.1 million in operating cash flow in 2024, used cash for $74.3 million in capital expenditures, $294.8 million in dividends, and $204.0 million in net debt repayments, with total debt at $1.38 billion as of year-end 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $509,084 | $731,946 | | Cash used for Investing Activities | $(74,288) | $(82,787) | | Cash used for Financing Activities | $(416,099) | $(717,833) | - Total debt as of December 31, 2024, was $1.38 billion, down from $1.58 billion at year-end 2023200304 - The company paid $294.8 million in cash dividends in 2024 and made no share repurchases202207 - Anticipated capital expenditures for 2025 are projected to be between $75 million and $85 million205 Financial Statements and Notes Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements, identifying Revenue Recognition as a critical audit matter, while notes detail 2024 restructuring charges of $45.7 million and a $44.5 million loss from the Europe Surface Transportation business divestiture - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and internal control over financial reporting240241251 - The critical audit matter identified was Revenue Recognition, specifically the estimation of revenue for shipments that were in-transit or completed but not yet invoiced at the end of the reporting period, which amounted to $200.3 million as of Dec 31, 2024244245 - The 2024 Restructuring Program resulted in $45.7 million in charges, primarily for severance, impairment of software, and rationalization of facilities371373 - The company entered an agreement to sell its Europe Surface Transportation business, classifying it as held for sale and recognizing a total pre-tax loss of $44.5 million in 2024 related to the divestiture377378 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2024, with no material changes during Q4 2024 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024385 - No material changes were made to internal control over financial reporting during the quarter ended December 31, 2024386 - Management's report confirms that the company maintained effective internal control over financial reporting as of December 31, 2024, based on the COSO framework390 Part III - Corporate Governance and Executive Compensation Directors, Compensation, and Related Party Transactions This section incorporates by reference details on directors, executive compensation, and related party transactions from the 2025 Proxy Statement, also noting equity compensation plan details including 7,364,576 securities to be issued and 3,328,769 available for future issuance - Information regarding directors, executive compensation, security ownership, and auditor fees is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement395398400402 Equity Compensation Plan Information (as of Dec 31, 2024) | Plan Category | Number of Securities to Be Issued Upon Exercise | Weighted Average Exercise Price | Number of Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 7,204,664 | $79.83 | 3,328,769 | | Equity compensation plans not approved by security holders | 159,912 | — | — | | Total | 7,364,576 | $79.83 | 3,328,769 |