Financial Data and Key Metrics Changes - In Q4 2025, total revenue and adjusted gross profit (AGP) declined approximately 7% and 4% year-over-year, respectively [32][39] - The AGP decline was primarily driven by a 13% year-over-year decline in Global Forwarding's AGP due to a significant drop in ocean rates [32][39] - Personnel expenses in Q4 were $337 million, including $15.2 million of restructuring charges, while excluding these charges, personnel expenses were down 8.2% year-over-year [33][34] - The effective tax rate for Q4 was 18.1%, with a full-year tax rate of 18.7% expected to be in the range of 18%-20% for 2026 [38] Business Line Data and Key Metrics Changes - In North American Surface Transportation (NAST), truckload volume rose approximately 3% year-over-year, while LTL volume increased approximately 0.5% year-over-year, reflecting market share gains [14][32] - Global Forwarding expanded gross margins by 100 basis points year-over-year through improved revenue management [7] - NAST AGP margin improved by 20 basis points year-over-year despite market pressures [6] Market Data and Key Metrics Changes - The Cass Freight Shipment Index declined year-over-year for the thirteenth consecutive quarter, marking the lowest Q4 reading since the financial crisis of 2009 [4] - Spot market costs for truckload capacity spiked during the last five weeks of Q4 due to seasonal capacity decline and winter storms [4][17] - Dry van load-to-truck ratios increased to approximately 10 to 1, compared to 6 to 1 during the same period in 2024 [17] Company Strategy and Development Direction - The company is focused on controlling what it can, including providing differentiated service and solutions, executing with discipline, and continuously improving its business model [5][8] - The Lean AI strategy aims to enhance automation and improve customer outcomes while maintaining industry-leading operating margins [9][30] - The company is committed to building a scalable model that leverages AI to drive automation across its operations [9][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment in Q4, including weak global freight demand and rising costs [4][32] - The company remains confident in its ability to execute strategic initiatives and improve operating leverage when freight demand eventually increases [9][22] - Management emphasized the importance of their lean operating model in navigating market challenges and driving sustainable growth [42][43] Other Important Information - The company generated $305.4 million in cash from operations in Q4 and ended the quarter with approximately $1.49 billion of liquidity [39][40] - The company returned approximately $207.7 million of cash to shareholders in Q4 through share repurchases and dividends [40] Q&A Session Summary Question: Can you provide perspective on Q1 and AGP growth? - Management noted that December was challenging due to ocean rate normalization and that cost pressures carried into January, but they remain committed to demonstrating outperformance in Q1 [50][51] Question: What are the expectations for operating margins in NAST for 2027? - Management indicated they are on a good trajectory to reach mid-cycle margins of 40% for NAST, with decisions on margin expansion versus growth to be made based on market conditions [53][54] Question: How does the company balance headcount reductions with maintaining service quality? - Management stated that headcount is not a KPI and emphasized engineering the business to focus on customer service while optimizing organizational structure [82]

Financial Data and Key Metrics Changes - The company reported a total revenue decline of approximately 7% year-over-year in Q4 2025, with adjusted gross profit (AGP) down about 4% year-over-year [32][39] - The AGP decline was primarily driven by a 13% year-over-year decrease in Global Forwarding's AGP due to falling ocean rates and market imbalances [32][33] - Personnel expenses in Q4 were $337 million, including $15.2 million in restructuring charges, while excluding these charges, personnel expenses were down 8.2% year-over-year [33][34] - The company generated $305.4 million in cash from operations in Q4 and ended the quarter with approximately $1.49 billion in liquidity [39][40] Business Line Data and Key Metrics Changes - In North American Surface Transportation (NAST), total volume grew by 1% year-over-year, with truckload volume increasing by approximately 3% [6][12] - Global Forwarding expanded gross margins by 100 basis points year-over-year through improved revenue management [7] - The company achieved double-digit productivity increases in NAST for the full year and a high single-digit productivity increase in Global Forwarding [7][19] Market Data and Key Metrics Changes - The Cass Freight Shipment Index declined year-over-year for the thirteenth consecutive quarter, marking the lowest Q4 reading since the financial crisis of 2009 [4][12] - Spot market costs for truckload capacity spiked during the last five weeks of Q4 due to seasonal capacity declines and winter storms [4][17] - The dry van load-to-truck ratio increased to approximately 10 to 1, compared to 6 to 1 during the same period in 2024 [17] Company Strategy and Development Direction - The company is focused on a Lean AI strategy, which combines lean operating models with advanced technology to improve service and operational efficiency [9][30] - The management emphasized the importance of controlling internal factors, such as service differentiation and cost management, to navigate challenging market conditions [5][8] - The company aims to continue expanding its operating leverage and market share, particularly when freight demand eventually increases [9][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but expressed confidence in the company's ability to manage through it better than in the past [4][32] - The company expects Q1 to be seasonally weaker compared to Q4, with a typical decline in the Cass Freight Shipment Index of about 2.3% [21] - Management remains optimistic about the future, indicating that the next two years could be more exciting than the previous two [46] Other Important Information - The company returned approximately $207.7 million to shareholders in Q4 through share repurchases and dividends [40] - The effective tax rate for Q4 was 18.1%, with expectations for the full year tax rate in 2026 to be between 18% and 20% [38] Q&A Session Summary Question: Insights on Q1 performance and AGP growth - Management noted that December was challenging due to ocean rate normalization and that spot rate cost pressures carried into January, but they remain committed to demonstrating outperformance in Q1 [48][51] Question: Long-term margin and volume growth expectations - Management discussed the importance of balancing margin expansion with market share growth, indicating that they are on track to achieve mid-cycle margin targets [49][54] Question: Understanding the Lean Operating Model - Management explained that their Lean AI strategy integrates people, technology, and a unique operating model, which allows for rapid innovation and competitive advantage [65][67] Question: Managing headcount reductions while maintaining service quality - Management clarified that headcount is not a KPI and emphasized their focus on engineering the business to optimize service without compromising quality [81]