C.H. Robinson Worldwide, Inc. — Q1 2022 10-Q
Business context and reporting period. The company provides global freight transportation and logistics services, including North American surface transportation (NAST), Global Forwarding, and other businesses. This unaudited report covers the three months ended March 31, 2022; comparisons are with Q1 2021 unless otherwise stated. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $6.816 billion | $4.804 billion | +41.9% |
| Gross profit | $900.5 million | $697.7 million | +29.1% |
| Adjusted gross profit (non-GAAP) | $906.2 million | $702.4 million | +29.0% |
| Adjusted gross profit margin (non-GAAP) | 13.3% | 14.6% | Down 130 bps |
| Operating income | $345.5 million | $223.3 million | +54.7% |
| Operating margin | 5.1% | 4.6% | Up 50 bps |
| Net income | $270.3 million | $173.3 million | +56.0% |
| Diluted EPS | $2.05 | $1.28 | +60.2% |
| Operating cash flow | $(13.9) million | $(56.7) million | Improved $42.8 million |
Transportation revenue rose 43.2% to $6.528 billion; sourcing revenue rose 18.0% to $287.6 million. Purchased transportation and related services increased 45.6%, faster than revenue, contributing to lower adjusted gross profit margin. Personnel expense increased 14.6% and other SG&A increased 24.7%; management cited higher headcount, purchased services, travel, claims and credit losses, and a non-recurring legal expense. The effective tax rate was 18.4%, versus 18.3%.
Segments
- NAST: Revenue increased 28.1% to $4.115 billion; operating income rose 33.3% to $182.4 million; adjusted gross profit rose 20.2% to $506.1 million. Truckload volume increased 4.0% and LTL volume declined 1.0%.
- Global Forwarding: Revenue increased 89.8% to $2.194 billion; operating income rose 85.1% to $167.6 million; adjusted gross profit rose 50.2% to $321.8 million. Ocean volume increased 7.0%, air tonnage 10.0%, and customs volume 5.0%.
- All Other and Corporate: Revenue increased 16.1% to $506.7 million; operating loss was $4.5 million, compared with a $4.0 million loss.
Balance sheet, debt and liquidity
At March 31, 2022, cash and cash equivalents were $242.8 million, total debt was $2.166 billion, and total liabilities were $5.426 billion. Debt increased from $1.919 billion at December 31, 2021. The company had $572 million outstanding on its $1 billion revolving facility and $499.4 million outstanding on its $500 million receivables securitization facility. It reported compliance with debt covenants. Management believes available cash, expected operating cash generation, credit facilities, and market borrowing access will be sufficient for anticipated needs for at least the next 12 months.
Operating cash flow remained negative as increased net income was more than offset by working-capital investment, particularly in receivables and contract assets. Management attributed receivables growth to higher pricing and volumes, especially in Global Forwarding, and said past-due receivables improved year over year and sequentially. Financing activities included $161.3 million of share repurchases, $72.9 million of dividends, and net debt borrowings of $247 million. Cash declined $14.6 million during the quarter.
Business trends, outlook and risks
- Management described North American carrier capacity as tight, but said the market began softening late in the quarter as demand moderated and capacity entered the market. Purchased transportation costs remained above historical levels but declined near quarter-end. NAST truckload linehaul costs per mile, excluding fuel, rose 21.0%; customer rates rose approximately 20.5%.
- Global Forwarding continued to face port congestion, equipment and labor shortages, and pandemic-related disruptions in China. Management reported easing ocean-freight demand out of China and slowing air-freight demand, while air capacity remained constrained.
- The company provided no specific revenue or earnings guidance in the supplied filing text. It stated its intention to continue investing in technology, dividends, and share repurchases, subject to liquidity, market conditions, and other factors.
- Principal disclosed risks include changes in economic conditions and customer demand, pricing and freight capacity, supply-chain disruption, fuel costs, competition, technology and cybersecurity, international operations, staffing, regulation, litigation and insurance, produce safety, acquisitions, war, and catastrophic events including pandemics.
Other material items
After quarter-end, the company sold a Kansas City office building for $55 million and expected to recognize an approximately $25 million gain in Q2 2022. It simultaneously agreed to lease the building for 10 years. The filing reports routine litigation, including contingent auto-liability matters, and says it does not expect resolution to materially affect results; possible additional losses could not be estimated clearly. Unrecognized tax benefits and related interest and penalties totaled $43.3 million; the company expected this liability to decrease by approximately $6.1 million over the next 12 months. The IRS was auditing tax years 2015–2017.
Important facts for investors to verify
- Whether the late-quarter softening in transportation markets persists, and how it affects purchased transportation costs, pricing, volumes, and adjusted gross profit margin.
- Whether working-capital needs and receivables growth ease and operating cash flow turns positive.
- Debt levels, facility availability, refinancing needs, and continued covenant compliance.
- The Q2 timing and realized gain from the Kansas City building sale, including the effect of the 10-year lease.
- Progress on tax audits and the expected timing and amount of changes in unrecognized tax benefits.
- The impact of the disclosed non-recurring legal expense and any developments in litigation, contingent auto claims, or insurance coverage.