C.H. Robinson Worldwide, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. C.H. Robinson is a global transportation and logistics provider, with reportable segments North American Surface Transportation (NAST), Global Forwarding, and All Other and Corporate. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Change |
|---|---|---|---|
| Revenue | $6,263.7 | $4,224.8 | +48.3% |
| Gross profit | $839.0 | $584.9 | +43.5% |
| Adjusted gross profit (non-GAAP) | $844.2 | $589.3 | +43.3% |
| Adjusted gross profit margin (non-GAAP) | 13.5% | 13.9% | Down 40 bps |
| Operating income | $310.8 | $168.2 | +84.7% |
| Net income | $247.1 | $136.5 | +81.0% |
| Diluted EPS | $1.85 | $1.00 | +85.0% |
| Operating cash flow | $19.1 for nine months | $337.0 for nine months | Down $317.9 |
For the first nine months, revenue rose 42.4% to $16,600.3, operating income rose 70.4% to $794.7, and net income rose 71.3% to $614.1. Diluted EPS was $4.56, up 73.4%. Adjusted gross profit margin for the nine-month period was 13.8%, compared with 15.2% a year earlier. The company identifies adjusted gross profit and related margins as non-GAAP measures.
Q3 revenue growth was concentrated in transportation: transportation revenue increased 52.1%, while sourcing revenue declined 5.7%. Global Forwarding revenue grew 137.9% and NAST revenue grew 30.5%. Tight capacity and disrupted supply chains drove sharply higher freight pricing and costs. NAST truckload linehaul rates charged to customers, excluding fuel, rose approximately 27%, while truckload linehaul costs rose approximately 26% year over year. Transportation adjusted gross profit increased, but transportation and consolidated adjusted gross profit margins fell as purchased transportation costs rose.
Cash, debt, and liquidity
At September 30, 2021, cash and cash equivalents were $202.6, versus $243.8 at December 31, 2020. Total debt was $1,725.9, including $632.0 outstanding on the $1.0 billion revolving credit facility; long-term debt was $1,094.0. The company reported $1,000.0 of revolving capacity, and said it was in compliance with its debt covenants. The facility matures in October 2023.
Nine-month operating cash flow was $19.1, down from $337.0 in 2020, primarily because higher shipment pricing and volumes increased receivables and contract assets, partly offset by higher payables and accrued transportation expense. Receivables were $3,721.6 and contract assets were $417.0 at quarter-end. Management said it was not seeing deterioration in receivables quality and reported year-over-year and sequential improvement in the share of receivables past due.
In the first nine months, the company spent $428.8 on share repurchases and $208.9 on dividends, and borrowed a net $629.7. Management believed available cash, expected operating cash generation, credit facilities, and market access would be sufficient for anticipated needs for at least the next 12 months, assuming no change to its business plan.
Management commentary, outlook, and risks
Management described strong freight demand alongside constrained truck, ocean, and air capacity, port congestion, equipment and labor shortages, and weather-related disruption. Ocean and air freight pricing and costs reached historic levels; ocean-to-air conversions supported air volumes. The company acquired Combinex Holding B.V. in June 2021 for $14.7 to expand its European road transportation presence.
The filing provides no specific earnings or revenue guidance. Management said the duration and financial effects of COVID-19, including variants, and global supply-chain disruption remained uncertain and could be material. It also cautioned that reduced freight volumes or carriers charging higher prices could pressure margins, particularly where the company honors contractual freight rates. Approximately 80% of employees were working remotely as of September 30, 2021; management did not expect this to adversely affect operations.
Other notable items included Q3 stock-based compensation of $40.8, including $22.7 recognized on performance-based awards granted before 2021; Q3 interest and other expense of $16.7, including $13.1 of interest expense and a $3.8 unfavorable foreign-currency impact; and a 16.0% effective tax rate. Routine litigation was not expected to have a material financial effect, although the company said it could not estimate potential losses for some proceedings. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether freight pricing continues to keep pace with rising carrier costs, and how that affects adjusted gross profit margins.
- Whether the large increase in receivables and contract assets converts to cash, and whether collection quality remains stable.
- How capacity constraints, port congestion, and COVID-19 developments affect shipment volumes, service costs, and the outlook.
- Debt levels, revolver usage, covenant compliance, and the company’s capacity to sustain dividends and repurchases alongside working-capital needs.
- The effect of incentive compensation, stock-based compensation, currency movements, and acquisition integration on future earnings.