C.H. Robinson Worldwide, Inc. — Q1 2021 10-Q
Reporting period: Three months ended March 31, 2021; unaudited consolidated results. The company provides global transportation and logistics services, including North American surface transportation, global forwarding, and sourcing.
Financial results
Amounts are in U.S. dollars. Year-over-year comparisons are against Q1 2020.
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $4.804 billion | $3.805 billion | +26.3% |
| Gross profit | $697.7 million | $564.2 million | +23.7% |
| Adjusted gross profit (non-GAAP) | $702.4 million | $568.0 million | +23.7% |
| Adjusted gross profit margin (non-GAAP) | 14.6% | 14.9% | -0.3 percentage points |
| Operating income | $223.3 million | $109.4 million | +104.1% |
| Net income | $173.3 million | $78.1 million | +121.8% |
| Diluted EPS | $1.28 | $0.57 | +124.6% |
| Cash flow from operations | -$56.7 million | +$58.5 million | Declined $115.2 million |
Operating margin rose to 4.6% from 2.9%; adjusted operating margin (non-GAAP) increased to 31.8% from 19.3%. Interest and other expense was $11.3 million, including $12.2 million of interest expense and an unfavorable $2.9 million foreign-currency impact, partly offset by a $2.9 million Asia government subsidy. The effective tax rate was 18.3%, versus 17.1%.
Segments and material changes
- North American Surface Transportation (NAST): Revenue rose 13.7% to $3.211 billion and operating income rose 38.8% to $136.8 million. Truckload volume fell 6.5%, while LTL volume grew 15.0%. Adjusted gross profit increased 13.0% to $421.1 million.
- Global Forwarding: Revenue increased 118.0% to $1.156 billion and operating income reached $90.6 million, compared with $12.0 million. Adjusted gross profit grew 67.0% to $214.3 million. Ocean volume rose 27.0%, air 7.0%, and customs 13.5%.
- All Other and Corporate: Revenue declined 3.2% to $436.4 million; operating loss widened to $4.0 million. Robinson Fresh weakness was partly offset by Managed Services growth.
- Transportation revenue increased 28.7%, while sourcing revenue declined 7.3%. Purchased transportation costs rose 29.4%. Average truckload linehaul rates charged to customers increased about 33.0%, slightly below the 33.5% increase in truckload linehaul costs, both excluding fuel.
- Personnel expense rose 9.3%, primarily from higher incentive compensation; average headcount declined 2.9%. Other SG&A expense declined 7.9%, mainly from lower travel and credit-loss expense.
Cash, debt, and liquidity
- Cash and equivalents were $217.6 million at March 31, 2021, down from $243.8 million at year-end. Accounts receivable increased to $2.874 billion from $2.450 billion.
- Total debt was $1.344 billion, including $250 million outstanding on the revolving facility, compared with $1.093 billion at year-end. The $1 billion revolver matures in October 2023; $750 million of stated capacity remained before considering other facility terms.
- Operating cash use reflected higher receivables and contract assets from increased pricing and volumes, partly offset by higher payables and accrued transportation expense. Management reported no deterioration in receivables quality and improvements in credit-loss and past-due measures.
- Investing cash use was $13.5 million, primarily capital expenditures and software investment; Q1 2020 included $223.6 million of acquisition spending. Financing cash provided $46.8 million, including net debt borrowings of $250 million, offset in part by $130.2 million of share repurchases and $70.0 million of dividends.
- Management said available cash, expected operating cash generation, credit facilities, and market credit should cover anticipated needs for at least 12 months, assuming no change in the business plan. The company reported compliance with debt covenants.
Outlook, risks, and other items
- No specific financial guidance or quantified full-year outlook was provided. Management said the future effects of COVID-19 remained uncertain and could be material.
- Management described tight North American truck capacity, driver shortages, strong freight demand, and historically high purchased-transportation pricing. Global forwarding faced port congestion, container shortages, and limited air capacity, raising ocean and air freight costs.
- Risks include weaker demand or freight volumes, further carrier-capacity reductions or price increases, margin pressure when honoring customer contracts, COVID-19 developments, cyber risks, international operations, litigation and contingent auto liability, and regulatory or LIBOR-transition changes.
- Prime Distribution Services, acquired in March 2020 for $222.7 million, contributed to NAST results and comparisons. The company recognized $28.5 million of payroll-tax deferrals and $0.7 million of tax credits under COVID-related legislation through March 31, 2021.
- Routine litigation was not expected to have a material effect; management reported no material changes in market risk or internal control over financial reporting. Disclosure controls were deemed effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether elevated freight rates and tight carrier capacity persist, and whether customer pricing continues to keep pace with transportation costs.
- Whether working-capital growth reverses and operating cash flow recovers from its Q1 outflow.
- How sustainable Global Forwarding’s unusually strong revenue and profit growth is as capacity constraints and pandemic-related disruptions change.
- Debt, revolver availability, covenant compliance, and the company’s continued funding of dividends and share repurchases.
- Potential material effects from COVID-19, tax matters, foreign-currency movements, and contingent auto-liability claims.