Jordan Alliger: No. I appreciate the answer. Thank you.
Operator: The next question is coming from Jon Chappell of Evercore ISI. Please go ahead.
Jon Chappell: Thank you. Good afternoon. Scott, in the answer to an earlier question, you’d mentioned kind of no change in strategic direction, and however, maybe greater sense of urgency and timing. You talked about the annualized savings by the end of ’23. But as you’ve been in this new role, have you found either new opportunities or ways to kind of front-end load some of the cost alignment that you have planned for the year? So therefore, you’re kind of timing that more with the macro headwinds or some of the volume headwinds you see and are still cutting in the back half of the year when conceivably things may be getting better?
Scott Anderson: Yes. No, thanks, Jon. There’s no doubt, it was a tough back half of the year. And that being said, I do see a palpable excitement about the future here. But in the short term, I think one of the things I’m trying to do with the management team, and I talked about empowering them, was also simplifying the message, aligning focus on customers and leveraging Arun and his team to show customer benefit. And we talked about the amplification of our people’s expertise in the field. But we’re very focused on expense. We’re focused on headcount. We’re focused on really tightly managing this business through the first half of the year. But also, as I’ve said to the senior leadership team, making no assumptions that the wind will be at our back throughout 2023.
I think there’s additional opportunity for us to get sort of more precise in how we go to market and find efficiencies throughout the company. I’m really proud of the team. It’s never easy to do what happened back in November, but the spirit of the folks in the field and the ability to want to get better, faster, stronger is absolutely here at Robinson.
Mike Zechmeister: And I can add a little color to just on the cost savings front. So we did make some progress against that expense reduction target here in Q4, particularly on the personnel side. And just as a reminder, back to the commitment. So we were taking the run rate of Q3 and annualizing it, and the commitment was that we would get to a net cost reduction of at least $158 million by Q4 of 2023. And if you look at what we delivered in Q4, you take out the restructuring expense and annualize where we’re at, you get to a number that’s about $2.27 billion. So the run rate that we were — if you take the Q3 and the annualized run rate of that, that was about $2.4 billion. So that implies that we’ve already — are already at about $130 million savings versus that original commitment.
Now you can’t read into that too much because in Q4, as I had spoke to earlier, we did have a benefit to our equity compensation that reduced the overall expense in Q4, and we wouldn’t expect that to continue into 2023. But the net of that is we have made some decent progress. We are, I think, much better focused going forward on headcount. And that will be a key since that’s such a big part of our cost structure as we roll through 2023.
Jon Chappell: Understood. Thanks, Mike, thanks, Scott.
Operator: The next question is coming from Brian Ossenbeck of JPMorgan. Please go ahead.
Brian Ossenbeck: Good afternoon. And thanks for taking the question. Maybe just two quick follow-ups then just on the expense reduction. It’s obviously announced a little while ago and implemented in the fourth quarter, but it still seems like things maybe got worse a little bit faster than you initially thought in Forwarding. So if you can just clarify if there are additional opportunities on the horizon or you’re sort of sticking with the $150 million for the time being and implementing that. And then just, Mike, I think you mentioned on January a little bit in terms of things stabilized. So I wondered if you could put some numbers behind that in terms of the truckload market, AGP per day volume or anything like that would be helpful as you start the first third of this first quarter? Thank you.
Scott Anderson: Yes, I’ll kick off on Global Forwarding and toss it over to Mike. The Global Forwarding team has a history of managing expenses really well through cycles. Obviously, the last 18 to 24 months was very unique. So I’m confident that they’re on point. And where they can find expense reduction that makes sense, they’re absolutely going to do it. And then maybe Mike can give some color to that.
Mike Zechmeister: Yes. So try to make sure I get to each part of your question. So first of all, on the cost savings part, we continue with the commitment to the $150 million net cost reduction by Q4 on a run rate basis annualized. And I’ll just point out maybe the obvious there that the inflationary environment that we’re in is as high as it’s been in 40 years. So the net cost reduction is offsetting our inflation and delivering the savings there, too. But we will stick with that. I will also add that if you did the math on the midpoint of the expense guidance that we just provided, you get to $2.2 billion for the year. And again, the run rate that we’re going off of is $2.4 billion. So we’re guiding to a midpoint of $2.2 billion, which is $200 million worth of savings.
So let me address that for a second. We are committed to the net cost reduction. That is what we would consider to be more permanent cost reduction, more structural in nature. We will likely deliver more savings than just that. But the second part of the savings is more what I would say transitory related to the softness in the market. And as we’ve talked about, we’ve got a history of adjusting our cost structure with the market. And because we are seeing some softness there, there is some additional savings that comes along with that. I think another part of your question was about AGP trends. We do give you — we did give you AGP per business day on an enterprise basis in Q4 where we were down 10% in October, down 7% in November and down 14% in December.
That softness has continued into January. But as I mentioned, the truckload volume that we delivered in Q4, we have seen improvements on that going into the New Year.
Brian Ossenbeck: Thanks for all that, Mike. So I guess the difference between the $150 million and the $200 million you guided to you, that would be basically the transitory of the market-based impact. Is that what you call out there?
Mike Zechmeister: Yes. Absolutely.
Operator: We are showing time for one final question. The final question for today is coming from Stephanie Moore of Jefferies. Please go ahead.
Stephanie Moore: Good afternoon. And thank you. I want to touch on with this change in strategic direction, I want to know how this change is being reflected in your capital allocation plans. You called out wanting to deliver on certain leverage targets, but maybe you could just speak to how or it could make sense to maybe adjust your capital allocation plan as you look to kind of change the strategic direction of the company. Thanks.
