C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) Q4 2022 Earnings Call Transcript

Scott Anderson: Yes. Thanks, Stephanie. I’ll have Mike start, and then I’ll wrap up and maybe talk about our capital allocation committee a little bit as well.

Mike Zechmeister: Yes. So from a capital allocation standpoint, I think one of the major differences here is of late has been the amount of free cash flow that we’ve had really resulting from the working capital dollars coming back to us. And we had been pointing to the idea that when the price and cost of purchased transportation in ocean, air and truckload would come back down off of the record all-time highs that, that $1.5 billion of absorbed working capital that we experienced from the end of 2019 to earlier in ’22 would start coming back. And of course, in Q3 and Q4, we saw over $1 billion of that tied up working capital come back to us, and therefore, began to deploy that in alignment with our capital allocation strategy.

And so of course, we covered our commitments, our investments, our dividend. And our policy after that is to, as we are managing our leverage to maintain our investment-grade credit rating, any money that’s left over after that goes to share repurchase. So you saw our share repurchase pick up quite a bit in Q3 and Q4. And then what we experienced after that was observing those prices coming down across ocean, air and truckload, which informs our forward-looking view on EBITDA and, therefore, informs our forward-looking view on the level of debt we need that we need to maintain the leverage ratio is appropriate to maintaining investment-grade credit rating. And so that’s a long way of describing a pullback on share repurchase to make sure that we maintain that targeted leverage.

But in terms of the overall capital allocation strategy, while there were some differences in activities as a result of the record free cash flow haven’t changed our philosophy at all on how we are planning to deploy our capital going forward.

Scott Anderson: Yes. And Stephanie, I would just add from a Board perspective, we’re making our Capital Allocation Committee a permanent committee, and we’re also going to be soon adding additional members to that. And I think this is really going to serve as a great partner to the management team in terms of looking at areas that we can drive value across the organization for both customers and shareholders.

Stephanie Moore: Great. Well, appreciate the time. Thank you.

Operator: Thank you. At this time, I’d like to turn the floor back over to Mr. Ives for closing comments.

Chuck Ives: Thank you, everyone. That concludes today’s earnings call. Thanks for joining us today, and we look forward to talking to you again. Have a great evening.

Operator: Ladies and gentlemen, thank you for your participation. This concludes today’s event. You may disconnect your lines at this time. And enjoy the rest of your day.