What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-23 · 162 added, 166 removed, 253 unchanged (56% of the section changed)

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Robinson Worldwide, Inc.

Robinson,” “the company,” “we,” “us,” or “our”) is one of the world's largest logistics platforms.

Our mission is to improve the world's supply chains through our people, processes, and technology by delivering exceptional value to our customers and suppliers.

We provide freight transportation services and logistics solutions to companies of all sizes in a wide variety of industries.

We operate through a network of offices in North America, Europe, Asia, Oceania, and South America.

We offer a global suite of services using tailored, market-leading differentiated technology built by and for our global network of supply chain experts working with our customers to drive better outcomes by leveraging our experience, data, technology, and scale.

Our global network of supply chain experts works with our customers to drive better supply chain outcomes by leveraging our experience, data, technology, and scale.

Our adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures.

Adjusted gross profit is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers.

Adjusted gross profit margin is calculated as adjusted gross profit divided by total revenues.

We believe adjusted gross profit and adjusted gross profit margin are useful measures of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profit to be a primary performance measurement.

Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profit and adjusted gross profit margin.

The reconciliation of gross profit to adjusted gross profit and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):

Robinson,” “the company,” “we,” “us,” or “our”) is one of the largest global logistics companies in the world, with consolidated total revenues of $24.7 billion in 2022.

We bring together customers, carriers, and suppliers to connect and grow supply chains.

We are grounded in our customer promise to use our technology, which is built by and for supply chain experts and powered by our information advantage, to deliver smarter solutions.

These global solutions, combined with the expertise of our people, deliver value–from improved cost reductions and reliability to sustainability and visibility–that our customers and carriers can rely on.

Our adjusted gross profits and adjusted gross profit margin are non-GAAP financial measures.

Adjusted gross profits is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers.

Adjusted gross profit margin is calculated as adjusted gross profits divided by total revenues.

We believe adjusted gross profits and adjusted gross profit margin are useful measures of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profits to be a primary performance measurement.

Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profits and adjusted gross profit margin.

The reconciliation of gross profit to adjusted gross profits and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):

Twelve Months Ended December 31,

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Direct internally developed software amortization 25,487 20,208 16,634

Adjusted gross profit / Adjusted gross profit margin $ 3,152,089 13.6 % $ 2,412,257 14.9 % $ 2,586,310 16.9 %

Adjusted gross profits / Adjusted gross profit margin $ 3,593,177 14.5 % $ 3,152,089 13.6 % $ 2,412,257 14.9 %

Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profit.

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Adjusted operating margin 35.3 % 34.3 % 27.9 %

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MARKET TRENDS

The North American surface transportation market experienced extremely tight carrier capacity in 2021 as strong demand combined with ongoing driver availability and supply chain disruptions caused by port congestion and weather events drove purchased transportation to historic levels.

This compared to an extremely volatile market in 2020 resulting from the early stages of the COVID-19 pandemic and restrictions implemented to control the outbreak, which drove significant volatility in customer demand and carrier capacity.

Industry freight volumes, as measured by the Cass Freight Index, increased approximately 13 percent in 2021 compared to 2020 and experienced growth in each quarter of 2021 compared to 2020.

This compared to a decline of approximately eight percent in 2020 compared to 2019 with significant volatility over the course of 2020.

The cost of purchased transportation in the North American surface transportation market declined significantly over the course of 2022 as excess carrier capacity combined with slowing demand led to softening market conditions.

This compared to extremely tight market conditions in 2021 as strong demand combined with challenges due to driver availability and supply chain disruptions drove purchased transportation costs to historic levels.

Many of these challenges improved over the course of 2022, allowing routing guides to perform more efficiently, which resulted in a comparatively soft market versus 2021.

Industry freight volumes, as measured by the Cass Freight Index, were flat in 2022, compared to a 13 percent increase in 2021.

One of the metrics we use to measure market conditions is the truckload routing guide depth from our Managed Services business.

Routing guide depth is calculated as a simple average of all accepted shipments over all tender instances for any shipment facilitated by our Managed Services business.

The average routing guide depth was 1.7 in 2021 compared to 1.4 in 2020.

The average routing guide depth increased steadily during the second half of 2020 and finished in line with those seen over the duration of 2021.

The global forwarding market has also been significantly impacted by supply chain disruptions caused by ongoing port congestion along with equipment and labor shortages in 2021.

These disruptions combined with strong demand have continued to drive purchased transportation costs for both ocean and air freight to historic levels.

As with the North American surface transportation market, this compared to the significant volatility seen in 2020 resulting from the COVID-19 pandemic.

In 2020, the COVID-19 pandemic resulted in a sharp decline in commercial air freight capacity and periods of significantly reduced ocean freight demand due to factory closures followed by a rapid surge of demand in the second half of 2020 when production resumed and companies began to replenish low inventory levels amidst the market uncertainty.

Routing guide depth represents the average number of carriers contacted prior to acceptance when procuring a transportation provider.

The average routing guide depth at the end of 2022 declined to 1.2, representing that on average, the first carrier in a shipper's routing guide was executing the shipment in most cases.

This average routing guide penetration is reflective of a softening freight market compared to the 1.7 average at the end of 2021.

The cost of purchased transportation fell significantly in the global forwarding market in the second half of 2022 as global demand slowed in most trade lanes.

The peak shipping season historically experienced in the second half of each year, which would typically drive elevated rates and volumes, remained uncharacteristically soft.

Shippers in the U.S.

and Europe continue to struggle with elevated inventory levels as consumer demand has been negatively impacted by inflation and macroeconomic uncertainty.

In an effort to adapt to this slowing demand, steamship lines continue to rationalize services by reducing capacity where possible with blank sailings and slow steaming.

All of these factors have allowed port congestion to ease in many parts of the world.

As with the North American surface transportation market, this compared to extremely tight market conditions in 2021 as strong demand combined with supply chain disruptions caused by port congestion along with equipment and labor shortages drove purchased transportation to historic levels in 2021 and the first half of 2022.

The slowdown of global demand has also had a significant impact on the air freight market.

Air freight pricing and volumes have significantly declined driven by shippers maintaining higher inventory levels, declining consumer demand, and improving ocean schedule reliability eliminating ocean freight to air freight conversions.

Air freight capacity continues to improve and drive rates lower in many trade lanes due to increased belly capacity as commercial flights become more frequent after being significantly reduced during the COVID-19 pandemic.

BUSINESS TRENDS

Our 2021 surface transportation results were impacted by the rising cost and price environment summarized in the market trends section above.

We did not, however, experience the significant year over year volume volatility seen in the industry as measured by the Cass Freight Index.

Industry freight volumes increased approximately 13 percent in 2021 compared to a decline of eight percent in 2020.

Our combined NAST truckload and LTL volume increased 5.5 percent in both 2021 and 2020.

The COVID-19 pandemic had a significant impact on our small business customers in 2020 as our customer count decreased nearly 12 percent, driven almost entirely by small and emerging market customers.

Throughout the COVID-19 pandemic we have continued to work with our customers to meet our contractual commitments, which has resulted in a higher than normal percentage of shipments with negative adjusted gross profit margins and less volatility in our combined NAST truckload and LTL volumes as compared to the Cass Freight Index.

We have continued to reshape our portfolio by adapting our pricing to reflect the rising cost environment and participating to a greater extent in the spot market.

The strong demand and tight carrier capacity conditions in 2021 resulted in our average truckload linehaul cost per mile, excluding fuel costs, increasing 30.5 percent.

Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, increased approximately 29.0 percent in 2021.

In our global forwarding business, we continued to experience significant increases in purchased transportation costs for both ocean and air freight due to the disruption caused by port congestion in addition to the equipment and labor shortages impacting the global forwarding market.

This along with increased volumes has resulted in strong growth in both total revenues and cost of transportation for our ocean and air freight services.

Ocean volumes increased 17.0 percent in 2021 with strong growth in nearly all regions we serve, driven by higher award sizes from existing customers and new customer growth in addition to the adverse impact to 2020 results from factory closures during the early stages of the COVID-19 pandemic.

Throughout 2021 and 2020, we have augmented our air freight capacity with charter flights due to the significant commercial capacity shortages in the market, which have resulted in larger than normal shipment sizes as compared to our pre-pandemic operations.

On June 3, 2021, we acquired Combinex Holding B.V.

(“Combinex”) to strengthen our European road transportation presence, for $14.7 million in cash.

On March 2, 2020, we acquired Prime Distribution Services (“Prime Distribution” or “Prime”), a leading provider of retail consolidation services in North America, for $222.7 million in cash.

The acquisition was effective as of February 29, 2020, and therefore the results of operations of Prime Distribution have been included as part of the NAST segment in our consolidated financial statements since March 1, 2020.

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Our 2022 surface transportation results benefited from the declining cost of purchased transportation over the course of the year, as periods where the cost of purchased transportation declines often result in improved adjusted gross profits per shipment in our portfolio.

Industry freight volumes as measured by the Cass Freight Index were flat in 2022 compared to the prior year.

Our combined NAST truckload and less than truckload (“LTL”) volume decreased 1.0 percent in 2022 compared to the prior year.

As a result of the softening market conditions, our contractual rates negotiated in prior quarters contributed to an increase in our adjusted gross profit per shipment and reduced the percentage of shipments with negative adjusted gross profit margins.

Our average truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 7.5 percent during 2022.

Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, decreased approximately 4.0 percent during 2022.

Our 2022 Global Forwarding results were largely consistent with the trends discussed above in the market trends section.

We experienced elevated purchased transportation costs and volume growth for ocean freight in the first half of 2022 and saw those purchased transportation costs and volumes rapidly decline in the second half of 2022.

Our total ocean freight volumes decreased 0.5 percent for the full year of 2022.

Air freight tonnage decreased 9.0 percent as we experienced more customers willing to accept longer transit times in the ocean freight market, which was also aided by the improved schedule reliability for ocean freight.

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select 2022 year-over-year operating comparisons to 2021:

• Total revenues increased 42.5 percent to $23.1 billion, driven primarily by higher pricing and higher volume across most of our services.

• Total revenues increased 6.9 percent to $24.7 billion, driven primarily by higher pricing in truckload, LTL, and ocean services.

• Gross profits increased 13.9 percent to $3.6 billion.

Adjusted gross profits increased 30.7 percent to $3.2 billion, primarily driven by higher adjusted gross profit per transaction and higher volume across most of our services.

• Personnel expenses increased 24.2 percent to $1.5 billion, primarily due to higher incentive compensation costs and a 4.2 percent increase in average headcount, and also due to the benefit realized in 2020 from our short-term, pandemic-related cost reduction initiatives.

• Selling, general, and administrative (“SG&A”) expenses increased 6.1 percent to $526.4 million, primarily due to the increases in purchased services and warehouse expenses, partially offset by decreases in amortization and bad debt expenses and by an $11.5 million loss on the sale-leaseback of a company-owned data center in 2020.

• Income from operations totaled $1.1 billion, up 60.7 percent from last year due to an increase in adjusted gross profits, partially offset by the increase in operating expenses.

Adjusted gross profits increased 14.0 percent to $3.6 billion, primarily driven by higher adjusted gross profit per transaction in truckload and LTL services.

• Personnel expenses increased 11.6 percent to $1.7 billion, primarily due to 11.7 percent increase in average employee headcount.

• Selling, general, and administrative (“SG&A”) expenses increased 14.6 percent to $603.4 million, primarily due to increases in purchased and contracted services, legal settlements, travel expenses, and an impairment of internally developed software, partially offset by a $25.3 million gain on the sale-leaseback of our Kansas City regional center and a decrease in credit losses.

• Income from operations totaled $1.3 billion, up 17.1 percent from last year, primarily due to an increase in adjusted gross profits, partially offset by the increase in operating expenses.

Adjusted operating margin of 35.3 percent increased 100 basis points.

• Interest and other expenses totaled $59.8 million, which primarily consisted of $52.1 million of interest expense, which increased $3.0 million versus last year due to a higher average debt balance.

The current year also included a $15.1 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses.

These expenses were partially offset by a $2.9 million local government subsidy in Asia for achieving specified performance criteria that was almost entirely offset by a reduction in foreign tax credits within the provision for income taxes.

• Interest and other expenses, net totaled $100.0 million, which primarily consisted of $77.1 million of interest expense, which increased $25.0 million versus last year due to a higher average debt balance.

The current year also included a $23.5 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses, which increased $8.4 million versus last year primarily due to foreign currency revaluation on intercompany assets and liabilities denominated in U.S.

Dollars in countries where the U.S.

Dollar is not the functional currency.

• The effective tax rate for 2022 was 19.4 percent compared to 17.4 percent in 2021.

The rate decrease was due primarily to a favorable mix of foreign earnings and an increased benefit related to U.S.

The lower rate in the year-ago period was due primarily to a favorable mix of foreign earnings and an increased benefit related to U.S.

tax credits and incentives.

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Diluted earnings per share increased 17.3 percent to $7.40.

• Cash flow from operations decreased 81.0 percent to $95.0 million.

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• Cash flow from operations increased significantly to $1.7 billion.

CONSOLIDATED RESULTS OF OPERATIONS

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$ 7.40 $ 6.31 17.3 % $ 3.72 69.6 %

Average headcount

Average employee headcount

17,601 15,761 11.7 % 15,119 4.2 %

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Consolidated Results of Operations—Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021

Total revenues and related costs.

Total transportation revenues and purchased transportation and related services increased significantly driven by higher pricing and volumes in most service lines, most notably ocean and truckload services.

The higher pricing was driven by the continued supply chain disruptions impacting both the global forwarding and surface transportation market discussed above in the market and business trends sections.

The prior year period was also impacted by the early stages of the COVID-19 pandemic, which resulted in significant volatility to both pricing and volumes.

Much of this volatility was the result of restrictions in place to control the outbreak, which resulted in the sharp decline in commercial air freight capacity and periods of significantly reduced ocean freight demand due to factory closures.

This was followed by periods of rapid demand increases when production resumed and companies began to replenish low inventory levels amidst the market uncertainty and elevated demand for essential products.

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Our sourcing total revenues and purchased products sourced for resale decreased due to lower pricing and costs per case, which was partially offset by higher case volume most notably in the foodservice industry, which was significantly impacted by the COVID-19 pandemic in the prior year.

Total revenues and direct costs.

Total transportation revenues and direct costs increased driven by higher pricing and freight costs in nearly all service lines, most notably truckload, LTL, and ocean freight services.

These increases were partially offset by volume declines in most of our service lines.

The cost of purchased transportation remained historically elevated in the first half of 2022 as the industry continued to struggle with elevated inventory levels and supply chain disruptions due to port congestion and driver and equipment shortages.

As global demand began to slow in the middle of 2022, the cost of purchased transportation began to decline, allowing port congestion and challenges due to driver and equipment shortages to ease.

Our sourcing total revenue and direct costs increased, driven by higher pricing and cost per case across all customer industries.

Gross profits and adjusted gross profits.

Our transportation adjusted gross profit increased driven by increased pricing and volumes in nearly all service lines, most notably ocean and truckload services, resulting in higher adjusted gross profits per transaction.

Our transportation adjusted gross profit margin decreased driven by the significant increase in the cost of purchased transportation and related services in nearly all service lines.

The prior year period also included significant volatility in both volumes and the cost of purchased transportation due to the impact of the COVID-19 pandemic.

We have continued to meet our customer commitments since the early stages of the COVID-19 pandemic, which has resulted in adjusted gross profit margin compression especially during periods of extreme volatility in the cost of capacity relative to our contractual customer pricing.

Sourcing adjusted gross profits increased driven by an increase in case volume from sourcing managed procurement customers in the foodservice industry as the prior year period experienced a significant decrease in demand resulting from the COVID-19 pandemic.

This increase was partially offset by a decrease in case volume with retail customers.

Our transportation adjusted gross profits increased due to increased pricing compared to the prior year across most of our services lines, most notably in our truckload and LTL services resulting in higher adjusted gross profits per transaction.

Our surface transportation adjusted gross profit per transaction benefited from the declining cost of purchased transportation relative to our contractual rates negotiated in prior quarters.

Sourcing adjusted gross profits increased driven by an increase in case volume across the retail and foodservice industries and higher adjusted gross profits per case across all customer industries.

Operating expenses.

Personnel expenses increased primarily due to incentive compensation increases reflecting the strong results in the current year, an increase in average headcount, and the impact of steps taken to reduce costs in response to the COVID-19 pandemic in the prior year, including furloughs, reduced work hours, and the temporary suspension of the company match to retirement plans for U.S.

and Canadian employees in addition to increased health insurance costs.

Stock-based compensation expense recognized on performance-based equity awards granted prior to 2021 totaled $62.0 million in the current year compared to none in the prior year.

There is no remaining stock-based compensation expense to recognize on our 2017 and 2018 performance-based equity awards while 20 percent remains on our 2019 and 2020 performance-based equity awards.

Refer to Note 6, Capital Stock and Stock Award Plans, for further discussion related to our stock-based compensation plan.

Other SG&A expenses increased due to increased purchased services and warehouse expenses, partially offset by decreases in amortization due to the completion of amortization related to intangible assets from a prior acquisition and bad debt expenses and the impact of an $11.5 million loss on the sale-leaseback of a company-owned data center in the prior year period.

Interest and other expense.

Interest and other expense of $59.8 million primarily consisted of $52.1 million of interest expense and a $15.1 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses in 2021.

Interest expense increased driven by a higher average debt balance compared to the prior year period.

The prior year period included a $3.3 million favorable impact of foreign currency revaluation and realized foreign currency gains and losses.

Personnel expenses increased primarily due to an increase in salaries and incentive compensation driven by an increase in average employee headcount.

These increases were partially offset by a reduction in stock-based compensation expense as the prior year included significant stock-based compensation expense on performance-based equity awards granted prior to 2021.

Other SG&A expenses increased primarily due to increases in purchased and contracted services, legal settlements, travel, and warehouse expenses.

These increases were partially offset by a $23.5 million gain on the sale-leaseback of a facility in Kansas City and lower credit losses.

Operating expenses in 2022 also included the impact of organizational changes made to support our enterprise strategy of accelerating our digital transformation and productivity initiatives.

In connection with these organizational changes, we recorded $21.5 million of personnel expense, primarily related to severance, and $15.2 million of other SG&A expenses, primarily due to the impairment of certain capitalized internally developed software projects as a result of these restructuring initiatives.

Interest and other income/expense, net.

Interest and other expense of $100.0 million primarily consisted of $77.1 million of interest expense, which increased $25.0 million compared to the prior year due to a higher average debt balance.

The current year also included a $23.5 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses driven primarily by balances denominated in U.S.

Dollars, including intercompany balances, in regions where the U.S.

Dollar is not the functional currency.

The prior year included a $15.1 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses.

These prior year expenses were partially offset by a $2.9 million local government subsidy in Asia for achieving specified performance criteria that was almost entirely offset by a reduction in foreign tax credits within the provision for income taxes.

Provision for income taxes.

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The effective income tax rate for the twelve months ended December 31, 2022 was lower than the statutory federal income tax rate primarily due to the tax benefit from U.S.

tax credits and incentives, foreign tax credits, and the tax impact of share-based payment awards.

These impacts were partially offset by state income taxes, net of federal benefits.

The effective income tax rate for the twelve months ended December 31, 2021, was lower than the statutory federal income tax rate primarily due to the tax benefit from U.S.

tax credits and incentives, and a lower tax rate on foreign earnings.

These impacts were partially offset by state income taxes, net of federal benefits.

The effective income tax rate for the twelve months ended December 31, 2020, was lower than the statutory federal income tax rate primarily due to the tax impact of share-based payment awards, including the tax benefit from the delivery of a one-time deferred stock award that was granted to our prior Chief Executive Officer in 2000 and excess foreign tax credits.

These impacts were partially offset by state income taxes, net of federal benefits and foreign income taxes.

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NAST Segment Results of Operations

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2022 2021 % change 2020 % change

Average headcount

Average employee headcount

7,365 6,764 8.9 % 6,811 (0.7) %

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Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021

Total revenues and related costs.

NAST total revenues increased due to higher pricing in truckload and, to a lesser extent, higher pricing in LTL services in addition to volume increases in both LTL and truckload services.

The increased pricing in truckload was driven by tight carrier capacity caused by driver availability challenges and the supply chain disruptions facing the industry as discussed above in the market and business trends sections.

The prior year was adversely impacted by weakening demand during the early stages of the COVID-19 pandemic, which resulted in industry volume decreases.

Total purchased transportation and related services increased, driven by higher average truckload linehaul costs per mile in addition to higher purchased transportation costs per transaction in LTL services and volume increases in both LTL and truckload services.

Total revenues and direct costs.

NAST total revenues and direct costs increased driven by higher pricing and freight costs in truckload and LTL services in addition to an increase in volume in truckload services.

The cost of purchased transportation started at historic levels in 2022 driven by the continuation of the strong demand that impacted much of 2021 combined with challenges related to driver availability, supply chain disruption, and weather events.

Many of these challenges improved over the course of 2022 as demand slowed, which resulted in the cost of purchased transportation declining over the course of 2022.

Gross profits and adjusted gross profits.

NAST adjusted gross profits increased, driven by increased adjusted gross profits per transaction due to the higher pricing and increased volume discussed above.

Our average truckload linehaul rate per mile charged to our customers increased approximately 29.0 percent.

Our truckload transportation costs, excluding fuel surcharges, increased approximately 30.5 percent.

NAST LTL adjusted gross profits increased due to increased volumes and increased adjusted gross profits per transaction.

NAST other adjusted gross profits decreased slightly as lower adjusted gross profits per transaction and lower volume in intermodal were partially offset by incremental warehousing services related to the acquisition of Prime Distribution.

NAST adjusted gross profits increased due to higher adjusted gross profits per transaction.

Our truckload services adjusted gross profit per transaction benefited from the declining cost of purchased transportation relative to our contractual rates negotiated in prior quarters.

Our average truckload linehaul rate per mile charged to our customers decreased approximately 4.0 percent.

Our truckload transportation costs, excluding fuel surcharges, decreased approximately 7.5 percent.

NAST LTL adjusted gross profits increased due to increased adjusted gross profits per transaction.

NAST other adjusted gross profits increased driven by increased warehousing services and an increase in intermodal adjusted gross profits.

Operating expenses.

NAST personnel expense increased primarily due to incentive compensation increases reflecting the strong results for the year and the impact of steps taken to reduce costs in response to the COVID-19 pandemic in the prior year, including furloughs, reduced work hours, and the temporary suspension of the company match to retirement plans for U.S.

and Canadian employees .

NAST SG&A expenses increased, driven by increased investments in technology, warehouse expenses, and purchased services, partially offset by lower credit losses.

NAST personnel expense increased primarily due to an increase in salaries and incentive compensation driven by an increase in average employee headcount.

NAST SG&A expenses increased driven by increased investments in technology, legal settlements, warehouse expenses, travel expenses, and increased expenditures for purchased and contracted services, including temporary labor.

The operating expenses of NAST and all other segments include allocated corporate expenses.

Allocated personnel expenses consist primarily of stock-based compensation allocated based upon segment participation levels in our equity plans.

Remaining corporate allocations, including corporate functions and technology related expenses, are primarily included within each segment’s other selling and administrative expenses and allocated based upon relevant segment operating metrics.

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Remaining corporate allocations, including corporate functions and technology related expenses, are primarily included within each segment’s other SG&A expenses and allocated based upon relevant segment operating metrics.

NAST operating expenses in 2022 also included the impact of organizational changes made to support our enterprise strategy of accelerating our digital transformation and productivity initiatives.

In connection with these organizational changes, we

recorded $6.3 million of personnel expense, primarily related to severance, and $3.2 million of other SG&A expenses, primarily due to the impairment of certain capitalized internally developed software projects as a result of these restructuring initiatives.

Global Forwarding Segment Results of Operations

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2022 2021 % change 2020 % change

Average headcount

Average employee headcount

5,712 5,071 12.6 % 4,708 7.7 %

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Ocean (0.5) % 17.0 %

45.5 % 11.0 %

Air (9.0) % 45.5 %

Customs 3.5 % 13.5 %

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________________________________

(1) In 2021, reported air volumes represent metric tons shipped.

Previously reported statistics were based on transactional volumes and have been restated to conform with the current period presentation.

(1) Adjusted gross profits is a non-GAAP financial measure explained above.

Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021

Total revenues and related costs.

Total revenues and purchased transportation and related services increased due to higher pricing in our ocean services and, to a lesser extent, higher pricing in our air freight services, in addition to volume increases in both ocean and air services.

The higher ocean and air freight pricing was driven by the unprecedented supply chain disruptions impacting the global forwarding market combined with strong demand as discussed in the market and business trends sections.

Increased air freight volumes were driven by ocean freight conversion resulting from the significant disruptions experienced in the industry and the continued increase in charter flights and larger than normal shipment sizes as traditional air freight capacity remains strained by a reduction of commercial flights.

The first half of 2020 was also severely impacted by reduced demand and production due to the early stages of the COVID-19 pandemic, which led to significant volume declines in all services in the prior year.

Total revenues and direct costs.

Total revenues and direct costs increased due to higher pricing and purchased transportation costs in ocean services, partially offset by lower pricing in air freight services, in addition to volume decreases in both ocean and air freight services.

Similar to surface transportation, the cost of purchased transportation started at historic levels in 2022 driven by the continuation of the strong demand that impacted much of 2021.

This was combined with supply chain disruptions caused by port congestion as well as equipment and labor shortages.

As global demand slowed in most trade lanes in the second half of 2022, many of these challenges improved, which resulted in a rapid decline in purchased transportation costs and pricing.

Gross profits and adjusted gross profits.

Ocean and air freight adjusted gross profits increased driven by higher pricing resulting in higher adjusted gross profits per transaction, in addition to increased volumes.

Customs adjusted gross profits increased, driven by increased volumes.

Ocean freight adjusted gross profits increased, driven by higher pricing and resulting in higher adjusted gross profits per transaction in the first half of 2022.

These higher adjusted gross profits were largely offset by declining shipments in the second half of 2022, as discussed in the market trends and business trends sections above.

Air freight adjusted gross profits decreased, driven by pricing and volumes significantly declining over the course of 2022 as shippers struggled with elevated inventory levels, consumer demand declined, and improving ocean schedule reliability eliminated ocean freight to air freight conversions.

Customs adjusted gross profits increased driven by an increase in transaction volumes.

Operating expenses.

Personnel expenses increased primarily due to an increase in average headcount and incentive compensation reflecting the strong results in the year.

The prior year included the impact of steps taken to reduce costs in response to the COVID-19 pandemic, including furloughs and reduced work hours.

SG&A expenses increased driven by increased investments in technology and increased purchased services, partially offset by a reduction of

amortization expense due to the completion of amortization related to intangible assets from a prior acquisition.

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Personnel expenses increased primarily due to an increase in salaries driven by an increase in average employee headcount.

SG&A expenses increased driven by increased investments in technology, partially offset by lower credit losses.

Global Forwarding operating expenses in 2022 also included the impact of organizational changes made to support our enterprise strategy of accelerating our digital transformation and productivity initiatives.

In connection with these organizational changes, we recorded $3.8 million of personnel expense, primarily related to severance, and $3.2 million of other SG&A expenses, primarily due to the impairment of certain capitalized internally developed software projects as a result of these restructuring initiatives.

All Other and Corporate Segment Results of Operations

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Total revenues $ 2,057,150 $ 1,864,431 10.3 % $ 1,794,028 3.9 %

Income from operations (13,999) (10,720) N/M (13,314) N/M

Loss from operations (15,884) (13,999) N/M (10,720) N/M

Adjusted gross profits (1)

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Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021

Total revenues and related costs.

Total revenues and related costs increased driven by higher truckload pricing and volumes in Other Surface Transportation, including a 6.0 percentage point increase from the acquisition of Combinex.

Robinson Fresh total revenues and related costs decreased due to lower pricing and costs per case, which was partially offset by higher case volume most notably in the foodservice industry, which was significantly impacted by the COVID-19 pandemic in the prior year.

Total revenues and direct costs.

Total revenues and direct costs increased driven by higher pricing and cost per case across all customer industries in Robinson Fresh.

Other Surface Transportation total revenues and direct costs also increased, driven by higher truckload pricing in Europe.

Gross profits and adjusted gross profits.

Robinson Fresh adjusted gross profits increased, driven by an increase in case volume from sourcing managed procurement customers in the food service industry as the prior year period experienced a significant decrease in demand resulting from the COVID-19 pandemic.

This increase was partially offset by a decrease in case volume with retail customers.

Managed Services adjusted gross profits increased, driven by increased transaction volumes resulting from an increase in freight under management.

Other Surface Transportation adjusted gross profits increased primarily due to a 6.5 percentage point increase from the acquisition of Combinex and a modest increase in truckload volumes.

Robinson Fresh adjusted gross profits increased, driven by an increase in case volume across the retail and foodservice industries and higher adjusted gross profits per case across all customer industries.

Managed Services adjusted gross profits increased, due to an increase in freight under management and growth in adjusted gross profit per transaction.

Other Surface Transportation adjusted gross profits increased primarily due to higher European truckload adjusted gross profits per transaction, partially offset by a decline in Europe truckload volumes.

Operating expenses.

The operating expenses for All Other and Corporate included the impact of organizational changes made to support our enterprise strategy of accelerating our digital transformation and productivity initiatives.

In connection with these organizational changes, we recorded $11.4 million of personnel expense, primarily related to severance, and $8.8 million of other SG&A expenses, primarily due to the impairment of certain capitalized internally developed software projects as a result of these restructuring initiatives.

LIQUIDITY AND CAPITAL RESOURCES

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Description Carrying Value as of December 31, 2022 Borrowing Capacity Maturity

Revolving credit facility $ 525,000 $ 1,000,000 October 2023

Receivables securitization facility (1)(2)

299,481 500,000 November 2023

Revolving credit facility $ — $ 1,000,000 November 2027

364-day revolving credit facility 379,000 500,000 May 2023

Senior Notes, Series A 175,000 175,000 August 2023

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Senior Notes, Series C 175,000 175,000 August 2033

Receivables Securitization Facility (1)

499,655 500,000 November 2023

Senior Notes (1)

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(1) Net of unamortized discounts and issuance costs.

(2) On February 1, 2022, we amended the Receivables Securitization Facility primarily to increase the total availability from $300 million to $500 million.

We expect to use our current debt facilities and potentially other indebtedness incurred in the future to assist us in continuing to fund working capital, capital expenditures, possible acquisitions, dividends, and share repurchases.

Cash and cash equivalents totaled $217.5 million as of December 31, 2022, and $257.4 million as of December 31, 2021.

Cash and cash equivalents held outside the United States totaled $217.1 million as of December 31, 2021, and $230.9 million as of

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December 31, 2020.

Working capital increased from $1.10 billion at December 31, 2020, to $1.48 billion at December 31, 2021.

We prioritize our investments to grow the business, as we require some working capital and a relatively small amount of capital expenditures to grow.

Cash and cash equivalents held outside the U.S.

totaled $204.7 million as of December 31, 2022, and $217.1 million as of December 31, 2021.

Working capital decreased from $1.48 billion at December 31, 2021, to $266.4 million at December 31, 2022.

We prioritize our investments to grow our market share and expand globally in key industries, trade lanes, and geographies, and to digitize our customer, carrier, and internal tools to support our organic growth.

We are continually looking for acquisitions, but those acquisitions must fit our culture and enhance our growth opportunities.

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Capital expenditures (128,497) (70,922) (54,009)

Acquisitions (14,750) (223,230) (59,200)

Other investing activities — 5,525 16,636

Acquisitions, net of cash acquired — (14,750) (223,230)

Sale of property and equipment 63,579 — 5,525

Cash used for investing activities (64,918) (85,672) (24.2) % (271,714) (68.5) %

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Other financing activities 71,671 43,949 89,803

Net cash provided by (used for) financing activities 7,573 (440,667) N/M (651,253) (32.3) %

Net cash (used for) provided by financing activities (1,619,546) 7,573 NM (440,667) NM

Effect of exchange rates on cash and cash equivalents (5,638) (3,239) 9,128

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Cash flow from operating activities.

The significant decrease in cash flow from operating activities in 2021 from 2020 was due to unfavorable changes in working capital.

These changes in working capital were primarily related to a sequential increase in accounts receivable and contract assets, partially offset by a related increase in accounts payable and accrued transportation expense.

Both increases were driven by a significant increase in pricing for most of our transportation services in addition to increased volumes in nearly all services during 2021.

The increase in accounts receivable was also impacted by a change in business mix from the significant growth of our global forwarding business where our days sales outstanding ratio is approximately double that of our NAST business.

Despite the increase in accounts receivable, we are not experiencing a deterioration in the quality of our accounts receivable balance.

Additionally, since the early stages of the COVID-19 pandemic, we have been closely monitoring credit and collections activities to minimize risk as well as working with our customers to facilitate the movement of goods across their supply chains while also ensuring timely payment.

The significant increase in cash flow from operating activities in 2022 from 2021 was due to a decrease in operating working capital.

The improvement in 2022 from 2021 was primarily due to a $650 million sequential decrease in operating working capital, which represents accounts receivable and contract assets less total accounts payable and accrued transportation expense.

The decrease in operating working capital was driven by the decline in the cost of purchased transportation and the related decline in freight rates near the end of 2022.

Conversely, 2021 included a $200 million sequential increase in operating working capital as the cost of purchased transportation and freight rates were rising near the end of 2021.

The increase in operating working capital near the end of 2021 was also impacted by a change in business mix from the significant growth of our Global Forwarding business where our days sales outstanding ratio is approximately double that of our NAST business.

Cash used for investing activities.

Our investing activities consist primarily of capital expenditures and cash paid for acquisitions.

Capital expenditures consisted primarily of investments in hardware and software, which are intended to increase employee productivity, automate interactions with our customers and contracted carriers, and improve our internal workflows to help expand our adjusted operating margins and grow the business.

During 2019, we sold a facility we owned in Chicago, Illinois, for approximately $17.0 million.

Capital expenditures consisted primarily of investments in software, which are intended to deliver scalable solutions to improve our customer and carrier experience and increase our efficiency to help expand our adjusted operating margins and grow the business.

During 2022, we sold an office building in Kansas City, Missouri, for a sales price of $55.0 million and recognized a gain of $23.5 million on the sale in the twelve months ended December 31, 2022.

We simultaneously entered into an agreement to lease the office building for 10 years.

In 2021, we used $14.7 million for the acquisition of Combinex.

In 2020, we used $222.7 million for the acquisition of Prime.

In 2019, we used $45.0 million for the acquisition of The Space Cargo Group and $14.2 million for the acquisition of Dema Service S.p.A.

We anticipate capital expenditures in 2023 to be approximately $90 million to $100 million.

Cash used for financing activities.

We had net borrowings on debt of $822.7 million in 2021 and net repayments of $143.0 million in 2020.

The 2021 net borrowings were primarily to provide cash for operations, as our working capital needs continued to increase throughout the year as mentioned above.

The 2020 net repayments were primarily to reduce the outstanding balance of the receivables securitization facility.

This receivables securitization facility expired in December 2020 and was not renewed;

however, we entered into a new receivables securitization facility in November 2021.

There was a $525 million outstanding balance on our senior unsecured revolving credit facility (the “Credit Agreement”) as of December 31, 2021, compared to no outstanding balance as of December 31, 2020 .

As of December 31, 2021, we were in compliance with

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all of the covenants under the Credit Agreement, the Accounts Receivable Securitization, note purchase agreement, and senior unsecured notes.

The increase in cash dividends paid was the result of our fourth quarter 2020 dividend being paid on January 4, 2021.

Near the end of the first quarter of 2020, we temporarily suspended our share repurchase activity as we assessed the impacts of the COVID-19 pandemic.

We resumed our share repurchase activity in the fourth quarter of 2020 and throughout 2021, which resulted in the increase in share repurchases in 2021.

We had net borrowings on debt in 2022 and 2021 and net repayments in 2020 .

Net borrowings in 2022 were primarily to fund share repurchases and working capital needs in the first half of 2022.

The increase in cash used for share repurchases was due to an increase in the number of shares repurchased and a higher average price per share during 2022 .

Net borrowings in 2021 were primarily to provide cash for operations, as our working capital needs increased throughout 2021 as mentioned above.

The net repayments in 2020 were primarily to reduce the outstanding balance on the Receivables Securitization Facility.

In December 2021 , the Board of Directors increased the number of shares authorized to be repurchased by 20,000,000 shares.

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The number of shares we repurchase, if any, during future periods will vary based on our cash position, potential alternative uses of our cash, and market conditions.

Over the long term, we remain committed to our quarterly dividend and share repurchases to enhance shareholder value.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

We may seek to retire or purchase our outstanding Senior Notes through open market cash purchases, privately negotiated transactions, or otherwise.

Although there continues to be uncertainty related to the anticipated impact of the COVID-19 pandemic on our future results, we believe that, assuming no change in our current business plan, our available cash, together with expected future cash generated from operations, the amount available under our credit facilities, and credit available in the market, will be sufficient to satisfy our anticipated needs for working capital, capital expenditures, and cash dividends for at least the next 12 months and the foreseeable future.

We believe that, assuming no change in our current business plan, our available cash, together with expected future cash generated from operations, the amount available under our credit facilities, and credit available in the market, will be sufficient to satisfy our anticipated needs for working capital, capital expenditures, and cash dividends for at least the next 12 months and the foreseeable future thereafter.

We also believe we could obtain funds under lines of credit or other forms of indebtedness on short notice, if needed.

As of December 31, 2022, we were in compliance with all of the covenants under our debt agreements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States.

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the U.S.

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures.

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Revenue is recognized for these performance obligations as they are satisfied over the contract term, which generally represents the transit period.

The transit period can vary based upon the method of transport, generally a number of days for over the road, rail, and air transportation, or several weeks in the case of an ocean shipment.

The transit period can vary based upon the method of transport;

generally, a number of days for over the road, rail, and air transportation, or several weeks in the case of an ocean shipment.

Recognizing revenue for contracts where the transit period is partially complete or completed and not yet invoiced at period end requires management to make judgments that affect the amounts and timing of revenue recognized at period end.

At December 31, 2021, we recorded revenue of $453.7 million for services we have provided while a shipment was still in-transit but for which we had not yet completed our performance obligation or had not yet invoiced our customer compared to $197.2 million at December 31, 2020.

As of December 31, 2022, we recorded revenue of $257.6 million for services we have provided while a shipment was still in-transit but for which we had not yet completed our performance obligation or had not yet invoiced our customer compared to $453.7 million at December 31, 2021.

The amount of revenue recognized for contracts where the transit period was partially complete declined significantly at December 31, 2022 compared to December 31, 2021 driven by the macroeconomic and industry factors impacting the cost of purchased transportation, in addition to the supply chain disruptions that caused increased transit times near the end of 2021.

See Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operations , for further information.

We utilize our historical knowledge of shipping lanes and estimated transit times to determine the transit period in cases where our customers’ freight has not reached its intended destination.

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Additionally, in our sourcing business, in some cases we take inventory risk before the specified good has been transferred to our customer.

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Customs brokerage, managed services, freight forwarding, and sourcing managed procurement transactions are recorded at the net amount we charge our customers for the service we provide because many of the factors stated above are not present.

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If the Step Zero Analysis indicates it is more likely than not that the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed (“Step One Analysis”).

As part of our Step Zero Analysis we determined that the more likely than not criteria had not been met, and therefore a Step One Analysis was not required.

When we perform a Step One Analysis, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill.

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Actual results may differ from those used in our valuations when a Step One Analysis is performed.

As part of our annual Step Zero Analysis performed in 2022, we determined that due to certain qualitative factors and the recent performance of our Europe Surface Transportation reporting unit, the more likely than not criteria had been met, and therefore a Step One Analysis was completed for this reporting unit.

Our Step Zero Analysis did not indicate that the more likely than not

criteria was met for any other reporting units and therefore a Step One Analysis was not completed for those reporting units.

As a result of our Step One Analysis for Europe Surface Transportation we determined that the fair value was greater than the reporting unit's respective carrying value.

As such, the goodwill balance of Europe Surface Transportation was not impaired.

No impairments have been recorded in any period presented in the financial statements.

INCOME TAX RESERVES.

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Uncertain income tax positions are included in “Accrued income taxes” or “Noncurrent income taxes payable” in the consolidated balance sheet.

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DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL CONTINGENCIES

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(3) Purchase obligations include agreements for services that are enforceable and legally binding and that specify all significant terms.

As of December 31, 2021, such obligations primarily include ocean and air freight capacity, telecommunications services, maintenance contracts, and information technology related capacity.

As of December 31, 2022, such obligations primarily include ocean and air freight capacity, telecommunications services, third-party software contracts, maintenance contracts, and information technology related capacity.

In some instances our contractual commitments may be usage based or require estimates as to the timing of cash settlement.

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Long-term liabilities consist primarily of noncurrent taxes payable and long-term notes payable.

Due to the uncertainty with respect to the amounts or timing of future cash flows associated with our unrecognized tax benefits at December 31, 2021, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority.

Due to the uncertainty with respect to the amounts or timing of future cash flows associated with our unrecognized tax benefits as of December 31, 2022, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority.

Therefore, $43.0 million of unrecognized tax benefits have been excluded from the contractual obligations table above.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis