C.H. Robinson Worldwide, Inc. (CHRW) Earnings Call Transcript & Summary

All right. Good morning, everybody. Let me go ahead and get started. I'm Chris Wetherbee, the transportation analyst at Citi. I appreciate you joining us to kick off day 2 of our 2022 Global Industrial Tech and Mobility Conference. We have a great day, jampacked from a transport perspective, and we're really excited to kick off this morning with C.H. Robinson. So joining us from the company, we have Bob Biesterfeld, who is the CEO -- President and CEO of the company. We also have Mike Zechmeister, who's sitting in the front row here, Chief Financial Officer; as well as Chuck Ives, who runs the Investor Relations effort for the company. So gentlemen, thanks so much for joining us. Maybe the best way to kickoff would be to sort of give a quick overview of what -- the sort of position you feel like we're in right now as we're sitting here in early 2022 as it relates to both the sort of North American Surface Transportation business as well as the Global Forwarding business.

Yes. I'd be happy to kind of share some perspective from where we sit there, Chris. And first and foremost, thanks for having us again this year. It's good to be here to kickoff the second day. As we exited the fourth quarter, and we thought about really the landscape that we're operating in, we saw continued tightness in trucking capacity here in North America, driven both by driver shortage as well as lack of available equipment and a really strong healthy economy. Add to that, the obvious ongoing disruptions and delays that we've had in the ports that have been driven and certainly well documented, low labor participation rates, et cetera. We changed the calendar, but we didn't really change the environment, right? And as we entered the first quarter, just when you maybe thought things couldn't get tighter, we saw what appeared to be a lot of drivers stay out of the marketplace for a period of time. And we saw really record load-to-truck ratios and tightness in the domestic trucking market. And so as we went through Lunar New Year here, maybe expected to see some softening. But really, I think as we look at it today, the first half of 2022 likely looks and feels a lot like where we were in 2021.

Got it. Okay. So still tight, still a lot of pressure on the supply chain and still a lot of demand in the market. And when you talk to your partner carriers that are out there, and ultimately, your shipper customers, I'm guessing it doesn't appear that there's a significant let up in demand and some of the dynamics of inflation haven't really had an impact as it stands today. Is it a fair way to think about the world?

I think it's a fair way to characterize it, yes.

Okay. Got it. That's super helpful. So let's sort of zoom out for a minute and sort of think big picture, it's always great to have the opportunity to speak to you because, obviously, being a leader in the industry, you have some interesting perspective. So there's -- what seems like more entrants getting bigger and more -- and applying more of their time and effort on the brokerage market, some using more of a technology-based approach, some kind of doing a little bit more old fashioned, how do you sort of see the market developing here? You guys have been a big player, if not the biggest player for a long time in this space. If you look out 5 years, I mean, what's the competitive landscape? How much are these other guys going to be able to catch up?

If I think about North American Surface Transportation, specifically the truckload brokerage piece that you're talking about, I mean, it's such a fragmented market, right? At the base, you've got some 250,000 motor carriers with an average fleet size of, what, 5? On top of that, you've got 20,000 brokers that exist in the market with certainly a long tail of small businesses. And to your point, there's been a lot of growth, a lot of consolidation. There's been a number of new entrants over the course of the past few years. But there's always been new entrants attempting to gain scale and using different mechanisms to do that. I think the entire industry is going through a bit of a transformation right now. I think as been well documented, I mean, the advancements in technology and the availability to really think differently about this 2-sided marketplace that we exist in, there's going to continue to be a lot of investment. And we're certainly making it both in terms of technology as well as just continuing to build out the model to be more effective, more efficient and more growth oriented. And so I think we'll continue to see consolidation. There'll likely be some challenges to some of the smaller providers in the environment that aren't able to keep up with the scale of investment that's going to be taken -- that's going to be needed in order to really succeed in the future.

So let's talk a little bit about technology and sort of the approach. You guys have had investment in technology for many years. And there's a lot of discussion about automation of the sort of the matching of loads. But can you walk us through a little bit about your specific approach to technology in the NAST business? So what ultimately are you trying to get in terms of the shipper experience as well as the carrier experience? Is it going to be just as simple as an iPhone to iPhone type of match? Are there other nuances to it? If you could kind of sort of frame out the approach from a technology standpoint, that would be helpful.

I think a lot has been made and maybe mischaracterized around automation, right? And our goal is not to just take our legacy processes and just automate them, right? It's -- and automation will be an output, right, as evidenced by I think the 1.2 million roughly bookings that occurred in an automated fashion with carriers last year in the Robinson platform, which was up 65%. But ultimately, we think about it as how do we scale kind of this transactional freight environment that we live in, right? How do we think about the demand side of the equation and really have scalable application for customers. So whether that's automated pricing, whether that's algorithmic-based pricing engines that are learning every day, that are making tens of thousands of quotes every day, every minute, every hour in allowing us to generate demand on the system in ways that simply our NAST network of 7,100 people can't do, right? So really helping kind of a 10x multiplier, allowing our people to create and generate more demand. On the other side of that marketplace is the carrier space, right? And how do we take this long tail of the 80,000 or 90,000 carriers that are in our network in any given day and help them to build better yield for their businesses. It doesn't have to be through an iPhone or an app, it could be, right? But we've got iPhones, we've got apps, we've got web, and we've got our people but really scaling that so that they can take the 10% to 15% to 20% deadhead miles out of their networks that they can scale more effectively. And then us kind of sitting in the midst of that and saying, "How do we most effectively manage yields, so that we're getting the best outcomes for our customers? That we're getting the best yields on our contracts? And so that we're delivering the greatest shareholder return for the owners of the Robinson stock." So again, I think what's maybe been characterized as a goal of automation is really about creating that kind of duality of the business model of having really smart people that can provide services, can provide strategy and excellence for our people. But then just really scaling that transactional base layer of freight. So we can increase the liquidity of that market and really drive more volume through it.

Got it. That makes sense. And then when you think about the investment in technology, can you give us a sense of sort of how that curve has sort of grown over time? And then as you look out a few years, sort of how much do you think we need to see -- Robinson needs to be spending on sort of an annual basis to continue to build the platform to the point that you want it?

We've talked about this $1 billion investment in technology over a 5-year period. Reality is that was really kind of a natural run rate of where we've been building over the course of the last decade. And so over the course of the next couple of years, we think we'll be kind of in that same range of investment in tech as well as, inclusive of that, the addition of the product organization that we've been building out over the course of last year. And really, we look to fund the growth and shift of that product organization through our ability to reduce some of the legacy IT expenses. And so really reorienting ourselves around the product organization sitting at the center of our business strategy. the voice of our customer and our engineering business. So I mean, really orienting and organizing ourselves in what we would call kind of single-threaded agile teams, right, cross-functional, cross-divisional teams in order to accelerate the pace of development and the speed in which we're delivering value to our customers, to our carriers and our employees internally. As we get to that fully built-out model, I would expect that we'll be able to draw down over time some of the old investment in kind of the legacy IT side.

And how do you think about scaling the workforce as it stands today? So that's something I want to get into in a little bit in terms of talking about sort of 2022 and maybe the outlook beyond that. But how do you think about several years out, what you need from a workforce perspective, maybe the productivity on a net revenue basis or maybe it's on a profit basis, how do you think about that?

I think about it, you could take an and-versus-or approach to this. And I think we could run the risk of saying it's people or digital, right? And that's really not the direction that we're heading. We're looking at it and saying, how do we make these investments in digital and in technology so that it's more of a function of and. We want our people that are booking 25 loads per person per day to be able to book 100 loads per person per day, right? But we still believe that we need those really quality people at the center of it. It's why we added 150 carrier reps last year into that job family is because we believe that we wanted those carrier reps to be there, to be active, be able to cover the freight that our customers needed us to do when they needed us to execute it. So even though we're fully committed to building out the digital path, we're also committed to building out more talent in the personnel side so that we can execute under all conditions.

And when you think about that sort of world where maybe several years out, where there is a little bit more automation, but I get your point about it not being sort of seamless, no people involved there. There's been a lot of discussion about sort of what the appropriate margin levels are and what's sustainable, what's not. Without specific sort of guidance, I mean, what's your general thought process about 3, 4, 5 years out with the inclusion of technology? Are double-digit profit margins or net revenue margin sustainable? And then how do you think about the liquidity or potential volume that you could see in a scenario like that?

Yes. When I look at adjusted gross profit or net revenue per shipment in our truckload business, absent the kind of the peaks of what back half of 2018, front half of '19 and the valleys of '20, and you just kind of take the highs and lows out. Our net revenue margins or net revenue dollars per shipment trade in a really, really tight band. And they're virtually the same in fourth quarter as they were 5 years ago. Now that's not to say that, that will be that way forever. I think there's going to continue to be downward pressure on margins as we get more price transparency in the market as there's more disaggregation or democratization of data rather. And so there's going to be outward pressures on that, but there've always been outward pressures on our model. So do I think they'll likely [ Technical Difficulty ], likely, we'll continue to face some pressure over time, which is why we're so focused on engineering costs. Transaction in the future comes at a 15% margin or 12% margin to customers. It's the kind of labor requirements that goes into those customers. It's the risk profile of those customers that will determine where they fall on ultimately in the adjusted gross profit margin spectrum. So not all of it's going to be 15% freight, but we can take really profitable 6% to 8% freight, if we need to, to fuel the energy to model.

Got it. That makes sense. And then maybe one sort of last big picture question before we start to drill down a little bit more closely. When you think about the sort of the landscape where bigger players want to get bigger, you still mentioned there was significant fragmentation. Do you think that there's room in the market in 5 years or more for 5 to 10 sort of quasi-digital freight platforms, if you will? Or is that too many? Do you think shippers want to deal with fewer on an aggregate basis? Or do you just sort of feel like we'd be out there and there's something be just as many players then as there is today?

I think that's probably a likely place where we end up is that there are -- whether it's 5 or 10 or somewhere in the middle players of scale that are highly skilled in the digital side and have execution capabilities. But I think that's 1 dimension of it, right? And so I think the carriers on the carrier side, they'll work with multiple, right, because the switching costs are very low. And so each of us is challenged to have differentiated value for the carrier beyond just having a load that moves from A to B, right? And so I know that every company in the industry is pursuing different ways of doing that as are we. On the shipper side, the value in that transactional moving freight to A to B, I think, is going to continue to be commoditized. So how do you think about the services that you layer on top of that? How do you think about the strategic benefits that the shipper gets from working with Robinson versus one of our competitors. And that's where I think we can continue to differentiate, whether that's through having the great people that we have, whether that's having the global network of integrated services between Forwarding and NAST. I mean just the simple integration between our truckload business and our LTL business and the ability to cross-sell that is a differentiator amongst any of these other platforms that you're kind of referencing.

Got it. Okay. No, that makes a lot of sense. That's helpful. So let's kind of drill down maybe a little bit more on 2022 in aggregate. Clearly, it seems like demand is still out there. I think when we think about the supply chain and some of the dynamics that are out there, how do you sort of feel like the volume environment is likely to shape out? I think there's a lot of questions about sort of a back half kind of loaded year. Congestion is sort of choked off some volume in certain end markets and certain verticals, certainly, the railroads have been struggling to a degree. How do you think about sort of the broad volume outlook as you think about 2022? It doesn't necessarily have to be Robinson specific, but sort of freight in general.

I think that as long as we are experiencing global freight delays and disruption that the demand for domestic trucking is going to continue to be really high. Yes. I think trucking will be a net winner in that environment between trucking and Intermodal. I think LTL, the environment, in terms of just the constraints around capacity, the inventory backlogs, the growth of e-commerce, I think there's a lot of tailwind for the growth in LTL as well. And as you know, those are 2 primary areas where we've got a lot of exposure. And we think that, that environment fuels growth for us just through the cycle, certainly through 2022. But beyond that, we think that the model that we have and the strategy that we're deploying is also going to carry that growth forward well beyond 2022. And we expect to be able to deliver volume growth in both of those models over the course of this year.

So how is that different from where we've been in the last couple of years? So the last, let's call it, 1 year to 18 months, volume at times has been weaker than the market, sometimes a little stronger than the market. You guys have obviously made more of a concerted effort to talk about the ability to sustainably grow through it. LTL, obviously, has been very strong. Maybe truckload was a little weaker, but I think truckload's kind of coming back for you. So can you talk a little bit about how you're impacting that in the approach that you guys are taking that can influence that?

Yes. We -- it's obviously been a very, I don't know, violent, if that's the word, but the cycle is between '17 and '22. And so we likely made some decisions in the last peak in terms of the speed in which we reacted to changes in the market and pricing. That had us a bit on the outside looking in with some customers as it came to kind of a lead into the next cycle. So our volume wasn't negatively impacted in '18, '19, '20 really because of that. When we got into '21, and I guess '20 -- into '20,. and we started to see in the back half, really the rapid escalation of cost of hire and the market cost of purchase transportation over the past 6 quarters, we've really had to kind of temper our acceptance rates on some contractual commitments there just in order to negate some of the exposure to negative financial outcomes on a per transaction basis. So we've probably tempered some of our volume growth more intentionally. But we really, as we look forward, we've seen volume growth in the past several quarters consecutively. We expect to continue to grow volume in each of the quarters this year. And I think we're in a -- we've got some wind in the sales in the NAST truckload business. On the LTL business, as we stated in the fourth quarter call, we had negative volume growth in LTL for the quarter. simply due to a handful of customers that had really outsized LTL shipment volumes in the fourth quarter of last year. And again, we expect that to normalize. We've got some tougher comps in the front half of the year. But through the year, we expect to drive that volume growth and share gaining.

Okay. Got it. How is customers' approach to bids changed? I know over the course of the last year and the tightness in the market, we've heard from you that some of the duration of contracts has been getting a bit shorter. So can you walk us through maybe what the portfolio looks like in terms of 1 year? Or maybe at 6 months? Maybe there's even maybe some 3-month deals in there? How does that sort of look? And what are you hearing now from customers about their desire to continue to maybe go short relative to traditional?

Yes. So fourth quarter was a continued kind of proliferation of shorter-term bids or even delays in pushing annual bids into the first quarter. We typically reprice about 60% of our portfolio between Q4 and Q1, and 100% of the portfolio every year, obviously. But first quarter is looking a lot more normal in terms of kind of the bid cycles certainly leaning more towards annual bids, some mini bids that are always occurring, but I was talking to the truckload team prior to flying out here to kind of get a sense of that. And they said, no, much more normal behavior on the shipper side seems to be performing well.

Okay. And when you think about the pricing opportunity, can you just remind us what you sort of think the opportunity is for you to price in 2022? On the truckload side?

Yes. On the truckload side, we came into kind of the back half of last year, and our economists were looking at it and saying we're kind of expecting mid-single-digit increases in terms of the overall contractual market. So we get a little deeper into that. We think that, that might be a little bit conservative. And it's likely high single digits is where we're seeing things play out over the course of 2022. Now obviously, every customer is going to experience that a little bit differently. So based on where they're starting from. But on average, if we think kind of the cost of purchase transportation where the market moves, kind of mid- to high single digits is where we're projecting over the course of this year.

Got it. Okay. A couple of points that I just want to make sure I'm aware of. Where are we in route guide depth as it stands right now? How difficult is it to get a truck?

Yes. So I mean we sat for our managed services business last year at kind of that 1.7 to 1.8 really throughout the course of the year and which is really amazing if you think about on average, essentially the second truck in the routing guide taking every shipment, considering how much repricing was done last year, not only by us, but by so many other in the industry and many in this room. Just with the incredible rate of increases in cost of purchase transportation last year, even the aggressive resetting of prices as soon as you reset it in 1 quarter, it wasn't right for the next quarter, just it kept us at that point. Nothing has really changed in the first quarter there. And I would say even in January, we saw some degradation in that just given some of the storm activity and kind of a lack of drivers in the brokerage space.

Got it. And then loss-making loads in all of '21, where was that? Because I think a lot of us view that as an opportunity to kind of catch up from a profit perspective. So remind us where that was in '21? And do you feel like you can make some progress on that this year?

Yes. I don't know the percentage of loads off the top of head, but it was certainly at a place that was at a record high. And that's not one of the records you want to have, by the way. It's not the one you want to win if you're on my team. So we do see an opportunity to really harvest and take that number down in 2022. That will be a big part of getting back to really the contractual -- the health of our contractual portfolio is really driving the improvements in adjusted gross profit in the contractual portfolio by taking out a number of those loss-making loads through the contracting piece. That's going to have a big impact on kind of our goal of moving towards a 40% gross profit margin in -- or not gross profit margin -- profit margin. operating margin in our NAST business as well. It's just fixing, if I could use that term, the contractual portfolio and getting the AGP right there.

How much progress do you think you could make towards that goal this year?

Significant.

Significant? Okay. Got it.

Yes. I mean what will -- and why I say that with such confidence is even though we're projecting a continued increase in the cost of purchase transportation and where the market will move in the contract space, we're not predicting another quarter of 40% increases in costs right? I mean you just -- we will see, I believe, some moderation of pricing in the market and potentially in the back half, some declines. And in either of those situations, if we're -- I think we're right on our forecast, we start to engineer out those losses, right? Those losses occur. Some are intentional, just on cyclicality, but those losses occur on unplanned events, right? An unplanned event for us in that is when you plan for cost to be up 20% and it goes up 40%, that -- we -- our model is predicated on selling long and buying short. And so volatile events in the market like we experienced in the back half of '18 and '19 and prices fall, we see significant margin expansion. Rapid increases like we've seen in the last 6 quarters, we get exposed in that contractual portfolio. And so part of what I opened with in terms of yield management and using science and machine learning in different ways in our models to try to maximize the yields so we can spot those trends and be a bit more proactive -- a lot more proactive in addressing that before they happen.

Got it. And then just to kind of go back to when you guys reported, January, with some of the stuff with COVID disruptions, that dynamic, that felt sort of like 4Q from a disrupted perspective, is that fair?

It is.

Okay. Got it. That's helpful. I want to ask 1 more question about NAST and then we move on to Global Forwarding. So on the capacity side, what's your take on sort of driver availability? We've talked to kind of -- that's pretty much everybody had talked to over the course of the last day about labor availability. And on the margin, it sounds like it's a bit better, not fixed by any stretch of the imagination. What's your take on drivers?

I think the beginning of the year, January was really challenging. It literally, I know that not every truck driver took an extra 2 weeks off, but it literally felt like every truck driver took an extra 2 weeks off to celebrate the holiday and the great 2021. I would say that it is feeling a little bit better. I mean some moderation, you can see that in whatever index you might look at, DAT, load-to-truck ratio and any of those available, that's kind of the one that we tend to look at. It is a good mark-to-market. And that would start to indicate that we're starting to see some moderation, not back to balanced market moderation, but less disruptive.

Okay. Got it. That makes sense. Just a reminder for folks in the room as well as on the webcast, you can submit questions. We will take them up here, and I can get them asked here. So feel free to do that. The instructions are on the tables in front of you if you're in the room. Let's talk a little bit about Global Forwarding. So this has been a really interesting sort of segment for you guys, obviously, significant growth that we've seen and the disruptions on the ocean in particular, where you have a market-leading position, has been extensive. So broadly speaking, as you think about 2022, I think there's a sense of a normalization being possible. So what's your overarching view and then we'll dig in a little bit more. But how do you think 2022 kind of shapes out from a Global Forwarding perspective?

Well, again, there is no perfect crystal ball in any of this. But again, if I just look at the number of ships out in the water today, that are supposed to be in, that are backlog of ports it's pretty hard to get to any sort of assumption that says the first half of the year is going to be different than where we closed out the last half of year. The back half of the year remains the question, right? I mean how much does pricing moderate? How much new capacity comes on? How much price control has shifted to the steamship lines that maybe wasn't there in the past? How much appreciation has the industry taken of the criticality of supply chain and having quality sound execution? So I've said it before, but I think if people are using 2019 as kind of the baseline for what normal is again. I think that 2019 left the building and isn't coming back. So I think we're going to find a new normal as we find that new normal, it's likely not where it stands today. And in our Forwarding business, we operate much more -- we don't operate under the same necessary long-term contracts that we do in NAST. And so as that market in Forwarding starts to cool, we would expect to see our adjusted gross profit on a per shipment basis start to draw down with that. Whereas in NAST, that happens, you start to actually see the expansion of our adjusted gross profit in NAST. So part of this is the intentionality of those 2 businesses working in concert, both for our customers as well as for our shareholders because we do believe they're complementary in the way that the market dynamics work, and we can continue to deliver EPS growth for our shareholders, even if Forwarding starts to come down because the market for us should really support NAST on the other side of that.

Yes. Yes, that certainly makes sense. And what's your take in terms of the ability for the liner companies to maybe be more disciplined around capacity and price going forward? I think there is a sense amongst that community that this has been a great windfall, but one that they might have the ability to extend a lot longer than maybe some people think. I don't know what your perspective is on that. You obviously have a lot of experience dealing with them. They have some capacity management tools at their disposal if they really want to use them even if congestion starts to ease.

Yes. I mean, admittedly, not my area of functional expertise, but clearly, I mean, from a thesis standpoint, it does seem like the power has shifted in some respects to the liner companies and whether that's through -- there's been tremendous consolidation in that industry that's been well documented over the past decade. You've got the alliances that have developed. I mean they would appear to have potentially some more pricing power today than they've had in some times past.

Got it. And then in terms of -- let's talk a little bit about the sort of cost side of the business. So that, to be fair, is 1 area that we were a little surprised in terms -- particularly the personnel. I think in the fourth quarter, you guys experienced maybe what was some tightness in the market from a labor perspective where you maybe saw a little bit of comp per employee increase, you probably hired a little bit more. But can you sort of talk through what your -- your ability to get labor is? And sort of how you feel around some of that 2022 guidance that you've given us for personnel expense in particular?

Yes. So in 2021, we experienced, at Robinson, what I'd call like the equity tsunami, right? So all of our long-term incentives, because in 2019 and 2020, the LTI did not vest, given the performance of EPS. What we -- based on the outsized results in forwarding and NAST is stronger year last year, too, we saw just incredible amounts invested. There was $90 million, I think, of incremental equity expense in 2021 relative to 2020. So a pretty significant bump in the personnel expenses there. In terms of the other line items in fourth quarter around personnel. So a few things going on there. One, yes, we increased the rate of hiring, both to somewhat catch up with the growth that we experienced in Forwarding specifically, and to get ahead of the growth that we expect in NAST. Additionally, as we work on workforce planning, so we're always kind of projecting out what our headcount looks like into the future so we can attract the right talent. We're finding just as many companies are, the average time to fill an open position is taking longer than it typically has in the past. So you've got to forecast your hiring in advance. So we make those hires. We also saw attrition start to decline in fourth quarter as well. So we did get maybe a little bit ahead of where we would have expected to find ourselves in fourth quarter, and that carried into the first quarter. If you think about the guidance that we provided, though around both personnel expense and SG&A, if you think about the midpoint of that guidance on personnel and the midpoint on SG&A for 2022, it's actually below where we finished out fourth quarter. And so we are in no way losing disciplines around cost. At the same time, we don't want to choke out the model for growth. And as we looked at some of -- I mentioned earlier, hiring more reps into the carrier job family, we're looking at that and saying, "Okay, productivity in that job family is up, well over 20% in the last couple of years. The work that we're doing is paying dividends. The technologies continue to advance. The model is continuing to get built out." But we also know that there's unanswered demand that's coming in every single day from our customers in aggregate that we feel that we can capitalize on if we've got more people rowing the boat, so to speak. And so you make the investment in those people, they become candidly a bit of a drain on productivity in the short term because they're new to the organization, they're learning the ropes. But over time, having them in the seats really helps to unlock more volume and more demand that we're able to respond to.

Got it. That certainly makes sense. A question that came in from the webcast was going back to the 40% margins from a NAST perspective. Can you give us some of the building blocks to get from where you were to where -- to 40%?

Yes, absolutely. And it starts with that contractual truckload portfolio and getting the adjusted gross profit right in terms of the line with our expectations there. That, candidly, in itself can take care of a lot of that. The second piece is the improvement and increased productivity through building out the digital freight exchange that we're working towards. I mean we -- I'm excited for kind of the first quarter earnings, and we're able to talk in detail. But we're seeing really nice progress since the launch of what we've internally called Project Infinity, to really personalize that carrier experience. We're seeing much greater uptake of the product. We're seeing greater retention of the carriers, more usage, and that in turn is driving greater efficiency and more kind of electronic books through the model. And so we'll have some really great data to share at the end of first quarter on that. But that's going to be a really critical part of enabling the staff that we have to simply move a lot more freight than they're able to do in today's model. The third piece is getting some of these newer employees up to productivity. Today, about 20% of our carrier job family is in what we call the associate role, which is kind of the entry-level point, and they're not yet at productivity. So there's an unlock associated with that. And then it's going to be just having real discipline around expenses. We know that there's been increased investment in tech that's going to be there for the next couple of years, but we would anticipate being able to draw that down as a percentage of total revenue in NAST. And so there's a pretty clear path there, we believe, in NAST to getting back to that. We may not get there in 2022, but we certainly see a path to getting there over time and maintaining that position.

Okay. Got it. That's very helpful. I wanted to ask a question about the Waymo announcement. I know it's a little off the topic of what we've been talking about, but I think it is very interesting. So can you talk a little bit about what specifically you'll be doing with them? And how do you sort of see AV working into the model?

Super excited about the partnership with Waymo. We first talked to them, I think, in 2017, we were out of Google X with a group of our executives, and they were early in their journey, right? And it was conversations like if we build an autonomous truck, who's going to unload the truck, right? I mean, just simple blocking and tackling. So we've been in conversation with them for about 7 years, and super excited to launch the partnership with them. In the short term, we're going to be co-moving our customers' freight on their equipment in a simple corridor kind of ballast to Houston quarter, but we certainly look to expand it from there. When we talk to Waymo about the benefit of us coming together, Robinson's got freight on a consistent basis across nearly 3 million lanes across North America. So if there's a -- and we've got density of freight to move in those lanes, right? So if there's a corridor where they need neither want to test of if there's a type of environment, we're most likely to have freight consistently there. And we'll continue to have conversations and build the partnership with Waymo. We also want to stay close to really anybody that's investing in the space. Part of what we talk about commercially is Robinson having the most connected platform. And I think AV will be, in the future, just another extension of that, just like how we think about TMS partners or ERP partners or others today. Given the density of our freight network, and I just fundamentally believe part of the reason why great trucking companies still have 10% empty miles or smaller trucking companies have 20% empty miles, it's the bias of the driver, right? The driver wants to go home. The driver wants to go somewhere. And if we can take this technology that Waymo is developing and others and align it with the liquidity of the Robinson network and eliminate the bias of that driver. I believe that there's a tremendous capacity unlock in North America, and we won't be talking about the driver shortage because not just because we're going to replace all the drivers with robots, that's not what I mean by that at all. But I just think there's a huge capacity availability that's just unmet. I think AV has got a real place to fill in that. But it's going to take liquid markets like ours to get there.

Yes. Okay. Makes sense. And it sounds like from what you're saying, nothing exclusive, you're certainly open to multiple players and see where the technology goes over time?

Absolutely. We want to be agnostic in that space.

Yes. Got it. Makes sense. Okay. Can we talk a little bit about capital allocation? So how do you think about today with where the stock is and what the opportunities are out there? We know it's been a more robust M&A market in transportation than really, frankly, my entire career I've seen. How do you prioritize things? Where is buying back your stock sit versus maybe making an acquisition or looking elsewhere?

Yes. So kind of the hierarchy of capital allocation needs at Robinson are one, we're committed to maintaining an investment rating -- investment grade rating on our debt. Yes, still early in Minneapolis. So investment-grade rating on our deck, kind of use that as a starting point. from there, we're really committed to the dividend, right? And we made a nice increase to the dividend early in the year. We think about the dividend in terms of kind of long-term EBITDA growth, let's grow the dividend in line with that. Then we evaluate, okay, well, I should say before the dividend is really investments that are close in, right? Things that we're doing that we know we can get returns on like our tech investments, like the things we've talked about already. Beyond the dividend, it's, okay, what's available in the market? What else is there to do with the cash? To your point, there is a tremendous amount of M&A opportunity, activity, but the valuations have been likely at ranges that we have not found the right opportunity to look at for Robinson. So from there, we're going to look at how can we best return capital to shareholders, and that's typically through opportunistic buybacks.

Okay. Got it. That makes sense. Okay. And then I guess when we think about -- just jumping around back to Global Forwarding for a moment. So we talked about NAST margins. Can we talk a little bit about what you think the sort of in a more normalize, like you said, maybe we'll find what normalized is at some point in the next couple of years. What do we think about the margins in that business long term?

We've been consistent in our messaging that we think 30% is kind of -- has been kind of industry best in class on operating margins for the Global Forwarding business. We're clearly north of that 30% marker in 2021, and perhaps will be through 2022 as well based on how we think about the market. But publicly speaking, we're still kind of thinking that 30% is the right long-term number there. But again, there are a lot of uncertainties in terms of where this market is going to play out. I think what's -- what will be good for everyone to see whenever normal gets here, is I think it will uncover the work that Mike Short and his team have been doing in forwarding over the course of the past 2 to 3 years, which is really around -- really integrating, not just acquiring but integrating the companies that we've acquired in Global Forwarding, and moving into a single global platform in Navisphere. I mean there's been a lot of talk about the tech investments, in tech investments that have been heavily pointed at forwarding, really moving towards global process standardization across that business. Looking at labor arbitrage, where we can, there's just -- there's a lot of really good stuff that's happening in that core Global Forwarding business that haven't shown themselves through just because of the incredible appreciation of adjusted gross profit that's occurred in the past couple of years.

Yes. Okay. That makes sense. As we're getting short on time, there's another question that came in on the webcast. It's about -- it's specifically about Maersk maybe pulling some of their volume away from forwarders and back in. I don't know if you can comment on that, but would love your take if you can. I think maybe bigger picture, when you think about Maersk or thinking about some of their inroads into more surface-based transportation, they're doing it on a more asset-light basis, but they certainly have been acquisitive in the market. So how do you see: number one, that first question; and then broader about the liner companies may be getting a little bit more involved in the surface side of it. What does that do from a competitive standpoint, if anything?

Yes. So I can't and won't comment on specific conversations that we have with carriers. But honestly, the second part of it, I think, is a validation of our model. The fact that when the liner companies are finding themselves flush with cash, they're saying, well, it makes a lot of sense to be an integrated services provider in North America. If we can get this global end-to-end, door-to-door solution, that's kind of what we've been doing at Robinson for the last decade. And it's what we continue to do every single day. It's why customers -- one of the reasons why customers choose to work with us. It will shift. Certainly, it will shift the dynamics in the marketplace in one way, shape or form. But it's how we've been going to market really since the acquisition of Phoenix in 2012. It's what we -- it's what we've aspired to do. It's what I think we're great at. And that's why I think we've been real share takers throughout the course of this disrupted time in the last couple of years.

Yes. So last question. I kind of asked you this earlier, we'll just get it. I'm asking kind of everybody what their take is in terms of progress improving the supply chain? So if you had to sit here and prognosticate about what you think might happen in the timeline on which it would happen, what's your best guess?

2023 is when we figure out what normal looks like. Just not sure what it is.

Yes. Okay. Fair enough. I think that's -- I think it's a very...

That's my prognostication. I also think the Vikings are going to win the Super Bowl next year. Take that for whatever it's worth.

Okay. Fair enough. Fair enough. I mean I'm a Giant's guy, so I don't think I have any hope. So that's okay. I could live with it, not going to be a problem from my perspective. Last question for me. If there is a product or a geography that you don't have today that you'd like to have, what is it?

From a product standpoint, I have a firm belief that we really want to be focused on markets where we can be really -- where we can have a differentiated market because -- be a market leader, have a differentiated market position. And so I'm comfortable with the products and where we sit today. What was the second one?

Geographies. Any...

Geography?

Obviously, that kind of takes to the Global Forwarding piece a little bit more into...

Yes. I mean, again, I think our investments in forwarding, there are pockets of Europe where we'd like to be stronger where we'd like to have a bigger presence. But that does open up a whole another kind of competitive landscape where I go back to my initial point of where do we want to be differentiated. If I think at the core of what -- so we serve global customers. But at the base of our customer base, we really help North American customers connect with the world, right? And so if I think through it in that lens, that would help to inform kind of where that next opportunity is.

Got it. Bob, thanks so much for taking the time. Really appreciate it.

Good to see you.

Thanks, everybody.

Thanks.