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

Okay. Great. Thanks, and good morning. We are powering away through what's been a great morning so far on the transportation side. We are very pleased to be joined by C.H. Robinson. Joining us from Robinson, we have Dave Bozeman, President and CEO; Damon Lee, Chief Financial Officer. I think Chuck is in the back, Senior Director of Investor Relations. So gentlemen, thanks so much for joining us. Really appreciate it.

Thanks for having us.

Thank you.

Probably the best way, Dave, maybe kind of kick it over to you to start, maybe give a little lay of the land of what you're seeing in the markets. There's lots of stuff that you look at. Maybe a quick synopsis of kind of what you're thinking and then we can dig into the individual businesses and what's going on specifically at Robinson.

Yes, absolutely. Well, first of all, thanks for having us.

Absolutely. My pleasure.

And glad to be here. I was -- I woke up today and was given a lot of messages. Time flies, right? It's like happy anniversary, Dave, on your second year anniversary with [indiscernible]

I should have started with that. There you go.

But I don't know where the time went, right? So it has been 2 years. And I guess I would open up by saying I'm really proud of the team at Robinson. We've introduced a lot of change, as you know, over the last couple of years. And I think the team has not only responded, but they've grown from it. And we feel good about that in our performance in 2024 and certainly in this last quarter in '25. As you said, Chris, we see a lot -- we have 83,000 customers. And for us, we're a little bit different. We not only have our NAST business here in North America, but we also have our global forwarding. And so we see a range of different customers that are out there. And it won't surprise you that there's a lot of uncertainty in dealing with those customers. We've been working with them. A lot of people think that things happen and there's a onetime thing. Well, supply chains have really been affected ever since the financial crisis, and Robinson has been on the forefront in working with customers. But there's a lot of uncertainty right now. Certainly, we're paying attention to what's going on in London. And right now, our customers right now are just in this kind of wait-and-see mode, and we're helping them to really navigate these kind of waters. I'd say coming back, we feel pretty good that we're driving a fit, fast focused approach at Robinson. That was really important, really get our cost control expenses to be more fit, drive a fast innovation and decision-making and then be focused on the things that we do well in. And for us, that's truckload, LTL, ocean and air just drive that everyday focus. And then finally, we just take an approach that from our recent Investor Day, we said we're going to do 2 things: One, we're going to grow market share; and two, we're going to expand margins. And I think we're setting out to do that. And we're going to do that by making sure that we have these higher highs and higher lows, have relative market outperformance. And that's what we wake up every day to do that. And we've aligned our incentives and everything to go with that to help us achieve that. So there's a lot that we can double-click on that, but that's kind of the opening that I would see overall. Still continues to be a 38, 39-month freight recession that's happening in here, and we have to deal with it. And that's what we're doing every day.

Helpful comments there. So let's sort of dig in a little bit and maybe just think about what you've seen over the course of the second quarter, there was a lot of discussion over the course of the first 1.5 days of the conference, particularly coming from the truck side that maybe the worst-case scenario of 2Q has been sort of taken off the table. So immediately coming out of the tariffs, there was concerns about a material dip in activity that could have happened. It doesn't seem like it's happened. It may mean that we won't get a surge following now that the tariffs on China have been dropped more materially. But what do you guys think? Does that sound about right for you guys in terms of the overall activity, both and seeing it both from the ocean side as well as the surface side here in North America?

Yes, Chris, I'll start and Dave can jump in. I'd say it is a bifurcated discussion, right? Certainly on the trucking side. So for us, truckload and LTL. I think it has been, as you mentioned, I think the worst-case scenario is off the table. I think we have not seen the volatility that would have come with that worst-case scenario. So I think what we've seen for trucking is -- has been kind of more of the same, right, where we've continued to kind of bounce along the trough of this freight recession and Q2 has been another example of that without the worst-case volatility that's unexpected. The forwarding side is a different animal, right? I mean, certainly, if you take our forwarding business, when the tariffs were announced in April, I mean, you essentially had an embargo between the 2 largest trading partners in the world, right, between China and the U.S., right? And so for many categories of goods, they stopped flowing altogether. So we saw essentially a cliff event in departures that took place after those tariffs were put in place that created a lot of demand destruction in that period of time. Now with the 90-day pause, we have seen order activity spike and come back. But what I would remind everyone specific to Q2 is there's a significant lead time between a departure and an arrival from a revenue recognition perspective. So even though we've seen booking activity increase, we started to see departure activity increase. There's a 3- to 4-week lead time between a departure and an arrival from a U.S. port perspective. And so from our perspective, forwarding is going to see some of that bounce back benefit, call it, the second half of June, mid-June to end June. But I think you're going to see the majority of that benefit fall into early Q3. So really a bifurcated discussion between our trucking business and our forwarding business. Certainly, the forwarding business has incurred a lot more volatility in Q2 related to the tariffs. I think the trucking side, it's been a lot more muted.

Yes. And I think if we jump back to the -- I think that's right. And we're going to jump back to the trucking side of the house, I'm sure you would have probably ask me this is there's the carrier capacity side of the house. We're still seeing -- there's still -- in this elongated market, we're still seeing excess carrier capacity, more than I think, should still be in the market. That is burning down, but it's not yet at a level that we think would be kind of normalized. But at the current burn rate would carrier capacity, we think early 2026 that, that will be kind of in a normalized state of capacity right now.

And so I want to dig in on both sides. Maybe we'll start with forwarding because that's obviously a little bit more volatile and then come back to the truck side of the house. So on the forwarding piece. So it sounds like the way to think about it is that we're -- 2Q captures some of the downside of the immediate aftermath of the tariffs, but only a part of the upside of the sort of eventual swing back. And just very in simplistic terms, that's the right way to think about it?

That's it.

Okay. That's helpful. And then I guess as we think about -- and so maybe we'll -- you will see make some of that up potentially in 3Q if we do see some degree of surge kind of coming through. Rates have been generally better. So that's volume. Rates have generally been kind of moving up a bit. I think there was an initial dip and now moving up. Is that the same cadence to think about in terms of recognition of what we're seeing with ocean rates?

Yes. I'd say rates kind of follow that same demand dynamic, right? So certainly, when trade slowed dramatically in April and early May, rates followed that trend, of course. And now we've seen rates pick up again falling demand. So I'd say rates have followed and lagged demand like they normally do. And I'd say I'd just remind everyone that certainly coming into '25, we did expect a normalization of ocean rates to begin with. So we expected rates to be down for '25. We still expect rates to be down for '25. So we don't believe anything that's happened in this Q2, early Q3 period has distorted a longer trend of a normalization of ocean rates for '25 versus '24.

Christian, if you recall in our Investor Day, we built that into our scenario planning as well.

So bouncing back over to NAST and thinking about the truck space. So I guess in the context of what you said, still some excess capacity. We've had a couple of the truckload guys come through over the course of the last 1.5 days or so. And the general feedback is bid season, kind of, again, going back to that theme of avoiding the worst-case scenario, bid season, which started okay, has ended okay without a meaningful disruption because of the sort of volatility around tariffs in the interim. So how would you characterize contract rates over the course of bid season so far?

Yes, I think that's right. I think that's the right characterization. I would say one area, though, that we're laser-focused on is -- I think that's right from a macro perspective. But as we've been able to demonstrate over the last several quarters is our ability to realize price in this marketplace, right? And so that doesn't change with the bid season. We still feel like we're in a really good position to continue to get accretive pricing in this marketplace is just the deployment of our strategy, right? So as Dave mentioned, we're laser-focused on outgrowing the market, laser-focused on expanding our operating margins. And part of expanding our operating margins is expanding our gross margins as well. We've had great success on price discovery, and we're continuing to have that success in Q2, and we'll expect to continue to have its success going forward. So what I'd say is I would agree with that comment from a macro perspective, but I think you'll see Robinson will continue to differentiate itself from a pricing perspective.

And I think I want to dig into the margins and all of that as well. In terms of volume, I think you saw that in the last quarter, you guys were able to maintain your AGP margins. You also ended up outperforming on a volume basis. That strategy continued to sort of work effectively as we're in the sort of market here in 2Q as well.

Well, we don't -- first of all, we only guide on expenses. So we're not going to guide on that. What we would say is we feel confident in the strategy that we have. And the strategy we have is it's an input-based strategy versus output. You and I have talked about this before. As at Robinson, we wake up every day and we really fuel and look at our inputs and operate effectively now with a level of speed that's different than how we've operated before. And that's our lean operating model in action, along with what we think is industry-leading technology. And those 2 give us the confidence of driving, as Damon said, volume and pricing leverage that we have.

I guess as we think about the rest of the -- I guess, maybe zoom out a little bit and think about margins in NAST and some of the opportunities you guys have had. You've done, I think, a wonderful job managing the resources of the business relative to the market that you've been in. It's obviously been a challenging I think you mentioned we're 30-plus I always lose count of how many months this has been.

Call it 39, but...

Who's counting, right? So we've had an extended downturn. I guess, how do you think about sort of the levers to pull on productivity as we move forward from here? I don't think we're expecting to get double-digit kind of improvements in that again, but what's the opportunity set?

Yes. I think it's a good question and to be able to hear this. We obviously felt really good about our 30% over the last couple of years of productivity. What we also -- we've been very open about that is going forward, we really start talking about single-digit productivity. But the key is that this is not a period, it's a comma. When you start talking about productivity the way we look at it at Robinson, meaning the markets will come back. And even at the high, the expectation in our company now is that we're still going to have productivity. There's a productivity expectation every year as we go along, and it's evergreen productivity, meaning that once we do that productivity, we're not giving it back. And so what you saw was that kind of compound initial grab of productivity as we go into this year, you can argue a really tough year. That doesn't sway where we're going. The teams are still expected to drive single-digit productivity, and I think we're on track for that.

Yes. I'll just add to what Dave said there is our operating model doesn't allow our productivity to plateau, right? So our target setting conditions keep going up and up and up. So what we did last quarter to achieve our target doesn't get you to next quarter's target, right? And so therefore, it forces our teams through that rigor and discipline to always think about what's the next level of tech evolution? What's the next level of operating rigor? What's the next level of process improvement that's going to drive productivity, right? And so we talk about our tech deployment a lot, but I think just as important in our success is the deployment of our operating model because that operating model doesn't let the tech get stale and it doesn't want to tech plateau. It forces the tech to get better. And so when we talk about -- look, we're focused on evergreen productivity. There is no in-state on when we believe productivity runs out because we don't believe it will run out. But it's also forcing our tech to get better. And I think that's a key leg of our stool to our strategy is it's about our people. We think we have the best people in the industry. We do believe we have the industry-leading tech and AI is a big piece of that. But the discipline and rigor that the operating model brings, we think, is just as important as the technology.

So a lot in that. Think about it, great people, we think the best logisticians in the world, great technology, but a super disciplined and very important operating rhythm and model. And you can have the greatest technology, you going to have one of those individually, but you need to have them all together, we think that's what -- that is the performance that we're driving. And just having great technology without an operating rhythm that surfaces problems that drives execution, that technology may just fall on its face.

And I've been thinking about this more. We've seen the way you've managed the business, generated productivity in a down market. Does that opportunity change when the market turns up? I mean, does it make it easier? [ Do it ] harder? The same? How do you think about that?

Yes, it's a great question. I'm going to say this, I'll throw it to Damon as well. The structure -- we think there's a structural change in Robinson. We feel like yesterday, I was talking about it in yesterday and today. Yesterday, 2018, where the company was versus today, there's been structural change within the company. Whether I'm here or not, I mean, that structural change doesn't go away. That's kind of evergreen. We also feel like the model and the system and the technology that we have, the more you put into it, the more it outputs. And so I feel instead of a linear improvement, there's an exponential improvement as you continue to drive more and more into the system. I did a gemba walk, which is something we do at Robinson, where you go to the work. and I really did a test to see if the people were looking at this technology and looking at it as a threat, was it a problem? And I just -- I surprised people, I sit at the desk with people and just talk to them. And this one gentleman I thought did a really nice job. We took our large language models out on quoting. And he's looking and saying, hey, listen, Mr. Bozeman, I may have guided to like 60% of those quotes. I mean we get thousands and thousands of quotes a day in this business. And in this business, as you know, time is money. And he looked and said, hey, I may get to 60% of those quotes, and I would have probably gotten back with a number. Charlotte to Fort Worth, I'd give you a number. Now our large language models are putting the heuristics and the details much more than we've ever done. It's responding back to Chris in a conversational manner and it's doing it in 90 seconds, and it's responding to every quote we get. And then he can operate as a human in the loop, continue to make it learn and continue to drive it. That can -- that's game changing for us because now we're able to get more loads that we would not have possibly gotten in the past. And so when you pump more into that, you're going to get more out of it. That's how I'm answering your question.

So yes, it sounds like maybe a good volume environment or a better volume environment is not a bad thing for that.

Robinson would love more volume, but we're saying if we don't get more volume, we're still going to perform.

Yes. And I'll just add to that. So we're excited to demonstrate what we can do in a higher market environment, right? We're not waiting for it. We're performing today regardless of the market, but we're excited to show what we can do. And I think the question we get on specifically the NAST business a lot of times is, well, how do we know you're not just going to flood people back when the volume returns. And our answer is there's no reason to flood people back when the volume returns in those areas that are related to operational task, right? Because the processes themselves have fundamentally changed.

Fundamentally changed.

So the process that required a human touch before. No longer requires the human touch, right? And so for us, we always have to kind of pause and think about it because for us, it goes without saying, right? There's no reason to bring the people back because the technology has already fundamentally changed that process, right? And so that's why we're extremely confident when we get the question on, will this transfer to -- with all you've done, will that transfer to a higher market? Our answer is absolutely yes. And we love to point to our Global Forwarding business. Our Global Forwarding business last year had year-over-year growth in every single quarter. It reduced headcount by 10% and generated substantial productivity, right? So all of the, call it, bear case thesis on the NAST side, we just demonstrated in the Global Forwarding side of the business. And I'll remind everyone, we over-indexed our tech deployment to NAST. That was intentional. So Global Forwarding was able to execute all of what I just said with a much less tech focus than NAST, right? So we feel very good about what the NAST business can do when the volume returns.

We could -- well said, we call that the canary in a coal mine. And if you really want to look and say, that Global Forwarding business goes under the same operating rigor and the same operating -- lean operating model that we do with NAST, and that's how it performed. We're now focusing deeper on Global Forwarding with our technology stack as well. So that will only get better. But that is something someone ought to look at and say, if we did that with a business that's has less technology stack in it. What will happen when volume pours into NAST, we're really excited about when that day comes. But until that day comes, we're going to still go at it.

And is the right way to think about kind of the key productivity metrics? Is it sort of AGP per salesperson or AGP per employee in NAST or -- and Global Forwarding? Is that the best way to measure?

It's really what we -- we've simplified it greatly, right, to be shipments per person per day, right? I mean that's -- and the simplification is key. One is it's easy to communicate externally, how we're measuring that metric. But then it's also really easy for our teammates to understand it as well, right? And so shipments per person per day is really what we lean into from a kind of a productivity pacing perspective. We certainly have other KPIs that round out the overall productivity dollars that go with our initiatives. But I would say that's the one metric we focus on. And it really is -- we get a question a lot about how much more headcount are you going to take out? We really don't look at it that way. We look at it as productivity, right? And certainly, productivity then facilitates that if I've set a target for operating leverage and volume goes up, I may actually add a head or 2, but I'm still demonstrating demonstrable leverage versus what I've ever done. And then if you -- in the environment that we've been in for the last 38 months, yes, we've attrited a lot of headcount because that's what the productivity drives us to do, right? But that productivity in the future, assuming volume returns to the system at some point, that productivity will either show up as headcount reduction like we've seen in this freight recession or it will show up as increased operating leverage when volume returns. But as Dave mentioned, like, we're extremely confident that regardless of the market cycle we're in, the productivity focus we have will translate.

And it's allowed us to invest in headcount from a customer-facing perspective, right? So as you know, we've focused on SMB, the small and medium business segment, along with some key verticals. But it's really allowed our people to do what they do best, instead of chasing down some of these manual tasks, it's spending time with customers and solving problems on their topology and where they move their freight and how they solve really difficult problems. We've invested in that space and bringing people in from a customer-facing perspective.

That's a great point because our headcount reductions have not been blind headcount reductions. They've been very systematic. I automate a process. I no longer need the head count, right? It hasn't been a, I will just reduce workforce by 10%, right? It's been very systematic as we deploy technology, and certainly, the headcount trends go along with that. And as Dave mentioned, in many customer-facing areas of our business, we've actually increased headcount while we've been in this freight recession, right? So it is a bit of a bifurcated story. Certainly, on the operational processes that have been transformed, that's where the vast majority of the headcount has come out. On the customer-facing and where we're moving up the value stack,with the customer, we've actually added headcount to facilitate that.

So let's kind of bridge from what you did in the first quarter from a margin perspective. I think you've talked about 40% or so kind of mid-cycle EBIT margins in the NAST business. So how much of this is going to be generated through productivity, volume growth? Do you need it to get there? How much does that help? And how do you think about whether it be GP per load or however you want to kind of think about the pricing piece of the business as well?

Yes. I think it's important to just do a quick reminder, again, our December 12 Investor Day, the scenario that we post, right, which was a scenario that talked about -- it's not something that we're actually seeing right now, but we talked about a 0 growth in the market, a mid growth, which was 2%, 2.5%, then a more high-growth scenario of 5%. We didn't model out a negative growth, right, in the market, which is you can argue is what we're seeing now. But for us, it doesn't matter. We're still moving forward on that. But I just want to reset remind everyone what that was. That $350 million to $450 million was on that 0 kind of mid and then 5% market growth perspective...

So I'll just take that and run with it. So I think the way I would bridge kind of current levels of NAST profitability to what we presented at Investor Day is -- so first of all, market is a piece of that, right? So certainly, we're not in a mid-cycle market. Our commitment to 40% margins for our NAST business was predicated on the mid-cycle market. So I think that's just kind of bullet number one. I think also from a rate perspective, we do expect rates to be accretive by 2026. So what we discussed in Investor Day was rates returning to pre-COVID levels, so 2019 levels for truckload. So that was part of the equation to get to 40%. But as Dave mentioned, I think the big part of the -- kind of the center core of the target was $220 million at the enterprise level. So that was NAST and Global Forwarding of self-help initiatives, right? So of that $220 million, and again, these are enterprise, not just NAST, $40 million of contribution from market outgrowth by 2026, $90 million of gross margin expansion by 2026, and $90 million of cost reduction and cost avoidance by 2026, right? And then we had a headwind that we're proud of because it means we win, which is we had $60 million of cost inflation, which is rewarding the people that help us succeed, right? So if you add up all those pieces with that $220 million of enterprise initiatives really at the core that's the path to the 40%, right? And as we've mentioned, that's a mid-cycle path. The other commitment we made in Investor Day is part of the ancillary comments is, look, we're committed to, whenever we return to any market dynamic that we've had historically, we will outperform what we've done historically. So 40% is not the cap for our NAST business, right? It's what we've estimated and what we've committed to at mid-cycle. But any time in the future, when we replicate a historical set of market conditions, we are highly confident we will outperform what C.H. Robinson has done in those conditions. So we feel very good about our 2026 commitments. We get that question a lot with all the market volatility and a lower-for-longer scenario. But we feel very good about the commitments we made.

We still very committed to those numbers.

And the gross margin piece, I tend to spend a lot of time thinking about productivity in terms of generating more shipments per day per person. But the gross margin side, the buy side, you guys have also talked about the opportunity there and technology is a key there. So I guess, early days here. And I guess the market has been reasonably stable from at least a spot rate perspective over the course of much of 2Q. Just maybe thoughts around sort of gross margins and how you guys have been able to navigate that? And then bigger picture, how do you think the opportunity continues to play out.

Yes. So as Dave said, of course, we don't guide, so we won't go too specific there. But what I would say is -- what's got us here thus far hasn't changed in Q2, right? So when we talk about expanding operating margins, expanding our gross margins is a subset of that. And we continue to do those same behaviors in Q2 that we've done for the last 5 quarters. We feel really good about our price and cost of hire discovery. So I use this example a lot where if you take Robinson of 3 to 5 years ago, we would set a pricing strategy at the beginning of the quarter and then 100 days later, we'd see how we did, right? Today, with our technology, with our operating rhythm, with everything that we've brought to the table on gross margin performance, we'll set a pricing strategy at 8:00 a.m. By 8:10, we're already testing that strategy. By 8:15, we're testing it again. If margin is coming in a lot better than I thought, I'm trading that margin for volume. If volumes come in lighter than I thought, I'm trading margin for volume. The amount of optionality that we have now on managing price versus cost -- it's just exponentially higher than we've ever had. And that's driven great price discovery for us, great cost to hire discovery. Dave gave an example of the person at the desk that wasn't getting to all their quotes. And when they did, it was an unsophisticated response, right? So today, look, Robinson has always had one of the best data sets in the industry, right? Historically, we just didn't have the ability to use it in real time. Today, we do. So when our technology is responding to that quote, it's not responding in a simple manner, looking at 1 or 2 data points, right? It's looking at hundreds of characteristics of the carriers, of the loads, of the customers of the lanes, and it's making a much more precise decision on how to service that load. That precision and frequency of testing is allowing us to scrape more price, scrape more cost to hire advantage and allowing us to expand our gross margins. There's many examples of where at a very simple level, a load didn't look attractive because we were matching the wrong load to the wrong carrier, right? Today, we're matching the right load to the right carrier, and that's actually a profitable load for us. So that's a load before we would have passed on because it didn't meet our profitability requirements. Today, through the sophistication of our tech to the frequency in which we're interrogating data, that's now a positive load for us.

Yes. And that kind of goes, Chris, to what I said about inputs versus outputs. And that's a big difference in the company. And most of the industry would look at output base you almost do an autopsy on what happened. But as you know, on an autopsy, the patient is dead already, right? You don't get a shot at that. And so this is why we look at input. And as Damon said, we look real time and it allows us to interrogate and prosecute the business and not the person, and we can do it in real time. That's kind of changed that execution and that muscle and that prowess, which is a fundamental difference in our company.

And I want to touch before we run out of time on the industry dynamic because I think that's super important. And I think a lot has changed over the course of the last 5 or so years where I think the perception was brokerage was under attack from a lot of sort of outside forces that were using technology to get into the business. We're pushing margins lower in pursuit of market share. Interest rates went from 0 to 4% or 5% and some of that became more difficult for those folks to do. So how do you think about it? We've heard recently that double-digit declines in brokerage capacity over the course of the last year or so. So just your view on the industry as it stands today?

Yes. It's a lot in that question, just to break it apart a little bit. So some of the facts on brokerage itself, we have seen over an 18% decline in brokerage over the last couple of years. So there's a burn down there. Now when I look at that and Damon looks at that, we don't look at that and say, oh, wow, that's great. It's kind of a so what to us because this industry that we're in, let's face it, a number of folks in this room can start a brokerage in a week or 2 with off-the-shelf software in doing that. So the barrier to entry in the broker space is pretty low. The difference is you have to finish the sentence in the conversation. The barrier to sustainability and growth is very high, right? So really large customers, even midsized customers, they're not going to look at Chris and Bozeman's brokerage and trust and give you that consistent. So it's really hard to stay at this realm in doing that. So we have seen kind of that blowdown. What you talked about on the digiTal disruptors coming in, we saw how that played out. Damon talked about a number of these things are why? Why? Because this industry Is difficult. It has variability. And the thesis was a pretty simplistic thesis. Everyone understood it. I would argue that it actually made some things better. This is not the only industry that, that happened. And it happened in the airline industry for discovery and a number of other industries where that just drove the competition to do that. We look at that and say, okay, fine, kind of game on, on doing that. But what I think the thesis missed is what we've been talking about up here now. You have to have people that understand this business. And sometimes it just comes down to experience and there are things that break and how are you going to fix that? And as I was sitting at the desk talking to someone one time and they were booking the load. And he said, I'm sorry, Mr. Bozeman, I have to go cancel that load. I said, what do you mean you have to cancel that load? He said that I just realized that carrier with that load is not going to work. It's a loose load, and it will be bad, right? People will come. We'll have to double price it, all that -- and he knew that off of experience in dealing with that. It took them 30 seconds to take that back, put the right carrier on there. In the model that you talked about with the digital disruptors wouldn't have happened, right, because variability in here is what kind of kill that thesis. This is why we feel like we got the right mousetrap. Greatest logisticians in the world, greatest technology, we think within the industry, allowing it to always evolve, get smarter and customers sometimes want to make sure that you're taking care of their loads. Chris and Dave's transmissions, that pays the bills, right? A really large customer, beverage customer, they're talking bot to bot with us. Right now, we just booked a lot of loads, right, over the last minute or 2. But now medium to small customers get that same sophistication in the way we're operating the business. And I think that's where the thesis was missed, and we feel good about it. Human in the loop, and that's going to make a difference, and it is making a difference, especially now when there's a call on quality.

Got it. That's very helpful. We have run out of time, so we're going to have to leave it there. But thank you, gentlemen, both very much for joining us. Really appreciate it.

Appreciate it.

Thank you.