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

All right. Good morning, everybody. My name is Tom Wadewitz. I cover the freight transports at UBS. Welcome to the first full day of the conference. I appreciate everybody joining us. We've got a great lineup. We're going to kick things off with C.H. Robinson. I think C.H. Robinson has had a great story. We've got Dave Bozeman, the CEO; and Damon Lee, the CFO. Chuck is in the audience as well. So thank you for joining us. Maybe I'll offer you a few intro comments, if you will, and then we just dive into the fireside chat session.

Yes. No, I appreciate it. I think we've just dived in, Tom. We're happy to be here. I feel really good about where we're going in Robinson, where we've been in the last 2 years. As Damon and I say, hey, the next 2 years are going to be just as more exciting than the last 2 years because we've got a lot going on, and we feel really good about it. So happy to talk about it and happy to have us here man.

Yes. Great. Great. Well, thanks so much for joining us. So I think you're -- against a tough cyclical backdrop, you've really shown a lot of impressive improvement in the last 2 years. And I think that investors have gained more confidence and more understanding, let's say, of some of the things you're doing on the technology side. That having been said, how do you think about where you are in the kind of journey with lean and tech and kind of how much has been driven by the lean initiatives so far? And how much has been driven by tech and then maybe how that mix kind of looks going forward?

Yes, interesting question. I'll start and Damon can weigh in as well. Well, first of all, we look at that a bit different, that question at Robinson. Lean and tech for us, it's really symbionic. It's a system. Our lean methodology is the pulse for how the company is running. And our technology is really kind of energized from our lean methodology. So they go hand-in-hand. Lean really allows our tech to flourish, and we talked about that publicly in doing that. We put in that lean operating model to really drive not only our pace, our decision-making, but it's also driven our innovation within the company that we're really proud about. It's allowed our tech now to open up and not only give us what we think are demonstrable results, but it's also allowed us to create what the next generation is, and that's agentic AI, and that's really driven off of our lean operating model. So it's an important point. We just don't go about this in a serious fashion within Robinson. This is a parallel fashion. It's symbionic. It's all one thing. So when I get that question, I always pause and give a little context to it. That's how we operate every day in Robinson. It's about creation and development from a technology perspective in a strong operating model.

Yes. I would just add, I think -- well said, Dave, I would say our technology makes the operating model better, and the operating model makes the technology better. So as Dave mentioned, they -- it's very difficult to bifurcate the 2, right? I think if you ask us how much productivity is related to each one, the answer is we don't know, right? Because they're so intertwined, they work so well together. There's really no value in trying to separate which one is driving what value because they work together to drive an exponential result. You ask what kind of level or what progress are we in our journey here. And I'd say we're in the early innings. If you think about the operating model, I would say we're in, call it, the third inning, using a baseball analogy across the entire enterprise, right? So that would include our NAST business, Global Forwarding business and the smaller businesses. So call it third inning on the operating model. And I would say that's going to be a many, many years, if not decades, journey. If you think about some of the best companies in the world that have lean operating models, I think most of them would tell you they've been doing it for 30 or 40 years, and they're still probably in the fifth or sixth inning, right? And so we're just getting started from a lean culture and an operating model perspective. From a technology perspective, I think the answer is a bit different between the 2 businesses, right? I'd say our NAST business is probably in the third inning of its technology deployment. And I'd say our Global Forwarding business is probably in the first inning of its technology deployment. But if you summarize everything together, certainly, as Dave mentioned, as we started, we truly do believe the next 2 years will be more exciting than the last 2 years because we're just getting started on our lean journey, and we're just getting started on our technology journey as well.

Yes. And Tom, just to put a period on that, what Damon just said. I think we've personally been doing this. I know I've been doing lean for over 30 years. And the reason he says that is that there's just a lot that has to happen. I'm super happy about where Robinson is, but there is so much grass to cut on where we are from a lean understanding, and you guys will continue to see that as we go forward.

Great. So if I think about the -- some of the productivity metrics you've talked about, I think you were aiming for over a 2-year period of time, like a 15% growth in loads per person per day. And then the go forward is more like, what, single digits plus agentic on top of that. That's a -- it's a pretty rapid pace of change for the organization. So how do you manage that change internally to maintain employee morale, to keep people excited about things, to keep people away from just being concerned about the jobs? And also from a customer perspective, is that something that you consider that you say, okay, well, how do we manage potential loss of customer connections as we have a reduction in our workforce?

Well, interesting question. Number one, is just radical transparency for us. I mean in starting this journey, one of the first things we did in the transformation is we actually sent out -- and I talked to a number of you back then, we actually sent out a what's impacting your work type of request, sent it out to every employee. And it was really me asking for feedback from our employees, what can make your job better? I intended to write back 340 responses, handwritten notes thanking everyone for their feedback, and it got back over 3,100 ideas. That told me a lot. But when you look at what those -- thematically, what those ideas were, it's really what we're doing in our transformation. So we've been very clear with our organization and saying, number one, we're going to get our swagger back. Two, we're going to start winning again. And everyone loves that. Now that being said, there's hard work to be done, and you have to be very transparent with everyone on what that means. And we have been in the journey. Are there some people who are no longer with the organization? There are, right? There are some people who've come into the organization. But our employees feel really good and they're very clear about where we are, and we measure that as well. So to sum it up, being super transparent with everyone, taking their feedback, executing on that, allowing Robinson -- and when people start to see that change and start to feel that win, it only starts to compound, and I think they feel really good about that.

Tom, I would only add a couple of simple concepts. One is I think transparency is critical when you're going through a transformation like we're going through at Robinson, right? So we've been very transparent with our team to say, look, 2 years from now, there are going to be roles that don't exist anymore or there are going to be roles that are dramatically different in scope and scale than they are today. But you can upskill to what the future holds, right? And so we've encouraged our entire employee base to get comfortable with AI tools, to get comfortable with the transformation we're going through, to get comfortable with lean techniques and the operating model so that they're prepared for the journey that we're going on. And I think that's been received quite well. I think, look, at the end of the day, employees want honesty, they want transparency. That's what Dave has certainly brought to this discussion. And then I think what Dave said is also critically important, right? Look, people want to win. People want to be on a winning team. And Robinson was a winning team for decades, right? And then they -- we hit a spot where that we weren't winning, right? And so now we're back to winning again. I can assure you that team that tasted defeat and now is tasting winning again. They never want to taste defeat again, right? And that is a huge motivating factor for our team. So to me, it summarizes, look, teams want to win. We're winning. I think that's a great tool from a motivation perspective. And then at the end of the day, I think transparency is key when you're going through a transformation like we're going through at Robinson.

Yes. And finally, for this audience and anyone watching here, I can't tell you the importance of leading by example as well. And when we say go to Gemba, that is a lean term where you go to the work. I personally, Damon and I leading the transformation from a lean perspective, that means going out, I've sat at the desk, for hours with employees. I've booked freight. Don't hold me to the quality of booking that freight, but I did it, right? But it was really about understanding the work that's happening because if you're going to make and when you make high judgment decisions, you really need to understand what's happening at the base grain of the work that's happening within your company. And going out and leading by example in doing that, leaders at this organization have to be educators and you have to go in and use the 5 whys and have to have a Socratic method. We're going through all of that. And I can't ask people to do something that I'm not leading myself. And that makes a huge difference when it comes to the transformation.

Great. Okay. Getting into the -- kind of talk a little bit about generative AI and then Agentic. Can you provide some examples of how have you used generative AI? And then maybe what were some of the challenges to deploying that? And then I'll ask about Agentic after that.

Yes. Let me frame it. I'll have Damon jump in because I want to frame that question is that we looked at this, none of it was haphazard, right? It was really about defining a problem. That's super important of how we operate this company. And defining that problem, we wanted to put together a comprehensive strategy. And we did that and shared that with our Board of Directors. They were very supportive. And in tacking this strategy of our 'order-to-cash process', we looked at that and said, "Hey, we could be much more efficient with the technology we have." And there are some benefits within Robinson that we'll get into but looking at that order-to-cash process in this industry, it's a very manual physical process. It's handoffs that happen within that process. And at our scale, that is a lot of handoffs or what I would call waste within the system that, quite frankly, customers really are not interested in paying for. And so that's where we focused our efforts of our technology first is to really reduce those mundane tasks, automate that kind of order-to-cash process. We've talked about our automatic quoting as an example. But I just want to frame that on what we're doing. Now there is a lot of different examples we can use. One of the ones we use that I think is super, super important is time is money in this industry, and you really have to be on it. And from a quoting perspective, we just were not bringing our best self when it came to respond to quoting. And in fact, we were probably responding to about 65% of the quotes that came in. And that's leaving a lot of potential loads on the table after we've launched our large language models and our generative AI, which this lends itself to be the perfect application because this is on-system data that you can really go after in generative AI. That now has moved us to 100% quoting 24/7 in about 30 seconds. And we respond back in a conversational manner to the customer, and that's very beneficial as well. That has changed the game for us because it's allowed us to really get more wins just in quoting. And there's a number of other examples. But I'll have Damon weigh in on some of the other things. I just want you to understand how we went about starting and attacking this quote-to-cash process.

Yes. I would just add, I mean, Tom, I think it starts -- it's hard to have a discussion on the progress you've made without starting with our strategy, and it's actually a quite simple strategy, right, which is we're going to outgrow our end markets, and we're going to expand our operating margins. Now it seems simple, but that and between the 2 defines everything we do at C.H. Robinson, right? So we're not just looking to grow or we're not just looking to improve quality of earnings. We have to do both. And that principle of and drives completely different problem solving within the company. And we've been able to do things that others in this industry said couldn't be done, like outgrowing the market and expanding margins at the same time. That's been a kind of an urban legend for decades that couldn't be done. We've been doing that now for several quarters. But it starts with that and strategy, right? We have to grow, and we have to expand margins at the same time. And as Dave mentioned, I'll just give you a couple of examples. The benefit we have realized from the operating model and our technology, what we call lean AI, you can see it throughout our P&L at C.H. Robinson, right? So it's not just benefiting cost. Now we have generated over 40% productivity since the end of 2022 across the enterprise, and we're proud of that number. And I'd like to say that's a number with no footnotes, right? There's no exclusions. There's no mystery. That's 40% productivity defined by shipments per person per day across C.H. Robinson since the end of '22, right, with no exclusions. So we're proud about that number, but it's more than just productivity, right? We've also aided our growth through that example Dave just gave. So you think about we have 30 -- over 30 agents that are operationalized and scaled at Robinson today. One of those agents manages our freight process, right? So we get a request for freight quote. Historically, we would only touch maybe 65% of those requests. So we're leaving 35% of freight opportunity to the wind that we never touched before. Today, in our NAST business, we get to 100% of the request for freight quote, right? So from 65% to 100%. So you can just imagine how that's aided our ability to grow and outgrow the market in our North American Surface Transportation business. In addition to just having a bigger ocean deficient from a freight opportunity perspective, our win rate has gone up as well. And you may ask, well, how did your win rate go up? I understand you get more access to freight. But the quality and the sophistication and how we're responding to those requests now has gone up exponentially, right? So before, if you had a human that was just trying to get to every request for quote, they were only getting to 65%. So the one they did get to, they would grab a handful of data, 5 or 6 pieces, put a quote together, send it back, right, in a fairly unsophisticated way. Today, our agents and our human in the loop, again, getting to 100% of the freight that's available to us from a quote perspective, they send back a much more sophisticated quote, right, gathering hundreds of data points. And so therefore, we're able to target that freight differently, and our win rate has gone up as a result of that. So that's one example, one agent that's not only driving revenue growth, but it's also driving productivity at the same time. Another agent we're very proud of is our revenue management agent, right? And so again, another kind of urban legend in this industry has been, look, you can't expand gross margins. They're commoditized, right? So you can't differentiate yourself at the gross margin level. We would say that's not correct, right? I'd say we've been doing that now for almost 2 years. And so we're able to use our technology. We're able to use the discipline of our operating model to drive price arbitrage and cost of hire arbitrage at the gross margin level and see sustainable benefits there as well. So that agent, again, not only driving productivity because we have less human touches managing that process than we did historically, but it's also driving gross margin expansion at the same time, right? So if you look at where AI is benefiting C.H. Robinson, right, it's not just a productivity play, although that's been a demonstrable benefit. It's revenue growth, it's gross margin expansion, it's operating margin expansion. And I always joke the easy thing for Dave and I is, I don't really have to convince you if it's working or not. You can just look at our earnings. You can look at the quality of the results that the organization is generating, and you can see the benefit firsthand. Go ahead, Dave.

Yes. And I was going to say, and for this room, this is super important. What Damon just said is we literally don't wake up every day and just say work for the day. That's a -- we expect that. That's a price of admission. What we just said is that you have to think about velocity and sustainability and scale. And all of those things are going to happen. This is why I make the statement that the next 2 years, I'm more excited about the next 2 years than the last 2 years because we've built and we are building constantly a sustainable process that will benefit in either market because you notice we don't talk about the macros because it doesn't matter when you build a system like this. If it's lower for longer, fine, we'll win in lower for longer. If it inflects, well, we have systems that will scale and will drive velocity, and we're actually anxious to see when that happens because you'll see even a more demonstrable benefit. So that's really, really the important takeaway off of what Damon said as well, is you have the today, but think about the tomorrow, this is a scalable system that we're building here.

So you touched on the macro piece that you'll regardless of the macro backdrop, you'll prosper and you'll execute on your strategy. How do you think about what is kind of assumed in your $6 or more for 2026 framework? Is that kind of a flat market? Are you assuming that there's a little bit of cycle lift in second half? Or how do you think about what's the assumption is macro-wise underneath that '26 view?

Yes, go ahead. Yes.

Yes, I'll take it and you can jump in, Dave. So I would say, certainly, in the approximate $6 EPS update to our Investor Day that we disclosed as part of Q3 earnings. So that $6 assumes no market growth, right? So that's a 0 market contribution scenario. So it's primarily $6 on the back of all the self-help initiatives that we've been generating at the company. From a productivity perspective -- and we talk about our productivity and kind of a stacking set of functions, right? So originally, our '26 commitment as part of Investor Day included what we consider our continuous improvement commitment of single-digit productivity essentially forever, right? Every single year, we're committed to single-digit productivity regardless of any circumstance. We improved that productivity target from single digits to double digits in our update. And we did that on the back of our discovery of Agentic AI, right? So we've had great benefits from GenAI over the last 2 years. We challenged the team in an operating review -- it's been a while now, on, okay, we're performing here today. We need to get to here. How can we do that? The tech team came back and said, we don't know. We need to do some problem solving to figure it out. They came back in pretty quick order and said, look, there's something new, the next evolution of AI called Agentic. We think that's what we need to get to the next level of performance at C.H. Robinson. And from that discussion to already starting to operationalize those agents was about 30 to 45 days. So it was a pretty quick discussion to, okay, we don't need to analyze this for 2 years, right? We know the answer here, and we were off to the races. But that pivot into Agentic AI is what allowed us to get confidence to move our productivity assumption in 2026 from single digits to double digits. And I think that's the way you can kind of think about C.H. Robinson's productivity journey going forward, which is we're going to have waves of productivity, difficult to predict because they are, call it, ideation and innovation. GenAI was certainly, I would consider a wave of innovation. I would say the implementation of the operating model was a wave of innovation for Robinson. And then I'd say Agentic is another wave of innovation. And so you've got that stacking effect that's happened in '24 and '25. And now we're confident it will happen again in '26. And then we say beyond '26, again, we're committed to single-digit productivity, yet to be determined if there's another wave of innovation that comes along. But that's the way I would frame it, Tom. I would say, certainly, no market contribution is in the $6 of EPS update. Productivity is assumed at double digits for '26. And then the Agentic benefit, we did comment does have more of an indexing to the second half of the year. And that's just purely the lead time, right? I mean it takes 12 to 18 months from the time you have a concept to the time you have it operationalized and scaled. And that -- and scaled is important, right? If you don't scale the tech, you don't get the optimal benefit. And so 12 to 18 months is what we've experienced as the lead time for those type of innovations, and that fits well to the second half of '26.

Yes. That just -- Tom, and that just reminds me of something -- again, I look at this room and those watching and what would I want people to take away from what Damon just said, one, the explanation of '26 and EPS for your question. But also, there are some people here that have been covering this company for a long time or they're aware of Robinson. We are just fundamentally a different company. I mean this is structurally a different company from yesterday to today. So going forward, when we talk about how we operate, it's experimentation, it's ideation, it's failing fast. It's small experiments that break and then we scale from there. That is -- I can't tell you, not only is that different for Robinson from yesterday to today, that's different than how the industry goes about operating. So if there's something we want to start looking at and saying, what's different? If you went into Eden Prairie or around all of our offices and facilities, the way we operate is different. And that is really a technology type of driven of operating culture that we have within Robinson with -- I can tell you right now, 12 months from now, Damon and I, as we sit up here, there's going to be something created at Robinson that we don't even know of yet because that's how we go about doing that. That's super important for you guys to hear that.

You hit a nerve with that one, Tom, because I'll add another comment, which is if you think about what we call policy deployment, which is really our multiyear strategy initiatives, right, roughly half of those initiatives that we're working on today didn't exist 12 months ago. When we talk about the sustainability of what we're doing, and as Dave mentioned, the ideation and the experimentation, right, this is going on every day, every week, every month, right? I mean there's new ideas that's surfacing literally every day, and then they go through our gauntlet of testing because again, we don't do any hobby spend at C.H. Robinson, right? If there's not a bright line ROI to where we're going to spend that money and get the return, we don't spend the money. So there is no hobby spend at C.H. Robinson, right? But to Dave's point, I mean, we've got this almost a technology culture now of just constant innovation, constant experimentation, which allows us to keep our funnel of organic opportunities extremely full, right? We feel really good about organic opportunities. And certainly, they've boded well for us over the last 2 years, and we feel like we have a very healthy pipeline going forward as well.

So I want to take a kind of a step back from that and say, okay, from an industry perspective, there is an opportunity for others to use AI and to become more efficient. There are a lot of good competitors out there in domestic truck brokerage. There's some good global forwarders out there competing against you in forwarding. How do you think about what others may do with this? So I think it's probably pretty fair to say you guys are ahead. You've been very successful. You've done the culture and the lean as well. So that -- and I know Damon, we've talked about like the moat, right, that those would be in place. But it seems to me like, well, others will still try to do some things. So do you think this is like the big players, everyone benefits. So you could see operating margins that are maybe stronger at other players as well and maybe the midsized or smaller players get hurt and can't participate? Or how do you think the overall impact to the industry is? And maybe there's a piece that you compete either away with some of the benefit too?

Yes. It's a good question, but let me put it in context. First and foremost, we wake up every day. Our focus is C.H. Robins. It is -- that's what we do. I don't -- there are some good shops out there, but we didn't invent generative AI, and we didn't invent agentic AI. What I do know is that we're all going on about a 4-year freight recession in dealing with that. Everyone has had to deal with those cards. And the technology is out there to use it. And so I can't tell you what the competition is going to do. I can tell you that we're not looking back. I think while people are really thinking about how they operationalize generative AI, I can tell you this company is already on to agentic AI which there are some fundamental differences on where that is. Now I'll just put a really important point on this. And I do think that we have an advantage, and it really comes down to domain expertise. We often talk about our 450 internal engineers and not only just internal engineers. These are individuals that have grown up in the industry and within Robinson. So they actually know freight. Why is that an important part? Well, because at some point, if you're going to go all in on using this technology, you're going to have to have some level of assistance. Either that's going to be your own internal assistance on what you're going to do to build your technology for your particular business and how you execute or you're going to have a partner, an integrator, someone's going to have to come in and do it for you. When that happens, they really have to -- they have to know your business and they have to know the industry. We don't have to do that. And what's the advantage of that? We get speed. And I can't tell you how critical speed is. We get to experiment fast and break things. That's super important. Our engineers actually know how to book freight from China to North Carolina. They've grown up in that, and they're building the agents that allow us to do that. We have Navisphere now that is our own TMS with our applications now running on top. That is an extreme advantage when it comes to what we can do from a speed perspective within Robinson. And then there's the data. As you know, we have the largest data set within the industry. Data is super important. And what you might not know is, yes, we have 37 million shipments annually each day -- each year, lots of data that comes with that. But there's also data in every load we don't win. And so that's even the more powerful data. So we deal with a lot of data and learning that happens. That makes this moat, Tom, deeper and wider. But again, we didn't invent this technology. Everyone has access to it. But I think it is showing up, as Damon says, in our P&L the last several quarters, and that's because we're executing.

Yes. Tom, I would add, as we've said before, do we think our peers and competition are going to experiment with AI and do things with AI. And I think the answer is, of course, they would, right? I think it would be probably reckless for them not to, right? But what I would say is when we talk about what makes C.H. Robinson different than our competitors, I would say it's not one moat. It's many moats that our competitors have to cross to do what we've been able to do. right? And so take the first moat is our operating model, right? And so I don't think you get anywhere near the benefit that we've gotten from our technology without the lean operating model, right? I don't think you would -- I think it would be a demonstrable difference in where we've succeeded on tech versus not without the operating model, right? And doing an operating model is not easy, right? It is changing the culture of your company all the way down to the desk, right? So there's very few things harder in a company than changing the culture and certainly putting in a lean operating model, a real one, right? There's lots of examples of fake lean out there. And a lot of people talk about lean because it can become the buzzword of the day. But to truly implement a lean operating model all the way down to the desk, it's hard, right? And we think that's a clear moat that competition would have to cross. As Dave mentioned, we build over 95% of our tech, right? So we have over 450 engineers, if that's what they do, right? They build the application layer on top of the LLMs. And as Dave mentioned, most of those 450 engineers have grown up in C.H. Robinson, right? They know the business. They know the industry, they know logistics and freight. So therefore, their ability to make a custom agent to do what we needed to do versus us paying a third party to kind of guess at what we needed to do. You can't compare the 2, right? The results are demonstrably different. Also, the speed of developing our own technology, right? So where it could take quarters, if not years, for companies that are outsourcing their AI adoption to third parties. We can do it in days and weeks, and we're doing it in days and weeks. We've always had the industry-leading best data set. I would argue, historically, we couldn't utilize it. We had it. It was an asset, but what were we doing with it, right? We didn't have the technology. We didn't have the discipline from the operating model to use it effectively. Now we do. And we think our data set is a key differentiator for us as well. Investment-grade balance sheet, right? We have not stopped investing in our technology through, as Dave mentioned, almost a 4-year freight recession. So our financial wherewithal allows us to do things that other competitors can't do. So if you add all those up, not just one moat that we think competition has to cross to do what we're doing. But it's 4, 5, 6 moats that they would have to cross. And oh, by the way, we're not stopping and we're not standing still, right? What we're doing today versus what we're going to be doing 2 years from now will be quite different, right? And so we're going to continue to advance. We're going to continue to run hard. We're going to continue to innovate, continue to drive the operating model. And so even if somebody did catch us to where C.H. Robinson is today in 2025, we're going to be on to a much different state 2 years from now. So I think all of that added together is why we feel pretty confident about what we're doing is special versus others in the industry.

So how do you think about M&A when the timing for that might be right? What might be a way to do it because your operating model, your use of tech, your execution is very strong. You've seen improvement in growth versus the market. So it's -- I'm sure it's attractive to drive that organic growth for a period of time. But it seems like you could also apply that method to other companies.

Sure.

So yes, any thoughts on is that part of the growth strategy in the future? Maybe when would be the time you'd start to look at that? And what might you want to do?

I'll have Damon jump in on the capital allocation. It's super important that we set this up and say, what's driven success, I think, so far with Robinson and will continue to do so is being disciplined and measured. And I've spoken to a number of you about that. That is our approach to be disciplined and measured. It's -- we've been around. We've worked at a number of organizations, and you know that. This is not our first rodeo, if you want to say that. We also know the statistics on how much is accretive. 30% of these acquisitions can be financially accretive. You get 84% of them failing. At Robinson, that won't happen. We always say our internal opportunities are robust. We have several internal opportunities that are very attractive. But jumping out and just chasing a shiny penny just to chase it and lose your discipline and focus, that's where things can break. And that's what we won't do. It doesn't mean that we're not kicking the tires. We're doing that all the time. And if it's the right fit, when it's the right fit, that's something that can fit into our system. I agree with you, we'll make a number of things better, but we have a certain bar that we're going for, and that's something that we're going to continue to do. But disciplined and measured, that is what we're going to do at Robinson.

Yes. And Tom, I'd say the simple answer is, will inorganic opportunities be part of our future growth story? The answer is absolutely yes. Now to Dave's point, we won't make a mistake there, right? So we're going to be disciplined. We're not going to chase. We're not going to create synergy cases that we know are low probability to make the valuation work, like when we acquire somebody, it will make sense, right? I think it will make sense to everyone in this room. It will make sense to us. It will be something that creates value for our shareholders. And I think the way to think about inorganic is it doesn't always have to be an extremely large acquisition, right? There's a lot of value to be had in small tuck-ins that have a niche technology that we think is attractive or could be a tuck-in that has a specialization capability that we think is attractive. It could be a small acquisition that helps us further our vertical and horizontal strategies that we have. But as Dave mentioned, like we've never stopped looking for inorganic opportunities. But I would tell you in the last 2 years, the bar has been extremely high for inorganic because of the return that we've generated on the dollars we've invested in our organic opportunities, right? It's very difficult for an acquisition to compete with those dollars because we've had such success and such high returns for those organic opportunities. So simple answer is yes. Inorganic will be part of our growth strategy, but it will be disciplined and thoughtful when we do it.

Okay. We're approaching the end of time here, but I want to get maybe a couple of thoughts from you on the freight trends, economy. Do you have -- do you see some reasons for optimism? I think data points in 4Q and we're getting some LTL updates and a lot of different sources of data, it seemed like it continued to be on the soft side. And I think that was true for October. It seems like that's the case for November. Are you seeing anything different than that? Or do you kind of see what were maybe something consistent with what we see from other transports? And then as you look to '26, I mean, do you have reasons for optimism? Or are you just like, hey, flat is the best view?

Yes. I would start, Tom, I'd say -- as you know, we don't spend a lot of time talking about the macros, right? We spend most of our time talking about how we execute our strategy at C.H. Robinson. And so the great thing about our strategy is it works in all market cycles. We're convinced of that, right? Because it's -- we fundamentally changed the process and the processes within the company, right? So we know they're scalable. We know they'll work because we get micro examples of being able to test that thesis all the time. So we're highly confident that whether we're in another year that looks like '25 or if we see a year that's got modest growth or if we see a year that inflects, we're highly confident that the strategy we're executing on outgrowing our markets and expanding our operating margins will continue, right? So we don't have a doubt there. I would say to that question, Tom, I'd say, look, there's -- I think there's theories on what can make '26 a better environment for freight. But I'd say at this point in time, they're just theories. I don't think there's any hard data that's really showing anything that would say the markets are going to improve in any type of material way. And certainly, on the cost side, there were certainly a lot of headlines in Q3 that costs were becoming an issue. And I would say we didn't see them as an issue in Q3. I think we did see a modest increase in cost in Q3, but we managed it, and we delivered our results, and we continue to outperform and we continue to expand margins. So on the cost side, I would say that's a modest curve as well. And so I think just in total there, Tom, I'd say it feels like lower for longer, which, again, from our perspective, we don't get disappointed with that because we know we have a recipe that wins if the markets are lower for longer. And then if volume returns to the system, we're extremely excited to be able to show the operating leverage that we're going to create with our new model, right? In fact, I've made this statement a couple of times is I think our operating leverage when the market starts to see volume return, will rival that of the asset players. I think we've developed a very attractive cost structure that I think will scale very well when volume returns.

Yes. It's well said. And just to put it on there, just one of the things why we're excited about it, we talked earlier when you asked the question around automation, and we talked about quoting. If we're doing 600,000 quotes today automatically through our technology, we always say you can add a 0 to that. And the system will just eat it up and churn it out. And that is scale. And so lower for longer, we're good, but we'll take the volume and our systems are ready for it. So glad to be here.

Okay. Dave, Damon, thanks so much for joining us.

Thanks, Tom.

Yes. Thank you.