Good morning, ladies and gentlemen, and welcome to the C.H. Robinson Second Quarter 2019 Conference Call. At this time all participants are in a listen-only mode. Following today's presentation, Bob Houghton will facilitate a review of previously submitted questions. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, July 31, 2019. I would now like to turn the conference over to Bob Houghton, Vice President of Investor Relations.

Thank you, Donna, and good morning, everyone. On our call today will be Bob Biesterfeld, Chief Executive Officer; and Scott Hagen, Corporate Controller and Interim Chief Financial Officer. Bob and Scott will provide commentary on our 2019 second quarter results. Presentation slides that accompany their remarks can be found in the Investor Relations section of our website at chrobinson.com. We will follow that with responses to the pre-submitted questions we received after our earnings release yesterday. Starting with this quarter, we will be shortening our prepared marks to devote a larger portion of the call to the question-and-answer session. I'd like to remind you that our remarks today may contain forward-looking statements. Slide 2 in today's presentation list factors that could cause our actual results to differ from management's expectations. And with that, I will turn the call over to Bob.

Thanks, Bob, and good morning, everyone. Thanks for joining our second quarter earnings call. For the second quarter, we achieved 3.5% net revenue growth versus the year-ago period, where net revenues increased 17%. We delivered our fifth consecutive quarter of operating margin expansion and an 8% increase to earnings per share. Our North American Surface Transportation business generated 6% net revenue growth in the quarter, and we delivered operating margin expansion in both our NAST and Robinson Fresh businesses. In Global Forwarding, the integration of the Space Cargo Group is off to a strong start, and we also expanded our Europe Surface Transportation business with the acquisition of Dema Services. And we continue to make improvements in working capital, which combined with the increased earnings, allowed us to generate nearly $200 million in cash flow from operations and increased cash returns to our shareholders. Within our North American business, there's no question that we are in a softer market today than we were a year ago. Driven by weakening demand and additional capacity, industry-wide truckload transactional volumes and spot market pricing are markedly below year-ago levels. Declining new truck orders and increased carrier bankruptcies suggest that capacity has peaked and is starting to exit the marketplace. Concurrently, the Global Forwarding market is experiencing air and ocean volume declines as shippers work through elevated inventory levels resulting from the volume pull-forward ahead of tariff activity. However, with this as a backdrop, there were a number of volume highlights in our second quarter. Our truckload contractual volume increased at a low single-digit pace. Truckload and LTL volumes per business day increased sequentially during the quarter. Our truckload and LTL volumes outpaced industry indices, such as the Cass Freight Index, where volumes declined mid-single digits in the second quarter. And ocean volumes included double-digit growth in Southeast Asia as we continue to benefit from our scale in this region amidst tariff uncertainty. With these results, I'd like to recognize the hard work of our people across the globe. Your continued commitment to deliver world-class service and to ensure the success of our customers and carriers is instrumental to our continued success. So with those introductory comments, I'll turn it over to Scott to review our financial statements.

Thank you, Bob, and good morning everyone. Slide 4 shows our financial results for the quarter. Our second quarter total revenues decreased 8.6% driven primarily by lower pricing across most transportation services. Total company net revenues increased 3.5% in the quarter, led by margin improvements in our truckload service line. Second quarter monthly net revenues per business day were up 4% in April, 6% in May and up 1% in June. Total operating income was up 3.9% over last year. Operating margin improved 10 basis points versus the prior year. Diluted earnings per share was $1.22 in the second quarter, up 8% from $1.13 last year. Slide 5 covers some other income statement items. The second quarter effective tax rate was 23.4%, down from 25.6% last year. We continue to expect our full year effective tax rate to be between 24% and 25%. Our second quarter interest and other expense totaled $6.6 million, up from $5.1 million last year. Interest expense declined in the quarter, driven by a reduction in our overall debt balance. The U.S. dollar strengthened against several of our key currencies this quarter, resulting in a favorable impact of $2.8 million from currency revaluations. The diluted share count was down 1.7% in the quarter as share repurchases were partially offset by the impact of activities in our equity compensation plans. Turning to Slide 6. We had another quarter of strong cash generation. Cash flow from operations totaled nearly $200 million in the second quarter, an 85% increase versus last year. A combination of an improved working capital performance and increased earnings drove the cash flow improvement. Capital expenditures totaled $17.7 million for the quarter. We expect our rate of capital spending to accelerate in the back half of the year, and we continue to expect capital expenditures…

Thank you, Scott. I'll begin my remarks on our operating segment performance by highlighting the current state of the North America truckload market. Slide 9 shows that rate of price and cost declines accelerated in our NAST truckload business in the second quarter. Price per mile billed to our customers declined 11.5% while cost per mile paid to our contract carriers net of fuel cost declined 14.5%. Our mix of contractual versus spot market business continued to shift towards more contractual freight during the quarter. As is typical at this point in the freight cycle, the rapid declines in both change in cost and change in customer pricing resulted in improvement in truckload net revenue margin in the quarter. Consistent with market trends, we're seeing double-digit declines in spot market pricing and lesser declines in the contractual market. One of the metrics that we use to measure market conditions is the truckload routing guide depth from our Managed Services business, which represents roughly $4 billion in freight under management. Average routing guide depth per tender was 1.2 for the quarter, representing that on average, the first carrier in a shipper's routing guide was executing the shipment in most cases. This route guide depth is among lowest levels we've experienced this decade. And it's a reflection of both softening demand and the reduction in price and cost shown in the slide. In 2019, our pricing strategies have shifted markedly from last year to reflect the current environment and to ensure that we're near the top of our customers' routing guides. Turning to Slide 10 in our North American Surface Transportation business. Second quarter NAST net revenues increased 5.8% driven primarily by growth in truckload. Our second quarter volumes outpaced year-over-year changes in the Cass Freight Index for the second consecutive quarter.…

Mr. Houghton, the floor is yours for the Q&A session.

Thank you, Donna. First, I would like to thank the many analysts and investors for taking the time to submit questions after our earnings release yesterday. For today's Q&A session, I will frame up the question and then turn it over to Bob or Scott for a response. Our first question comes from Tom Wadewitz with UBS. Jack Atkins from Stephens and Dave Vernon from Bernstein asked similar questions. What are the primary factors driving the significant fall-off in net revenue performance year-over-year from up 3.5% in the second quarter to down 8% in July? Are there factors that could cause July to be meaningfully worse than what you'd expect for August and September?

Good morning, Tom, Jack and Dave, thanks for the question. Results in second quarter decelerated throughout the quarter as our net revenue dollars per load decreased sequentially week-to-week. If we look back from week 22 to week 26, we saw a pretty significant dropoff in our net revenue per truckload until we reached a bit of an equilibrium at around 5% below our historical trailing 10-year average during week 26. So we’ve seen slight uptick in net revenue per load during the last week of July, but we do anticipate continued pressure on that key metric of net revenue per load based on what we’re seeing in the marketplace and where we feel like we’re needing to reprice our business in order to maintain and take volume in this market. By repricing at the current market rates, our win rate on contractual business is really higher than we’ve ever experienced at any time. So we see that as a real positive on the bids that are coming through our process in the second and third quarter. But these awards are coming in at lower margins than what we saw last year. So this, coupled with contractual customers seeking mid-cycle price relief and really the lack of spot market freight, these factors are going to continue to put pressure on net revenue per load through the balance of this year when comparing to the second half of last. So it’s clear that our path to EPS growth in the second half of this year is really going to need to be driven by meaningful truckload volume growth. And while I’m not going to attempt predict the results for August or September at this point relative to July, sequentially our growth rate did slow through Q3 last year in truckload. So the comps do get somewhat more favorable as the quarter progresses. But really our success in the third quarter isn’t going to be driven by our comps alone. The team in NAST is, if nothing else, scrappy and aggressive and also very aware that while we’re the largest player in the 3PL market, we still represent less than 3% of the overall truckload marketplace. And I think it’s important to call out that our incentive systems are all really designed around growth. And so you’re going to see a pretty motivated team in the marketplace right now really focused on driving growth in the second half.

Thanks, Bob. The next question is from Jack Atkins with Stephens. Todd Fowler with KeyBanc asked a similar question. Truckload volume has declined in six out of the last seven quarters. While it’s clear spot market trends are very soft, what is preventing the return to volume growth, given your significant cost advantage?

So there really isn’t an easy answer for this question. And I’d be lying if I said that our goal was to have volume be down in six of the past seven quarters, right. If you look back at the relationship between our truckload volume growth on a quarterly basis and truckload net revenue per shipment over the past several years, what you see is largely a cyclical story. When net revenue per load is down, volume is typically up. When volume is up, net revenue per load is typically down. There’s all sorts of lagging and leading indicators to this that we could talk about. But in short, it’s really been kind of the same cycle for the last several years. Over the history of Robinson, we’ve largely been focused on maximizing total net revenue across NAST. And this has come with that tradeoff that you’ve seen between volume growth and margin expansion or contraction. As I’ve talked in a lot of forums about our work to reengineer our processes, to take cost out of our model, to get further along in evolving our NAST structure and our strategy and to further centralize our pricing support and leveraging things like technology and data science in different ways, our goal is really to change this trajectory. And we need to get to a point where we’re growing volume and taking share regardless of where we’re at in the cycle. So we’re really proud of the results that we’ve delivered and the story really isn’t all that negative. We’re winning huge awards from some great companies in the contractual space that are far outpacing our awards in contractual freight that we had last year. But in many cases, these awards are not making up for the loss of the spot freights that we executed when routing guides were failing last year for these same companies. So we’re seeing for some of those largest customers volumes trending down. So we know that we need to be more consistent in our results in order to do this, forcing us to think differently and act differently within our network in order to break through some of these cyclical patterns.

Thanks, Bob. The next question comes from several analysts. What is your take on truckload industry capacity? Do you see a reduction in carriers or capacity generally?

So we’ve obviously seen the same publicly announced carrier bankruptcies and closings and exits from the marketplace that everyone else has seen. And in talking to a lot of the carriers that we work with, there’s certainly a sentiment there around kind of the negative marketplace compared to last year. You couple that with the declines in Class 8 orders, cancellations of orders and just general sentiment around carrier profitability, and you can start to see the tea leaves that are going to probably focus on contraction of capacity. Based on the rate of increase in capacity that we saw the last couple of years and these changing market dynamics, we’d expect many of the smaller carriers that entered fairly rapidly to exit at a pace similar as they entered. So candidly, if you look at our business, we were a little bit surprised to see the increase in new carriers sign-ups this quarter and seeing that increase by, I think, 9% compared to last year. But we really contribute that to not so much new small carriers entering the market but perhaps those carriers gravitating towards Robinson as they look for other alternatives to keep their equipment moving. So in many cases, the past is obviously a pretty good predictor of the future. And the past cycles would indicate that when these spot markets start to dry up, we see this downward pressure on rates and we’ll see this contraction in capacity.

Thanks, Bob. The next question is from Bruce Chan with Stifel. We’ve heard reports of increasing price competition, especially on contractual business. To what extent is this true for you? And is it normal or abnormal, given where we are in the freight cycle?

I’d really qualify this as a normal part of the freight cycle. In this marketplace, from a contractual standpoint, if you’re not first in the routing guide, you’re last. And so in this market, I’d estimate that somewhere around 85% of all truckload freight is moving under contractual terms right now. As we said in our prepared remarks with a routing guide depth of about 1.2, which is the lowest we’ve seen in the last decade, you’re probably only going to see 5%, maybe 10% of tenders in the contractual market actually fall to secondary carriers or to the spot. So given that balance, the routing guide lead just really isn’t leading to that much opportunity in the spot market, which continues to lead the heavy pressure towards being first in the routing guide, which obviously fuels a lot of competition around price.

Thanks, Bob. The next question is from several analysts. Is C.H. Robinson seeing a greater impact from tech-focused players in the market? Or are the competitive pressures coming from conventional brokers and the broader market?

I think as everyone knows on the call, the competitive landscape that we face spans from the 18,000 registered freight brokers in the U.S., in some cases, many of the asset-based carriers, other IMCs and the forwarders, amongst others. Our market has always been competitive. And today, just like any time in the past, it’s not disproportionately impacted by any one type of competitor. Competition to us is a constant in this fragmented industry. And frankly, we’re not as much focused on our competition because we really prefer to keep our attention focused on how we serve the customers and the carriers and how we create value. So it’s not just saying we’re ignoring the emerging trends amongst competition or the great utilization of technology, but we’re really keeping our focus on the things that we can control.

Thanks, Bob. The next question comes from Dave Vernon with Bernstein. Are your contract shippers putting downward pressure on your sell rates or otherwise reducing your allocations due to the weak spot market?

So the tone through a lot of these questions kind of confirm that there is downward pressure on rates and greater competition for rates. I would add that we have seen some shippers come back outside of normal bidding cycles asking for either rate concessions or term concessions in order for incumbent carriers, such as Robinson, to maintain our incumbent volumes. I don’t think that’s unique to us but more a broad marketplace statement. One thing that’s interesting that we’ve started to see over the last quarter is that with spot markets – spot market rates being so far below contractual rates in many lanes, instead of shippers following a normal routing guide process, if a first carrier rejects a tender, we’re seeing more and more shippers go directly to the spot market versus going to that secondary carrier in the routing guide, which does have some impact to the level of commitments that get fulfilled. One might think that it’s counter to what we’ve seen in the decline of the spot market volumes. But again, there’s so little freight falling to that second tender position, it really doesn’t compare to where we were last year.

Thanks, Bob. The next question is from Brian Ossenbeck with JPMorgan. Have shippers shown any preference for brokers or asset-based carriers so far in 2019? Will this change as both carriers and brokers attempt to move up in the routing guide?

Good morning, Brian. We haven’t seen any indication in our contract renewals. And I’d even go back to the fourth quarter of last year, go back for the past few quarters. We haven’t seen any indication that shippers are showing any favor towards either brokerage or assets in any meaningful way compared to past contract cycles. In our experience, smart shippers evaluate the performance of individual providers based upon whatever their key metrics of service, quality, rate, commitment, tender acceptance and make decisions upon their customer experience with the provider more so than favoring or disfavoring a section of capacity providers based on their asset ownership position.

Thanks, Bob. We’ll give this next question to Scott. Tom Wadewitz with UBS and Fadi Chamoun with Bank of Montreal ask, is NAST net revenue performance meaningfully better or worse than the overall 8% decline in July?

NAST net revenue is the primary driver of the overall minus 8% net revenue to change per day in July, driven by declining margins but also by comparisons to a very strong growth in the prior year while we have seen Global Forwarding show up slightly in July.

Thanks, Scott. The next question is from Todd Fowler with KeyBanc. Jordan Alliger from Goldman Sachs asked a similar question. Please provide an update on truckload contract pricing. Where are contract renewals currently? And what impact will recent renewals have on gross margin expectations going forward?

So as I’ve kind of alluded to, we’re seeing truckload contract pricing that we’re bidding in the second quarter and into the third quarter inflecting negative compared to last year in the contract market. In terms of where renewals are at, on a positive note, our win rates on contractual bids in terms of the percentage of opportunities that we’re winning in the second quarter were twice that of where we were at in fourth quarter and 1.5 times where we were at in first quarter. So we are winning a larger share of the freight that we get visibility to. The other side of that coin though is that frankly there’s just not as much freight being bid during the second quarter as we see in fourth quarter and first quarter. So as we said in our prepared remarks, we’re really targeting to be first in the routing guide for our customers. And that typically is going to drive a lower net revenue per load in that contractual business.

Thanks, Bob. The next question also comes from Todd Fowler. Brian Ossenbeck with JPMorgan asked a similar question. How will C.H. Robinson improve operating leverage? What are the main areas Robinson is targeting for efficiencies? And is there an expectation that efficiencies will hit an inflection point at some point? Or is it more of a gradual implementation over an extended period?

All right. So there’s a lot to this question and we can probably go on for the rest of the time we have just around this. But I’ll try to touch on a few key areas. But I want to flip the question around a little bit, Todd, and take the focus off us creating internal efficiencies and focus more on how we’re reducing friction and increasing value for really all parties across the supply chain. And of course, by doing that, the focus is on, at the same time, improving efficiency and improving that efficiency internally, which is ultimately what’s going to drive improved operating leverage. So there’s a lot of areas that we’ve got focus, but I’ll speak to a few of them. The first is around pricing. And so we’ve spent the last few years working to really automate pricing for our customers and our carriers, which allows for faster response time, more accurate bidding, greater compliance to routing guides, et cetera. And so that’s a real area of investment and focus around efficiency and improvement of quality is around pricing. The second area that gets a lot of press right now is around freight matching and the idea around digital freight matching. We know that the majority of our carriers are small carriers. About 85% of our freight is executed by small carriers. And these carriers tend to have higher empty miles and less efficient networks than do some of the larger carriers. So we’re investing a lot in data science in order to provide them better yields and better matches and reducing their deadhead miles and hopefully helping them to run more efficient businesses. By moving towards a more digital platform for matching, it also eliminates the need for negotiations and takes – makes us…

Thanks, Bob. The next question comes from Chris Wetherbee with Citi. Brian Ossenbeck asked a similar question. Can you provide an update on your automation efforts? Is the softer freight environment more or less conducive to further automation progress?

I think I touched on much of this in the previously submitted question from Todd. But in general, we don't see the market as a driving factor around our automation efforts. We've got a clear long-term road map of where we expect to be in terms of the next months, quarters and years. And that will continue to be implemented regardless of where we're at in the cycle.

Thanks, Bob. Jack Atkins with Stephens asked about headcount growth. Todd Fowler asked a similar question. Where do you anticipate headcount going for the remainder of the year? And do you believe that you can expand net revenue per employee in the second half of 2019? Or does the current operating environment make that difficult?

Our focus has been on having our change in headcount really across the enterprise. And NAST specifically lagged out of our change in volume over time. As you saw through the first half of this year, our headcount growth did exceed that of total volume growth slightly. Looking forward based on what we see as our current trajectory, we would expect headcount to decrease sequentially throughout the balance of this year and to finish 2019 flat to down compared to year-end of 2018. So as I said, our focus continues to be on taking share and growing volume. So if volumes are not being up significantly or positively by the end of the year, it is possible that headcount could be up at a rate lesser than where volume growth lands. Given the headwinds – the second part of that question around net revenue per employee, given the headwinds around truckload net revenue per load in the second half, I do think it will be challenging to increase the net revenue per employee relative to last year's second half.

Thanks, Bob. Lee Klaskow from Bloomberg asked total 2019 second quarter headcount went up by about 2% sequentially from the first quarter and was driven by a 5% increase in the All Other and Corporate area. Is that technology-related hires? Can you provide any color on what this is? Scott, why don’t you take this one?

Sure. A large portion of the 5% increase was driven by the expansion of our IT organization. We have a talented team of 1,000 people in IT, and we continue to hire data scientists and software engineers to accelerate the digital transformation that is critical for our future success. We have spent over $1 billion on technology in the current decade, and we expect to increase our rate of spending on technology to at least $200 million annually over the next five years so that we can better leverage our data to drive insights to our customers, our carriers and to our employees.

Thanks, Scott. Brian Ossenbeck and Jack Atkins asked about SG&A. What is driving the SG&A per employee higher this quarter, year-over-year and sequentially? Will this remain elevated with the current IT investments? Scott, why don’t you take this one as well?

Sure. This is sort of consistent with the last answer. But much of the SG&A increase was driven by investments in technology, particularly expenses related to the integration of our purchased software. And we do expect the technology portion of SG&A expense to remain elevated through the rest of the year.

Thanks, Scott. The next question is from Matt Young with Morningstar. The global air and ocean forwarding industry is fairly fragmented but not quite as much as the U.S. highway brokerage space. Could you offer some thoughts on C.H. Robinson’s opportunities to grab share in the forwarding market?

Sure. Good morning, Matt. So we’re one of the largest NVOs from Asia to North America and the largest from China to the U.S. But we still have such a small fraction of the total global market under management that we see a ton of runway for growth. As we see our results, ocean really dominate the air for us. And we see air as a continued area for growth. We think we’ve got a lot of growth runway in several geographies and across our service portfolio in Global Forwarding. And our approach is going to be similar to what you’ve seen really up this point. Since 2012, we’ve invested about $1 billion into our Global Forwarding business in terms of the acquisition of Phoenix and APC and Milgram and Space Cargo. So we’re going to continue to run that play, which is a blend between organic and nonorganic growth. So if you think about what we’ve been doing, it’s focused on acquiring solid, founder-led businesses with strong teams with cultural fit that fill in geographies or service needs for us. We then kind of run the play to convert the agent business of those acquisitions to our Robinson network. And then we – frankly, we crossed all the heck out of all of our new Global Forwarding customers with surface trans services and we sell our new Global Forwarding capabilities to our existing surface trans customers. So we see a lot of room for growth in kind of the string of pearls approach and a lot of synergies in the approach for our Global Forwarding business.

Thanks Bob. The next question is from Jordan Alliger with Goldman Sachs. You noted that current market conditions are expected to continue through the balance of 2019. But what is the feedback you're getting from customers, especially in truckload brokerage with respect to peak season demand outlook, essentially trying to ascertain if expected market weakness is more tied to excess truck capacity, competitive pressures or underlying demand?

Yes. Thanks, Jordan. So as I've said, we do think that there are some excess truck capacity in the marketplace today. But I do think that the definition of peak season has continued to evolve over the past several years. And the peak today is much less compressed than it has been in the past. And we attribute a lot of this to e-commerce and how that's changed retailing in general. But today, we tend to measure peak across months and not weeks, which frankly makes it much more manageable. Our belief is that this trend, coupled with the excess capacity, will likely lead to a less robust peak season in the back half of 2019 and 2020. And that's not to say that there won't be some regional tightness of capacity or short-term increases in spot market demand and pricing. But in general, we don't see anything that would trigger a large-scale change in the market fundamentals.

Thanks, Bob. Scott Schneeberger from Oppenheimer asked about less than truckload. Please discuss business conditions in LTL versus prior years of this current cycle or prior cycles and how you foresee this business trending in the intermediate term.

Okay. So the way that we report the LTL service line, there's a lot in that. And we include our common carrier LTL business, where we're providing freight to the network of common carriers. We include our consolidation business, which includes consolidation for industries such as retail and automotive as well as just general freight, all kinds, as well as our temperature-controlled consolidation, which focuses on everything from fresh-cut flowers and produce to frozen goods. So with that being said, our LTL results at times will not cycle exactly with how you might see some of the other publicly traded LTL carriers report their results. The diversity of our services that we report under LTL is really what's been fueling our growth over the past several years. And we anticipate that mix continuing to drive growth moving forward as we provide this kind of unique and bundled service to our customers. Our customer base within LTL really spans virtually all industries and all customer size segments from some of the largest global companies to really mom-and-pop shippers that need that efficient digital solution that I – and access to market that I talked about earlier. So in terms of our business that's most alike to the other publicly traded LTLs, we saw similar results in the quarter to what you've seen reported in other releases. And that’s pretty consistent weight for shipment decrease as there was less truckload spillover freight hitting the LTL networks. And in general, volume was flattish for the quarter. Much of the financial improvements in LTL for us during the quarter can be attributed to lower purchase line haul transportation costs within that consolidation side of the business.

Thanks, Bob. Our next question comes from Bruce Chan with Stifel. Jason Seidl with Cowen and Company asked a similar question. Scott, this one’s for you. Have developments in the global markets affected your target list for M&A? Are there any lanes where you prefer to grow in this type of environment? And would you focus domestically if global freight market slow relative to the U.S.

Thanks, Bob. We are always looking at M&A options to expand our geographic presence. This has been a theme for us over the past number of years. They have typically been businesses that are strong financially and are a good cultural fit and a good business model fit. And even if global forward freight marketing slow, we wouldn’t sit on the sidelines if a good opportunity presented itself. We will continue to look at acquisitions that fill geographic space for us and that strengthen our scale. We will also look at companies that would add new services or technology to our platform.

Thanks Scott. The next question is from Scott Schneeberger. Please address C.H. Robinson’s opportunity and progress in Managed Services and discuss the company’s ability to leverage this business with other businesses in the portfolio to garner contract wins.

I’ll address the question. First off, I wanted to touch a bit on our Q2 results and maybe add some more color to the Managed Services results. And the fact that revenues were flat for the quarter is really a function of timing. We’ve got a really, really solid pipeline of deals for our Managed Services business that have already been closed and several more that are to close in the coming quarters. So we feel like our growth trajectory should be on a pace similar to what you’ve seen in that business over the last couple of years. So if we peel back Managed Services, TMC is the largest part of that Managed Services business. And they’re really focused on global, complex, multinational, multimodal shippers with really complex supply chains, which lead to complex global integrations. Typically in what this would have been a high-growth business for us, we’re bringing on new supply chain engineers and more talent prior to revenue actually being recognized due to the complexities and the length of time associated with these integrations. So we’re in a really good place with this business. We expect that the freight under management and the revenue to accelerate in the back half of the year. In terms of the intersection of this Managed Services or TMC business with the other divisions at Robinson, one of the things that differentiates TMC in the marketplace is a commitment to being a neutral platform. But typically what we see is that the TMC or Managed Services are sold to existing customers of either European Surface Transportation or NAST or Global Forwarding. And so these typically tend to be customers that have a favorable opinion of Robinson to begin with. And when we implement the TMC platform over the top and provide the customer with a neutral platform to manage their bidding, their supply chain management or their routing guides, we typically see Robinson other divisions do very well and maintain or grow share with those customers, given the fact that they're given a neutral platform and solid decision making support to mark with.

Thanks Bob. The next question is also from Scott Schneeberger. C.H. Robinson has been acquisitive in Europe recently. Please discuss your growth opportunity and strategy in Europe, particularly in freight brokerage?

We probably don't talk about Europe enough in terms of what we see in the opportunity there. And we've been in Europe for around 25 years now doing freight brokerage. I would say the C.H. Robinson model is one that's not that common in the European marketplace as with most surface transportation companies tend to have more blended model between assets and independent contractors or brokered carriers tend to be more of the integrators. Our growth in Europe has been a blend of organic and acquired growth over time with the latest acquired company prior to Dema being Apreo Logistics back in 2012. Today, with the acquisition of Dema Services, we gained some density in the Italian marketplace, which we didn't previously have. And we added some great people, which will help us to continue to build out our scale and expertise in the market. If we look at Europe Surface Transportation independently, in total, we've got 37 offices there across 16 countries and about 650 people executing Surface Transportation for a wide variety of customers in Europe. I'd say there's a few things over the past couple of years that have evolved in a really positive manner that are worth sharing. And the first is that we've really strengthened our leadership in terms of the talent that we have within Europe. We built a really strong leadership team there based – local leaders versus expats. And we've also become much more focused on driving truckload growth with enterprise clients, whereas in the past, we were maybe more of an overflow carrier for the marketplace. So one of the great things about our Europe surface trans business is that we're able to share a lot of learning’s and a lot of technology back and forth between our NAST business and European surface trans. So while there are certainly differences and intricacies between the two businesses, there's a lot of learnings that we can take back and forth, which allow us to accelerate our development in Europe. Given that, that European marketplace is equal to or greater than in size to the U.S. truckload marketplace, we're really committed to continuing to invest and growing in that space.

Thanks, Bob. Our next question comes from Ravi Shanker with Morgan Stanley. Bruce Chan asked a similar question. What will be the impact of IMO 2020 on the Global Forwarding business?

We really view the impacts of IMO 2020 to largely be a pass-through for us. Should the increased costs and the forecast of the impacts of IMO to the steamship lines lead to further consolidation of capacity or reduction of capacity or in any way interfere with global trade, that could certainly have adverse impacts to our Global Forwarding business. But at its face value, we see the cost impacts as being a pass-through.

Thanks, Bob. Scott, another question for you. Allison Landry with Credit Suisse asked about working capital. You've made good progress on working capital efficiency. Can you discuss how much further you might have as far as optimizing accounts receivable and accounts payable?

Sure. We are pleased with the progress on working capital efficiency. We also feel we have room to continue to optimize our working capital performance. We have a number of initiatives underway to improve our cash conversion while continuing to provide a high level of service and support to our network of customers and carriers and vendors.

Thanks, Scott. The next question is from Ravi Shanker with Morgan Stanley. Ken Hoexter with Bank of America Merrill Lynch asked a similar question. Can net revenue margins increase year-over-year in the second half of 2019 with the truckload spot and contract rate gap closing?

I think as you know, we tend to manage our business to net revenue dollars per shipment versus net revenue margin just because of all the noise around net revenue margin. And given the current market conditions and our forecast for the market for the balance of this year though, we would anticipate net revenue dollars on a per load basis to decrease compared to the second half of 2018, where we experience net revenue dollars on a per load basis well above our 10 year moving average.

Thanks, Bob. And our final question is from Scott Schneeberger. Please provide perspective on your intermediate term and long-term margin objective for the Global Forwarding business.

So for Global Forwarding, as we've been integrating companies over the past few years and bringing all these global companies onto a single system, there's been an outsized investment in technology for Global Forwarding business. We've more than doubled our investment in technology for Global Forwarding over the course of the last several years. Also with the acquisition, there's a fair amount of impact to purchase price amortization. But if we think about our target operating margin for that Global Forwarding business, we look in the intermediate term to moving that towards the high-20s. And the ultimate goal is to have that in the low-30s for that GF portfolio.

Thanks, Bob. That concludes the Q&A portion of today's earnings call. A replay of today’s call will be available in the Investor Relations section of our website at chrobinson.com at approximately 11:30 a.m. Eastern Time today. If you have additional questions, I can be reached by phone or e-mail. Thank you again for participating in our second quarter 2019 conference call. Have a good day.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. And you may disconnect your lines at this time, and have a wonderful day.