Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2022 Conference Call. At this time all participants are in a listen-only mode. Following the company’s prepared remarks we will open the line for live question and answer session. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, February 1, 2023. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations.

Thank you, Donna, and good afternoon, everyone. On the call with me today is Scott Anderson, our Interim Chief Executive Officer; Arun Rajan, our Chief Operating Officer; and Mike Zechmeister, our Chief Financial Officer. Scott and Mike will provide a summary of our 2022 fourth quarter results and our outlook for 2023. Arun will provide an update on our path to a scalable operating model to improve the customer and carrier experience. And then we will open the call up for questions. Our earnings presentation slides are supplemental to our earnings release and can be found on the Investors section of our website at investor.chrobinson.com. Our prepared comments are not intended to follow the slides. If we do refer to specific information on the slides, we will let you know which slide we're referencing. I'd also like to remind you that our remarks today may contain forward-looking statements. Slide two in today's presentation lists factors that could cause our actual results to differ from management's expectations. And with that, I'll turn the call over to Scott.

Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. I'd like to start today's call by expressing my appreciation and the Board's gratitude for the contributions that Bob Biesterfeld made to C.H. Robinson over his 24 years with the company, including his three years as CEO. Under Bob's guidance, C.H. Robinson navigated the challenges presented by the pandemic and the ongoing supply chain disruptions. And he played an important role in positioning Robinson for long-term success. We wish Bob all the best. In order to accelerate C.H. Robinson's strategic initiatives and take the company into its next chapter, the Board felt that a change in leadership was needed. Jodee Kozlak, the newly appointed Chair of the Board, is leading the Search Committee to find a new CEO. With Jodee's background and expertise, I can't think of anyone more qualified to lead the Board and the search process. To give you a little of my background, I've spent over 10 years as a Director here at Robinson and the last three years as Chairman of the Board. I've spent the first 25 years of my career at Patterson Companies, most recently as CEO from 2010 to 2017 and also Chairman from 2013 to 2017. I look forward to working closely with Jodee and the Board as well as the whole Robinson team in the coming weeks and months. I'm excited to bring my experience and my knowledge of Robinson to the role of Interim CEO. I'm leveraging the relationships I have with the senior leadership team to ensure that we continue delivering superior global services and capabilities to our customers and carriers while continuing to execute with great focus on our sustainable growth strategy. During my first few weeks as Interim CEO, I've been meeting with our…

Thanks, Scott, and good afternoon, everyone. Our Q4 financial results reflect the price declines and slowing demand in the freight forwarding and surface transportation markets that Scott referenced earlier. Our fourth quarter total company adjusted gross profit or AGP was down $88 million or 10.3% compared to Q4 of 2021 driven by a 39% decline in Global Forwarding and partially offset by a 5.7% growth in NAST. The market softness was also prominent on a sequential basis, with total company AGP down 13%, including a 24% decline in Global Forwarding and an 11% decline in NAST. On a monthly basis, compared to Q4 of 2021, our total company AGP per business day was down 10% in October, down 7% in November and down 14% in December. In our NAST truckload business, our volume declined on a year-over-year basis for the first time in seven quarters with shipments down 4%. Within the fourth quarter, monthly volume declined sequentially from October through December as freight demand weakened. Our AGP per truckload shipment increased 6.5% versus Q4 last year due to an increase in our contractual truckload AGP per shipment. On a sequential basis, however, our truckload AGP per shipment came down 6.5% but remained above our 10-year average. During Q4, we had an approximate mix of 65% contractual volume and 35% transactional volume compared to a 55-45 mix in the same period a year ago. Routing guide depth of tender in our Managed Services business, which is a proxy for our overall market, declined from 1.3 in the third quarter to 1.2 in the fourth quarter, which is the lowest level we've seen since the pandemic impacted second quarter of 2020. The sequential declines in our truckload linehaul cost price per mile that we experienced in Q1 through Q3 continued in Q4…

Thanks, Mike, and good afternoon, everyone. During the fourth quarter, we continued to focus our efforts on working backwards from customers and carriers needs to build a scalable operating model. A scalable operating model improves customer and carrier experience and improves service levels while simultaneously reducing our cost to serve. These efforts include operationalizing our information advantage at scale by giving customers insights around price and coverage and providing features to carriers that improve their utilization and cash flow. Increased digitization is a key element of the scalable operating model. There are a number of data points that demonstrate our progress in 2022, including 183% increase in loads booked digitally by carriers and increased digitization across the board as evidenced by 2.3 billion digital transactions with customers and carriers, which represented a 30% increase year-over-year. In 2023, we will continue to deliver meaningful improvements to our customer, carrier and employee experience by accelerating the digital execution of all touch points in the life cycle of the road, including order management, appointments, in-transit tracking, cash advances and financial and documentation processes. We made progress on this front in Q4 as well with the automation of appointment-related tasks, increasing 34% year-over-year and in-transit tracking automation increasing by 450 basis points versus Q3. We are focused on opportunities to automate or make self-serve those processes that are core to our operating model, which we expect will enable us to decouple volume and headcount growth and drive increased productivity while simultaneously improving the customer experience and service levels. Throughout 2023, we'll provide updates on the progress we're making on shipments per person per day, which is a key metric to measure our productivity improvements. During the recent restructuring efforts, we continued our ongoing evaluation and prioritization of our tech and software projects. Through the assessment of those projects, we determined that some were no longer relevant to the acceleration of our scalable operating model, and we incurred the restructuring charges that Mike described earlier. The remaining projects are better aligned to improve the customer and carrier experience and reduce our cost to serve. And therefore, we're allocating more of our investments to those projects. We've also taken steps to align compensation and incentives to support our strategic priority of creating a scalable operating model, which is foundational to being the low-cost operator, which ultimately gives us the pricing flexibility to unlock and accelerate long-term market share growth while delivering our long-term operating margin targets. With that, I'll turn the call back over to Scott for his final comments.

Thanks, Arun. As inflationary pressures continue to weigh on global economic growth and freight markets present cyclical challenges, we need to continue evolving our organization to bring great focus to our highest long-term strategic priorities, including keeping the needs of our customers and carriers at the center of what we do while lowering our overall cost structure by driving scale. I believe in the strategy that the team is executing on to deliver a scalable operating model. We expect this initiative will continue to drive improvements in our customer and carrier experience and amplify the expertise of our people, all of which will drive share gains and growth. And as Arun said, we expect these efforts will also improve our productivity, which will reduce our operating costs and lead to improved returns for our shareholders. I'd like to close by saying thank you to our employees for persevering during the period of extended market disruption and the market correction that is followed and for continuing to provide industry-leading service to our customers and carriers. This concludes our prepared remarks. And with that, I'll turn it back to Donna for the Q&A portion of the call.

[Operator Instructions] Today's first question is coming from Jack Atkins of Stephens. Please go ahead.

Good afternoon. And thank you for taking my question. So Scott, if I could address this to you. The change in leadership at the CEO level would indicate that the Board believes that a change in strategic direction is necessary. But if I listen to the message on the conference call today, it's very similar to the message three months ago from the company. So I guess my fundamental question here is, what is actually changing at C.H. Robinson today? And as you think about the qualities that you're looking for in the permanent CEO, what are those? And where does the Board want to take this company over the long term? Thank you.

Yes. Thanks, Jack. Appreciate the question. A few things. First of all, the Board was unanimous in our decision. And it really was around an opportunity for this to be an inflection point of performance at the company, and new leadership being a component of that in terms of making that happen. As I said in my prepared remarks as well, we were also unanimous in our appreciation of Bob's contribution to the company over his career. I think this is a tremendous opportunity here at Robinson and couldn't be more excited after the five weeks I've spent with our people and in the field. Our core strategy of building out our operating model going forward, I think, is solid. Obviously, new eyes in terms of a new CEO will give some perspective to that as well. But strategically, we are absolutely in a spot with global supply chains becoming more complex to be a go-to partner in the future. So this is not a shift in strategy for the company. This is really a shift in sort of accelerating performance and moving at a faster pace.

And then in terms of the qualities for the next CEO, can you maybe talk about that for a moment?

Yes. As I mentioned, Jodee Kozlak, our Board Chair now is the Head of the Search Committee. Just for background, Jodee was the former Chief HR Officer at Target. So she's familiar in processes like this. We're using a leading executive search firm that's helping the Board. We're going to take our time. We're going to be thorough and inclusive. And we're going to be broad in terms of the type of qualities we're looking at for the next CEO. Like I said before, this is a tremendous opportunity for somebody. We're looking for an experienced operator with sharp strategic thinking and someone who really can take Robinson to the next level. I think the next 10 years for Robinson are going to be the most exciting for the company going forward. So the opportunity here is fantastic for the next leader.

Okay. Thank you for the time.

The next question is coming from Bruce Chan of Stifel. Please go ahead.

Thanks, operator. And good afternoon everyone. Maybe just a follow-up on the strategic question and maybe in a little bit more of a pointed way. But when you think about your customer base, how many of them use you for end-to-end service? How many are both NAST and Global Forwarding customers? And then when you think about Bob's kind of statement before that Global Forwarding was an intrinsic part of Robinson, do you feel the same way about that division going forward? Thank you.

Yes. First, why don't I turn it over to Mike for some specifics on that, and then I'll get my perspective.

Yes. As we look at the combination of NAST and Global Forwarding, we've seen some great opportunities from a cross-selling standpoint between the two. And as we pointed out, if you look at the last 12 months, we've had over half of our revenue in AGP comes from customers who use both, Surface Transportation and Global Forwarding, services. We've looked deeper into this. We could probably do a better job at taking advantage of the relationships on both sides, but we have had some pretty compelling results. And I'll share with you one of the studies that we did where we looked at the last five years and we looked at customers who use both NAST and Global Forwarding versus customers who use one or the other. And the five-year compound annual growth rate for customers who use both was 400 basis points better than those who use one or the other. So we've been able to leverage customer relationships, bring business from NAST customers to Global Forwarding customers and vice versa. We believe as we think about customers and what they need and what they want that we can bring a full complement of services that they really need where they can get stuff from center Asia, center China to center U.S. with us and do it in a way that is value-added to their supply chain. So we believe in the ability to leverage both of those businesses, and that's our plans going forward.

Yes. And I'll add on to that. I was on the board in 2012 when we did the Phoenix acquisition, which really was sort of the baseline of our modern Global Forwarding business. And we have built a substantial business in Global Forwarding and I think have just begun to see those cross-selling benefits. I'm a believer that, as I said before, global supply chains are getting more complex, and partners that can solve problems and I've seen that already in customer meetings I've sat in over the last five weeks can create tremendous value for multiple players, including Robinson. That being said, as a Board, we always stress test the portfolio and challenge ourselves as to the best ways to drive value for customers and shareholders. So I would say -- particularly, I would say, after the last two years, we have a great franchise in our Robinson Global Forwarding business, and we have a tremendous opportunity in a world where supply chains are just so much important post pandemic.

And just a quick follow-up there. You all talked a lot about this new, I guess, global platform and some of the tech changes that you're making. Arun, I didn't hear a whole lot about the Global Forwarding side of that. Maybe just some quick comments about what's in store on the technology side for Forwarding. And ultimately, do you feel that Navisphere is the right platform there?

Yes. In terms of scalable operating model, we think of that cross divisionally across NAST and Global Forwarding. The opportunity, as it relates to creating a scalable operating model, exists in Global Forwarding just as much as NAST. In terms of an increased focus in that context, Global Forwarding is already down the path, but we believe there are acceleration opportunities that the product and tech organizations will be focused on starting in the back half of this year. As it relates to Navisphere, I think of Navisphere as a system of record. There is a lot of -- much of the work that we're doing that's probably around Navisphere in terms of how we harvest the data out of it, run our algorithms and present it back to customers and carriers in whatever form they choose to consume it.

And I would add on to that, that in the Global Forwarding business, the opportunity for tech enhancements is probably greater. The business is probably further behind truckload in the U.S., for sure, and LTL. And so there's more complexity in Global Forwarding when you get languages, currencies, culture, customs that makes it a more challenging environment from a tech enhancement standpoint. But that being said, the tech enhancements on the Global Forwarding side have been great. They've done some really nice backhouse automation. They've got some customer-facing features that have improved services. And they're excited about the tech for 2023. In fact, they've shown the tech to some customers. Nav 2.0 is something that customers are excited about. And it's been a while, I mean, since our team internally has been excited about the upcoming year with respect to tech and Global Forwarding. Certainly is.

Yes, this is Scott. I'll just add on just some perspective from the Global Forwarding team. And when you have basically a stress test that they've had and the amount of volume they moved and the way they did it over the last two years, they're very open about areas where technology can help them improve. And to echo what Mike just said, we were with Mike earlier this week who heads up Global Forwarding, and I think he is excited about what's coming but also excited to drive the change management internally that we'll get the investment back on the tech investment for the return.

Great. Thanks for the color.

Thank you. The next question is coming from Jeff Kauffman of Vertical Research Partners. Please go ahead.

Thank you very much. I had a question for Arun. Arun, where -- when you think of digitalization and digital transactions on the platform, how do you define what's digital versus what's not digital? And thinking about both the Forwarding and the NAST businesses separately, where are you in terms of percent of transactions that are -- you consider digital today? And where do you want to be by the time we're finished with this change?

Yes. I mean the way we think about digital versus non-digital, if there's a manual touch, it's generally not digital. So you take in-transit tracking as an example. And I think the way a digital-first company might approach that might be different than a broker has approached it for the past couple of decades. And historically, there have been several -- lots of touches as it relates to in-transit tracking. And the way I think about it is the less we touch the load as it relates to in-transit tracking, the better it is in terms of both productivity of our internal people, obviously. And equally for our customers, it's a better experience because you have less variability in service outcomes, and it's a more standardized outcome for them. So that's kind of how we think about it across multiple processes in the life cycle of the load. So think about track and trace, think about document management, payments, appointments and so on. So it's a matter of driving down the manual touches for each of those processes systematically over time, which drives greater productivity and better customer experience and carriers. That's kind of how we think about it. Scott, go ahead.

Yes. I would just add sort of how I talk about it to the employees as sort of an incumbent leader in the space that is using technology to sort of modernize the business is through sort of some business examples, I come from a distribution background. So you look at a company like Grainger and how they've leveraged technology to really drive tasks but then unleash the expertise their employees have for their customers. That's very similar to, I think, the opportunity we have here is really make our employees or logistics experts much more productive and then make technology tools that are sticky to the customer and that they really appreciate in terms of just making us easier to do business with. And I think Arun's product team is absolutely on that track.

And maybe just to add some color to what Scott said. Reducing touches, for sure, along the lines of what I described, were equally amplifying the abilities of our people. An example might be someone in sales. How do we do targeted sales versus sort of the approach that you might have taken in the past? The ability to take behavioral data and give them insights to be more targeted in their efforts.

And then the second part of that question, please, Arun, where are you today in terms of -- however you choose to think of it. I was thinking percentage of transactions that are digital. Where do you want to take that in two or three years? And where do you want to take that long term?

I think the lens to look at it is -- these are all inputs, and the output that we're looking for is effectively better productivity of our people as we measured by shipments per person per day and a better customer outcome or carrier outcome. In the case of customers, it's better on time in full performance and greater customer satisfaction. So those are the output metrics we look at. And so as a goal for 2023, we have a productivity improvement expectation from these investments of 15% that we track quarterly. I think it's better for us to look at it that way. And the input metrics might vary because we might see a greater opportunity for productivity in in-transit tracking versus appointments. And so we'd rather not go there on these calls and just focus on productivity and customer outcomes as the expectations from these investments.

Okay. Thank you very much.

The next question is coming from Chris Wetherbee of Citi. Please go ahead.

Thanks. Good afternoon. Scott, maybe a question here about Global Forwarding. So it sounds like this is something you think is key to the portfolio going forward. So I think it would be helpful to maybe give a bit of a perspective of where you think we are in sort of the normalization cycle. Obviously, the pandemic boosted rates to extraordinarily elevated levels, and as you noted in the release, were kind of back down to pre-pandemic levels in some of these end markets. So prior to 2020, this business was generating net revenues north of $500 million. It peaked out, obviously, a multiple of that. What is the right number for Global Forwarding as we start to go forward? I guess maybe in other words, how much share has been sort of captured there? What's the cross-selling opportunity? Just if you could give us some perspective of how to think about it in the context of normalization, I think that would be great.

Yes. Great, Chris. I'll make a few comments and then turn it over to Mike to dive into a little more granular detail. I would say my statement is Global Forwarding at Robinson today is a much stronger business than it was pre-pandemic. And I think part of what we owe to you is exactly that question is what is the run rate of this business on a more normalized rate. I'm super encouraged by Mike Short and his team and what we're doing in the marketplace, knowing that we're up against a backdrop of a tougher marketplace this year. But maybe Mike can give some specifics in terms of some numbers to help you with that question.

Yes. Chris, happy to do that for you. So after running operating income margins of over 50% in Global Forwarding in Q1 and Q2, obviously, we knew that wasn't a sustainable level, and the market would come back to us at some point. The normalization, if you call it that, has surprised us a bit in terms of the speed and magnitude of the correction. And so I think in that process, we found ourselves with cost structure that didn't match the business. And so we are in the process of kind of rightsizing that cost structure. During the pandemic in some of those periods, we were intentionally investing in our business. There was the ability to get the attention of customers to a greater extent. We were improving customer service. We're investing in technology. And the intent all along was to come out of the pandemic in a better place. And we feel like we've done that. But as Q4 demonstrates, when you look at the operating income margin, we've still got a ways to go in rightsizing our cost structure, and Mike and the team have been getting after that. Headcount is down and will be down further as we enter into the New Year. We do think that a 30% operating income margin for the long term is still the right number. And I mentioned the technology and how the technology can help improve the operating margin on a go-forward basis, but I'll mention a few other things that I think are key to success in that Global Forwarding business, too, and things that the team is encouraged for in terms of continuing to gain market share as we go. But another one I'd mention is operational uniformity. That's really standardizing a lot of the work and…

Okay. So the idea is relative to that pre pandemic era. Margins maybe could be double what they were, so there's the ability to absorb some downside shock here or normalization over the course of this year and next year on the net revenue line. I guess that's the way to kind of triangulate to the way you think about profitability of the business.

I think that's fair.

The next question is coming from Jordan Alliger of Goldman Sachs. Please go ahead.

I was wondering if you could talk a little bit to where you think we are from a spot market perspective for truckload pricing. And sort of based on where you think maybe that bottoming occurs, how are we in terms of contract timing on your non-renegotiated contracts to this point? Thanks.

Yes. Jordan, let me take that. So first of all, the demand has really pulled back here. That's pretty clear. And as a result, the spot market has really dried up. There's not a ton of opportunity there. In the prepared comments, we talked about we're sitting at a contract business that the commitments from the customers to be able to deliver the volumes that were inside of those contract agreements are being pressured because of the overall demand. So the business right now, we were 65-35 contract spot. The spot opportunities are not there to a great extent. And so we would expect that, that eventually flattens out here as we go through the year. I'm not sure if you follow the projections that we have in the marketplace around pricing, but we're anticipating a 16% year-over-year decline in truckload spot cost per mile in 2023, most of that coming early in 2023. And then the contract pricing generally follows where the spot market is on a lag basis. And so inside the contract business, maybe I'll take you back to the beginning of 2022. And so as we were entering into new contract business and bidding on contracts that were available, we were looking at the potential in the back half of '22 with COVID shutdowns, the holiday season, Chinese New Year coming that prices would hold up more than they did. As things played out, there really wasn't a key season. The demand was soft. The prices came down. And so as we were bidding on contracts in Q1 and Q2, we weren't as successful on a win percentage as we probably would have liked to have been. And certainly, we would have been better had we known the drop-off that was coming. So then you kind…

No. I appreciate the answer. Thank you.

The next question is coming from Jon Chappell of Evercore ISI. Please go ahead.

Thank you. Good afternoon. Scott, in the answer to an earlier question, you'd mentioned kind of no change in strategic direction, and however, maybe greater sense of urgency and timing. You talked about the annualized savings by the end of '23. But as you've been in this new role, have you found either new opportunities or ways to kind of front-end load some of the cost alignment that you have planned for the year? So therefore, you're kind of timing that more with the macro headwinds or some of the volume headwinds you see and are still cutting in the back half of the year when conceivably things may be getting better?

Yes. No, thanks, Jon. There's no doubt, it was a tough back half of the year. And that being said, I do see a palpable excitement about the future here. But in the short term, I think one of the things I'm trying to do with the management team, and I talked about empowering them, was also simplifying the message, aligning focus on customers and leveraging Arun and his team to show customer benefit. And we talked about the amplification of our people's expertise in the field. But we're very focused on expense. We're focused on headcount. We're focused on really tightly managing this business through the first half of the year. But also, as I've said to the senior leadership team, making no assumptions that the wind will be at our back throughout 2023. I think there's additional opportunity for us to get sort of more precise in how we go to market and find efficiencies throughout the company. I'm really proud of the team. It's never easy to do what happened back in November, but the spirit of the folks in the field and the ability to want to get better, faster, stronger is absolutely here at Robinson.

And I can add a little color to just on the cost savings front. So we did make some progress against that expense reduction target here in Q4, particularly on the personnel side. And just as a reminder, back to the commitment. So we were taking the run rate of Q3 and annualizing it, and the commitment was that we would get to a net cost reduction of at least $158 million by Q4 of 2023. And if you look at what we delivered in Q4, you take out the restructuring expense and annualize where we're at, you get to a number that's about $2.27 billion. So the run rate that we were -- if you take the Q3 and the annualized run rate of that, that was about $2.4 billion. So that implies that we've already -- are already at about $130 million savings versus that original commitment. Now you can't read into that too much because in Q4, as I had spoke to earlier, we did have a benefit to our equity compensation that reduced the overall expense in Q4, and we wouldn't expect that to continue into 2023. But the net of that is we have made some decent progress. We are, I think, much better focused going forward on headcount. And that will be a key since that's such a big part of our cost structure as we roll through 2023.

Understood. Thanks, Mike, thanks, Scott.

The next question is coming from Brian Ossenbeck of JPMorgan. Please go ahead.

Good afternoon. And thanks for taking the question. Maybe just two quick follow-ups then just on the expense reduction. It's obviously announced a little while ago and implemented in the fourth quarter, but it still seems like things maybe got worse a little bit faster than you initially thought in Forwarding. So if you can just clarify if there are additional opportunities on the horizon or you're sort of sticking with the $150 million for the time being and implementing that. And then just, Mike, I think you mentioned on January a little bit in terms of things stabilized. So I wondered if you could put some numbers behind that in terms of the truckload market, AGP per day volume or anything like that would be helpful as you start the first third of this first quarter? Thank you.

Yes, I'll kick off on Global Forwarding and toss it over to Mike. The Global Forwarding team has a history of managing expenses really well through cycles. Obviously, the last 18 to 24 months was very unique. So I'm confident that they're on point. And where they can find expense reduction that makes sense, they're absolutely going to do it. And then maybe Mike can give some color to that.

Yes. So try to make sure I get to each part of your question. So first of all, on the cost savings part, we continue with the commitment to the $150 million net cost reduction by Q4 on a run rate basis annualized. And I'll just point out maybe the obvious there that the inflationary environment that we're in is as high as it's been in 40 years. So the net cost reduction is offsetting our inflation and delivering the savings there, too. But we will stick with that. I will also add that if you did the math on the midpoint of the expense guidance that we just provided, you get to $2.2 billion for the year. And again, the run rate that we're going off of is $2.4 billion. So we're guiding to a midpoint of $2.2 billion, which is $200 million worth of savings. So let me address that for a second. We are committed to the net cost reduction. That is what we would consider to be more permanent cost reduction, more structural in nature. We will likely deliver more savings than just that. But the second part of the savings is more what I would say transitory related to the softness in the market. And as we've talked about, we've got a history of adjusting our cost structure with the market. And because we are seeing some softness there, there is some additional savings that comes along with that. I think another part of your question was about AGP trends. We do give you -- we did give you AGP per business day on an enterprise basis in Q4 where we were down 10% in October, down 7% in November and down 14% in December. That softness has continued into January. But as I mentioned, the truckload volume that we delivered in Q4, we have seen improvements on that going into the New Year.

Thanks for all that, Mike. So I guess the difference between the $150 million and the $200 million you guided to you, that would be basically the transitory of the market-based impact. Is that what you call out there?

Yes. Absolutely.

We are showing time for one final question. The final question for today is coming from Stephanie Moore of Jefferies. Please go ahead.

Good afternoon. And thank you. I want to touch on with this change in strategic direction, I want to know how this change is being reflected in your capital allocation plans. You called out wanting to deliver on certain leverage targets, but maybe you could just speak to how or it could make sense to maybe adjust your capital allocation plan as you look to kind of change the strategic direction of the company. Thanks.

Yes. Thanks, Stephanie. I'll have Mike start, and then I'll wrap up and maybe talk about our capital allocation committee a little bit as well.

Yes. So from a capital allocation standpoint, I think one of the major differences here is of late has been the amount of free cash flow that we've had really resulting from the working capital dollars coming back to us. And we had been pointing to the idea that when the price and cost of purchased transportation in ocean, air and truckload would come back down off of the record all-time highs that, that $1.5 billion of absorbed working capital that we experienced from the end of 2019 to earlier in '22 would start coming back. And of course, in Q3 and Q4, we saw over $1 billion of that tied up working capital come back to us, and therefore, began to deploy that in alignment with our capital allocation strategy. And so of course, we covered our commitments, our investments, our dividend. And our policy after that is to, as we are managing our leverage to maintain our investment-grade credit rating, any money that's left over after that goes to share repurchase. So you saw our share repurchase pick up quite a bit in Q3 and Q4. And then what we experienced after that was observing those prices coming down across ocean, air and truckload, which informs our forward-looking view on EBITDA and, therefore, informs our forward-looking view on the level of debt we need that we need to maintain the leverage ratio is appropriate to maintaining investment-grade credit rating. And so that's a long way of describing a pullback on share repurchase to make sure that we maintain that targeted leverage. But in terms of the overall capital allocation strategy, while there were some differences in activities as a result of the record free cash flow haven't changed our philosophy at all on how we are planning to deploy our capital going forward.

Yes. And Stephanie, I would just add from a Board perspective, we're making our Capital Allocation Committee a permanent committee, and we're also going to be soon adding additional members to that. And I think this is really going to serve as a great partner to the management team in terms of looking at areas that we can drive value across the organization for both customers and shareholders.

Great. Well, appreciate the time. Thank you.

Thank you. At this time, I'd like to turn the floor back over to Mr. Ives for closing comments.

Thank you, everyone. That concludes today's earnings call. Thanks for joining us today, and we look forward to talking to you again. Have a great evening.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time. And enjoy the rest of your day.