Mike Zechmeister
Chief Financial Officer at C.H. Robinson Worldwide
Thanks, Dave, and good afternoon, everyone. Global freight markets in Q2 continued to be impacted by weak demand, high inventories, and excess capacity, which resulted in a more competitive marketplace with suppressed transportation rates. North American freight volumes and load-to-truck ratios remain near the low levels of 2019. In the freight forwarding market, ocean vessel and air freight capacity continues to exceed demand, which has kept ocean and air freight rates low during the period of significant declines that extends back to the second half of 2022.
Despite the weak demand, new vessel deliveries are expected to continue to add capacity to the ocean market. This suggests that the influence of excess capacity may persist for several periods, despite the steamship line's efforts to manage capacity through blank sailings, slow steaming, and redeploying capacity to other lanes. We are staying focused on what we can control, providing superior service to our customers and carriers, and streamlining our processes by removing waste and manual touches. The result has been meaningful cost reduction and productivity gains across our business.
With our record quarterly financial results in Q2 of last year as a comparable and the macro forces that I outlined as the backdrop, our second quarter total revenues of $4.4 billion declined 35% compared to Q2 last year. Our second quarter adjusted gross profit, or AGP, was also down 35% year over year, or $366 million, driven by a 45% decline in our Global Forwarding and a 36% decline in NAST. On a sequential basis, total company AGP was down 3%, driven by a 6% decline in NAST. That was partially offset by a 1% increase in Global Forwarding and a 6% increase in the total of our other segments. On a monthly basis compared to Q2 of last year, our total company AGP per business day was down 30% in April, down 39% in May, and down 37% in June.
In our NAST truckload business, our Q2 volume declined by approximately 6.5% on a year-over-year basis. Within Q2, average daily volume in April was stronger than March, but weakened in May and held in June, which resulted in a 0.5% sequential decline in Q2. During Q2, we had an approximate mix of 70% contractual volume and 30% transactional volume in our truckload business.
Routing guide depth of tender in our Managed Services business, which is a proxy for the overall market, declined from 1.4 in Q2 of last year to 1.1 in the second quarter of this year, which is the lowest level we've seen for a full quarter since the recession of 2009. The sequential declines in our truckload linehaul cost per mile since Q2 of last year began to level off and increased sequentially in May and June, causing the June cost per mile to be only $0.02 below the March cost per mile. On a year-over-year basis, we saw a decline of approximately 19% in our average truckload linehaul cost per mile paid to carriers, excluding fuel surcharges.
Due to the time lag for contract pricing to follow spot market costs, Q2 truckload linehaul pricing continued to decline on a sequential basis, resulting in a 23% year-over-year decline in our average linehaul rate or price build to our customers, excluding fuel surcharges. These changes resulted in a 41.5% year-over-year decrease in our truckload AGP per mile and AGP per shipment, with declines in both contractual and transactional AGP per shipment. This is the largest year-over-year decline in AGP per mile that we've experienced in the last 10 years and is in contrast to the 46.5% increase in Q2 last year.
In our LTL business, shipments were flat on a year-over-year basis and up 5% sequentially. By leveraging our broad access to capacity in all modes of LTL and our high level of service, our LTL team continues to onboard a pipeline of new business that is offsetting the softness in the LTL market. AGP per order, however, declined 19% compared to Q2 last year, driven primarily by the market conditions and lower fuel prices.
As I mentioned, market conditions in our Global Forwarding business were also soft behind weak demand and plenty of capacity. Despite that, our ocean and air volume, each grew sequentially, exhibiting the progress our Global Forwarding team has made through adding new customers, diversifying trade lanes and verticals, and leveraging investments in technology and talent over the past several years. In Q2, Global Forwarding generated revenue of $780 million and AGP of approximately $179 million, which declined 45% year over year compared to the record high from Q2 last year. Within these results, our ocean forwarding AGP declined by 53% year over year compared to 51% growth in Q2 of 2022. The Q2 results were driven by a 49.5% decrease in AGP per shipment and a 7% decrease in shipments.
Turning to expenses, we delivered on our expense reduction and productivity expectations for the quarter, Q2 personnel expenses were $377.3 million, including $13.1 million of restructuring charges, down 15.2% compared to Q2 of last year. Excluding the restructuring charges, our Q2 personnel expenses were down 18.1% year over year, primarily due to the cost optimization efforts and lower variable compensation. Our headcount was also down significantly in Q2, with ending headcount at 15,763, down 13.1% year over year.
In Q2, we elevated our cost optimization efforts, which began in Q4 of last year as we streamlined our workflows and removed waste to help ensure a more competitive and sustainable long-term cost structure. As a result, our shipments per person per day in NAST has increased by 12% year to date through Q2, and we remain on track to deliver on our target of 15% year-over-year improvement by Q4 of this year. I'd also note that we were able to achieve the productivity gains in a soft volume market, which sets us up well for when the market demand returns.
Going forward, we expect continued improvements in shipments per person per day and the associated cost benefits through the remainder of 2023 as we streamline processes and improve customer outcomes with technology that supports our people and processes. As a result of the progress on our cost optimization efforts, we now expect 2023 personnel expenses to be toward the lower end of the $1.45 billion to $1.55 billion range that we previously provided. As a reminder, our expense guidance excludes restructuring expenses.
Moving to SG&A, Q2 expenses were $155.6 million and included $1 million of restructuring charges. Excluding the Q2 restructuring charges and last year's $25.3 million gain on the sale-leaseback of our Kansas City regional center in Q2, SG&A expenses were up approximately 8.5% compared to Q2 of last year, primarily due to increases in claims and warehouse expenses. We continue to expect our 2023 SG&A expenses to be $575 million to $625 million, including $90 million to $100 million of depreciation and amortization expense.
As you may recall from our Q1 earnings call, we raised our cost savings commitment to $300 million of net annualized cost savings by Q4 of this year compared to the annualized run rate of the Q3 expenses from last year. We continue to be on track to deliver those expense reductions, and the majority are expected to be longer-term structural changes to our cost base that will help us improve operating margins once demand returns.
Q2 interest and other expense totaled $18.3 million, down $9.1 million versus Q2 last year. Q2 included $23.2 million of interest expense, up $6.3 million versus Q2 of last year due to higher variable interest rates against a reduced debt load. Q2 also included a $3.5 million gain on foreign currency revaluation and realized foreign currency gains and losses compared to a $10.3 million loss in Q2 last year, with both driven by various foreign currency impacts on inter-company assets and liabilities. As a reminder, our FX impacts are predominantly non-cash gains and losses.
Our Q2 tax rate came in at 14.9% compared to 21.3% in Q2 of '22. The lower tax rate was driven by lower pre-tax income and incremental benefits from tax credits and incentives. We now expect our 2023 full-year effective tax rate to be in the range of 16% to 18%, assuming no meaningful changes to federal, state or international tax policy. Adjusted or non-GAAP earnings per share, excluding the $14.1 million of restructuring charges, was $0.90. Excluding the $25.3 million gain from Q2 last year, non-GAAP earnings per share was down 64% compared to the 75% increase in Q2 last year.
Turning to cash flow. Q2 cash flow generated by operations was approximately $225 million compared to the $265 million in Q2 of 2022, demonstrating our ability to generate cash and make investments in the business through the freight cycle. The year-over-year decline in our cash flow was driven by a $251 million decrease in net income, partially offset by $144 million sequential decrease in net operating working capital in Q2, resulting from the declining cost and price of ocean and truckload transportation. Over the last four quarters, as the cost and price of purchased transportation have come down, we have realized a benefit to working capital and operating cash flow of more than $1.4 billion.
In Q2, our capital expenditures were $24.4 million compared to $43.2 million in Q2 of last year, and we continue to expect our 2023 capital expenditures to be in the range of $90 million to $100 million. We returned $106 million of cash to shareholders in Q2 through $73 million of cash dividends and $33 million of share repurchases. The cash returned to shareholders exceeded net income, but was down 74% versus Q2 last year, driven by the $137 million of cash used to reduce debt.
Now on to the balance sheet highlights. We ended Q2 with approximately $1.1 billion of liquidity comprised of $859 million of committed funding under our credit facilities and a cash balance of $210 million. Our debt balance at the end of Q2 was $1.74 billion, which includes debt paydown of $532 million versus Q2 last year.
Our net debt to EBITDA leverage at the end of Q2 was 1.81 times, up from 1.39 times at the end of Q1. Our capital allocation strategy is grounded in maintaining an investment-grade credit rating, which allows us to optimize our weighted average cost of capital. With the year-over-year earnings reduction and $0.5 billion of debt paydown, we'll continue to manage our capital structure to maintain our investment-grade credit rating.
As you would expect, the cash that we use to reduce debt generally reduces the amount of cash available for share repurchases. Over the long term, we remain committed to growing our quarterly cash dividend in alignment with long-term EBITDA growth. Our dividends and share repurchase program are important levers to enhance shareholder value as we are delivering quality customer service more efficiently than anyone in the marketplace.
As we have demonstrated through the ups and downs of our highly cyclical freight market, the strength of our business model makes us a reliable partner for our customers and allows us to invest through the cycle. Our customers value the stability and reliability that we provide as we work to optimize their transportation needs.
I'd like to close by adding that I am incredibly excited about the direction we are headed and our ability to build on the productivity and cost control progress that we've made. By leveraging lean principles to reduce waste and the emerging benefits of our combination of machine learning and generative AI across our scaled model, we are positioned well to deliver greater efficiency and improved competitiveness in the marketplace to generate greater value for Robinson shareholders.
With that, I'll turn the call over to Arun to provide more details on our efforts to strengthen our customer and carrier experience and improve our efficiency and operating leverage.
