XPO, Inc.

Welcome to the XPO Logistics first quarter 2021 earnings conference call and webcast. My name is Melissa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you have a question, please press star 1 on your telephone keypad. Please note, this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of the applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. For instance, there can be no assurance that the company's planned spinoff of its logistics business will occur as currently contemplated or at all. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release are made on this call, are made only as of today, and the company has no obligation to update any of these forward-looking statements except to the extent required by law. During this call, the company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and in the related financial tables on its website. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the investor section of the company's website. I'll now turn the call over to Brad Jacobs. Mr. Jacobs, you may begin.

Thank you, operator. Good morning, everybody. Thanks for joining our conference call. With me today in Greenwich are David Weissner, our CFO, Matt Fassler, our Chief Strategy Officer, and from London, Malcolm Wilson, our current CEO of XPO Europe and future CEO of the planned spin GXO. As you saw, we had a tremendous first quarter that beat expectations and gave us a very strong start to 2021. On a year-over-year basis, our first quarter revenue was up 24% to $4.8 billion, which is an all-time high, not just for a first quarter, but for any quarter. Our revenue includes 22% growth from our transportation segment, where the truck brokerage market is white-hot, and the LTL environment is coming back strong. And in logistics, our revenue growth was a hefty 27%. Our logistics segment also had a great first quarter for sales, with a number of large contract wins. Company-wide, we set new first quarter records for both net income and adjusted EBITDA. Both of our segments generated robust EBITDA in the first quarter, leading to our third consecutive quarterly record. Our $443 million of adjusted EBITDA was a year-over-year increase of 33%. And our first quarter adjusted EBITDA margin of 9.3% was up from the prior year by 70 basis points. Technology and operational excellence were the two big drivers here. Even with the gains we've been reporting, we're confident that we're in the early innings of margin improvement. On the back of our first quarter beat and considering the optimism we're hearing from our customers, we significantly raised our full year 2021 adjusted EBITDA guidance to a range of 1.825 to $1.875 billion. Our LTL business in North America is on a solid upward trend. Tonnage per day in LTL was up 3.7% in the quarter compared with a year ago, and yield X fuel was up 4.2%. Our LTL adjusted operating ratio, X real estate, improved to a first quarter record of 84.3%. which was 220 basis points better than a year ago. In truck brokerage, the story is growth, growth, and more growth. Three months ago, we reported a record fourth quarter for our brokerage business, and now we've driven results higher to top it with another record quarter. Our loads per day in brokerage were substantially better than the market, up year over year by 25%. Revenue in brokerage was up 83%. And net revenue was up 132%. Our net revenue margin in brokerage was up 389 basis points to 18.6%. The big driver behind our brokerage performance is our technology and the productivity we're getting from XPO Connect, our digital platform. Over the last five years, our technology enabled us to handle 41% more volume with just a 3% increase in sales and procurement headcount. In logistics, our growth is being driven by the big three tailwinds of e-commerce, outsourcing, and customer demand for warehouse automation. I'm delighted to report that we recently won the largest contract in the history of our North American logistics business. It's also the largest win for our company overall at $1.8 billion of projected revenue through 2032. This includes both an extension and an expansion with a longstanding customer. Malcolm will talk about some other recent wins in a minute, including three major brands that in total will be using over a billion dollars of our logistics services over the next five years. We're also continuing to make excellent progress on GXO, the planned spin-off of our logistics business. We remain on track to complete the spin in the second half of the year, and our goal is to have GXO be investment grade from day one, followed by XPO. Our strategy and our spin address the consistent themes we've heard from shareholders over the last year to simplify the company and reduce leverage. With that, I'll ask Malcolm to share some recent developments in our logistics business. Malcolm?

Thank you, Brad. Demand for our logistics services is very strong due to a combination of secular tailwinds and our company's positioning within this environment. The three big megatrends of outsourcing, e-commerce, and warehouse automation are driving the double-digit revenue and EBITDA growth in our logistics. Outsourcing has been a consistent trend for years, but it accelerated as a result of the pandemic. Large companies have become more aware of both the critical importance of supply chain continuity to their success and the potential vulnerability of handling logistics completely in-house. We collaborate strategically with customers to help them redesign their supply chains and We give them greater visibility and flexibility through our technology. The sustained rise in e-commerce we're seeing is a secular shift in consumer buying behavior. We can all relate to this. Right now, all the fulfillment times are being compressed, most notably in the direct space. What used to be a five-day logistics process is now down to one day or less. Advanced automation and intelligent machines are cost-effective ways to meet these expectations. In consumer end markets, where supply chains are becoming increasingly complex, our investments in robotics and advanced automation are delivering fast, smarter logistics processes at lower cost for our customers and our company. We're utilizing more and more robotic technology to deliver crucial improvements in speed, Control, accuracy, safety, quality of employment, and consistency of outcomes. This gives us strong positioning as a large-scale operator and industry innovator. More than ever, Blue Chip customers see the strategically and deeply integrated solutions we provide as mission-critical. This is evident in the growing number of customers in this business. In the first quarter, we had a number of important wins with some significant value attached to each of them. As Brad mentioned, one of these wins is the largest contract in our company's industry. We also won several of the very large customer contracts. An exciting development is the contract we just signed with Apple, who is a major new customer for us. We'll open a massive distribution center for Apple in Indiana with over a million square feet of state-of-the-art space for e-commerce fulfillment. It will be direct to consumer distribution that uses advanced automation and robots to personalize products before we ship them to consumers. Two other examples of large customer wins in Europe are ASOS and Waitrose. ASOS is a global online fashion retailer we've been serving since 2014. A recent agreement with them is a pair of contracts that further cement our position as the UK's e-fulfillment leader. ASOS has renewed our distribution centre and expanded the relationship with a second hub we'll open next month. Waitrose is a prominent UK food retailer that values our expertise in temperature control and ambient food distribution. We implemented our first contract with Waitrose in the midst of COVID last year, and this year they're entrusting us to run an incremental distribution center. These contracts demonstrate how Blue Chip customers trust our reliability and value our ability to deliver innovation. The great examples of tremendous potential for profitable growth we're seeing in the logistics landscape in Europe and North America. Of our new business signings overall, there's a good balance between established customers seeking longer-term contracts and new, first-time customers like Apple. All in all, year-to-date, we're executing on customer agreements with a combined value of more than $4 billion over the contract line. These agreements also give us great visibility into future revenue and margin performance in our logistics business, which is planned to be spun off as GXO. All of the work streams required for the spin are in good shape and running to schedule. Importantly, we've been building the GXO C-suite over the last month with strong internal appointments and external hires. I'd like to mention Beresh Oran, who will be GXO's chief financial officer. Beresh is a hands-on CFO who also thinks strategically about value creation. During his tenure as CFO of the Sabanci Group, he led the multinational finance operation of one of Turkey's largest publicly traded companies. I'm also pleased to welcome Mark Manduka, who will be our chief investment officer. Mark has been the number one ranked transport analyst in Europe for eight years in a row, with an impressive track record at Citigroup. GXO will be a high growth company, and I'm pleased that we're making great progress in bringing a world-class team together in preparation to lead that growth. There will be more announcements to come. Now, David will go over the quarter.