XPO, Inc.

Hello, and welcome to the XPO Logistics third quarter 2021 earnings call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Brad Jacobs. Please go ahead.

Good morning, everybody, and thanks for joining our call. With me today in Greenwich are Robbie Tulsian, our CFO, Matt Fassler, our Chief Strategy Officer, and Mario Horek, our CIO and Acting President of LTL. We also have Drew Wilkerson, who leads our North American Transportation Group, joining us for Q&A. As you saw from our press release, the company overall had an excellent third quarter. We beat expectations for revenue, adjusted EBITDA, adjusted EPS, and free cash flow, and raised our full-year guidance by more than a beat. We now have two reporting segments following the spinoff of GXO. The largest service offering in our brokerage and other services segment is North American Truck Brokerage, which had another remarkable quarter. Our North American LTL segment had mixed results. and were actively course-correcting. Highlights of the quarter company-wide include a year-over-year increase in revenue of 22%. We also grew adjusted EBITDA, excluding real estate, by 25%. Our revenue was the highest of any quarter in our history, and our adjusted EBITDA was a third-quarter record. marking the fifth consecutive quarter we've raised the bar on this metric. In North American truck brokerage, we continue to significantly outperform the market in growth of gross revenue, net revenue, and volume. Year over year, we grew volume with our top 20 customers in total by 45%. We also significantly increased productivity growing loads at nearly twice the rate of headcount. The largest driver of this productivity is our technology, specifically our XPO Connect digital brokerage platform, which continues to have very high levels of industry adoption. Matt will give you the growth numbers behind XPO Connect, including the number of carriers we have on the platform and the carrier usage, customer count, and cumulative downloads. In LTL, we delivered record third quarter revenue and adjusted EBITDA, ex-real estate gains, and our strongest yield growth yet, up 6%, ex-fuel. But our adjusted operating ratio, ex-real estate, eroded by 190 basis points year over year. Mario will cover this in detail later on the call. Many of you know Mario from his 10 years with XPO. He's one of the most talented executives I've ever worked with and one of the first leaders I hired at the company. Mario and I have worked shoulder to shoulder on every major project since. Today, he'll talk about the five-point action plan we've taken to return to our trajectory in LTL of significant multi-year operating ratio improvement. This includes how we're addressing shortages of equipment and labor and using XPO-specific capabilities like trailer manufacturing and in-house driver schools. We're also moving to the next phase of our strategy in LTL for shareholder value creation. Over the next 12 to 24 months, we plan to add approximately 900 doors to our LTL network, which equates to about 6% more doors than we have now. We believe these targeted investments will enhance network-wide operating efficiency and support future revenue growth. And notably, our LTL segment has superlative return on invested capital, making it an ideal use of shareholder resources. We continue to target at least a billion dollars of adjusted EBITDA in LTL in 2022. In conclusion, We delivered a number of key financial achievements in the quarter company-wide and in each of our segments. And once again, we raised our guidance for full year 2021. Finally, we were delighted to pay down $1.5 billion of debt in the quarter, moving us closer to our goal of an investment-grade rating. I'll now hand over to Ravi to discuss our results and our balance sheet.

Thank you, Brad, and good morning, everyone. Today, I will discuss our third quarter results, our balance sheet and liquidity, and our updated outlook for 2021. In the third quarter, we delivered strong year-over-year growth in both revenue and adjusted EBITDA, with both results coming in higher than expectations. We generated revenue of $3.27 billion, which was a year-over-year increase of more than 22%. Fuel prices contributed three points to growth, resulting in organic growth of 19%. The impact of FX was not material in the quarter. We grew adjusted EBITDA by almost 15% to $307 million. Reform of our spin-off, this was a third quarter record for us, and it reflects strong growth and execution in our brokerage and other services segment. Excluding real estate gains, our year-over-year adjusted EBITDA growth was 25%. For the quarter, our adjusted EBITDA margin, excluding gains from real estate sales, was 9.2%, an improvement of 20 basis points year-over-year. Both of our segments, brokerage and other services, and North America LTL, contributed to our growth. In our brokerage segment, adjusted EBITDA increased by 46% in the third quarter And in our LTL segment, adjusted EBITDA excluding gains from real estate was up year-over-year by 2%. Operating conditions in the quarter were favorable with robust consumer activity and an ongoing rebound in the industrial sector, as well as a firm pricing environment. This was partially offset by cost pressures, especially on the purchase transportation line, and by the impact of labor and equipment shortages. Matt will provide additional color on our segment performance in a few minutes. Our adjusted earnings were $0.94 per diluted share, which was up from $0.42 per diluted share from a year ago, an increase of 124%. This year-over-year increase was primarily driven by higher EBITDA, lower interest expense, and lower tax rate. We generated $250 million of cash flow from continuing operations spent $77 million on gross capex and received $12 million of proceeds from asset sales. As a result, our free cash flow was a very robust $185 million. This exceeded our expectations for the quarter, driven by strong earnings as well as capex and working capital timing that worked in our favor. We are executing our strategy of driving shareholder value as a pure-play transportation company. On a trailing 12-month basis, total company return on invested capital was 33%, with the North American LTL segment above that. Given this return profile, we are increasing our capex in LTL, primarily with plans to add additional doors and purchase equipment to support expanded door capacity. Our cash balance at September 30th was $254 million after paying down $1.5 billion of debt in the quarter. This cash, combined with available debt capacity under committed borrowing facilities, gave us over $1.2 billion of liquidity at quarter end. We had no borrowing outstanding under our ABL facility. Maintaining strong liquidity will continue to be a top priority for us. Our net leverage at September 30th was 2.8 times adjusted EBITDA for the last 12 months. Following the spin-off of GX4, We use the $794 million dividend from GXO and $384 million in net proceeds from our equity offering along with cash on hand to repay all our outstanding senior notes due in 2023 and 2024, a total redemption of over $1.5 billion. For the full year, we have reduced our growth debt by approximately $3 billion. We have begun to benefit from lower interest expense this year and our interest expense will decline by another $60 million on a year-over-year basis for 2022. We now have no significant debt maturities until 2025. We'll continue to deleverage our balance sheet through free cash flow generation and adjusted EBITDA growth. Our progress on deleveraging is important in the context of our target to achieve net leverage in the range of one to two times adjusted EBITDA by the first half of 2023 and our commitment to achieve an investment-grade rating. Turning to the outlook we issued yesterday after market close, we updated our full year guidance in light of our strong third quarter results and the favorable economic trends we see today. Our outlook assumes these trends will continue and the market impacts of labor and equipment shortages don't get worse. The raise in our fully adjusted EBITDA includes a fourth quarter adjusted EBITDA target of $300 million to $305 million. On the cash flow front, our new outlook is for full-year free cash flow of $425 million to $475 million. We expect growth capex to be $375 million to $400 million and net capex to be $250 to $275 million for the year. The updated full-year pro forma depreciation and amortization guidance is $390 million to $395 million, and there is no change to pro forma interest expense of approximately $200 million. We expect our reported interest expense for the year to be approximately $230 million. Our full year tax rate is now expected to be 24% to 26%, which is an increase of 1% versus our previous guidance, driven by discrete items and non-deductible expenses. Our average share count forecast for the year remains unchanged at approximately 114 million diluted common shares and we expect to end the year at approximately 116 million diluted common shares. The full year adjusted EPS guidance on a pro forma basis is now $4.15 to $4.25. The change in our adjusted EPS range reflects higher EBITDA and an increase in tax rate. In conclusion, We had a transformative third quarter with the spin-off of our logistics segment, and we are enthusiastic about our prospects as a transportation leader in the market we serve. I will now turn things over to Matt.