XPO, Inc.

Welcome to the XPO Logistics Q1 2022 Earnings Conference Call and Webcast. My name is Laura 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 dial star 1 on your telephone keypad. Please limit yourself to one question when you come up in the queue. If you have additional questions, you're welcome to get back in the queue and we'll take as many as we can. Please note that 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 applicable security 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. A discussion of the factors that could cause actual results to differ materially is contained in the company's SEC filings as well as in its earnings release. The forward-looking statements in the company's earnings release or made on this call are only made 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 the 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 the related financial tables or 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 will now turn the call over to Brad Jacobs. Mr. Jacobs, you may begin.

Good morning, everybody. Thanks for joining our call. With me today in Greenwich are Robbie Tulcian, our CFO, Matt Fassler, our Chief Strategy Officer, Mario Haric, our CIO and Acting President of LTL, and Drew Wilkerson, President of North American Transportation. As you saw, we delivered a quarter of record results with solid beats across revenue, net income, adjusted EBITDA, and adjusted EPS, including our eighth straight quarterly beat on adjusted EBITDA. We grew revenue by 16% over last year's first quarter, generating the highest revenue of any quarter in our history. We also had first quarter records for net income, adjusted EBITDA, and adjusted EPS, which was up year over year by 58%. To reflect their momentum, we raised our full year financial outlook by more than the first quarter beat. We're now guiding at the midpoint to adjusted diluted EPS growth of 26%. Both of our core North American businesses, LTL and truck brokerage, delivered double-digit revenue growth in the quarter. Our LTL network today is a very different business than it was just six months ago. Many of the network improvements we're driving are ahead of plan. We expect our adjusted operating ratio to improve sequentially by more than 400 basis points for the second quarter. And we continue to expect our adjusted operating ratio, excluding real estate gains, to inflect to year-over-year improvement later in the quarter, and for the full year to be at least 100 basis points better than 2021. Our goal is to create a world-class LTL carrier that delights our customers and our shareholders. Turning to North American Truck Brokerage, we're continuing to fire on all cylinders there. Our volume growth exceeded 20% for the sixth consecutive quarter. This best-in-class brokerage business is continuing to take share and do it profitably. First quarter margin dollars were up 21% year-over-year and rose 5% sequentially, outperforming typical seasonality in large part due to the effectiveness of our digital platform, XPO Connect. I'm pleased that we have a brokerage veteran lined up to lead the spinoff, Drew Wilkerson. Drew will be CEO, and he's been the main architect of our brokerage growth since joining us in 2012, most recently as President of North American Transportation. He'll have a long runway to grow the business as a pure-play brokerage company. The spin-off process is on track, as is the planned divestiture of our European operations, which had an excellent first quarter. And finally, we're pleased with the deleveraging we achieved in the first quarter. In three months, we brought our net leverage ratio down from 2.7 times to two times, which is at the top edge of our target range. So in sum, We produced an excellent quarter and raised our outlook. We have multiple company-specific avenues for value creation, including the spin-off of our tech-enabled brokerage platform, the ongoing transformation of our LTL business, the divestiture of our European operations, and our continuing deleveraging. Now I'll ask Ravi to cover our results in our balance sheet.

Ravi? Thank you, Brad, and good morning, everyone. Today, I will discuss our first quarter results, our balance sheet and liquidity, and our outlook for the balance of 2022. For the first quarter, we delivered strong year-over-year growth in revenue, adjusted EBITDA, and adjusted diluted EPS. Revenue in the quarter was a record $3.5 billion, up 16% year-over-year. The net impact of fuel prices and FX accounted for two points. Organic revenue growth for the quarter was 14 percent. We grew adjusted EBITDA by 15 percent to a Q1 record of $321 million. Adjusting for gains from real estate sales, the year-over-year growth in adjusted EBITDA was 25 percent. This reflects particularly strong growth in our brokerage and other services segment, looking at a two-year stack adjusted EBITDA was up 55 percent. For the quarter, our adjusted EBITDA margin was 9.2 percent, excluding gains from real estate sales. This was an improvement of 60 basis points year over year. Operating conditions in the quarter were favorable, and the pricing environment stayed firm. This was partially offset by inflationary pressures on labor and purchase transportation. Corporate costs in the quarter was down 19% year-over-year as we continue to optimize our corporate cost structure following the spin-off of GXO. Our interest expense during the quarter was $37 million compared to $65 million in the year-ago period. This reflects the pay down of approximately $3 billion of debt last year. The effective tax rate for adjusted EPS during the quarter was 23%. Our adjusted earnings per directed share for the quarter was $1.25, which was up from 79 cents a year ago, an increase of 58%. This increase was primarily driven by higher adjusted EBITDA and lower interest expense. We generated $200 million of cash flow from continuing operations spent $137 million on gross capex and received $3 million of proceeds from asset sales. Gross capex was up $63 million year over year, with the majority of the additional spend going towards equipment purchases for North American LTL business. As a result, our free cash flow was $66 million, which was above our expectations. This includes the impact of $15 million of cash outflows related to transaction costs that were not contemplated in our free cash flow guidance. We are making significant progress on our strategy to create two pure plate transportation powerhouses, and we remain on track to complete the spin-off of our tech-enabled brokerage platform in Q4 of this year. As part of our strategic plan, We took an important step last quarter when we completed the sale of our intermodal business for cash proceeds of $710 million, which represented a multiple of approximately 10 times 2021 EBITDA. Including the proceeds from the sale of the intermodal business, we ended the quarter with $1 billion of cash on the balance sheet. This cash, combined with the available debt capacity under committed borrowing facilities, gave us $2 billion of liquidity at quarter end. We had no borrowings outstanding under our ABL facility. After quarter end, we repaid $630 million of 2025 notes. This was another significant step in our plan to reduce our debt and deleverage our balance sheet. Our net leverage at quarter end was two times adjusted EBITDA. We are ahead of schedule on our deleveraging plan and we now expect to be below two times leverage before year end. In light of our strong first quarter results and ongoing earnings visibility, we updated our full year guidance after market closed yesterday. Our new full year guidance for adjusted EBITDA is $1.35 billion to $1.39 billion. The update reflects our first quarter outperformance, the sale of the intermodal business, and our strong outlook for the remainder of the year. The real estate assumptions we gave you in February remains the same. For the second quarter, we expect our adjusted EBITDA to be $360 million to $370 million. Performa, for the intermodal sale, the midpoint of our second quarter EBITDA guidance implies a year-over-year growth rate of 15%. We have raised our outlook for fully adjusted EPS to a range of $5.20 to $5.60. This increase reflects our new EBITDA guidance and the deduction in interest expense resulting from our pay down of debt. The midpoint of our adjusted EPS guide implies year-over-year growth of 26%. On the cash flow front, Our outlook for full-year free cash flow remains $400 million to $450 million. As a reminder, our outlook excludes all transaction-related cash outflows. Our full-year guidance for depreciation and amortization expense is approximately $385 million, down from $400 million, reflecting the sale of the intermodal business. We expect interest expense of $150 million to $160 million, down from $170 million to $180 million previously. There's no change to our previous guidance for capex and the tax rate. In conclusion, we are continuing to execute on our strategic plan, and we remain excited about our prospects for the balance of 2022. I will now turn things over to Matt. Thanks, Robbie.