XPO, Inc.

Welcome to the XPO Q3 2022 Earnings Conference Call and Webcast. My name is Rob, and I will be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you have a question, please dial star 1 on your cell phone keypad. Please limit yourself to one question when you comment in the queue. If you have additional questions, you're welcome to get back into 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 make certain forward-looking statements within the meaning of 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. A discussion of 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 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 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 Investors section on the company's website. I will now turn the call over to Brad Jacobs. Mr. Jacobs, you may begin.

Good morning, everybody, and happy Halloween. Thanks for joining our earnings call. With me today in Greenwich are Mario Harrick and Drew Wilkerson, our two incoming CEOs of XPO and RXO, and Ravi Tulsian, our CFO of XPO. We'll be joined during Q&A by XPO's Chief Strategy Officer, Matt Bassler, and from RXO, we have Jared Weisfeld, Chief Strategy Officer, and Jamie Harris, Chief Financial Officer. This morning, we reported another strong quarter with over $3 billion of revenue and record third quarter operating income, up year over year by 65%. Notably, we generated $142 million of free cash flow, while more than doubling the historical gross capex we invested in our North American LTL network. Under Mario's leadership, our plan for LTL 2.0 is gaining momentum. This morning, we reported third quarter records for LTL revenue and adjusted EBITDA. And one of the most telling LTL metrics is our accelerating year-over-year tonnage trend, which improved every month through the quarter and inflected positive in September. Our third quarter tonnage outperformed typical seasonality, which is the opposite of what we're hearing in the industry. Importantly, our tonnage remains strong in October, and we expect positive year-over-year tonnage for the fourth quarter. We're getting more freight from customers for two good reasons. One is the investments we've been making in capacity, and the other is our improved quality of service. Our truck brokerage business under Drew's leadership continued to outperform in the third quarter. The team grew volume year over year by an impressive 9%. They also delivered a very strong gross profit margin of 19%. I'm pleased that both companies will be strongly positioned for growth when RxO spins off tomorrow. We've been working towards separating our asset-based and asset-light businesses since we announced our strategic plan in March, and this is a watershed moment for XPO shareholders. The final piece of the plan is the divestiture of our European business. We will not be providing any updates on that sales process today. Before I close, I want to thank Robbie for his many contributions to XPO's success over the last six years. Robbie was instrumental to our GXO spin last year, and he's led our finance organization through the current spin process and the sale of Intermodal. We wish Robbie the very best, and we're pleased that he'll assist in the transition to Carl Anderson, our incoming CFO, who joins us next week. I look forward to working with Mario and Drew in my roles as executive chairman of XPO and non-executive chairman of RXO. And now, Robbie will cover the quarter. Robbie?

Thank you, Brad, and good morning, everyone. Today, I will discuss our third quarter results and our balance sheet and liquidity. In the third quarter, we generated revenue of just over $3 billion. Excluding the impact of the intermodal business, which was sold in March, revenue increased 3% year over year. Currency had a negative impact on our reported revenue of $86 million, or 3%. We grew adjusted EBITDA to $352 million, reflecting strong earnings growth across the businesses. The year-over-year increase in adjusted EBITDA was 15% or an increase of 25%, excluding intermodal and gained some real estate sales. FX negatively impacted EBITDA by $8 million in the quarter. Our adjusted EBITDA margin was a third quarter record of 11.6%, representing a year-over-year improvement of 220 basis points. The firm pricing environment continued this quarter and helped offset inflationary pressures. Our European business also continued its strong performance with organic revenue growth of 6.8%, which was driven by both volume growth, and price. Our corporate cost for the third quarter, excluding one-time expenses, was down year-over-year by 37%. This reflects continued rationalization of our corporate cost structure in preparation for the upcoming spin-off of RXO. Our interest expense for the quarter was $35 million compared to $53 million in the year ago period. The effective tax rate for the adjusted EPS for the quarter was 23%. Our adjusted earnings per directed share was $1.45, which was up from $0.94 a year ago for an increase of 54%. This increase was primarily driven by higher adjusted EBITDA and lower interest expense. We generated $265 million of cash flow from continuing operations spent $127 million on growth capex and received $4 million of proceeds from asset sales. Growth capex was up $50 million year-over-year, primarily allocated to investments in our LTL network capacity. Our free cash flow was $142 million. This includes $53 million of cash outflows related to transition costs that were not included in our free cash flow guidance. Excluding this transaction cost, our free cash flow was $195 million for the quarter. Moving on to the balance sheet, we ended the quarter with $544 million of cash. This cash, combined with available borrowing capacity and the committed borrowing facilities, gave us over $1.5 billion of liquidity at quarter end. We had no borrowings outstanding under our ABL facility, and our net leverage at quarter end was 1.7 times adjusted EBITDA. RXO will dividend the net proceeds to XPO, which XPO will then use to pay down debt. Lastly, on a personal note, I'm very thankful to XPO and Brad for the opportunity to be part of this leadership team and the incredible transformation we have achieved over the last few years. Both companies are well positioned to continue on their growth path, and I wish both Jamie Harris and Carl Anderson success in their new roles. I will now turn things over to Mario.