XPO, Inc.

Welcome to the XPO first quarter 2024 earnings conference call and webcast. My name is Jessie and I'll 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 one on your telephone keypad. Please limit yourself to one question when you come up into 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 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 investor section of the company's website. I will now turn the call over to XBO's Chief Executive Officer, Mario Herrick. Mr. Herrick, you may begin.

Good morning, everyone. Thanks for joining our call. I'm here in Greenwich with Kyle Wismans, our Chief Financial Officer, and Ali Faghri, our Chief Strategy Officer. This morning, we reported financial results that were well above expectations for revenue and earnings in the soft market for freight transportation. It was a strong first quarter for us company-wide, reflecting the momentum we carried into 2024. We grew revenue year-over-year by 6% to $2 billion, and we improved our adjusted EBITDA by 37% to $288 billion. Adjusted diluted EPS was 45% higher year-over-year at 81 cents. As you saw in our results, our LTL 2.0 plan is firing on all cylinders. I want to frame my comments this morning around the four pillars of our plan and the tremendous progress we're making. I'll start with the pillar that is most important to our growth and profitability, which is to provide world-class service to our customers. Our first quarter damage claims ratio continued to be among the best in the industry at a company record of 0.3%. This was an improvement from 0.7 percent last year and from 1.2 percent when we launched LTL 2.0 just over two years ago. The underlying driver of this improvement has been a reduction of more than 70 percent in damage frequency. Another key service metric is on-time performance, which has now improved on a year-over-year basis for eight consecutive quarters. In short, we're delivering meaningful service improvements while moving more volume through our network with a multi-year plan that balances operational excellence and investments in the network. This includes the freight airbag systems we introduced in the second half of last year. That equipment is now installed in 75% of our service centers, and we expect to complete the rollout by mid-year. The sites that have the airbags are seeing an improvement in damage frequency of greater than 20%. We've also recently updated our trailer loading procedures, which will continue to enhance our service quality over time. And as we insource more miles from third-party carriers, we expect this to further reduce damages and improve on-time performance. We've made it clear to our customers and employees that service quality is our North Star, and we're well on our way to becoming the best-in-class LTL service provider. The second pillar of LTL 2.0 is to invest in our network. Our business has historically generated a high return on invested capital. Since the launch of LTL 2.0, we've added over 12,000 trailers and 4,000 tractors to our fleet. This has allowed us to operate more efficiently and maintain strong network fluidity while insourcing more line haul transportation. Over two-thirds of our 2024 CAPEX is allocated for fleet. We added nearly 1,600 tractors in the first quarter, which brought down our average tractor age to 4.2 years from five years at the end of 2023. The new tractors are more efficient to operate resulting in an improvement in our fleet maintenance costs. We also manufactured nearly 1,300 trailers in the quarter, and we recently celebrated the 30th anniversary of our production facility in Arkansas. We are the only U.S. freight transportation company to manufacture its own trailers, which puts us in a unique position to create capacity when our customers need it, and we can do it with less capital. In terms of the 28 new service centers we acquired in December, we've now opened the first six on schedule in April, with another six planned for the second quarter. This is expanding our presence in growing freight markets like Nashville, Las Vegas, and Houston. We plan to bring another dozen sites online by the end of this year and expect all 28 to be operational by early 2025. The third pillar of our plan is to drive above-market yield growth. Yield is our single biggest opportunity for margin improvement, and it's the highlight of our results this morning. We grew yield, excluding fuel, by 9.8% year over year, which helped us deliver nearly 400 basis points of adjusted operating ratio improvement. Even with the gains we've made, we still have a significant pricing opportunity that we can capture over time through three distinct levers, by improving our service, growing our assessorial business, and expanding our local customer base. As we continue to improve our service, we're able to align our price with the value we deliver. This was reflected in our contract renewal pricing, where we achieved year-over-year growth in the high single digits for the third consecutive quarter. We also captured a double-digit increase in accessorial revenue as customers took advantage of our premium services. The fourth quarter rollout of our retail store offering went well, and we're developing a pipeline of customers specifically for this premium service. In the first quarter, we introduced another new service called Must-Arrive By Date, which is already gaining strong customer traction. and we're expanding our trade show and cross-border services with the support of our newest service centers in Las Vegas and Nogales, Arizona. Lastly, we're continuing to have success in growing our local customer base. From a strategic perspective, local accounts are a higher margin business for us, and we've expanded our local sales force to double down on this opportunity. In the first quarter, we earned 10% more shipment from local customers compared to the year ago. The final pillar of LTL 2.0 is cost efficiency, specifically with purchase transportation, variable costs, and overhead. In the first quarter, we reduced our purchase transportation cost by 21% year-over-year by covering more line haul miles in-house while also paying lower contract rates for the miles we outsourced. We ended the quarter with 18% of line haul miles outsourced to third parties, which was a reduction of 370 basis points year over year. That puts us at the higher end of our target range for a 200-400 basis points improvement this year. We expect to accelerate the number of miles we bring in-house in 2024, which will give us greater efficiency, flexibility, and quality control. This will be supported by our initiative to add driver teams in sleeper cab trucks for long-distance hauls. We've onboarded over 100 of these teams, and we're targeting a few hundred sleeper trucks to be in operation by the end of this year. Lastly, As our volume growth continues to outpace our headcount growth, our variable labor costs creates an ongoing margin opportunity. We managed this effectively in the first quarter through the strong execution of our operational teams and our proprietary technology. Turning to Europe, our business continued to perform well in a soft macro environment. We increased both revenue and adjusted EBITDA versus the prior year. supported by a strong pricing environment and a robust sales pipeline. Our strongest year-over-year growth rates in adjusted EBITDA were in France and the UK, which are two key geographies for us. In France, the increase was in the mid-teens, and in the UK, it was in the high single digits. Across the European business as a whole, our first quarter EBITDA was the highest it's been since the pandemic. In summary, we made significant progress in executing our strategy in the first quarter, while continuing to make investments in long-term growth. Our service quality is at record levels. We're growing yield faster than the market, and we're driving cost efficiencies in areas that have the greatest impact on earnings. The initiatives we put in place are contributing to our strong operating momentum and cementing our foundation for future growth. We've come a long way under LTL 2.0, and we're still in the early stages of unlocking our full potential. Now, I'm going to hand the call over to Kyle to discuss the first quarter result. Kyle, over to you.

Thank you, Mario, and good morning, everyone. I'll take you through our key financial results, balance sheet, and liquidity. It was a strong first quarter across the board. Revenue for the total company was $2 billion, up 6% year-over-year. This includes top-line growth of 9% in our LTL segment and 1% in Europe. Our LTL revenue excluding fuel was up a robust 12% year-over-year. On the cost side in LTL, salary, wages, and benefits were 10.5% higher in the quarter than a year ago. The increase primarily reflects wage and benefit inflation, as well as incentive compensation aligned with the segment's strong first quarter performance. We mitigated these impacts by delivering our fifth straight quarterly increase in labor productivity on a year-over-year basis. Our labor hours per day increased by 3.5 percent in the quarter, while our shipments per day increased by 4.7 percent. We were also more cost-efficient with purchase transportation through a combination of insourcing and rate negotiation. Our expense for third-party carriers was down year-over-year by 21 percent, which equates to a $21 million savings in the quarter. Depreciation expense increased by 22 percent year-over-year, or $13 million, reflecting the investments we're making in the business. This continues to be our top priority for capital allocation in LTL. Our first quarter CapEx was primarily allocated to purchasing new tractors from the OEMs and manufacturing more trailers in-house. Next, I'll add some detail to adjusted EBITDA, starting with the company as a whole. We generated adjusted EBITDA of $288 million in the quarter, which was up 37 percent from a year ago. Both our North American and European segments contributed to the increase. Our adjusted EBITDA margin was 14.2%, representing a year-over-year improvement of 320 basis points company-wide. We also continued to rationalize our corporate cost structure. Our first quarter corporate net expense was $5 million, for a year-over-year savings of 44%. Looking at just the LTL segment, we grew our adjusted operating income by 50 percent year-over-year to $175 million, and we grew adjusted EBITDA by 40 percent to $255 million. This reflects the combined impact of pricing gains, cost efficiencies, and increase in volume. In our European transportation segment, Adjusted EBITDA was $38 million for the quarter, up 3 percent over the prior year. Company-wide, we reported operating income of $138 million for the quarter, up 138 percent year-over-year. And we grew net income from continuing operations by 294 percent to $67 million, representing diluted earnings per share of $0.56. On an adjusted basis, PS increased by 45% year-over-year to $0.81. And lastly, we generated $145 million of cash flow from operating activities in the quarter and deployed $299 million of net CapEx. Moving to the balance sheet, we ended the quarter with $229 million of cash on hand. Combined with available capacity under our committed borrowing facility, this gave us $793 million of liquidity. We had no borrowings outstanding under our AVL facility at quarter end. Our net debt leverage ratio at the end of the quarter was 2.9 times trailing 12 months adjusted EBITDA. This was an improvement from three times at year end 2023, and we expect to further reduce our leverage this year. The ongoing investments we're making are enhancing our earnings growth trajectory and will support our long-term goal of achieving an investment-grade profile. Now, I'll turn it over to Ali, who will cover our operating results.