XPO, Inc.

Welcome to the XPO Second Quarter 2025 earnings conference call in 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 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 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-GAP 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 by the extent required by law. During the call, the company will also refer to certain non-GAP financial measures as defined under applicable SEC rules. Reconciliation of such non-GAP financial measures to the most comparable GAP measures are contained in the company's earnings release and in 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-GAP financial measures in the investor section on the company's website. I'll now turn the call over to XPO's Chief Executive Officer Mario Harak. Mr. Harak, you may begin.

Good morning everyone and thank you for joining our call. I'm here with Kyle Wismans, our Chief Financial Officer, and Ali Fagery, our Chief Strategy Officer. Earlier today we reported strong second quarter results. We generated $2.1 billion of revenue and adjusted EBITDA of $340 million. Our adjusted diluted EPS of $1.05 exceeded expectations. And our North American LTL business continued to outperform the industry, building on our momentum across the network. Over the past two years, we've improved our adjusted operating ratio by 470 basis points in a soft-trade environment, underscoring the strength of our operating model. And in the second quarter, we outpaced both the industry and normal seasonality on margin expansion. This was underpinned by above-market yield growth, ongoing cost efficiencies, and most important, the superior service that supports our customers. Additional highlights of the quarter include our strategic investments in the network and the technology that differentiates our value proposition. I'll speak to our recent progress starting with customer service. In the second quarter, we achieved -over-year improvement in damage frequency and a damage claims ratio of 0.3%. This reflects the discipline we bring to our service culture. We also continued to raise the bar with on-time performance with our 13th straight quarter of -over-year improvement. Our network speed and reliability are key differentiators for customers. We're continuing to elevate our world-class service levels with a customer-loving mindset across our organization, a significant network expansion, and technology-driven operating excellence. The ongoing investments we're making in the network support both long-term growth and efficiency. Since launching our LTL Growth Plan in 2021, we've added nearly 6,000 tractors and more than 17,000 trailers to our fleet. Our average tractor age is now less than four years, which improves reliability and reduces maintenance costs. On the real estate side, we're seeing strong contributions from the growth of our footprint. In recent quarters, we've opened some of the largest LTL service centers in North America, including two additional break-balk locations in Carlisle, Pennsylvania and Greensboro, North Carolina. These facilities sit in key freight corridors and are ramping up fast, helping us move more direct loads by building density in the network. Our customer shipments are flowing more efficiently -to-end, and we're reducing both re-handles and miles, while also enhancing our pickup and delivery operations. Almost all of the acquired facilities are now open, and we've met our target of 30% excess door capacity. This position starts to capture profitable share in freight market rebound and unlock more operating leverage. Now let's turn to pricing, which continues to be a key driver of our outperformance. Our strong service levels are enabling us to earn above-market yield growth and win new business. In the second quarter, we increased yield, excluding fuel, by .1% -over-year with sequential growth from the first quarter, and we see a long runway to further align our pricing as we enhance our value to customers. We're also seeing a benefit to mix from local accounts and premium services, which now represent a larger share of our revenue and carry higher margins. Demand continues to grow for our premium offerings, including our grocery consolidation service, which we expect to ramp in the coming months. It's an attractive end market with significant growth potential, and our differentiated service offering uniquely positions us to gain share in this vertical. Cost efficiency is another area of the business where we made meaningful progress in the quarter, most notably with labor productivity and line haul. Our proprietary labor planning platform gives our managers visibility into volume flows with the ability to adjust staffing to demand in real time. We're seeing significant benefits, including a second quarter improvement in labor hours per shipment versus the prior year. This is just one example of how our -in-class technology helps us improve margins, even when demand is down. It's a competitive advantage that will compound as industry volumes recover. On the line haul side, we reduced outsourced miles to just .8% of total miles, which brought down our purchase transportation expense by 53% year over year. That's more than 900 basis points lower than last year and the best level in our history, with more opportunity ahead. And our new AI-powered line haul models are driving additional savings, reducing normalized line haul miles by 3%, empty miles by over 10%, and freight diversions by more than 80%. Recently, we started piloting AI-driven functionality for trailer and route assignments and pickup and delivery operations. The early results are encouraging, with positive trends in stops per hour and trailer utilization. We're excited about what AI can mean for our operations and our customers, and we expect it to become increasingly important to our strategy over the long term. In closing, we reported another quarter of our performance that showcased the operating momentum we've built across every part of the business. We delivered strong yield growth, realized cost savings throughout the network, and deepened our competitive edge through world-class service and technology. Our AI initiatives are already generating measurable returns, and our investments in the network are unlocking new levels of efficiency and flexibility. We're operating from a position of strength with a clear plan to deliver sustained margin expansion and long-term value creation. With that, I'll turn it over to Kyle to walk through the financials. Kyle, over to you.

Thank you, Mario, and good morning, everyone. In our LPL segment, revenue declines 3% on a -over-year basis, largely due to a reduction in fuel surcharge revenue tied to the price of diesel. Excluding fuel, LPL revenue is down 1%. On a sequential basis, LPL revenue increased 10% on a -over-year basis, On the cost side in LPL, we continue to make meaningful progress in reducing our purchase transportation expense. Our third-party carrier expense declined 53% -over-year as we in-sourced more line-home miles. This resulted in $36 million in savings for the quarter. With labor, we held our cost of salary, wages, and benefits roughly flat -over-year by improving productivity, which offset inflationary pressures. Our technology has been the key to realizing steady productivity gains across our network. In terms of equipment, our maintenance cost per mile improved 6%, supported by the addition of newer tractors to our fleet. LPL depreciation expense increased 13%, or $10 million, consistent with our strategy of investing in the network, including our rolling stock. Next, let's start to adjust the dividend. Company-wide, we generated $340 million of adjusted EBITDA, down 1% from a year ago. In our LPL segment, we grew adjusted EBITDA by 1% to $300 million and expanded this margin by 90 basis points to 24.2%. These results speak to the strength of our operating model. We have the ability to deliver strong yield growth and cost discipline in a soft environment, as we did in the second quarter. This helped offset headwinds from lower fuel surcharge revenue, tonnage, and pension income. For our European transportation segment, we reported adjusted EBITDA of $44 million, while the corporate segment had a $4 million loss. For the total company, second quarter operating income was $198 million, which is a 1% increase from the prior year. Net income was $106 million, which equates to $0.89 of diluted earnings per share. And on an adjusted basis, EPS was $1.05 compared with $1.12 a year ago. Lastly, we generated $247 million of cash from operating activities in the quarter and deployed $191 million of net capbacks. Moving to the balance sheet, we ended the quarter with $225 million of cash on hand. Combined with available capacity under our committed borrowing facility, this gave us $824 million of liquidity at quarter end. And our net debt leverage ratio improved to 2.5 times trailing 12 months adjusted EBITDA, compared with 2.7 times a year ago. Looking ahead, while we remain committed to investing in initiatives that support long-term growth, we expect our capex to moderate and our free cash flow conversion to increase going forward. This positions us with greater flexibility to return capital to shareholders over time and pay down debt. Regarding share buybacks, we initiated our program with $10 million of the common stock repurchased in the second quarter. And we plan to scale up our buyback activity as free cash flow increases. This reflects our confidence in the long-term value of our shares. With that, I'll hand it over to Ali to walk through our operating results.