XPO, Inc.

Welcome to the XPO fourth quarter 2025 earnings conference call and webcast. My name is Shamali, 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 securities laws, which by their nature involves 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 forlicking 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 forlicking 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 table 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 XPO's Chairman and Chief Executive Officer, Mario Herrick. Mr. Herrick, you may begin.

Good morning, everyone, and thank you for joining us. I'm here with Kyle Wismans, our Chief Financial Officer, and Ali Fagri, our Chief Strategy Officer. This morning, we reported another quarter of strong execution to close out the year. Company-wide, we delivered fourth quarter adjusted EBITDA of $312 million and adjusted diluted EPS of $0.88. Excluding real estate gains in both periods, Adjusted EBITDA increased 11%, and adjusted EPS increased 18% year-over-year. In North American STL, we generated adjusted operating income of $181 million, which was up 14% from the prior year. And we improved our adjusted operating ratio by 180 basis points, significantly outperforming normal seasonality. We've now expanded our LTL margin by 590 latest points since 2022, which marked the start of one of the most prolonged trade downturns in history. This speaks to the resilience of our strategy, and it will continue to serve us well this year and in the long term, regardless of the cycle. The key components of our strategy are fully within our control, and I'll start with our most important lever, customer service. In 2025, we'll reduce damages and improve service quality to new company records, reflecting our focus on providing a superior customer experience. We're achieving this by balancing our network more precisely, reducing the number of freight re-handles, and implementing tighter operating processes at the service center level. And critically, our stronger service performance is translating directly to better commercial outcomes. As a result, we've been able to earn higher prices and gain market share by providing consistent work-class service. When we make ongoing investments in the business, we're strengthening the connection between service quality and value creation. For example, we've deliberately invested in the network ahead of the off-cycle to create more than 30% excess load capacity. This has given us the flexibility to operate more efficiently in the current environment and we're positioned to respond quickly in a recovery. On the equipment side, our average tractor age at year end was 3.7 years, giving us one of the youngest fleets in the industry. This improves reliability and safety while reducing our maintenance cost per mile to the lowest level in our history. From a labor standpoint, we're staffed to support any near-term increases in demand while maintaining our high service levels. Combined with lower employee turnover, and the national scale of our driver training schools were well positioned to flex labor efficiently as volume grows. Each component of our capacity has a role in making sure we realize significant upside from our operating leverage when demand recovers. Next is pricing, which has a direct correlation to margin performance. Throughout 2025, we saw customers place more value on our service as reflected in the pricing gains we earned. For the full year, we grew yield excluding fuel by 6%. It was also the third consecutive year that we improved revenue per shipment for every quarter. In addition, the expansion we're driving with local customers and premium services is contributing to our above-market pricing growth. These revenue streams come with higher margins, and we see long runways for both as core parts of our business. Another highlight of 2025 that contributed to margin was our improved cost efficiency. This was underpinned by productivity gains and a lower reliance on purchase transportation. Productivity improved roughly one and a half points for the year, with a ramp in the second half from our latest technology rollouts. These are proprietary applications that use AI for planning, freight flow management, and network operations. Importantly, we've completed a successful pilot of our AI-driven route optimization tools for pickup and delivery. And now we're expanding this internally developed technology to nearly half of our service centers this quarter. We expect this to further reduce overall miles and improve stops per hour across a cost category of nearly $900 million. And on purchase transportation, we exited the year with the lowest level of outsourced miles in our company's history. at 5.1% of total miles. This has given us greater control over service quality and a more flexible cost structure. These cost efficiencies will scale with volume, and we expect the benefits to margin to grow over time. To sum it up, we've entered 2026 from a position of strength, following a year of significant progress in our performance. While we're pleased to have reported above-market results for another four quarters, we have multiple drivers to improve our MTL operating ratio well into the 70s in the years to come. It's a substantial expansion of our operating margin. Number one is pricing, where we see a double-digit opportunity to surpass the market in pricing growth over time by continuing to enhance service quality and revenue mix. Another key is our investment in capacity ahead of the cycle. We've built excess capacity across our network, positioning us for profitable share gains and operating leverage as demand recovers. And we have a long runway to improve cost efficiency and productivity through network applications of AI at scale. These are all high-impact initiatives that are already driving results. Importantly, our progress will be amplified by the billions of dollars of cumulative free cash flow we expect to generate in the coming years, starting with a meaningful acceleration in 2026. This will prompt an increase in share repurchases and debt reduction to further compound our earnings growth. 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. I'll walk through the fourth quarter financial results, followed by our balance sheet, liquidity, and capital allocation. For the total company, revenue increased 5% year-over-year to $2 billion. Revenue in our LTL segment was $1.2 billion, up 1% from last year, as their increase in yield more than offset the decrease in volume. Turning to cost, we continue to make progress in key areas that relate directly to margin. On a year-over-year basis, our salary, wage, and benefits expense decreased 1%, or $7 million, driven by strong productivity gains. And our purchase transportation expense decreased 46%, or $20 million, as we continue to insource line haul miles and optimize the network. This is a structural cost reduction that will help support stronger incremental margins as truckload rates rise when the freight market recovers. Depreciation expense increased 11%, or $9 million, reflecting our ongoing investments in equipment and capacity to support long-term growth. Moving to profitability, total adjusted EBITDA was $312 million for the quarter, with $285 million generated by our LTL segment. Excluding gains on real estate transactions, adjusted EBITDA increased year-over-year by 11%, both for the company as a whole and for the LTL segment. In Europe, adjusted EBITDA was $32 million, while corporate adjusted EBITDA was a loss of $4 million. For the total company, four-quarter operating income was $143 million. Net income was $59 million, and diluted earnings per share was 50 cents. Net income includes $14 million of gains on real estate and equipment, as well as $33 million of restructuring expense. This was primarily from previously granted equity awards related to the transition in board leadership. On an adjusted basis, diluted EPS was 88 cents. Excluding $0.08 per share of real estate gains in the fourth quarter of 2025 and $0.21 per share in the fourth quarter of 2024, adjusted EPS increased 18%. Turning to cash flow and CapEx, we generated $226 million of cash flow from operating activities in the quarter and deployed $84 million of net capital expenditures. We ended the quarter with $310 million of cash on hand after repurchasing $65 million of common stock and paying down $65 million on our term loan facility. Combined with available capacity under our committed borrowing facility, total liquidity at year end was $910 million. Our net leverage ratio at year end was 2.4 times trailing 12 months adjusted EBITDA for 2025. down from 2.5 times for 2024, and significantly lower than the three times we reported for 2023. As we look ahead, we expect to meaningfully increase free cash flow generation this year and over the years to come. This will enable us to accelerate share repurchases while also continuing to strengthen the balance sheet through debt pay down. Before I close, I'll summarize this year's planning assumptions to help you with your models. For 2026, we expect total company gross capital expenditures of $500 to $600 million, interest expense of $205 to $215 million, pension income of approximately $14 million, an adjusted effective tax rate of 24% to 25%, and a diluted share account of approximately 118 million shares. These assumptions are included in our latest investor presentation. And with that, I'll turn it over to Ali to cover the operating results.