XPO, Inc.

Welcome to the XPO Q1 2026 earnings conference call and webcast. My name is Kevin, and I'll 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 telephone keypad. Please limit yourself to one question when you come up to the queue. If you have additional questions, you're welcome to get back into the queue and and we'll take as many questions 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 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 its earnings release. The forward-looking statements in the company's earnings release are 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 the 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 information, important information regarding forward-looking statements and non-GAAP financial measures, in the Investors section on the company's website. I would 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 Faghri, our Chief Strategy Officer. This morning, we reported record first quarter earnings with strong momentum across the business. Company-wide, we delivered adjusted EBITDA of $319 million dollars, up 15% year-over-year, and our adjusted diluted EPS was $1.01, up 38%. In North American LTL, we increased adjusted operating income by 20%, and we delivered an adjusted operating ratio of 83.9%. That's an improvement of 200 basis points year-over-year, which is also well ahead of normal seasonality. These results mark a clear acceleration of our performance driven by the disciplined execution of our strategy. It starts with customer service when we continue to make significant progress. In the first quarter, we reduced our damage claims ratio below 0.2% with damages at a record low. This is the service metric that matters most to LTL customers. We've developed new AI-driven technology that addresses damages by improving how we load our trailers. These tools evaluate load quality in real time and help us protect our customers' freight. We're also running one of the fastest networks in the industry with the largest number of standard one-day and two-day lanes. Our mix of speed, coverage, and safe handling, combined with reliable on-time performance, is delivering a superior experience for our customers. And this is translating into better commercial outcomes, including stronger pricing and ongoing market share gains. We've also built our network to support growth by investing ahead of demand across our workforce, fleets, and service centers. These are the three main components of capacity to move freight for our customers. On the real estate side, we've added density in growth markets, and we continue to operate with more than 30% excess door capacity. This allows us to run our network efficiently today and respond quickly as volumes recover. Another area where we invest to gain a competitive edge is in our rolling stock of tractors and traders. We have one of the youngest fleets in the industry with an average tractor age of 3.9 years. This gives us an advantage with reliability, safety, and lower maintenance costs. Trailers are just as critical to capacity because they enable more efficient freight flows across our network. We've manufactured more than 20,000 trailers since the start of the freight down cycle. And from a labor standpoint, we have a proprietary workforce planning model that uses technology to flex labor hours as demand changes. This allows us to improve productivity while maintaining high service levels. Taken together, our investments in capacity are creating strong operating leverage that will enhance our bottom line as the cycle turns. Another strategic lever is pricing, where we saw continued momentum in the quarter with underlying trends that improve each month. As demand recovers, customers place more value on carriers they can rely on for both capacity and consistent service, and that translates into stronger pricing and continued share gains for us. One area where we're continuing to earn market share is with local customers. In the first quarter, we grew shipments in this high margin channel by mid to high single digits in acceleration from the prior quarter. We're also continuing to shift toward higher quality freight, including shipments that need our premium services. The demand for our rollout offering was a key driver of our margin improvement in the first quarter. And we're seeing increased adoption in verticals like grocery and healthcare, where we fill a definite need as customers in these segments have service-sensitive freight. In short, we have multiple levers we can execute and a long runway to build on our momentum, with a double-digit pricing opportunity over the years to come. And lastly, another important driver of our outperformance is cost efficiencies. In the first quarter, our productivity improvement of 4% was well above our long-term target of 1.5%. We achieved this by ramping our technology to ensure that the benefits are both durable and scalable. Specifically, we're leveraging proprietary tools that use AI to improve planning, optimize trade flows, and enhance day-to-day network execution. This is especially valuable in line haul and pickup and delivery operations, where the savings can be significant. For example, we've rolled out our pickup and delivery tools for route optimization to about half the network, and we're seeing tangible efficiencies, including fewer miles and more stops per hour. We expect to have this set fully implemented by the end of the year. And to bring down our purchase transportation costs, we've reduced outsourced miles to some of the lowest levels in our history. This has given us a more flexible cost structure that mitigates our exposure to rises in truckload rates. Importantly, these initiatives are driving structural improvements that will scale as volumes recover, creating further opportunities for margin expansion. In closing, our strong start of the year reflects the strength of our model and the consistency of our execution. We have a clear line of sight to achieving an LTL operating ratio in the 70s, driven by ongoing service improvements, profitable share gains, above-market yield growth, and robust cost efficiency across our network. Increasingly, all four of these drivers will be propelled by our proprietary technology, NAI. We also see a significant opportunity to further compound earnings as we expect to generate billions of dollars of cumulative free cash flow in the coming years. accelerating share repurchases, and debt reduction. This is how we're building our path to long-term value creation for our shareholders. 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 take you through our key financial results, balance sheet, and capital allocation. For the first quarter, total company revenue was $2.1 billion, an increase of 7% year over year. Revenue in our LTL segment grew 5% to $1.2 billion, primarily driven by higher yield and fuel surcharge revenue. On the cost side in LTL, we continue to operate more efficiently and with less reliance on purchased transportation. Our productivity gains in the quarter help mitigate the impact of wage inflation, line haul land sourcing, and volume growth. Our salary, wage, and benefits expense increased year-over-year by 4%, or $27 million. On purchased transportation, we enhance our structural cost improvement by further reducing our use of third-party carriers. This will help us control line haul costs as the cycle recovers and truckload rates rise. Depreciation expense increased by $8 million, or 10% year-over-year, reflecting our continued investments in the network to support long-term growth. During profitability, we increased adjusted EBITDA company-wide by 15% to $319 million. Our adjusted EBITDA margin was 15.2%, an improvement of 100 basis points from the first quarter the prior year. In our LTL segment, we grew adjusted operating income by 20% to $198 million and adjusted EBITDA by 16% to $290 million. Our LTL adjusted EBITDA margin improved by 230 basis points to 23.6%. In our European transportation segment, adjusted EBITDA was $33 million. And in our corporate segment, adjusted EBITDA was a $4 million loss. Returning to the company as a whole, we reported operating income of $174 million for the quarter, up 15% year over year. And we grew net income by 46% to $101 million, representing diluted earnings per share of 85 cents. On an adjusted basis, diluted EPS was $1.01, an increase of 38% year-over-year. Moving to cash flow and CapEx, we generated $183 million of cash flow from operating activities in the quarter and deployed $104 million of net capital expenditures. We ended the quarter with $237 million of cash on hand, after repurchasing $30 million of common stock and paying down $30 million on our term loan facility. Combined with available capacity under our committed borrowing facility, our total liquidity at quarter end was $837 million. Our net leverage ratio was 2.3 times trailing 12 months adjusted EBITDA, down from 2.4 times at year-end 2025. continuing the trend of the last two years. We expect a meaningful step up in free cash flow generation this year, with momentum building over the next few years. This should accelerate the pace of share repurchases and deleveraging. Before I wrap up, I want to highlight an update to our full year 2026 planning assumptions. We now expect our adjusted effective tax rate to be in the range of 23% to 24%. This is reflected in the latest investor presentation. Our other planning assumptions for the year remain unchanged. With that, I'll hand it over to Ali to walk through our operating results.