Q1 2024 XPO Logistics Inc Earnings Call

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Operator: Welcome to the XPO First Quarter 2024 Earnings Conference Call and Webcast. My name is Jessie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode.

Jesse: Welcome to the X P O first quarter 2024 earnings conference call and webcast. My name is Jesse and I'll be your operator for today's call.

Jesse: At this time all participants are in a listen only mode.

Operator: 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 go 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.

Speaker Change: 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.

Speaker Change: 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.

Operator: Please note that this conference call is being recorded. Before the call begins, I will 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.

Speaker Change: 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.

Speaker Change: 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.

Operator: 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 may also refer to certain non-GAAP financial measures as defined under applicable SEC rules.

Speaker Change: 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.

Speaker Change: During this call. The company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules reconcile.

Speaker Change: A reconciliation of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and related financial tables or on its website.

Operator: 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 includes additional important information regarding forward-looking statements and non-GAAP financial measures, in the Investors section of the company's website. I will now turn the call over to XPO's Chief Executive Officer, Mario Harik. Mr. Harik, you may begin.

Speaker Change: 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 of the company's website.

Speaker Change: I will now turn the call over to <unk>, Chief Executive Officer, Mario Herrick, Mr. Herrick, you may begin.

Good morning, everyone. Thanks for joining I would call.

Mario A. Harik: 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 EB Tau by 37%. $288 million. Adjusted values at EPS were 45% higher year over year at $0.81.

Mario A. Harik: I'm here in Greenwich with Congressman <unk>.

Mario A. Harik: Financial Officer, <unk>, <unk>, our Chief strategy Officer.

Mario A. Harik: This morning, we reported financial results that were well above expectations for revenue and earnings in a soft market for freight transportation.

Mario A. Harik: It was a strong first quarter for us company wide.

Mario A. Harik: Reflecting the momentum we carried into 2024.

Mario A. Harik: We grew revenue year over year by 6% to $2 billion.

Mario A. Harik: And we improved our adjusted EBITDA by 37% to $288 million.

Mario A. Harik: Adjusted diluted EPS was <unk>, 45% higher year over year at 81 cents.

Mario A. Harik: 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, providing 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%.

Mario A. Harik: As you saw in our results our MTL to point to Oakland is firing on all cylinders.

Mario A. Harik: I want to frame my comments this morning around the four pillars of our plan and the tremendous progress we're making.

Mario A. Harik: I'll start with the printer that is most important to our growth and profitability.

Mario A. Harik: To provide world class service to our customers.

Mario A. Harik: I would first quarter damage claims ratio continued to be among the best in the industry.

Mario A. Harik: At a company record of 0.3%.

Mario A. Harik: This was an improvement from 0.7% last year and from 1.2% 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% in damage frequency.

This was an improvement from 0.7% last year.

Mario A. Harik: And from one 2% when we launched LTE at a 2.0 just over two years ago.

Mario A. Harik: The underlying driver of this improvement has been a reduction of more than 70% and damage frequency.

Mario A. Harik: Okay.

Mario A. Harik: 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%.

Mario A. Harik: Another key service metric is on time performance.

Mario A. Harik: Which has now improved on a year over year basis for eight consecutive quarters.

Mario A. Harik: In short, we're delivering meaningful service improvements, while moving more volume through our network.

Mario A. Harik: With the multi year plan that balances operational excellence and investments in the network.

Mario A. Harik: This includes the <unk> airbag systems, we introduce in the second half of last year.

Mario A. Harik: That equipment is now installed in 75% of our service centers.

Mario A. Harik: We expect to complete the rollout by mid year.

Mario A. Harik: The sites that have the airbags are seeing an improvement in damage frequency of greater than 20%.

Mario A. Harik: Yeah.

Mario A. Harik: We've also recently updated our trailer loading procedures, which will continue to enhance our service quality over time. And as we outsource 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 investing in our network.

Mario A. Harik: We've also recently updated our trailer loading procedures, which will continue to enhance our service quality over time.

Mario A. Harik: And as we in source more miles from third party carriers, we expect this to further reduce damages and improve on time performance.

Mario A. Harik: We've made it clear to our customers and employees that service quality is our north star and.

Mario A. Harik: And we were well on our way to becoming the best in class Lts service provider.

Mario A. Harik: The second bidder of LTR to point, though is to invest in our network.

Mario A. Harik: 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 sourcing more line-haul transportation. In fact, over two-thirds of our 2024 capex is allocated to the 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.

Mario A. Harik: Our business has historically generated a high return on invested capital.

Since the launch of LTE L 2.0, we've added over 12000 theaters and 4000 factors solid fleet.

This has allowed us to operate more efficiently and maintain strong network fluidity.

Mario A. Harik: The in sourcing more line haul transportation.

Mario A. Harik: Over two thirds of our 'twenty 'twenty four capex is allocated for fleet.

Mario A. Harik: Yeah.

Mario A. Harik: We added 1600 tractors in the first quarter, which brought down our average tractor age to $4 two years from five years at the end of 2023.

Mario A. Harik: 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.

Mario A. Harik: The new tractors are more efficient to operate resulting in an improvement in our fleet maintenance costs.

Mario A. Harik: We also manufactured nearly 1300 theaters in the quarter and we recently celebrated the 30th anniversary of our production facility in Arkansas.

Mario A. Harik: We are the older U S free transportation company to manufacture its own theatres, which puts us in a unique position to create capacity when our customers need it.

Mario A. Harik: And we can do it with less capital.

Mario A. Harik: Yeah.

Mario A. Harik: 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.

Mario A. Harik: 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 plants for the second quarter.

Mario A. Harik: This is expanding our presence in the growing freight markets like Nashville, Las Vegas and Houston.

Mario A. Harik: We plan to bring another dozen sites online by the end of this year and.

Mario A. Harik: And expect all 28 to be operational by early 2025.

Mario A. Harik: 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.

Mario A. Harik: The third pillar of our plan is to do.

Mario A. Harik: Above market yield growth.

Mario A. Harik: Yoga is our single biggest opportunity for margin improvement.

Mario A. Harik: And it's a highlight of our results this morning.

Mario A. Harik: 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 accessory 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.

Mario A. Harik: We could do we yield excluding fuel by nine 8% year over year, which helped us deliver nearly 400 basis points of adjusted operating ratio improvement.

Mario A. Harik: Even with the gains we've made we still have a significant pricing opportunity that we can capture overtime through three distinct levers.

Mario A. Harik: Improving our service.

Mario A. Harik: I would ask the Saudi oil business and expanding our local customer base.

Mario A. Harik: As we continue to improve our service, we're able to align our price with the value we deliver.

Mario A. Harik: 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.

Mario A. Harik: This was reflected in our contact center, you will pricing what do we achieved year over year growth in the high single digits for the third consecutive quarter.

Mario A. Harik: 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 were developing a pipeline of customers specifically for this premium service.

Mario A. Harik: In the first quarter, we introduced another new service called must arrive by date, which is already gaining strong customer traction.

Mario A. Harik: 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 shipments from local customers compared to the year ago. The final pillar of LTL 2.0 is cost-efficiency, specifically with purchased transportation, variable costs, and overhead.

Mario A. Harik: And it would expanding our trade show in cross border services with the support of our newest service centers in Las Vegas, and Nogales, Arizona.

Mario A. Harik: Lastly, we're continuing to have success in growing our local customer base.

Mario A. Harik: From a strategic perspective local accounts are the higher margin business for us and.

Mario A. Harik: And we've expanded our local sales force to double down on this opportunity.

In the first quarter, we earned 10% more shipman from local customers compared with a year ago.

The final pillar of LCL to point O is cost efficiency.

Mario A. Harik: Specifically with purchase transportation variable costs and overhead.

Mario A. Harik: In the first quarter, we reduced our purchased transportation costs by 21% year-over-year by covering more line haul miles in-house while also paying lower contract rates for the miles we outsource. 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 the 200-400 basis points improvement this year.

Mario A. Harik: In the first quarter, we did use our purchased transportation cost by 21% year over year by covering more line haul miles in house, but also being lower contract rates for the miles we outsource.

Mario A. Harik: We ended the quarter with 18% of line haul miles outsourced to third parties.

Mario A. Harik: Which was a reduction of 370 basis points year over year.

Mario A. Harik: That puts us at the higher end of our target range for the 200 400 basis points improvement this year.

Mario A. Harik: 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 steeper 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.

Mario A. Harik: We expect to accelerate the number of miles we bring in house in 'twenty, 'twenty, four which will give us greater efficiency flexibility and quality control.

Mario A. Harik: This will be supported by our initiatives to add drivers teams and steeper cat trucks for long distance halls.

Mario A. Harik: We've on boarded over 100 of these teams and we're targeting a few hundred sleeper trucks to be in operation by the end of this year.

Mario A. Harik: Lastly, as our volume growth continues to outpace our headcount growth, our variable labor cost 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 continues 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.

Mario A. Harik: Lastly, as our volume growth continues to outpace our head count growth I would've variable labor costs.

Mario A. Harik: It's an ongoing margin opportunity.

Mario A. Harik: We manage this effectively in the first quarter through the strong execution of our operational teams and our proprietary technology.

Mario A. Harik: Turning to Europe.

Mario A. Harik: Our business continues to perform well in a soft macro environment.

Mario A. Harik: We increased both revenue and adjusted EBITDA versus the prior year supported by strong pricing in vitamin and a robust sales pipeline.

Mario A. Harik: Our strongest year-over-year growth rates and adjusted EB TAP 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.

Mario A. Harik: Our soldiers here over the year to growth rates in adjusted EBITA, when in France, and the U K, which are two key geographies for us.

Mario A. Harik: In France, the increase was in the mid teens and in the U K it wasn't the high single digits.

Mario A. Harik: 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.

Mario A. Harik: Across the European business as a whole I would first quarter EBITDA was the highest it's been since the pandemic.

Mario A. Harik: In summary, we made significant progress in executing our strategy in the first quarter, while continuing to make investments and long term growth.

Mario A. Harik: Our service quality is at record levels.

Mario A. Harik: <unk> yield faster than the market and we're driving cost efficiencies in areas that have the greatest impact on earnings.

Mario A. Harik: The initiatives, we put in place are contributing to our strong operating momentum and cementing our foundation for future growth.

Mario A. Harik: 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 results. Kyle, over to you.

Mario A. Harik: We've come a long way on the S. T. L 2.0, and we're still in the early stages of unlocking our full potential.

Mario A. Harik: Now I'm going to hand, the call over to Kyle to discuss the first quarter results call over to you.

Kyle Wismans: 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 included 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 of LTL, salary, wages, and benefits were 10.5% higher in the quarter than a year ago.

Kyle: Thank you Mario and good morning, everyone I'll take you through our key financial results balance sheet and liquidity.

Kyle: It was a strong first quarter across the board.

Kyle: Revenue for the total company was $2 billion up 6% year over year.

Kyle: This includes top line growth of 9% and our <unk> segment and 1% in Europe.

Kyle: Our LTM revenue, excluding fuel was up a robust 12% year over year.

Kyle: On the cost side and L. T L salary wages and benefits were 10, 5% higher in the quarter than a year ago.

Kyle Wismans: 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% in the quarter, while our shipments per day increased by 4.7%. We were also more cost-efficient with purchased 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% 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.

Kyle: The increase primarily reflects wage and benefit inflation as.

Kyle: As well as incentive compensation aligned with the segment's strong first quarter performance.

Kyle: We mitigated these impacts by delivering our fifth straight quarterly increase in labor productivity on a year over year basis.

Kyle: Our labor hours per day increased by three 5% in the quarter.

Kyle: While our shipments per day increased by four 7%.

Kyle: We were also more cost efficient with purchased transportation.

Kyle: Through a combination of insourcing and rate negotiation.

Kyle: Our expense for third party carriers was down year over year by 21%, which equates to a $21 million savings in the quarter.

Kyle: Depreciation expense increased by 22% year over year or $13 million.

Kyle: Reflecting the investments, we're making in the business.

Kyle: This continues to be our top priority for capital allocation and L. T O.

Kyle Wismans: Our first quarter CAPEX was primarily allocated to purchasing new tractors from the OEMs and manufacturing more trailers in-house. 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% from a year ago. Both our North American and European segments contributed to the increase.

Kyle: Our first quarter Capex was primarily allocated to purchasing new tractors from the Oems and manufacturing more trailers in house.

Kyle: Next.

Speaker Change: I'll add some detail to adjusted EBITDA, starting with the company as a whole.

Speaker Change: We generated adjusted EBITDA of $288 million in the quarter, which was up 37% from a year ago.

Speaker Change: Both our North American and European segments contributed to the increase.

Kyle Wismans: Our adjusted EBITDA margin was 14.2%, representing a year-over-year improvement of 320 basis points company-wide. We also continue 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% year over year to $175 million, and we grew Adjusted EBITDA by 40% to $255 million. This reflects the combined impact of pricing gains, cost efficiencies, and an increase in volume. In our European transportation segment,

Our adjusted EBITDA margin was 14, 2%, representing a year over year improvement of 320 basis points companywide.

Speaker Change: We also continued to rationalize our corporate cost structure.

Speaker Change: Our first quarter corporate net expense was $5 million for a year over year savings of 44%.

Speaker Change: Looking at just the L. T. L segment, we grew our adjusted operating income by 50% year over year to $175 million.

And we grew adjusted EBITDA by 40% to $255 million.

Speaker Change: This reflects the combined impact of pricing gains cost efficiencies.

Speaker Change: And the increase in volume.

Speaker Change: In our European Transportation segment adjusted.

Kyle Wismans: Adjusted EBITDA was $38 million for the quarter, up 3% over the prior year. Company-wide, we reported operating income of $138 million for the quarter, up 138% year-over-year. And we grew net income from continuing operations by 294% to $67 million, representing diluted earnings per share of $0.56 on an adjusted basis.

Speaker Change: EBITDA was $38 million for the quarter.

Speaker Change: 3% over the prior year.

Speaker Change: Companywide, we reported operating income of $138 million for the quarter up 138% year over year.

And we grew net income from continuing operations by 294% to $67 million.

Representing diluted earnings per share of 56.

Speaker Change: On an adjusted basis.

Kyle Wismans: 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 lending facility, this gave us $793 million of liquidity. We had no borrowings outstanding under our AVL facility at Corp. Our net debt leverage ratio at the end of the quarter was 2.9 times trailing 12 months adjusted EBITDA.

Speaker Change: <unk> increased by 45% year over year to 81.

Speaker Change: And lastly.

We generated $145 million of cash flow from operating activities in the quarter.

Speaker Change: And deployed $299 million of net Capex.

Speaker Change: Moving to the balance sheet.

Speaker Change: We ended the quarter with $229 million of cash on hand.

Speaker Change: Combined with available capacity under our committed borrowing facility. This.

Speaker Change: This gave us $793 million of liquidity.

Speaker Change: We had no borrowings outstanding under our ABL facility at quarter end.

Speaker Change: Our net debt leverage ratio at the end of the quarter was two nine times trailing 12 months adjusted EBITDA.

Kyle Wismans: This was an improvement from three times at year-end 2023, and we expect to further reduce our leverage this. 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.

Speaker Change: This was an improvement from three times at year end 2023 and.

Speaker Change: And we expect to further reduce our leverage this year.

Speaker Change: 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.

Speaker Change: Now I'll turn it over to Ali who will cover our operating results.

Ali: Thank you Kyle.

Ali Faghri: I'll start with our LTL segment, which reported another quarter of profitable growth with strong underlying trends. On a year-over-year basis, we increased our shipments per day by 4.7% in the quarter, led by 10% growth in our local sales channel. This resulted in growth in tonnage per day of 2.6%. However, our weight per shipment was down 1.9%, which was less of a decline than the prior quarter.

Ali: I'll start with our L. T L segment, which reported another quarter of profitable growth with strong underlying trends.

Ali: On a year over year basis, we increased our shipments per day by four 7% in the quarter.

Ali: Led by 10% growth in our local sales channel.

Ali: This resulted in growth in tonnage per day of two 6%.

Ali: And our weight per shipment was down one, 9%, which was less of a decline than the prior quarter.

Ali Faghri: On a year-over-year basis, this was our third consecutive quarter of improvement in weight per shipment. On a monthly basis, the trends across our operating metrics were broadly positive. Our January tonnage per day was down 1.1% year over year, February was up 3.5%, and March was up 5.9%. Looking just at shipments per day, January was up 1.4% year over year; February was up 5.8 percent, and March was up 7.2 percent. In April, our preliminary tonnage per day was up 3.1% year over year, while our shipment count was up 4.8% on a two-year stack base. April shipments per day and tonnage per day accelerated versus the month of March.

On a year over year basis. This was our third consecutive quarter of improvement in weight per shipment.

Ali: On a monthly basis, the trends across our operating metrics were broadly positive.

Ali: Our January tonnage per day was down one 1% year over year.

Ali: February was up 3.5% and March was up five 9%.

Ali: Looking just at shipments per day January was up one 4% year over year.

Ali: February was up five 8%.

Ali: And March was up seven 2%.

Ali: In April our preliminary tonnage per day was up three 1% year over year.

Ali: While our shipment count was up four 8%.

Ali: On a two year stack basis April shipments per day, and tonnage per day accelerated versus the month of March.

Ali Faghri: We also delivered another strong quarter of yield growth; we grew yield excluding fuel by a robust 9.8% compared with the prior year, although our improving weight per shipment was a modest mixed headwind to yield. Our revenue per shipment, XFUEL, accelerated for the third consecutive quarter to a year-over-year increase of 7.9 percent. Importantly, our underlying pricing trends are strong as we continue to align our pricing with the better service and value-added offerings we provide. Our contract renewal pricing was up 8% in the quarter compared with a year ago.

Ali: We also delivered another strong quarter of yield growth, we grew yield excluding fuel by a robust nine 8% compared with the prior year.

Ali: While our improving weight per shipment was a modest mix headwind to yield.

Ali: Our revenue per shipment ex fuel accelerated for the third consecutive quarter to a year over year increase of seven 9%.

Ali: Importantly, our underlying pricing trends are strong as we continue to align our pricing with the better service and value added offerings, we provide.

Ali: Our contract renewal pricing was up 8% in the quarter compared with a year ago.

Ali: Yeah.

Ali Faghri: Turning to margin, our first quarter adjusted operating ratio was 85.7%, which was an improvement of 390 basis points year over year. We've now reported nearly 400 basis points of year-over-year margin expansion in each of two consecutive quarters, and the current quarter is tracking for an improvement at the same level or better. Our strong margin performance was primarily driven by yield growth and bolstered by our cost initiatives and productivity gains. In addition, sequentially, our adjusted OR improved by 80 basis points, which outperformed our expectations.

Ali: Turning to margin our first quarter adjusted operating ratio was 85, 7%.

Ali: Which was an improvement of 390 basis points year over year.

Ali: We've now reported nearly 400 basis points of year over year margin expansion in each of two consecutive quarters in the current quarter is tracking for an improvement at the same level or better.

Ali: Our strong margin performance was primarily driven by yield growth and bolstered by our cost initiatives and productivity gains.

Ali: Sequentially, our adjusted or improved by 80 basis points, which outperformed our expectations.

Ali: Okay.

Ali Faghri: Moving to our European business, we delivered year-over-year revenue growth despite ongoing softness in the macro environment. Additionally, as with the prior quarter, our strong pricing outpaced inflation. Volume improved month by month and turned positive on a year-over-year basis in March. We also grew adjusted EBITDA versus the prior year, even with fewer working days, reflecting disciplined cost control. The team continues to execute well and earn new business from high-caliber customers. This momentum is reflected in our sales pipeline, which has expanded to nearly $1.2 billion. This should continue to strengthen our position in key European geographies.

Ali: Moving to our European business, we delivered year over year revenue growth despite ongoing softness in the macro environment.

As with the prior quarter, our strong pricing outpaced inflation.

Ali: Volume improved month by month and turned positive on a year over year basis in March.

Ali: We also grew adjusted EBITDA versus the prior year, even with fewer working days, reflecting disciplined cost control.

Ali: The team continues to execute well and earned new business from high caliber customers.

Ali: This momentum is reflected in our sales pipeline, which has expanded to nearly $1.2 billion.

Ali: This should continue to strengthen our position in key European geographies.

Ali Faghri: I'll close with a summary of our strong start to the year, which lays the foundation for the significant margin improvement we expect in 2024. As you heard from us this morning, we're continuing to deliver record service levels, provide more value to our customers, and earn higher returns. Our service improvements, combined with the momentum of our accessorials offering, drove another quarter of strong yield growth, and we achieved meaningful cost efficiencies through our line haul insourcing initiative and labor productivity gains.

Ali: I'll close with a summary of our strong start to the year, which lays the foundation for the significant margin improvement we expect in 2024.

Ali: As you heard from US. This morning, we're continuing to deliver a record service levels, providing more value to our customers and earning higher returns.

Ali: Our service improvements combined with the momentum of our accessorial offering drove another quarter of strong yield growth.

Ali: And we realized meaningful cost efficiencies through our line haul in sourcing initiatives and labor productivity gains.

Ali Faghri: In summary, our strategy is working. We're delivering strong revenue and earnings growth, and we're still in the early stages of realizing our margin expansion opportunity. Now, we'll take your questions. Operator, please open the line for Q&A.

Ali: In summary, our strategy is working we're delivering.

Ali: During strong revenue and earnings growth and we're still in the early stages of realizing our margin expansion opportunity.

Speaker Change: Now we'll take your questions operator, please open the line for Q&A.

Operator: Thank you. Ladies and gentlemen, we will now be conducting our question and answer session. 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. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

Speaker Change: Thank you, ladies and gentlemen, we will now be conducting a question and answer session. Please limit yourself to one question when you come up in the queue.

Speaker Change: If you have additional questions you're welcome to get back in the queue and we'll take as many as we can.

Operator: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is coming from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Our first question is coming from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question.

Ravi Shanker: Thanks, morning, everyone. Mario, you said that you are seeing some pretty good pricing momentum and there's a lot more to come. How much of your order book is repriced already and kind of, you know, what's the potential opportunity there as you kind of go through the year?

Ravi Shanker: Thanks, Good morning, everyone.

Ravi Shanker: So Mario you said that you are seeing some pretty good pricing momentum and there's a lot more to come how much of your order book is repriced already.

Ravi Shanker: What what's the potential opportunity there is as you're going to go through the year.

Mario A. Harik: Hey, Ravi and Mario. When we look at the overall contract renewal rate, we were up in the single digits in the first quarter, and usually, on average, we renew roughly around a quarter of our contracts. And that performance for us was driven by all the service improvements that we are delivering for our customers, which obviously we earn a higher price because they don't want to see disruptions in their supply chain. And they also understand we're investing in our network to be able to provide that great service.

Ravi Shanker: Yeah.

Ravi Shanker: Hey, Ravi when.

Ravi Shanker: When we look at the overall contact renewables. So we went up in the high single digits in the first quarter and usually on average. We are we are you would all get under a quarter of our contracts and that's important for US was driven by all the service improvements that we are delivering what I would customers that obviously, we were in a higher price because they don't want to see disruptions in their supply.

Ravi Shanker: Shane and they also understand that investing in our network to be able to provide great service and they can put us in the third quarter of high single digits and we have since the bankruptcy of PLO. That's would be we have another quarter of the of the book effectively when it gets to be negotiate to get into upcoming in the upcoming quarter as well.

Mario A. Harik: Again, for us, it's been the third quarter, five single digits. And we have, since the bankruptcy of Yellow, that would be, another quarter of the book effectively to renegotiate here in the upcoming quarter as well.

Kyle Wismans: Got it, it's helpful. And maybe as a follow-up, I think you said 2Q-OR, I think year-over-year improvement's similar. Can you just unpack that a little bit more? Kind of how do we think about the evolution through the months of 2Q and kind of how much OR would improve our seasonality?

Speaker Change: Got it that's helpful and maybe as a follow up I think you said two Q or.

Kyle Wismans: Thank you.

Speaker Change: I think year over year improvement similar or can you just unpack that a little bit more going up how do we think about Uh huh.

Speaker Change: For the months of <unk> and kind of how much or would improve our seasonality. Thank you.

Kyle Wismans: Yeah, you got it, Ravi. I'll actually give you the color on the tonnage yield and, or ultimately, or outlook like we usually do. But on the tonnage side, for us, April was up 3% on a year-on-year basis, and shipment counts were up in the same ballpark as the first quarter as well. We do expect the second quarter to be up at a similar level. For us, April was actually better than seasonality compared to March.

Speaker Change: Yeah, you got it right.

Speaker Change: Actually give the color on the tonnage yields an ultimate yard out looks like we usually do but on the tonnage side for US April was up 3% on a year on year basis than shipment counts went up in the same ballpark as the first quarter as well, we do expect the second quarter to be up in a similar level for us April was actually.

Kyle Wismans: And we'll give another update here on the May tonnage early June mid-quarter. And on the yield side, as I said earlier, we do expect yield to be up on a year-on-year basis in a similar range as we had in the first quarter. April, for us, was also in a similar range.

Speaker Change: Better than seasonality compare compared to March and we'll give another update here underneath tonnage early June mid quarter and on the yield side as I said earlier, we do expect yields to be up on a year on year basis and it's similar.

Speaker Change: What are the range as we head into the first quarter April put US was also on dissimilar in a similar range from a revenue per shipment perspective, we saw that accelerate from Q4 to Q1, and we expect on a quarter over quarter.

Kyle Wismans: From the revenue per shipment perspective, we saw that accelerate from Q4 to Q1, and we expect, on a quarter-over-quarter basis, on an absolute dollar basis, for that to further accelerate in the second quarter. And ultimately, from our perspective, we expect a strong quarter for margin improvement. Sequentially, we expect an improvement from Q1 to Q2 of 2 to 250 basis points going into the third quarter. That would put us in the low to mid-83 range for Q2, which implies more than 400 basis points of margin improvement on a year-on-year basis, which we believe would be a very good performance in this trade market.

Speaker Change: Absolute dollar basis for them to further accelerate in the second quarter and ultimate differently from an oil perspective, we expect a solid quarter for the margin improvement sequentially. We expect to be an improvement from Q1 to Q2 of two to 250 basis points going into the third quarter that would put us call. It in the low to mid 83 array.

Speaker Change: <unk> four for Q2, which implies more than 400 basis points of margin improvement on a year on year basis, which we believe would be very very good performance in this and this is a great market.

Kenneth Scott Hoexter: Thank you. Our next question is coming from the line of Ken Hoexter with Bank of America. Please proceed with your question.

Speaker Change: Thank you. Our next question is coming from the line of Ken <unk> with Bank of America. Please proceed with your question.

Mario A. Harik: Great. That's a great detail there, Mario.

Ken: Great that's a great detail that Mario congrats.

And a way to go just the talk about the growth of local sales and and what that's meant to it seems like that had outsized growth compared to.

Mario A. Harik: Congratulations and way to go. Just talk about the growth of local sales and what that means. It seems like that had outsized growth compared to your national sales in the quarter, and it seems to be accelerating. Maybe talk about the pace that you expect that to continue because that's been an important driver for the prices that you're talking about.

Ken: To your national sales in the quarter and it seems to be accelerating maybe talk about the pace that you expect that to continue because that's been an important driver for the pricing that you're talking about thanks.

Mario A. Harik: Thanks. Thanks. Thanks, Ken. It is a big part of

Speaker Change: Thanks, Ed Thanks, Ken It's a big part of our strategy to grow our local account business. Because again. These are more sticky relationships, we have with those customers and they are supported with the local relationship with one of our centers in a local market and so over the last 12 months, we increased the head count and our local sales force by Nokia at all.

Mario A. Harik: So over the last 12 months, we increased the headcount in our local sales force by roughly around 25% over that period of time, and we're seeing great performance. Here in the first quarter, our shipment count was up 10% on a year-on-year basis.

Speaker Change: 25% over that period of time, and we're seeing great performance, even the first quarter shipment count was up 10% on a year on year basis, just to give you a stat. There we've added more than 3000, new buying accounts in that channel and so far the year year to date. So it is a segment of growth put us we're investing more in it.

Mario A. Harik: Just to give you a stat there, we've added more than 3,000 new buying accounts in that channel so far this year-to-date. So it is a segment of growth for us. We're investing more in it. When customers see our focus on service and taking care of them and taking care of their freight, we're seeing very good growth associated with that.

Speaker Change: And when customers see I would focus on service and taking care of them and they can get up that freight we're seeing very good growth associated with that.

Speaker Change: Great.

Mario A. Harik: On future growth, we've seen some volatility in some customers kind of taking on freight and losing it. Maybe talk about the demand environment in the backdrop here. You know, we've had mixed signals; our indicator seems to be improving in the backdrop. Any signs that you're seeing demand improve in the backdrop?

Speaker Change: On the <unk>.

Speaker Change: Future growth, we've seen some volatility in some customers kind of taking on freight and losing it maybe talk about the demand environment in the backdrop here.

Speaker Change: You know we've had mixed signals are our indicators seems to be improving in the backdrop any signs that you're seeing demand improve in the backdrop.

Mario A. Harik: We are seeing the freight markets continuing to be soft, Ken. The underlying demand from customers is soft, but it's stable. It seems to be bouncing along the bottom from that perspective.

Speaker Change: We are seeing in the freight markets continuing to be soft again, the underlying demand from customer is soft. However, it is stable, but it seems to be bouncing along the bottom from the from that perspective, obviously again put us April was better than seasonality, but a lot of that is based on our sales efforts on our quality improvement our service improved.

Mario A. Harik: Obviously, again, for us, April was better than seasonality, but a lot of that is based on our sales efforts, our quality improvements, and our service improvements are enabling us to drive those gains. Now, if you break it down between industrial and retail, we saw the ISM peak over 50 for the first time in March, but then it dropped back down to 49 here in April. So, we're seeing the industrials be a bit more muted.

This are enabling us to drive to drive those those gains now if you break it down between industrial and retail.

Speaker Change: The ice and peak over 50 for the first time in March but then it dropped back down to 49, you had in April and so we're seeing the industrials via this more muted and we saw solid industrial customers and we usually survey them on a quarterly basis. They do expect growth in the back half, but it seems to be music codes on the retail side inventories are largely normal.

Mario A. Harik: Now, when we talk to our industrial customers, and we usually survey them on a quarterly basis, they do expect growth in the back half, but it seems to be muted growth. On the retail side, inventories are largely normalized at this point, and what our customers are telling us, they do expect, again, growth in the back half, given the easier comps, but it's still softer consumer demand as well. So, again, the market seems to be on the softer side in terms of underlying demand.

At this point.

Speaker Change: As I was telling us they do expect again growth in the back and get them in the back half given the easier comps, but it's still softer consumer demand as well. So again the market seems to be on the software side in terms of the underlying demand, but again for us it's about gaining more momentum in that local account segment and as we deliver right service numbers.

Mario A. Harik: But again, for us, it's about gaining more momentum in that local account segment, and as we deliver great service numbers, our customers are rewarding us with more freight. Our next question is coming from Daniel Imbro with Stevens. Please proceed with your question. Yeah, good morning, guys. Thanks for taking our question.

Our customers are rewarding us with more freight.

Daniel Imbro: Thank you. Our next question is coming from Daniel Imbro with Stevens. Please proceed with your question.

Thank you. Our next question is coming from Daniel <unk> with Stephens. Please proceed with your question.

Daniel: Yeah. Good morning, guys. Thanks, taking my questions.

Daniel: Yeah.

I wanted to dig in to the cost side and a little bit more detail, obviously better performance on the or here in the first quarter and you mentioned, bringing mine haul and in house 200, or 400 basis points. This year, where can that go in 'twenty five and beyond and then Mario on the variable cost side, you know one of the other lever that you and the team are targeting so as we kind of execute on this initiative, what's the next leg.

Daniel: Of the cost takeout you seen the model.

Ali Faghri: Sure, Daniel. So when you think about line haul insourcing, obviously an important strategic initiative for us. Here in the first quarter, we were at about 18.1% of miles that were outsourced to third parties. We improved that by 370 basis points on a year-over-year basis and also improved 150 basis points quarter-over-quarter. And that was at the higher end of our full-year target range of improving by 200 to 400 basis points annually. In terms of our targets, we've talked about cutting third-party line haul miles in half by 2027 relative to where we were at year-end 2021. So that would get us to somewhere in that low teens percent range as a percentage of total miles.

Mario A. Harik: Sure sure sure Danielle So when you think about line haul in sourcing obviously, an important strategic initiative for US here in the first quarter. We were at about 18, 1% miles that were outsourced to third parties, we improved that by 370 basis points on a year over year basis also improved 150.

Mario A. Harik: Basis points quarter over quarter and that was at the higher end of our full year target range has been improving by two to 400 basis points and you annually in terms of our in terms of our targets. We've talked about cutting third party line haul miles in half by 2027 relative to where we were at year end 2021, so that would get us to somewhere.

Mario A. Harik: In that low teens percent range as a percentage of total miles that's not only going to be a cost benefit for us, but it's also going to help us with service as well as we've talked about more recently, we've been rolling out initiatives to accelerate the pace of in sourcing specifically team drivers and sleeper cab trucks, we already have 100 of those.

Ali Faghri: That's not only going to be a cost benefit for us, but it's also going to help us with service as well. As we've talked about more recently, we've been rolling out initiatives to accelerate the pace of insourcing, specifically team drivers and sleeper cab trucks. We already have 100 of those teams onboard, and we expect to have a few hundred of those teams in the fleet by the end of 2024. And that's going to allow us to drive efficiencies in our line haul network, but also accelerate that pace of insourcing. And in terms of, Mario, in terms of variable cost...

Mario A. Harik: Team is onboard it and we expect to have a few hundred of those teams and the fleet by the end of 2024, and that's going to allow us to drive efficiencies in our line haul networks, but also accelerate that pace of in sourcing.

Mario A. Harik: And then Mario, in terms of the variable cost levers, Ali mentioned the insourcing of third-party line haul, which comes, you know, obviously, you thought here in the first quarter our PPE costs were down over 20%. Now when you look at the other levers around variable labor costs, and the team has done a great job operationally managing labor. Here in the first quarter, we had the fifth consecutive quarter of productivity improvement.

Mario A. Harik: And in terms of then Mario in terms of variable cost levers. So I mentioned to the in sourcing of third party line haul, which that comes to you know obviously you saw kid in the first quarter, our <unk> costs were down over 20% now when you look at the other lever that on variable labor costs and the team has done a great job operationally.

Managing labor here in the first quarter, we had the fifth consecutive quarter of productivity improvement. If you look at the quarter, we our shipment count went up more than I would head count effectively in the first quarter and that's led to a better because obviously if it's up to the bottom line. There are a lot of that is driven again by operational execution in the field and it's also driven by our proprietary technology.

Mario A. Harik: If you look at the quarter, our shipment count went up more than our head count effectively in the first quarter, and that led to benefits obviously to the bottom line. Now a lot of that is driven again by operational execution in the field, and it's also driven by our proprietary technology that enables us to manage labor very effectively. So if you think through the quarters and years to come, these are two big levers for us. One is the continued reduction of PPE costs, and then the second one is labor productivity.

Mario A. Harik: That enables us to manage labor to very effectively so if you think through the quarters and years to come. These are two big levers for US. One is the continued reduction of PPE costs and then the second one is labor productivity.

Speaker Change: Okay I'll leave it there one question best of luck guys.

Speaker Change: Thank you.

Fadi Chamoun: Thank you. Our next question is coming from the line of Fadi Chamoun with BMO Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question is coming from the line of <unk> with BMO capital markets. Please proceed with your question.

Fadi Chamoun: Yeah, good morning. Thanks for taking my question and congrats on the strong results. Were there any costs associated with the new terminal that you opened in Q1? Are there any hidden costs that you expect? Kenneth Hoexter, Brandon Oglenski, Jason Seidl, Carl Anderson, Jonathan Chappell, Brian Ossenbeck, This, I mean, you mentioned renewals are tracking in the 8% range. Is that the kind of complete book of business that we have seen?

<unk>: Yeah. Good morning, Thanks for taking my question and congrats on strong results what are there any costs associated with the new terminals that you opened in Q1 are there any dragging costs that you expect.

Speaker Change: Kind of as we go into the second quarter in the second half of year as you reopen.

Speaker Change: These terminals and just a follow up kind of on the pricing side of things.

Speaker Change: This.

Speaker Change: You mentioned renewals are tracking in the 8% range is that is that kind of complete kind of the book of business that we have seen.

Fadi Chamoun: started to get renewed as service levels improved last year. I'm just trying to figure out from a comp perspective. Do we start to get into easier, I mean, harder comps in the second half of this year, or is that momentum potentially sustainable?

Speaker Change: <unk> started to get renewed at surface level improved last year I'm, just trying to figure out from a comp perspective do.

Speaker Change: Do we start to get into easier.

Speaker Change: Mean harder comps in the second half of this year.

Speaker Change: Or or is that momentum potentially sustainable thanks.

Mario A. Harik: Thanks, Fadi. I'll start with the yellow acquired site opening, and I'll turn it over to Kyle to discuss contract renewals. But when you look at the new service that we're bringing online, we don't see them as having a meaningful cost headwind for us. We do expect them to be OR neutral this year, and they will become accretive in 2025 and beyond.

Speaker Change: Thanks, Andy I'll start with the <unk>.

Speaker Change: Hello site openings of the acquired sites opening I'll turn it over to Kyle to discuss.

Kyle: Renewables, that's when you look at the New service centers, you were bringing online we don't see them as having a meaningful a cost headwind for us, but we do expect them to be all neutral and in this year and then it would become accretive in 2025 and N V O N E.

Kyle Wismans: Now, here in the near term, in the second quarter, I mean, it's a small impact on cost, probably the 10 to 20 basis point range on OR associated with those sites as we first turn them on, and then we start getting the efficiency benefits. Now, there's a reason why for us that's the case, because if you look at the service centers, we already cover 99% of all ZIP codes, and they fall into three categories.

Kyle: In the near term in the second quarter I mean, that's a small impact of cost probably in the 10 to 20 basis points range on or associated with those sites as the first turn them on and then we start getting to the efficiency benefits. There's a reason why for US. That's the case because if you look at the service centers, we already cover 99% of all ZIP codes and they fall into three categories.

Kyle Wismans: In some markets, we are moving from a smaller location to a larger location, and as soon as we do that, we gain all the benefits of having more space on the dock that enables us to run more productively and more efficiently for better service. But your variable cost is the same because we just relocated the team and the rolling stock from site A to site B. The second scenario is where we are adding a site to an existing market where we already have a service center.

Kyle: <unk> in some markets, we are moving from a smaller location to an offshore location and as soon as we do that we regained all of the benefits of having more space on the dog that enables us to run more productively and more efficiently put a better service.

Kyle: Do you have a cost is the same just because we just relocated the team and the rolling stock from site to site.

Kyle: The second scenario is where we are adding it's tied to an existing market, where we already have a service center and a good example of that is Nashville, I wasn't however in yogurt lit cell sites, which is north of Nashville, a few weeks ago, but that's the case, where you look at that site, we split the existing team in that market between two sites or more than the two sites Sunday.

Kyle Wismans: A good example of that is Nashville. I was at our new Goodlettsville site, which is north of Nashville, a few weeks ago. But that's the case where you look at that site; we split the existing team in that market between two sites or more than two sites. So, in the case of Nashville, we already have 30, 35 city drivers in Goodletsville, but these were relocated from our Nashville terminal to Goodletsville. So, there as well, you see a small impact from the cost per door, the more space that we have, but you don't see a meaningful impact on cost.

Kyle: Self Nashville, we already have 30, 35 city drivers and Goodlettsville, but these were relocated from our Nashville tournament will integrate integrate that's felt so is there as well do you see a small impact from the cost per door. The more space that we have but you don't see a meaningful impact on costs and we have two smaller markets and Eau Claire, Wisconsin in Nogales, Arizona that are net new.

Kyle Wismans: And we have two smaller markets in Eau Claire, Wisconsin, and Nogales, Arizona, that are net new markets, but they are smaller terminals, and Nogales is right across the border from Mexico, and it's already running ahead of expectations in terms of the demand we're seeing on the site. So, on a net-net basis, we look at these as being go-on neutral, and then accreted for 2025 and beyond. Hey Fadi, when you think about renewal...

Kyle: Markets, but they are smaller terminals and they're already in Nogales is that right across the border from Mexico, and it's already running ahead of expectations in terms of the demand we're seeing on the site. So I mean, that's been the society. We again, we look at these as being on useful and then accretive for 2025 and beyond.

Kyle Wismans: Hey Fadi, when you think about renewals, we renegotiate about 25% of the contractual book each quarter. So from the disruption last year, we've gone through about 75% of the book. And then if you think about the outlook for contract renewals, we expect to be somewhere in the high single-digit range for the remainder of the year.

Kyle: When you think about renewals so we renegotiate about 25% of the contractual book each quarter. So from the disruption last year, we've gone about throughout 75% of the book and then if you think about the outlook for contract renewals, we expect to be somewhere probably in the high single digit range for the remainder of the year.

Speaker Change: Okay, great. Thank you.

Jonathan B. Chappell: Thank you. The next question is coming from John Chappell with Evercore ISI. Please proceed with your question.

Speaker Change: Thank you. The next question is coming from Jon Chapell with Evercore ISI. Please proceed with your question.

Speaker Change: Okay.

Kyle Wismans: Thank you, good morning. Kyle, kind of a simple one for you, maybe. So in February, you gave some annual guidelines, low single-digit tonnage, yield ex-fuel, mid single-digit, OR 100 to 200, and 150 to 280 points improvement. And it feels like with the one Q upside and the commentary that Ali and Mario have given about April so far and how 2Q is tracking, you're off to a much better start. Is there any way to frame what the full year guide may look like, you know, based on the first four months of the year vis-a-vis the February guide?

Jonathan B. Chappell: Thank you and good morning.

Jonathan B. Chappell: Kyle kind of a simple one for you maybe fill in February you gave some annual guide low single digit tonnage yield ex fuel a mid single digit or 100 or 200.

Jonathan B. Chappell: 150 to 200 basis points improvement and it feels like with the <unk> upside in the commentary that Mario.

Jonathan B. Chappell: Mario given that our April so far and how qq's tracking that you're off to a much better start is there any way to frame what the full year guidance may look like you know based off the first four months of the year vis vis the February guide.

Kyle Wismans: Sure, so I think what's important to think about is if you take the Q2 guide we walked through today, so if you're in the low to mid-83s, you know, if you think about that and you roll through typical seasonality for both Q3 and Q4, that would imply our full year OR to be at the high end of the outlook range. Now, there's still a path, John; we could do better than that given the momentum we have now and the potential for a macro recovery, but it's still early in the year. We'll give you an update as the year progresses.

Mario A. Harik: Sure so.

Mario A. Harik: What's important to think about is if you take the Q2 guide who walked through today. So if you're in the low to mid 80 threes.

Mario A. Harik: If you think about that in your role through typical seasonality for both Q3, and Q4 that would imply a full year or to be at the high end of the outlook range now there's still a path John we can do better than that given momentum we have now.

Mario A. Harik: The potential for a macro recovery, but its still early in the year, we'll give you an update as the year progresses.

Kyle Wismans: Okay, and no change to the others, Tom Hedger for you as well.

Speaker Change: Okay, and no change to the others tonnage or are you as well.

Kyle Wismans: No change right now to that assumption.

Speaker Change: No change right now to the assumptions.

Kyle Wismans: Okay. Thanks, Tom. Thank you. Our next question is coming from Stephanie Moore with Jeffreys. Pleased to see you with your question.

Speaker Change: Okay. Thanks, Tom.

Stephanie Lynn Benjamin Moore: Thank you. Our next question is coming from Stephanie Moore with Jeffreys. Please proceed with your question. Hi, good morning. Thank you.

Stephanie Lynn Benjamin Moore: Thank you. Our next question is coming from Stephanie more with Jefferies. Please proceed with your question.

Stephanie Lynn Benjamin Moore: Hi, good morning, Thank you.

Stephanie Lynn Benjamin Moore: I wanted to actually follow up on the prior question or two questions ago I just thought the ramp of terminals any change in the timeline of the ramp of service. The ramp of these service centers just given you know what is that a weaker macro.

Mario A. Harik: Stephanie, we will expect to change the timeline because we think of these openings as being an investment for the next 10 plus years, and we are prioritizing markets that are capacity constrained for us today. I mean, you hear us talk about markets like Las Vegas, for example, or Brooklyn, New York, or Houston, Texas. These are markets where we don't have enough doors as things stand. So they get treated water very, very quickly. And the second area is around cost efficiency. I mentioned earlier on the Goodlessville site as an example.

Speaker Change: It was if any we don't expect to with a changed the timeline because we think of these opening as being an investment for the next 10 plus years and we are prioritizing markets that are capacity constrained for us today. I mean, you guys talk about the markets like Las Vegas for example, in Brooklyn, New York or Houston, Texas. These are markets, where we don't have enough doors as things.

Speaker Change: And so they are they get a lot of accretive very very quickly and the second area is that on cost efficiency I mentioned earlier it onto a good physical site. As an example, it's not that we are ramping variable costs associated with that just just to give you. An example for the first phase off so it doesn't and thought of it also had opening they're opening up here in the second quarter, what I had to get towards the top 30 or so heska.

Mario A. Harik: It's not that we are increasing the variable costs associated with that. Just to give you an example, for the first phase of a dozen terminals we're opening up here in the second quarter, we're adding a total of 30 or so headcount to be able to support those service centers because we already have the labor in those markets and we're just splitting the teams between the new service centers or relocating from one service center to another.

To be able to support those service centers, because we already have the labor in those markets and we're just starting the teams which means between the new service centers or relocating from one service center to another so we don't see the macro is impacting our cadence of opening. These are we expect to open 12 them to up to 12 by the source.

Mario A. Harik: So we don't see the macro as impacting our cadence of opening these. We expect to open up to 12 by the second quarter, another 11 to 12 in the back half of the year, and the remaining five or so sites in early 2025.

Thomas Richard Wadewitz: Thank you. Our next question is coming from Tom Wadowitz with UBS. Please proceed with your question.

Speaker Change: In the quarter. Another 11 to 12 in the back half of the year and the remaining five or so sites in early 2025.

Speaker Change: Great I'll leave that with my one question. Thank you.

Speaker Change: Thanks, Stephanie.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question is coming from Tom <unk> with UBS. Please proceed with your question.

Thomas Richard Wadewitz: Hi. Yeah, good morning, and congratulations on the really strong results.

Tom: Hi, Yeah, good morning, and congratulations on the really strong results.

Tom: I, let's see I wanted to ask you a question kind of related to that momentum you have how much sensitivity do you think that your volume and pricing trend has to just what the overall freight market does obviously your service improvement is a big factor, but you know it's hard to think there's no impact from the actual freight.

Tom: Freight market trend. So maybe just a thought on that kind of volume and price. How sensitive are you to trade you know if it gets weak or whatever and then I guess the second part would be how sensitive is your or improvement to the volume side I know it would be sensitive to price, but you know volume comes in two points weaker than you think are you still going to be able to do similar margin improvement too.

Speaker Change: Two what were talking about thank you.

Mario A. Harik: Let's see, I want to ask you a question kind of related to that momentum you have. How much sensitivity do you think that your volume and pricing trend have to just what the overall freight market does? Obviously, your service improvement is a big factor, but it's hard to think there's no impact from the actual freight market trend. So maybe just a thought on that kind of volume and price: how sensitive are you to freight if it gets weaker or whatever?

Speaker Change: Yeah. Thanks, Thanks, Tom I'll start with the first one in terms of market sensitivity I mean, obviously, we're not immune to the market if things have slowed down a lot in the back half of the year. Then that's what we're going to be impacted but that said, we do expect to outperform and the reason why is that our our strategy is working our service product is improving and customers are rewarding us with hydro <unk>.

Speaker Change: We're launching new premium services and these are resonating in the market.

Our local sales force and that comes at a higher margin. So we were doing a lot of things cause at our company driven to counter to whatever comes from a macro perspective, I mean, you look at the first quarter. It wasn't very muted freight market. We are still in the freight recession, yes, we are delivering great numbers given that our strategy is working and the team is executing on that on that strategy, but again, we have.

Speaker Change: We will if the volume environment goes down.

Speaker Change: We're going to beyond the pressure from a volume perspective, but we expect to gain market share as we go along and from a pricing perspective, a lot of the initiatives. We have that all driving pricing auto based on all the things I, just mentioned, which enabled us to also deliver goods good pricing number as a as a whole.

Mario A. Harik: And then I guess the second part would be how sensitive is your OR improvement to the volume side? I know it would be sensitive to price, but volume comes in two points weaker than you think. Are you still going to be able to do similar margin improvements to what we're talking about? Thank you.

Speaker Change: And what about the second part being like you know if you get you know two points less whatever pick a number a volume growth.

Mario A. Harik: But this said, we do expect to outperform, and the reason why is that our strategy is working, our service product is improving, and customers are rewarding us with higher prices. We're launching new premium services, and these are responding in the market. We're growing our local sales force, and that comes at a higher margin. So we're doing a lot of things that are company-driven to counter whatever comes from a macro perspective. I mean, when you look at the first quarter, it was a very muted freight market.

Speaker Change: It is EUR improvement sensitive to that or not particularly so.

Speaker Change: Yeah.

Mario A. Harik: We are still in a freight recession, yet we are delivering great numbers given that our strategy is working and the team is executing on that strategy. But again, if the volume environment goes down, odds are we're going to be under pressure from a volume perspective, but we expect to gain market share as we go along. And from a pricing perspective, a lot of the initiatives we have that are driving pricing are based on all the things I just mentioned, which enable us to also deliver good pricing numbers as a whole.

Speaker Change: So Tom this is all he is as Mario mentioned, we're not immune to the macro but within our baseline outlook, we're assuming very modest assumptions around tonnage growth you saw here in <unk> and also in <unk> as well with relatively modest tonnage growth on a year over year basis in that low single digits range, we were able to deliver 400.

Ali Faghri: Well, and what about the second part being like, you know, if you get, you know, two points less, whatever, pick a number of volume growth, is the OR improvement sensitive to that, or not particularly so?

Ali Faghri: So, Tom, this is Ali. As Mario mentioned, we're not immune to the macro, but within our baseline outlook, we're assuming very modest assumptions around tonnage growth. You saw here in 1Q and also in 4Q as well, with relatively modest tonnage growth on a year-over-year basis in that low single-digit range, we were able to deliver 400 basis points or nearly 400 basis points of year-over-year OR improvement. As you roll forward into the second quarter, we're assuming tonnage up in that low to mid-single-digit range.

Speaker Change: At this point to nearly 400 basis points of year over year or improvement as you roll forward into the second quarter, we're assuming tonnage up in that low to mid single digit range, we expect 400 plus basis points of or improvement. So for us specifically, while there is some sensitivity to the tonnage outlook, where we're focused on is driving yield growth driving cost.

Ali Faghri: We expect 400-plus basis points of OR improvement. So, for us specifically, while there is some sensitivity to the tonnage outlook, where we're focused on is driving yield growth and driving cost efficiency, and we have a lot of control over our own destiny and a lot of company-specific levers we can pull to drive both yield growth and cost efficiency to drive stronger OR improvement, even in a softer macro environment.

Speaker Change: <unk> C and we have a lot of control over our own destiny in a lot of company specific levers, we can pull to drive both yield growth and cost efficiencies to drive stronger or improvement even in a softer macro environment.

Brian Patrick Ossenbeck: Thank you. Our next question is coming from Brian Ossenbeck with J.P. Morgan. Please proceed with your question.

Speaker Change: Thank you. Our next question is coming from Brian often back with J P. Morgan. Please proceed with your question.

Mario A. Harik: Hey, good morning. Thanks for taking the time to answer the question. I just wanted to maybe get your thoughts on competition, you know, both with other LTLs, some of which are expanding their footprint as well, but also some of the last question from Tom in terms of the freight market. We have seen probably a bit more weight from a weaker truckload market, but you're also seeing better weight per shipment in your trends. So it doesn't seem like you're as exposed as maybe some others, so maybe you can walk through the details.

Brian: Hey, good morning, Thanks for taking the question.

Brian: Just wanted to maybe get your thoughts on competition, you know both with other L. T O some of which are expanding their footprint as well.

Brian: So some of the last question from.

Brian: Tom in terms of the freight market, we have seen probably bit more weight from a weaker truckload market, but you're also seeing better weight per shipment and your trend. So it doesn't seem like you're as exposed as maybe some others. So maybe you can walk through the details on that.

Mario A. Harik: Yeah, I'll first start with the back half of the weight per shipment, or the back half of your question. For us, the weight per shipment has sequentially improved. A lot of that goes back to the... we are being very disciplined on the type of freight we are taking into our network to make sure it fits the profile of an LTL network, and it's all accretive from an overall margin perspective. Now, when you look at the move of freight potentially from LTL to truckload, I had the team run an analysis here recently for us, and it's roughly around half a point of shipment that are those heavy LTL shipments that we have seen effectively go down more than their corresponding other parts.

Brian: Yeah.

Speaker Change: He was a with the back half on wafer shipment or a backup for your question.

What else weight per shipment has sequentially improved a lot of that goes back to the we are being very disciplined on the type of freight we are taking into our network and to make sure that fits the profile of an LTE network and its all accretive and from me. So on the overall motion margin perspective, now when you look at the move of our freight.

Speaker Change: Then shifting from LPL to truckload.

Speaker Change: I had the team done an analysis here recently for us and it's probably I don't have a point of shipments or those heavy MTL shipments that we have seen effectively go down more than the corresponding other other parts.

Mario A. Harik: And that's driven predominantly by truckload rates being lower. But it's not a meaningful number, but we're seeing some of that in terms of the LTL to TL share. The good news is that as soon as the truckload market tightens, that becomes a tailwind for LTL receipts coming back. In terms of the overall industry dynamics, when you look at the capacity in our industry, you go back a year ago, all of the yellow service centers were up and running, and now about half of them have been sold.

Speaker Change: And that's sort of and it's predominantly by the truckload rates fee income being lower but it's not a meaningful number but we're seeing some of that in terms of the MTL TTM shift is the good news there is as soon as the truckload market tightens that becomes a tailwind for LPL receive coming back.

Speaker Change: In terms of the overall industry dynamics when you look at the capacity in our industry. You go back a year ago all of the yellow service centers were up and running.

Speaker Change: Now about half of them had been sold so you don't look about 80, 90% of these are coming back for NPL carriers and a year from now would be at 90, 495% of the industry capacity that was running just a short year ago and when you look at the overall will be audited freight recession, so when you're looking out.

Mario A. Harik: So, you know, look, about 80-90% of these are coming back to LTL carriers. In a year from now, we'll be at 94-95% of the industry capacity that was running just a short year ago. And when you look at the overall picture, we are in a freight recession. So when you look at the LTL industry, and you look at all the publicly traded LTL carriers, you can see that from a baseline of 2021, shipment count in our industry is down in the teens since the post-COVID environment.

Speaker Change: The industry and you look at all of the publicly traded LPL carriers, you can see that from a baseline of 2021 shipment counts and how the industry is down into the teens.

Speaker Change: Since that since the post COVID-19 and vitamins and it's not the 2021 was a particularly strong year. It was even less shipments and in Seattle in 2019, or 18 or 17. So.

Mario A. Harik: And it's not that 2021 was a particularly strong year. It had even fewer shipments in LTL than 2019 or 18 or 17. So the best way to think about it is that that capacity went out at a time when freight markets were down in the teens. About half of it is coming back, but we haven't seen any meaningful shipment recovery yet. So from an industry capacity perspective, as soon as we see any meaningful form of recovery, you would see that we don't have enough capacity in the LTL space as a whole.

Speaker Change: The best way to think about it is that the capacity went out at a time when freight markets were down in the teens about half of it is coming back, but yes, we haven't seen yet any meaningful shipment recovery. So for me it's industry capacity perspective as soon as we see any meaningful form of recovery you would see that we don't have enough capacity in the U S.

Speaker Change: Aerospace as a whole.

Brian Patrick Ossenbeck: So just to quickly follow up on that then, looking into the latter half of this year and probably more like next year, what are some of the incremental margins you would expect on, I guess, the new facilities in particular, especially in some of the bigger areas with more density? Should that be similar to what we saw this quarter, around 40 percent or so, or maybe a little bit less? And, of course, it would depend on the pace of the macro. But I just wanted to get your sense in terms of how those assets would fit when the recovery does come back. Sure.

Speaker Change: So just to quickly follow up on that then looking into the later half of this year and probably more like next year. What are some of the incremental margins you would expect I guess, the new facilities in particular, especially in some of the bigger areas with with more density should.

Speaker Change: Should that be similar to what we saw this quarter was around 40% or so or maybe a little bit less and of course, it would depend on the pace of the macro but I just wanted to get your sense in terms of how those assets would fit.

Speaker Change: When the recovery does come back.

Ali Faghri: Sure, Brian. This is Ali.

Speaker Change: Sure. Brian. This is Ali we we do expect very strong incremental margins on these new service centers as you saw here in <unk>, we delivered very strong incremental margins in Q2, if you look at what we're implying for or that implies incremental margins north of 50% and as we cycle into the second half of the year and into 2025.

Speaker Change: As these new service centers come online, we would expect to maintain that very strong performance in incremental margins comfortably about 40%.

Speaker Change: Okay.

Ali Faghri: We do expect very strong incremental margins on these new service centers. As you saw here in 1Q, we delivered very strong incremental margins. In 2Q, if you look at what we're implying for OR, that implies incremental margins north of 50%. And as we cycle into the second half of the year and into 2025, as these new service centers come online, we would expect to maintain that very strong performance in incremental margins comfortably above 40%.

Speaker Change: Thank you. Our next question is coming from Jason Seidl with TD Cowen. Please proceed with your question.

Jason H. Seidl: Thank you. Our next question is coming from Jason Seidl with TD Cowen. Please proceed with your question.

Thank you operator Mario team congrats on the strong quarter. One question one follow up here, how should we think about this push to the more local accounts or has an impact on the overall yield so I understand how the margin impact works I was just curious if there's any impact on yields and then Kyle I wanted to follow up you mentioned <unk>.

Speaker Change: At the quote unquote higher end of the O our target range and I'm, assuming you meant the better and but the lower or I just want to clarify that.

Jason H. Seidl: Hey, thank you, our better Mario team. Congratulations on the strong quarter. One question, one little follow-up here: how should we think about this push to more local accounts as an impact on overall yield? I understand how the margin impact works. I was just curious if there's any impact on yield. And then Kyle, I wanted to follow up. You mentioned being at the quote unquote higher end of the OR target range, and I'm assuming you meant the better end, but the lower OR. I just want to clarify.

Kyle: Yeah, Hey, Jason So I'll take the first part of the question too. So when you think about the local account strategy in a move from from.

Kyle Wismans: Yeah, hey Jason. So I'll take the first part of the question too. So when you think about the local account strategy and a move from 20% to 30% of the book, and when we talk about our overall opportunity from a yield perspective, we said we have probably the mid-teens gap at times. When you think about growing the local accounts, we think that's two to three points of what that gap could be just from growing that local business.

Speaker Change: 20% to 30% of the book when we talk about our overall opportunity from a yield perspective, we said we have probably even mid teens GAAP at times. When you think about growing the local accounts. We think that's two to three points of a.

Jason H. Seidl: What that gap could be just from from growing that local business.

Speaker Change: Okay, that's great and then with respect sorry, and then with respect to the or target, yes. So if if.

Kyle Wismans: That's great. And then with respect to the OR target, you know, yeah, so if... As we're performing now and what we expect, just rolling seasonality would put you at the higher end of that target in 250 days. Yeah, that's what I

Speaker Change: As we're performing now and what we expect just rolling seasonality would put you at the higher end of that target in the 250 basis point range.

Speaker Change: Yeah, that's what I, that's what I thought you meant alright fantastic. Thank you very much for the time as always.

Speaker Change: Got it.

Kyle Wismans: Yeah, that's what I thought you meant. All right, fantastic. Thank you very much for your time, as always. You got it. Thank you. Our next question is coming from Jordan Alliger with Goldman Sachs. Please proceed with your question. Yeah, I'm morning. Longer term question. I think you'd mentioned that LTL.

Jordan Robert Alliger: Thank you. Our next question is coming from Jordan Alliger with Goldman Sachs. Please proceed with your question. Yeah, I'm morning. A longer term question.

Speaker Change: Thank you. Our next question is coming from Jordan <unk> with Goldman Sachs. Please proceed with your question.

Jordan: Yeah, Hi morning, a longer term question I think you'd mentioned that L. T. O 2.0, it's still in the earlier days there earlier innings and obviously now you know since you first put that plan that you have the.

Jordan: Former yellow terminals that you're rolling out.

Jordan: Any thoughts on assessing some of the longer term margin improvement potential that you could get to in Washington truck load. These would be the original expectations our updated expectations.

Mario A. Harik: Thanks, Jordan. Well, the initial We're at least 600 basis points of our improvement from a baseline of 2021 through 2027. But we, yeah, but that's what we always said, at least because we're not stopping at 600 basis points and we're not stopping in 2027. But with the momentum we have and all the initiatives and the plan working as expected, we do expect to get there faster. But obviously, we're not stopping at 600 or 2027. Our goal is to get to the 70s from an order perspective and eventually into the mid 70s and eventually into the low 70s.

Speaker Change: Okay. Thanks, Thanks, Jordan well initiative.

For at least 600 basis points of improvement from the baseline of 2021 through 2027.

Speaker Change: We yeah, but that's what we've always said that leaves because we're not stopping at 600 basis points and we're not stopping in 2027, but with the momentum we have and all the initiatives and the plan are working as expected we do expect to get there faster, but obviously, we're not stopping at six homegoods or or 2027, I would go to to get to the <unk> from an order perspective, and eventually into the mid seventies.

Speaker Change: She was in the low sevens.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Brandon Robert Oglenski: Thank you. Our next question is coming from the line of Brandon Oglenski with Barclays. Please proceed with your question. Hey, good morning, and thanks for taking the ques-

Brandon Robert Oglenski: Okay, thank you. Thank you. Thank you. Our next question is coming from the line of Brandon Oglenski with Barclays.

Speaker Change: Thank you. Our next question is coming from the line of Brandon <unk> with Barclays. Please proceed with your question.

Brandon: Hey, good morning, and thanks for taking the question Maury I was wondering if you could talk to service outcomes. During the quarter. I know you guys were called out a really low claims ratio and then how does that factor in you know with these new terminals opening does X P O actually become more of a growth story as you look out the next two to three years I mean, obviously cycle contingent.

Mario A. Harik: Yes, so the way we think about the new service centers, they will help us deliver better service as well, because usually when you have more space on a dock, you turn your dock doors less often, which gives you more time to load trailers effectively and also be able to build what we call pure trailers that can go through the network without any re-handling along the way. So we believe that more space is going to enable us to even have a better service product over time as well.

Maury: Yeah. So the way the way, we think about the new service centers. They they will help us to deliver better service as well because usually when you have more space on the dock you have you have you turned less often your doors your dock doors, which gives you more time to loews theatres, effectively and also being able to build what we call. It pure theatres that can go through the network.

Maury: Any of the handling along the way so we could EBIT more space is going to enable us to even have a better service product over over time as well.

Mario A. Harik: Similarly, we have initiatives around insourcing third-party line haulers, as we mentioned earlier, and these also come with an improvement in service, and we obviously have the airbag systems and the new loading methodology and all the things that we are doing as a company to further improve service. Now, in terms of growth, our goal is to keep on improving service and drive yield more than tonnage. But at some point, whenever there is a market inflection, we'll be able to take on more freight, but we're focused on making sure it's a lot of creative freight and it's operating at the right yield as well.

Maury: Similarly, we have initiatives that out in sourcing third party line haul as we mentioned earlier on and this also come with an improvement in service and we have obviously, the airbag systems loading and technology and all the things that we are doing as a company to further improve service now in terms of being growth I would go to us to keep on improving service and drive yield more than tonnage, but at some point whenever.

Maury: Whenever there is a market inflection would be able to take on more freight that's.

Maury: We're focused on making sure this or accretive Fraser and its operating under ice healed as well. So again, we're not chasing tonnage, we're chasing yield and keep on improving that service product as well.

Mario A. Harik: So again, we're not chasing tonnage; we're chasing yield and keeping on improving that service product as well. Thank you. Our next question is coming from the line of Scott Schneeberger with Oppenheimer. I'm pleased to see you with your questions. Thanks very much.

I appreciate it.

Scott Andrew Schneeberger: Thank you. Our next question is coming from the line of Scott Schneeberger with Oppenheimer. Please proceed with your question. Thanks very much.

Maury: Thank you. Our next question is coming from the line of Scott Schneeberger with Oppenheimer. Please proceed with your question.

Scott Andrew Schneeberger: Oh, thanks, very much could we touch on Europe, I think Mario you mentioned it was the best quarter since Covid out and seeing some strength in the U K and in France.

Scott Andrew Schneeberger: What end market, specifically and I guess I'll throw in a question too of is now in an improved time to to be considering that disposition.

Mario A. Harik: First, I'll start with the back half of the question. Our long-term plan remains to be a pure-play North American LTL carrier, and selling that business is a strategic priority of ours. But we're going to be patient.

Mario A. Harik: So first of all I'll start with the back half of the question I would long term plan remains to be a pure play North American MTL carrier and selling that business is a strategic priority of ours, but we're going to be patient we want to make sure that we are maximizing the returns on that business. If there's a business that has a lot of scarcity value in western Europe with either number one.

Mario A. Harik: We want to make sure that we are maximizing the returns on that business. It is a business that has a lot of scarcity value in Western Europe, with either number one, number two, or number three in LTL, truckload, and brokerage. And it's in key Western European geographies. Think about the UK, France, Spain, and Portugal. So it's not a matter of if, but when.

Number two or number three and LPL truckload and brokerage and it's in key western European geographies think about U K, France, Spain, Portugal, So it's not a matter of if but when.

Mario A. Harik: Meanwhile, the business is performing really well. As you mentioned, our EBITDA for the first quarter was the highest it's been since the pandemic. And some of these key geographies in France, for example; our EBITDA was up in the mid-teens in the UK. And a lot of it is driven by a really good, strong sales pipeline driven by good pricing, and the team is just executing at every level in our European business.

Mario A. Harik: While the business is performing really well and as you mentioned, we would EBITA for the first quarter was the highest it's been since the pandemic and some of these key geographies in France. For example, our EBITA was up in the mid teens in the U K EBITDA was up in the high single digits and a lot of it is driven by really good strong sales pipeline driven by good price.

Mario A. Harik: And the team is just executing in every in every level and in our European and our European business and keep in mind. That's in the backdrop of a soft freight economy, and we have seen our volumes inflect positive in the month of March we are seeing more strength in the less than truckload business in Europe, but also in the brokerage side and the.

Mario A. Harik: And keep in mind, that's in the backdrop of a soft freight economy, and we have seen our volumes inflect positively in the month of March. We are seeing more strength in the less-than-truckload business in Europe. But also on the brokerage side and the truckload side, we are also seeing an improvement in overall trends. Thank you. Our next question is coming from Kevin Ganey with Thompson Davis & Company. Please proceed with your question.

Mario A. Harik: Truckload side, we are also seeing an improvement in overall trend.

Speaker Change: Great. Thanks.

Speaker Change: Thank you. Our next question is coming from Kevin <unk> with Thompson Davis <unk> Company. Please proceed with your question.

Kevin Ganey: Hey guys, good morning.

Kevin: Hey, guys. Good morning, congrats on the quarter.

Kevin: I actually wanted to go into operating cash flow. It was a pretty strong quarter for that and was wondering what levers kind of drove that from your standpoint. It wasn't any kind of efficiency changes that you guys have done there and then.

Kevin: And maybe the outlook that you guys have for the remainder of the year on cash flow.

Kyle Wismans: Yeah, you know, from a cash flow perspective, I think it's another strong quarter from a working capital perspective. Obviously, Q1 tends to be negative from a cash flow standpoint, but I think even given that and the higher CapEx, we had a really good end result. I think what's important when you think about cash flow is that for the rest of the year, we expect to generate over $100 million in cash flow in 2024.

Speaker Change: Yeah, you know from a from a cash flow quarter I think it's another strong strong quarter from a working capital perspective, obviously Q1 tends to be negative from a cash flow standpoint, but I think even given that and the higher capex. We had a really good unresolved I think what's important when you think about cash flow is for the rest of the year, we expect to generate over $100 million of cash flow.

Speaker Change: In 2024, that's even contemplating the elevated level of spending from a capex perspective. So we said 700 700 $800 million and our planning assumptions. We think we'll be in that range and I think even with that we should still be comfortably over 100 million of cash flow again timing you got to think about so Q1, we said it's negative but we had a lot of tractor deliveries here in the first quarter.

Kyle Wismans: That's even contemplating the elevated level of spending from a CapEx perspective. So we said $700 to $800 million in planning assumptions. We think we'll be in that range. And I think even with that, we should still be comfortably over $100 million in cash flow. Again, timing is something you've got to think about. So Q1, we said it was negative, but we had a lot of tractor deliveries here in the first quarter, 1,600 deliveries in Q1, most of the whole year. So that CapEx number for Q1, at $299 million in net CapEx, will come down over the course of the year. We feel very strong. We feel very good about our cash generation ability.

Speaker Change: <unk> hundred deliveries in Q1, most of the whole year or so so that capex number for Q1 at 299 million and that Capex will come down over the course of the year, we feel very strong we feel very good about our cash generation abilities here.

Speaker Change: Perfect. Thanks, guys.

Mario A. Harik: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over to XPO's Chief Executive Officer, Mario Harik, for closing comments.

Speaker Change: Thank you we have reached the end of our question and answer session I would like to turn the floor back over to <unk>, Chief Executive Officer, Mario Herrick for concluding comments.

Operator: Thank you, Operator, and thank you all for joining us today. I'm proud of our strong first quarter and the tremendous progress we're making. As you can see from our results, our LTL 2.0 plan is working and is gaining momentum in a soft macro for freight transportation. We look forward to updating you on our continued progress next quarter.

Mario A. Harik: Thank you operator, and thank you all for joining us today I'm proud of our solid first quarter and the tremendous progress we're making as you can see from our results our LCL to point those things is working and is gaining momentum in a tough macro port freight transportation. We look forward to updating you on our continued progress next quarter. Operator, you can now end the call. Thank you.

Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.

Speaker Change: Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

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