Welcome to the XPO Q3 2022 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During the call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company’s SEC filings as well as in its earnings release. The forward-looking statements in the company’s earnings release or made on this call are made only as of today and the company has no obligation to update any of these forward-looking statements except to the extent required by law. During this call, the company may also refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company’s earnings release and the related financial tables or on its website. You can find a copy of the company’s earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the Investors section of the company’s website. I will now turn the call over to Brad Jacobs. Mr. Jacobs, you may begin.

Good morning, everybody, and Happy Halloween. Thanks for joining our earnings call. With me today in Greenwich are Mario Harik and Drew Wilkerson, our two incoming CEOs of XPO and RXO, and Ravi Tulsyan, our CFO of XPO. We will be joined during Q&A by XPO’s Chief Strategy Officer, Matt Basler, and from RXO we have Jared Weisfeld, Chief Strategy Officer, and Jamie Harris, Chief Financial Officer. This morning, we reported another strong quarter with over $3 billion of revenue and record third quarter operating income, up year-over-year by 65%. Notably, we generated $142 million of free cash flow, while more than doubling the historical gross CapEx we invested in our North American LTL network. Under Mario’s leadership, our plan for LTL 2.0 is gaining momentum. This morning, we reported third quarter records for LTL revenue and adjusted EBITDA. And one of the most telling LTL metrics is our accelerating year-over-year tonnage trend, which improved every month through the quarter and inflected positive in September. Our third quarter tonnage outperformed typical seasonality, which is the opposite of what we are hearing in the industry. Importantly, our tonnage remains strong in October, and we expect positive year-over-year tonnage for the fourth quarter. We are getting more freight from customers for two good reasons. One is the investments we have been making in capacity, and the other is our improved quality of service. Our truck brokerage business under Drew’s leadership continued to outperform in the third quarter. The team grew volume year-over-year by an impressive 9%. They also delivered a very strong gross profit margin of 19%. I am pleased that both companies will be strongly positioned for growth when RXO spins off tomorrow. We have been working towards separating our asset-based and asset-light businesses since we announced our strategic plan in March, and this is a watershed moment for XPO’s shareholders. The final piece of the plan is the divestiture of our European business. We will not be providing any updates on that sales process today. Before I close, I want to thank Ravi for his many contributions to XPO’s success over the last 6 years. Ravi was instrumental to our GXO spin last year, and he has led our finance organization through the current spin process and the sale of intermodal. We wish Ravi the very best. And we are pleased that he will assist in the transition to Carl Anderson, our incoming CFO, who joins us next week. I look forward to working with Mario and Drew in my roles as Executive Chairman of XPO and Non-Executive Chairman of RXO. And now, Ravi will cover the quarter.

Thank you, Brad, and good morning, everyone. Today, I will discuss our third quarter results and our balance sheet and liquidity. In the third quarter, we generated revenue of just over $3 billion. Excluding the impact of the intermodal business, which was sold in March, revenue increased 3% year-over-year. Currency had a negative impact on our reported revenue of $86 million or 3%. We grew adjusted EBITDA to $352 million, reflecting strong earnings growth across the businesses. The year-over-year increase in adjusted EBITDA was 15%, or an increase of 25% excluding intermodal and gains from real estate sales. FX negatively impacted EBITDA by $8 million in the quarter. Our adjusted EBITDA margin was a third quarter record of 11.6%, representing a year-over-year improvement of 220 basis points. The firm pricing environment continued this quarter and helped offset inflationary pressures. Our European business also continued its strong performance with organic revenue growth of 6.8%, which was driven by both volume growth and price. Our corporate costs for the third quarter, excluding one-time expenses, were down year-over-year by 37%. This reflects continued rationalization of our corporate cost structure in preparation for the upcoming spin-off of RXO. Our interest expense for the quarter was $35 million compared to $53 million in the year-ago period. The effective tax rate for the adjusted EPS for the quarter was 23%. Our adjusted earnings per diluted share was $1.45, which was up from $0.94 a year ago, or an increase of 54%. This increase was primarily driven by higher adjusted EBITDA and lower interest expense. We generated $265 million of cash flow from continuing operations, spent $127 million on growth CapEx, and received $4 million of proceeds from asset sales. Gross CapEx was up $50 million year-over-year, primarily allocated to investments in our LTL network capacity. Our free cash flow was $142 million. This includes $53 million of cash outflows related to transaction costs that were not included in our free cash flow guidance. Excluding these transaction costs, our free cash flow was $195 million for the quarter. Moving on to the balance sheet, we ended the quarter with $544 million of cash. This cash, combined with available borrowing capacity under committed borrowing facilities, gave us over $1.5 billion of liquidity at quarter end. We had no borrowings outstanding under our ABL facility, and our net leverage at quarter end was 1.7x adjusted EBITDA. RXO will dividend the net proceeds to XPO, which XPO will then use to pay down debt. Lastly, on a personal note, I am very thankful to XPO and Brad for the opportunity to be part of this leadership team and the incredible transformation we have achieved over the last few years. Both companies are well-positioned to continue on the growth path. And I wish both Jamie Harris and Carl Anderson success in the new roles. I will now turn things over to Mario.

Thanks, Ravi, and good morning, everyone. As you saw from our earnings report, we achieved the second straight quarter of tangible results from our growth strategy, which we call LTL 2.0. Our investments in capacity and the momentum we have with service quality are accelerating our top and bottom lines. We reported revenue of $1.2 billion and adjusted EBITDA of $258 million, which, excluding real estate gains, was 19% higher than a year ago. Both our revenue and adjusted EBITDA are third quarter records, and we continue to expect to deliver at least $1 billion of adjusted EBITDA this year based on no more than $50 million of real estate gains in the fourth quarter. As Brad mentioned, we steadily improved our tonnage through the quarter, outpacing typical seasonality. A key inflection point came in September when we flipped tonnage positive year-over-year. Our tonnage trends continue to surpass typical seasonality in October. I am pleased that our results are strengthening relative to our peers. Our operating ratio in the quarter was 85%, and our adjusted operating ratio was 82.8%, that’s a year-over-year improvement of 160 basis points. The full-year target we put out with our preliminary third quarter results is for 50 to 100 basis points of adjusted operating ratio improvement year-over-year. We expect at least 120 basis points of year-over-year improvement in Q4. In the third quarter, we improved yield by 7%. And we continue to see rational industry pricing. Now, I want to double-click on LTL 2.0 and talk about what’s driving our results. We focus on two critical areas to drive long-term performance. The first is providing world-class service to our customers, and the second is investing in capacity ahead of demand. Our objectives are to gain market share, optimize pricing and improve operational efficiency. It starts with our investment in capacity. Our LTL CapEx spend this year will end up at 9% to 10% of revenue, which is about double our historical CapEx budget. In August, we opened a new terminal in New Jersey to manage volume flowing through the Northeast Corridor. This replaced a smaller terminal and added 24 new doors to our network. This expansion, in addition to the other five terminals we have opened over the last year, puts us at 369 doors against our target of 900 net new doors open by year end 2023. On the trailer side, our ability to manufacture our trailers at scale is unique in the industry. Our trailer production rate is the highest it’s ever been. We added a second production line in the first quarter, and we will be adding a third line in the fourth quarter. We are tracking to expand our line-haul trailer fleet by more than 10% by year end 2022. Our goal is to increase trailer production by another 50% next year, which would allow us to further expand with our line-haul and our pickup and delivery fleet. On the tractor side, we are working with the OEMs to bring on more trucks in 2023. And for our drivers, we have expanded our training footprint to what we believe is the largest in the industry, with 130 driver school locations. This is another company-specific advantage, and we expect to train 1,700 drivers this year. In 2023 and for at least the next several years, our plan calls for CapEx at 8% to 12% of revenue to expand our capacity so we can say yes to customers more often. The other two goals of the plan, optimizing pricing and improving operational efficiency are a function of our people and our technology delivering great service. Damage frequency is one of the metrics customers care most about. In September, we delivered our best damage frequency since 2016 and improved again in October. We improved damage frequency year-over-year in the third quarter by 58%, and the numbers are up and to the right, with a 76% improvement in September and 86% in October. That didn’t happen in a vacuum. We changed our incentive compensation to focus on reducing damages and improving shipping quality, all the way down to the supervisor level. We also launched a program at our terminal called Gladiator to recognize quality loading. If the quality target is exceeded, the entire team at that terminal is rewarded. And we launched new technology in the field that allows us to raise the 30,000 trailers we load each day. We can now pinpoint trailers that fall short of our quality loading standards and identify which supervisors and dockworkers need more coaching. These are just some of the internal initiatives that are energizing the team to elevate our customer service metrics, and the impact has been dramatic. Another important investment we are making is in our sales force. We are taking a layered approach to sales with teams dedicated to strategic accounts, national accounts, and also the base of 24,000 smaller accounts that are our bread and butter. All three customer segments have a role in growing the business. In the third quarter, we onboarded some major accounts with the potential to become top 10 customers for us. The feedback we hear from these customers is that they are pleased with their onboarding experience and with the service we provide them. There is a direct correlation between our success in winning this business and the fact that we are willing to invest in capacity and service to back up our promises. This is where our technology comes in as well. I spent a lot of time in the field talking to our managers and team members on the frontline. We have equipped them with new tools to make them more successful, and we put in strong feedback loops to capture their inputs. The result has been really exciting. In the most recent employee survey we conducted last month, which includes our dockworkers and drivers, we saw the highest engagement and highest job satisfaction since we acquired Con-way in 2015. What we are doing now is building off that culture so that our entire team has the voice in how we get to world-class. So in summary, we are investing in every lever of growth, including network capacity, quality of service, and the satisfaction of our team to deliver that service. This is LTL 2.0, and we believe that this plan focused solely on North American LTL can move us to the top of the industry at a pace that outperforms our peers over time. Now, I hand it over to Drew to cover truck brokerage on RXO.

Thanks, Mario. I’d like to thank Brad and the entire XPO team. It’s been an absolute privilege to work with this top-tier group over the past decade. North American transportation, soon to be RXO, had another strong quarter. We continue to harness our massive capacity and cutting-edge technology to grow volume, expand gross profit margin and drive adoption of our proprietary brokerage platform. I will start by discussing some key metrics from the quarter and then talk about our strong position heading into tomorrow’s launch of RXO. In the third quarter, we delivered more loads than in any other quarter in our history. Our volume was up year-over-year by 9%. Our September average loads per day was also an all-time record, and this was not an anomaly. Over the last 3 years, we grew volume at a 15% CAGR and we grew gross profit dollars at a 35% CAGR. Our consistent outperformance proves that we can take share in any market. And importantly, our growth is profitable. Our gross profit margin was a strong 19%, up year-over-year by nearly 500 basis points, and our year-over-year gross profit dollars were up 31%. In the third quarter, we generated operating income of $52 million and adjusted EBITDA of $78 million. Our technology is the engine behind our financial outperformance. Over the last decade, we built this platform from scratch. And now, our strategic investments are continuing to drive adoption among customers and carriers. Another 10,000 carriers have registered on RXO Connect. And our mobile app has been downloaded 850,000 times, that’s up 53% year-over-year, and 75% of carriers returned to the platform within 1 week. Carriers love how easy it is to use our technology, which gives them access to an enormous amount of volume from the largest shippers in the world. They also love our strong carrier rewards program. In the third quarter, we created or covered 81% of truck brokerage loads digitally. While we anticipate a muted peak season, we are still seeing very strong contractual bid activity, and we expect year-over-year load growth in the quarter. In the fourth quarter, we expect to generate adjusted EBITDA similar to the third quarter, excluding incremental corporate costs as a standalone company. With robust data powering our business and a team with deep understanding of the transportation sector, we are poised to outperform regardless of fluctuating market conditions. The spin-off of RXO marks a new chapter, but some things will remain the same. For example, our commitment to rapid growth and strong profitability. We operate in a $750 billion industry, led by a $400 billion for-hire truckload market, with $88 billion in brokerage alone. We are an industry leader, yet we only have about 4% share of this growing and underpenetrated market, which gives us an enormous opportunity for growth. Brokers are taking share from asset-based carriers, and we are leading the charge. Our customers and carriers are excited about the added value we can provide as a standalone company focused solely on our asset-light services. The RXO brand stands for massive capacity and cutting-edge technology, and we have the right people to leverage both advantages. We expect to continue to take share and outperform for our employees, customers, carriers, and our shareholders. That concludes our prepared remarks. I will now turn it over to the operator for Q&A.

Thank you. Our first question today comes from Ravi Shanker with Morgan Stanley. Please proceed with your questions.

Thanks. Good morning, everyone. Mario, a couple of questions for you. The accelerating relative tonnage in LTL kind of you went through some of the service changes you have made that kind of help you with that, but do you see that as – are you taking share from your peers, or is it more of you being exposed to kind of in a better part of the market and kind of taking more advantage of that?

See, we are driving taking market share overall. So Ravi, when you look at the investments we have made in capacity first. By adding terminals in markets where we were short on capacity, we were able to gain more business from customers in those markets. As an example, we opened up a terminal in Atlanta 6 months ago. And in the month of September, we have seen tonnage in the Atlanta market go up 38% on a year-on-year basis. We are also investing in more fleet and more drivers as well, and the sales force is very energized with the improvement in both the service product as well as the investments we are making in our sales force. So we had record business wins in the second quarter and the third quarter, record pipeline, and we are on a very, very strong trend of winning business and winning market share. Now sequentially, when we are – Q3 was better than typical seasonality when compared to Q2, and we flipped to positive tonnage in the month of September, and we also continue to see that in the month of October, where we came in better than typical seasonality, and we expect tonnage to be up on a year-on-year basis for the fourth quarter as well.

Got it. And maybe as a follow-up to that kind of can you also unpack the 3Q to 4Q walk, especially on the OR and maybe any puts and takes that we need to keep in mind as we think about that versus seasonality? Thank you.

Yes, sure. Thanks. So I mentioned tonnage obviously going up, going – in the fourth quarter. On the yield side, we – the pricing backdrop remains good, but we expect our yield to be up low to mid single-digits in the fourth quarter, which is driven in part by tough comp and lapping the GRI that we won’t take till early next year this year. But generally, the momentum is strong on both tonnage and yield from that perspective. On the OR side, it’s at least 120 basis points of OR improvement in the fourth quarter. And obviously, as we execute through the rest of the quarter here, our goal is to succeed that as well.

Great. And congrats to each one of you for the carrier so far and the carriers to come. So thanks for all the time over the years.

Hey, thanks. Good morning. I just want to clarify the fourth quarter OR guidance, I think it’s the worst sequential 3Q to 4Q we have seen in the model. So is this just – is the incremental tonnage coming on at lower yields or margins? And then any thoughts on what that means for next year’s OR? And then, Drew, I just want to clarify when you said similar EBITDA, I think for the RXO, when are we going to get the pro forma RXO numbers for Q3? I just want to – we haven’t seen those.

Scott, I will start first on the LTL side. So as we said at least 120 basis points for the fourth quarter. Now that OR degradation is slightly higher than typical seasonality from the third to the fourth quarter and that’s driven predominantly by cost pressure associated with persistent inflation that we expected that to abate more in the back half of the year. That’s specifically coming from wages is the first category. Generally, our labor is up mid single-digits in part to be able to accommodate the additional demand and tonnage we are getting. And also, we are seeing higher inflation in some other cost categories, including maintenance and parts to keep our fleet up to date, and also some of our facilities expenses are higher due to inflation as well.

Scott, this is Drew. You will get historicals through June next week. And I believe December 1 is the day for Q3.

Okay. Yes, if there is any way to get it? The sooner, the better, I think, for all of us trying to build models for RXO. Thank you.

Understood. Thanks, Scott.

Hey, thanks. Good morning. Maybe I wanted to ask Mario to comment on sort of the strategy in the LTL business. So growing tonnage in an environment where we are actually seeing maybe decelerating tonnage at some of your competitors. I wanted to get a sense of whether you feel like there are going to be trade-offs in yield for tonnage in the quarter – over the course of the next couple of quarters, particularly for in a more challenging macro environment. And then I know you mentioned there is some incremental door capacity coming online, which can help sort of boost that. But how do you think about the competitive environment and maybe how that influences yields in 2023? And maybe sort of just following up on that comment around how you think the operating ratio may sort of trend out as you think about the next several quarters and into ‘23?

Sure thing, Chris. So first, starting with the overall strategy, so our strategy is focused on keeping to improve our service product to our customers and delivering best-in-class service, as well as investing in capacity in areas and markets where we have a need for that capacity based on what we are hearing from our customers and the demand that we are seeing from our customers, and that in turn is leading to us gaining market share through investments in the sales force that we are doing and going and gaining new business. This includes, for example, incentivizing our salespeople to onboard new business, including new logos, as we grow the business moving forward. In terms of yield dynamic, I mean, obviously, yield has always been very strong in our industry. This is mainly driven by the fact that if you look over the long time period, there is less capacity in the LTL than there was 10 years ago. And we continue to see that play out. So in a softer market, if the market gets softer, we would see yield be in the low single-digit territory. And in a strong market, we’d see that be in the high single-digit, low double-digit territory, and we expect that to play out next year depending on what happens with the macroeconomic conditions. And then finally, for us, for the set of company-specific initiatives, is around operational cost reduction or overall operational excellence. And that’s a combination of using our technology to keep on refining our line-haul pickup and delivery and dock costs as well as in-sourcing third-party line haul to our own assets. Today, third-party line haul is roughly 10% to 11% of our revenue. And when you think about in-sourcing, we save 30% to 40% per mile. So we can see that also obviously being a tailwind for us from a cost perspective, not only next year, but over the years to come. For 2023, obviously, we will talk more about 2023 as we report next quarter, depending on what we’re seeing in the market, but we’re modeling for different scenarios depending on what the macro is doing.

Okay. And just to clarify, so you think tonnage growth is possible with maintenance of yield growth being – still being positive, so you can keep the two of those positives together?

That’s correct, Chris.

Hi, good morning. Just wanted to Chris’ question a little further. The pricing dynamic and the algorithms that you guys and the analytics that you’re pushing forward, I know you mentioned low single digit, but do you think that’s pricing above sort of the market at this point? Is that giving you the capability or is it better cost management? Just any thoughts there. And then, Drew, any color on how we should think about the contract versus spot/mix as you exit 2022 at this point? Thanks.

Allison, I’ll start first with the yield question. So again, for the fourth quarter, we expect yield to be up low to mid-single digits, which is in line with difficult seasonality when you play out Q3 going into Q4. Now, keep in mind that in the fourth quarter of last year, we had a tough comp with yields having been up 11% on a year-on-year basis. We also, last year, if you recall, in the month of November, we took an early GRI, which we typically take early in the year as opposed to in the month of November. So we’re going to be lapping the GRI. And in terms of new customers versus existing customers, there is a bit of a mix impact, specifically on length of haul that also would be a bit of a drag on yield. But generally, we continue to see a very rational pricing environment. Our contracts in yields, for example, in the first quarter were still up high single-digits. So we – again, we see a rational environment, but this is what the trend looks like as we head into Q4.

And Allison, the contract for spot for brokerage was at 73%, again, contract and 27% on the spot. That’s exactly where we wanted to be during this market. It allowed us to operate at strong margins, continuing to take market share and do it profitably. And as we head into next year, we’re in a strong bid cycle right now. Bids are up significantly on a year-over-year basis right now.

Yes. Good morning. Drew, had a couple for you. I wanted to see if you could just offer some thoughts on how we ought to think about revenue per load when we look at like fourth quarter and gross margin percent. Are you thinking that it will be kind of stable sequentially? Or do you expect further pressure in the market and some pressure on those metrics? And then, I guess, if I look beyond fourth quarter, as the truckload market’s weaker, as contract rates come down, does that drive pressure on your gross margin eventually? I know there is the transition where it’s favorable, but maybe just how you think about gross margin in brokerage out a couple of quarters as well.

Yes. Thanks, Tom. So I’d start with we expect to grow volume on a year-over-year basis in the fourth quarter, and we expect it to operate at strong margins. We were at 19% this quarter. It could be a hair behind that as we’re into Q4. We’ve got volume tailwinds. To your point on gross margin per load, you could see that come down. But right now, we’re operating in line with our 3-year average and ahead of our 5-year average. So it doesn’t matter what happens in the market. There are a lot of unknowns in 2023. We’re confident that we will outperform the market as a whole next year.

Yes. Hi, good morning. I’m sort of curious, I know it may be early for 2023 guidance per se, but maybe sort of big picture. Can you talk to a little bit – two things. One, your thoughts on RXO EBITDA, will it be growth next year? And then secondarily, on LTL operating ratio, know the long-term targets, but do you expect improvement in 2023? Thanks.

Yes. Jordan, as I just said to Tom, there is a lot of unknowns as we head into 2023. We’re in a very strong bid cycle right now. Bids are up significantly for us year-over-year. Customers are coming back to us. We’re growing with our existing customer base, and we’re also growing with new customers coming in. So I’m confident that we will go out and take market share for 2023, but don’t want to go much beyond that.

Yes. For the XPO side on the LTL side, I mean, obviously, we will talk more about 2023 as we get closer to the beginning of the year. But generally, we are modeling for different scenarios. In one scenario, if the macro does get softer and that impacts the volumes, obviously, we’re not immune to the macro, although we’re planning on outperforming in terms of gaining market share. But that said, obviously, we would flex our variable costs where today, 75% of our cost is variable in price to volume. And we also have a few potential tailwinds from a P&L perspective, which includes in-sourcing our third-party line-haul miles. The fact that we have higher exposure to purchase transportation would be a good guy in a softer environment with truckload rates coming down. That’s kind of how we look at the year overall. But obviously, our intent is to continue to gain market share, but we’re modeling for different scenarios.

Okay, thanks.

Hey, great. Good morning, and good luck with the spin process. Maybe, Mario, if we could just kind of follow-up on that last kind of debate and Scott’s earlier questions about the OR. You’re talking about inflationary costs rising. You’re pushing out your GRI, which you had last year in November to the beginning of the year. You’re talking about the worst OR improvement in the fourth quarter, I guess, on a sequential basis. You mentioned. Is there anything you can do given the environment to move some of those costs quicker? Is there potential that you benefit, as you mentioned, on purchased transportation maybe faster, given those rates are coming down? I’m just trying to wonder what you can do, self-help maybe even faster given the environment and the exposure you just talked about on those few items.

The purchase transportation is definitely one of those areas, Ken. Because when you look at purchase transportation, today, contractual rates are still up on a year-on-year basis, although they obviously moderated significantly from where they were earlier in the year. In a continued soft market, we would see the contractual rates continue to come down, which obviously would be a tailwind for us from a PT perspective. Similarly, for in-sourcing third-party line-haul miles or cutting schedules. If the volume is more challenged going to 2023, then obviously, that’s an area we can move on faster with cutting schedules as well. And we are also accelerating some of our rollouts on the technology side in terms of how we run our docks, our pickup and delivery operation, and our line-haul operation to improve operational efficiencies in those areas as well that will help become tailwinds in 2023, if there is a softer environment from a ton standpoint.

And I guess just my follow-up would then be on the – will you adjust the timing of the rollout in CapEx on the doors? And maybe you could talk a bit about – each of you, the corporate costs. What scale should we target for each of the groups going forward into the fourth quarter and next year?

Yes. I’ll start with the capital deployments. So we are not planning on slowing down our capital deployment. We think about the capital we invest in the business as being a long-term investment that goes through the cycle. So it doesn’t matter what the markets are doing on the short term, these will give us capacity whenever the markets go back up again, being able to handle that capacity. This includes, on the door side, a lot of the projects we’ve done so far, we’ve opened up six terminals that we’re predominantly opening up a new terminal versus a lot of the projects that we’re going through now are expansion projects for existing terminals. So we have a half a dozen or so projects that are already underway in the Dallas market, Houston, Salt Lake, Atlanta, and a few other markets as well where we are expanding the terminal base. In terms of fleet, we do need, obviously, the fleet for two reasons. One, as we in-source third-party line-haul, we’re going to deploy some of that CapEx for both trucks and trailers to be able to move some of these miles onto our own assets as well as position the fleet where we can bring the fleet age down, which would help with maintenance expenses as well. So we continue to expect to deploy that CapEx through the cycle here as we head into 2023.

And then, Ken, you asked about the incremental cost that will come over to RXO. It’s around $45 million on an annual basis that will be incremental to us of corporate costs.

And for the XPO, it would be roughly the unallocated corporate cost for LTL or roughly around $80 million.

Thank you. Good morning. Mario, simple one for me. You’re talking about the positive trends in tonnage. I was hoping you could break that down for us. Where were you in July on a year-over-year basis? Where were you in September, if that was the inflection point in term positive? It is October 31. So I understand you have a day left, but maybe give us a sense of where October is as well. Just as you talk about doing better than the peers in the positive direction, help us put a magnitude on that.

You got it. When you look at the third quarter, so we’ve improved every month in the quarter and then flipping positive in the month of September. And the quarter as a whole and the monthly trend was better than typical seasonality in terms of sequential volume improvements. And that continued in the month of October, where we’re seeing strong volume trends as well that both outpaced typical seasonality and with positive tonnage for the full month as well.

John, it’s Matt. July was the softest month in the quarter. August, obviously better than that, closer to the quarterly average. September, obviously much, much better, and October, to your point, 1 day left, is a good month for us and again, outpaced typical seasonality for the quarter, for the month of September, and for the month of October as well.

Hey, good morning, everyone and thanks for taking my question. So, Drew, just a couple of points for you, I think you mentioned that you’re going through a bid cycle right now. Pricing is actually coming in positive. Was that a comment on contract rates? And should we be thinking that double-digit volume is attainable here in the near-term, like 4Q and looking into next year?

Yes, Brandon, I don’t think that I said that pricing on contract was positive in the bid cycle. Pricing is slightly down from what we’re seeing on contract. Spot is down more than that, and on double-digit volume growth going forward, we expect that we can do that over the long run, but don’t look for it on a quarter-by-quarter basis for where we’re at. We’re confident that there is a – we will outperform the market in 2023 and beyond. We’re confident in the 5-year guide that we’ve put out there that has a midpoint of $500 million of EBITDA, roughly 70% growth from where we are today.

Thanks. Good morning. And Mario, could you touch upon, I think you mentioned three new, and clarify if that’s accurate or not, new customers in the third quarter that could become top 10 customers. Could you just touch upon how that may be impacting metrics for the next few quarters? And any additional commentary on developments in the sales force and strategy there with regard to our customers? Thanks.

Yes. On the large customers we onboarded. So we onboarded several large customers in the third quarter that have the potential to become top 10 customers. And it’s a combination of both large industrials and large retail as well that we onboarded through there. Now what we’re doing differently from a sales perspective, one is that we expanded our sales force since the beginning of the year. We have roughly around 7% more salespeople in our sales force. We also established a new strategic account selling team, which is focused on the largest 200 to 250 strategic accounts across North America, where we split that team between RXO and XPO at the beginning of the year, where these strategic centers are now – a portion of the strategic centers are focused on our LTL business. And that’s paying dividends. In the second quarter, we had record business wins. In the third quarter, we had another quarter of record business wins. Our pipeline is the highest it’s been, and we’re trending in the right direction. We’ve also incentivized our salespeople to get new logos and expand business with existing logos, and that’s also paying dividends as well. And when we pass forward to the years to come with our investments in capacity where we are getting capacity ahead of demand, as well as the focus on keep on improving service significantly over time as well, all of these would lead to more wins as we head over the years to come in our 5-year plan.

This is Ravi here. So our European business continues to perform very well. Last quarter, we had a very strong organic revenue growth of 6.8%, which was driven by both volume and price. For the full year, our business is performing exactly in line with our expectations. And the macros are definitely getting tough, but we continue to outperform the macro and are able to price in the inflation.

Hey, good morning. I want to come back to Drew first. You can maybe clarify the comment about the strongest – strong bid cycle. Was that more on a volume perspective? Because it does sound like it...

That’s the volume number of bids that we’re seeing, Brian. So the number of bids that we are participating in is up significantly. That’s existing customers, but it’s also new customers who are coming to us for the first time as well.

Yes. And Brian, on your question on service. So definitely service has been a great trend for us with dramatic improvement over the course of the last year. I mean, I mentioned in my opening remarks our damage frequency, which is a measure of when we deliver skids to our customers, what’s the – how many of them are effectively damaged. And it’s the best it’s been since 2016 where, for the full quarter, it improved by 58%. For the month of October, it improved by 76% – September 76%, and October by 86% on a year-on-year basis. And we’ve implemented many programs to delight our customers and how we service them. And we’re hearing that feedback from the customers, which helps with obviously onboarding more business. Our customer satisfaction—we do weekly surveys with our customers—it's at record highs in the third quarter. And that’s going to allow us to onboard more and more customers over time. In terms of gaining market share, a lot of that goes back to, obviously, the improvement in service but, at the same time, the investments in capacity, where we’re being able to say yes more often to customers in markets where we are adding that additional capacity as well. On the yield side, yield continues to be rational when I look at our contracts renewals even through what is a softer macro, we’re continuing to see strong contract renewals associated with that. And again, in the software macro, you would see yield come down a bit, but you would still see it in positive territory. And then obviously, in a strong macro, you would see yield be in that high single-digit territory. So we continue to expect rational pricing in our industry over the years to come.

Thanks, operator. Thank you, gentlemen for taking my question. Mario, I wanted to stick on yields a bit. Would you say that the yields for the recent contract wins in 3Q were above your cost inflation? And then what’s the level of confidence getting yield above cost inflation in this bigger-than-average bid season that you’ve been talking about?

Yes. We are seeing – going into the fourth quarter, when we think about cost inflation, remains persistent higher than what we expected it to be, which is putting pressure on the overall margins, which is what we discussed earlier. However, for the new wins, obviously, yield is also a factor of mix as well. So some of the new wins, and it’s a combination—all of them are obviously profitable above cost and all of them operate really well. But at the same time, they could have some mix change associated with them, depending on the customers. But generally, it’s in the ballpark of where our overall mix is. We’re seeing some pressure on length of haul, where some of these shipments are shorter in nature with some of these wins, but that’s about the only dynamic that we’re seeing that’s different than our existing mix. But yields are up sequentially going from Q3 to Q4, and they are in line with typical seasonality as well.

Yes. Thanks, operator. Thanks for the question. When it comes to our carrier base, we grew our carrier count at RXO Connect by 10,000 carriers for the quarter. So we’re continuing to see carriers who want to come back and do business with us. It’s easy to hop onto our platform and book a load, negotiate, do that with no human interaction. There is a great rewards program that they have got access to. And you can see that our registered carriers in RXO Connect year-over-year are up 48%. Our weekly carrier usage is up 60%, and our RXO has been downloaded 850,000 times. So there is a lot of momentum for carriers to continue to come over and do business with RXO. We have got the volume they need and an operating system that they love to use.

Thank you, operator. So it’s been an amazing journey. It’s been an amazing decade. I feel lucky. I feel privileged and very gratified. I want to thank the shareholders, particularly those who have bought the shares when it was a fraction of where it is now and stuck with it and held onto it and made a lot of money. And thank you very much for your support. And I also want to thank the hundreds of thousands of team members who created – well, now as of tomorrow, will be three great companies. And I want to especially thank Mario and Drew for your commitment to bring the companies to a new level and achieve even greater heights than we’ve accomplished over the last decade and to prove our supporters right and our detractors wrong. Thanks, everyone. Have a great day.

This will conclude today’s conference. Thank you for your participation. You may now disconnect your lines at this time.